Peggy E. (Peg) Gustafson was sworn in as SBA Inspector General on October 2, 2009. Ms. Gustafson previously served as General Counsel to Senator Claire McCaskill (D-MO), where she advised the...
Audit Report 5-04: Review of the Small Disadvantaged Business Certification Program
On November 4, 2004, the OIG issued Audit Report 5-04, Review of the Small Disadvantaged Business Certification Program. The objective of the this survey was to determine whether the SBA was properly evaluating the qualifications of those firms applying only to the Small Disadvantaged Business Program as a Small Disadvantaged Business. This review did not include 8(a) firms also seeking such certification.
The OIG found that eligibility reviewers in SBA’s Office of Certification and Eligibility (OCE) did not adequately consider whether owners of companies applying for SDB certification were economically disadvantaged. Eligibility reviewers were also certifying companies as SDBs when their owners had defaulted on government obligations. The OIG documented four findings: (1) the criteria for determining the economic disadvantage of SDB owners were not properly applied; (2) SDB eligibility reviewers were not checking for applicant past-due taxes or other delinquent federal financial obligations; (3) criteria for managing agency records were not followed, and (4) program officials need to ensure that the new database contains correct information.
The SBA generally agreed with the findings, but disagreed with recommendation 1C related to the first finding. For this recommendation, the SBA did not want to de-certify the firm that the OIG found unqualified for program participation due to the firm owner’s total assets. The SBA stated that the Office of Hearing and Appeals’ (OHA) opinion cited in the report did not “mandate a finding of no economic disadvantage, under any circumstances, if an individual has $4.1 million in total assets.” The OIG disagreed that the circumstances included in the program office’s investigation of this issue, and noted that the office did not include this analysis in their formal comments to this report. Further, since the referenced OHA case found that $4.1 million is an excessive amount of assets, the OIG determined that a subsequent finding that assets nearly 40 percent greater are not excessive would be arbitrary and capricious.