SBA’s Office of Inspector General (OIG) recently inspected SBA’s 2019-2020 corrective actions to determine whether they had effectively reduced the risks previously found in SBA’s 8(a) Program eligibility determinations. Apparently, the OIG liked what it saw.
The SBA’s September 15, 2020, OIG Report explains that the OIG first identified the 8(a) Program’s administration as a “top management challenge” for the SBA in 2003. The OIG’s most recent audits identified two significant internal control weaknesses that allowed improper 8(a) Program certification and continued participation of ineligible firms. This follow-up OIG inspection focused on those weaknesses.
The first weakness was outlined in the SBA’s April 7, 2016, OIG Audit Report on SBA’s 8(a) Business Development Program Eligibility, where the OIG found that SBA was not properly documenting whether companies admitted in the 8(a) Program had met all eligibility criteria. The OIG said:
Of the 48 businesses SBA admitted to the program that we reviewed, 30 did not meet one or more areas of eligibility, according to information in the Business Development Management Information System. The problem happened because managers overturned lower-level reviewers’ recommendations for denial without fully documenting how the identified eligibility concerns had been resolved. As a result, it was not clear whether the 30 firms should have been approved for the 8(a) program.
As a result, the OIG recommended an update to SBA policy that would require the Associate Administrator for Business Development and the Director of the Office of Certification and Eligibility to clearly document their 8(a) Program approval and denial justifications, “particularly when those decisions differ from lower-level recommendations.” The OIG closed this recommendation on June 17, 2019, based on SBA’s corrective action issuing revised standard operating procedures to reflect these additional documentation requirements.
The OIG reviewed this corrective action and “verified that program officials followed the revised policy for those applications.” The OIG identified 16 of 512 8(a) applications received from October 1, 2019, to June 12, 2020, where there were different recommendations from the approver and lower-level reviewer. And OIG found, “[i]n each case, the approver had justified and documented their reasoning in SBA’s certification management system, Certify.SBA.gov.” As such, the OIG considered the corrective action to be “fully implemented and effective.”
The second weakness was identified in SBA’s September 7, 2018, OIG Audit Report on Improvements Needed in SBA’s Oversight of 8(a) Continuing Eligibility Processes, where the OIG found that SBA had not been performing the required continuing eligibility reviews upon receiving “specific and credible complaints” regarding eligibility and had not been logging all of the OIG Hotline complaints. The OIG said:
Our review of 10 firms referred by the OIG Hotline revealed that they were all ineligible for the 8(a) program. This occurred because SBA’s 8(a) policy directive was not consistent with SBA’s 8(a) regulations’ requirement to conduct continuing eligibility reviews upon receipt of specific and credible information regarding the eligibility of 8(a) firms. Furthermore, the SBA’s policy directive did not provide guidance on logging, tracking, and disposition that should be completed to adequately address complaints.
In response to this finding, the OIG recommended that the Administrator and Associate Administrator for Government Contracting and Business Development “develop a robust system for tracking” continuing 8(a) Program eligibility complaints and the actions taken to address those complaints.
The OIG closed that recommendation on July 7, 2020, in response to SBA’s corrective action implementing the BD Hotline Complaints Tracker as the official tracking system for 8(a) continuing eligibility complaints and the actions SBA takes to address them.
The OIG reviewed this corrective action by testing two FY 2020 complaints from the OIG Hotline about 8(a) Program participants. It found “that program officials had logged the complaints and documented the actions taken in the BD Hotline Complaints Tracker,” and thus, considers the corrective action implemented.
Based on these two reviews, the OIG report concluded:
We verified the corrective actions SBA implemented effectively addressed the internal control weaknesses by ensuring program officials justified their recommendations to admit firms applying to the 8(a) program and program officials tracked complaints received about firms’ participating in the 8(a) program.
If you have any questions about your own eligibility to apply to SBA’s 8(a) Program or your continued compliance with SBA’s 8(a) Program eligibility rules, give us a call.
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