Evaluation Report 14-19: Improvements Needed in SBA’s Oversight of the Financial Management of the District of Columbia Small Business Development Center

On September 29, 2014, the OIG issued Evaluation Report 14-19, Improvements Needed in SBA’s Oversight of the Financial Management of the District of Columbia Small Business Development Center.  This report presents the results of the first in a series of reviews we plan to conduct on the Small Business Administration’s Small Business Development Center (SBDC) Program.

The OIG found that the District of Columbia SBDC (Lead Center) did not meet its statutory matching requirement concerning a $625,000 grant award.  The OIG determined that due to the Lead Center’s incorrect calculation of indirect costs, incorrect classification of its grant activity, and submission of unreasonable and unallowable costs, the SBA improperly credited the Lead Center with an overmatch of grant funds totaling$143,811—when the Lead Center actually under-matched its required contribution by $21,415.

Furthermore, the OIG identified weaknesses in the Agency’s internal control system that impacted the Agency’s ability to detect regulatory violations and other non-compliance issues.  Most notably, the two existing standard operating procedures used to administer the SBDC program were last updated in August of 1985.  Therefore, they do not address numerous subsequent changes made by Congress to Section 21 of the Small Business Act, by the Office of Management and Budget to guidelines on grant administration, and by the SBA to regulations for the SBDC Program.

Finally, the Agency is taking steps to update its policies and procedures for the SBDC Program and to ensure that the Lead Center properly computes indirect costs for its future program years.  However, improvements are still needed in the SBA’s oversight structure to ensure that the Lead Center accurately reports financial information; incurs and claims reimbursement for allowable and allocable costs; and complies with applicable laws, regulations, policies, and procedures.

The OIG recommended eight actions directed to the Associate Administrator for Small Business Development Centers to improve the Agency’s oversight of the financial management of the Lead Center and the SBDC Program as a whole.