On June 30, 2000, the OIG issued Audit Report 0-19, Audit of Small Disadvantaged Business Certification Program Obligations and Expenditures. The purpose of this audit was to determine whether the Small Business Administration used Small Disadvantaged Business (SDB) funds for their intended purpose. The SDB program provides federal procurement benefits to small disadvantaged businesses bidding on federal contracts by giving them up to a 10 percent price preference on their bids. The OIG reviewed a judgmental sample of $13.6 million of the total expenditures and obligations made as of July 31, 1999.
The OIG found that about $3.0 million of the sample expenditures and obligations were related to non-SDB certification activities. The OIG documented four findings and issued five recommendations, specifically: (1) certain obligations and expenditures were ineligible for SDB reimbursement, (2) unsupported distribution of overhead and electronic application system costs charged to the SDB certification program, and (3) other areas require management action to improve operation of the SDB Certification Program. The OIG also noted four other areas requiring management action to improve the operation of the SDB Certification Program: (a) the SDB Certification Program was funded through other agencies’ voluntary participation in Economy Act Agreements, making the funding for the program unreliable and unpredictable with no legal basis to ensure the other agencies would continue funding the program, (b) the SDB Certification Program and supporting offices were overstaffed with SDB funded employees, with 100% of SDB funded employees spending significant amounts of their time on non-SDB work; (c) the SDB Certification and Eligibility office did not track its inventory in SBA’s electronic inventory management system, and (d) the SDB Certification and Eligibility office ordered excess equipment that remained in storage for over one year.