Audit Report 0-31
On September 30, 2000, the OIG issued Audit Report 0-31, Audit of Boscart Construction, Inc. The objectives of this audit were to determine whether the SBA (1) properly evaluated Boscart’s initial eligibility for the 8(a) program and ensured its continuing compliance with 8(a) program requirements, and (2) awarded and administered its contracts with Boscart in accordance with its internal procedures and applicable regulations. The audit team reviewed SBA’s files related to Boscart, its owner and the owner’s spouse, and interviewed various SBA and contractor personnel. The OIG also analyzed accounting information and amounts paid to Boscart for services rendered and contract performance.
The 8(a) program was created to assist small business concerns owned and controlled by socially and economically disadvantaged individuals develop their business skills and become viable business firms. To be certified by the SBA for participation in the program, applicants must show that their firms are owned by socially and economically disadvantaged individuals, meet SBA’s small business size standards, and have a reasonable potential for success, as defined in SBA regulations. Firms in the program are eligible for contracts that Federal agencies set aside for 8(a) firms and may receive SBA technical assistance and management training.
In fiscal year 1999, about 6,000 small businesses participated in the 8(a) program, and $6 billion was awarded in 8(a) contracts. The SBA’s Office of Procurement and Grants Management is responsible for administering and acquiring contractual services for the SBA in accordance with applicable Federal requirements. The Office of Government Contracting and Minority Enterprise Development (GC&MED) is responsible for determining the eligibility of firms for the 8(a) program. In September 1997, the SBA certified Boscart Construction Inc., a general contracting company, solely owned by its president, for participation in the 8(a) program. In October 1997, the SBA appointed Boscart’s owner to its National Small Business Development Center (SBDC) Advisory Board. In May 1998, the SBA hired Boscart’s owner’s spouse as a GS-15 Schedule C (political appointee) in the Office of Capital Access. Between February and September 1998, The SBA awarded six contracts to Boscart that ultimately totaled $658,310 in value.
The OIG determined that the SBA’s process for evaluating Boscart’s initial 8(a) program eligibility was flawed because it relied on inaccurate and unverified financial information. Subsequently, the agency did not ensure the company’s compliance with 8(a) program requirements by accepting a contract on the company’s behalf for which it was not eligible. In addition, the SBA did not comply with (1) its standards of conduct regulations by awarding contracts without required approvals and (2) Federal Acquisition Regulations (FAR) by not documenting significant contract actions. As a result, the Agency has reduced assurance that its programs and operations are achieving their intended purposes, in accordance with prescribed policies, procedures and ethical requirements. The OIG issued five findings and recommendations.