White Paper: Risk Awareness and Lessons Learned from Prior Audits of Entrepreneurial Development Programs

This White Paper provides SBA information regarding lessons learned and identified risks from prior audits and other reviews that it should consider as it implements mandates to administer Federal funds to Small Business Development Centers (SBDCs), Women’s Business Centers (WBCs), and resource partner associations related to the Coronavirus (COVID-19) pandemic. The increase in Federal funds to SBDCs, WBCs and resource partner associations and expedited timeframes will place additional stress on existing controls. This document is intended to assist SBA with ensuring that funds are used as intended and that program goal and objectives are met.

The President signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law on March 27, 2020. The Act contains several provisions intended to provide economic relief to our nation's small businesses. One of the Act’s provisions provides $240 million for grants to SBA’s SBDC and  WBC resource partners to offer counseling, training, and related assistance to small businesses affected by COVID-19. The Act also provides $25 million for grants to resource partner associations to establish a single centralized hub for COVID-19 information, including a training program to educate resource partner counselors and mentors on the COVID-19 resources and information available to effectively assist affected small businesses.

The Office of Inspector General has conducted audits and other reviews to evaluate management controls and to assess program integrity, efficiency, and effectiveness of SBDC and WBC programs as well as previous awards to resource partners for disaster technical assistance. We compiled findings from those audits and reviews that identified significant issues and relevant risks. Prior audits and reviews identified that SBA did not:

• Enforce financial reporting requirements and did not detect budget reallocations.
• Consistently enforce reporting requirements, perform data verification procedures, or provide sufficient guidance and monitoring of grant recipients.
• Effectively oversee the resource partners to ensure they delivered increased services generated by the additional disaster technical assistance funding.

In summary, to ensure the integrity of entrepreneurial development programs and to mitigate the risk of funds not being used for intended purposes, SBA should:

• Establish clear oversight requirements in the notices of award and ensure program officials and grant recipients implement increased internal controls
• Establish outcome-oriented performance measures specific to entrepreneurial development COVID-19 priorities
• Track program data to adequately monitor and validate the performance of COVID-19 grant assistance
• Provide appropriate training to all grants officers and program personnel responsible for monitoring grant recipients’ response to COVID-19
• Establish methodology to ensure funds are appropriately allocated to resource partners
• Establish a quality assurance plan to prevent and detect improper payments
• Provide oversight to ensure the COVID-19 programs are implemented as intended and that program goals and objectives are met