On March 30, 2006, the OIG issued Audit Report 6-19, Review of a Company’s 8(a) Business Development Program Eligibility. The OIG had received complaints about an 8(a) Business Development (BD) company. In reviewing the complaints, the OIG determined that the company was ineligible for 8(a) BD participation since the company’s disadvantaged owner violated 8(a) BD eligibility requirements concerning good character, payment of federal financial obligations, and control of the company. Specifically, the company did not inform the SBA that it failed to meet eligibility requirements.
The OIG found that the during the application process, the company’s disadvantaged owner and president was delinquent on over $270,000 in taxes owed to the Internal Revenue Service (IRS). While the owner negotiated a payment plan with the IRS to avoid ineligibility, he did not make the first or subsequent payments listed on the repayment agreement. The OIG also found that the company made two false statements to the SBA in its application by stating that the company was not providing compensation to either of its owners.
Although the company did not comply with 8(a) BD eligibility requirements, it received a $9.3 million 8(a) BD contract on July 30, 2004. If the SBA had been aware of the violations as they occurred, the company would not have been admitted into the 8(a) BD program. Further, it would not have received an 8(a) contract that an 8(a) BD company, in compliance with program regulations, may have received. The OIG recommended that the Associate Administrator for Business Development take the necessary steps to remove the company from the 8(a) BD Program.