Audit Report 4-3-E-009-023: Job Opportunity Reporting Under the Section 503 and 504 Programs
Date Issued: Friday, September 30, 1994
Report Number: 4-3-E-009-023

On September 30, 1994, the OIG issued Audit Report 4-3-E-009-023, Job Opportunity Reporting Under the Section 503 and 504 Programs.  The objective of the OIG’s review was to determine if the reported job opportunities created or retained as a result of SBA assistance were accurate and otherwise in compliance with SBA requirements.  The OIG reviewed job opportunity information in the 1991 and 1992 annual reports submitted by six CDCs located in Alabama and Tennessee. The CDCs were selected based on amount of activity, location, and discussions with SBA staff.  The OIG also reviewed the CDCs' files for 31 selected projects and visited 11 of the 31 projects. In addition, the OIG obtained and reviewed records of CDC job claims data maintained by the Office of Financial Assistance, Office of Rural Affairs and Economic Development (ORA&ED).  The OIG also interviewed loan recipients, CDC and SBA staff, and several labor experts and economists.

 

The SBA requires each CDC to maintain an average of at least one job opportunity for every $35,000 of debenture financing provided, unless otherwise approved.  Prior to June 14, 1990, the required job opportunity average was one job per $15,000 of SBA debenture financing.  The change from $15,000 to $35,000 was based on an SBA study of capital investment required for job creation and inflationary factors.  The $15,000 ratio had been in effect since 1980 and was believed to be outdated.  Based on CDC annual reports through September 30, 1992, the 503/504 projects funded totaled more than $2.8 billion in SBA guaranteed debentures and created or retained over 314,000 jobs—an average of $8,900 per job nationwide. The OIG concluded that the CDCs reviewed did not always comply with the SBA's job opportunity reporting requirements but had provided the required number of jobs (one for each $35,000 of SBA assistance) on the approved projects.