Peggy E. (Peg) Gustafson was sworn in as SBA Inspector General on October 2, 2009. Ms. Gustafson previously served as General Counsel to Senator Claire McCaskill (D-MO), where she advised the...
Audit Related Memorandum 7-6-H-007-005: SBA Form 994, Application for Surety Bond Guarantee Assistance
On January 30, 1997, the OIG issued Audit Related Memorandum 7-6-H-007-005, SBA Form 994, Application for Surety Bond Guarantee Assistance. This memorandum is related to Audit Report 7-6-H-007-008, Audit of Fidelity and Deposit Company of Maryland’s Underwriting Process. While conducting the audit of F &D’s underwriting process, the OIG identified requiring additional guidance related to the preferred sureties on the submission of SBA Form 994, Application for Surety Bond Guarantee Assistance. According to SBA Standard Operating Procedure 50-45, an application for an SBA-guaranteed bond is made by the applicant to a surety on SBA Form 994. The SBA uses the information contained in the Form 994 (i.e., type of business, affiliates, gross receipts, anticipated project start date, subcontractors, previous SBA bonds, SBA debts, payments to surety, certification of data, and so forth) to determine whether to approve the surety bond guarantee application.
During the OIG’s audit of F&D, the OIG noted that since March 1996, F&D has not required contractors to complete the SBA Form 994 in its entirety for an SBA bond guarantee. An F&D official stated that for the initial bond, the only information required on Form 994 was the certification by the contractor and the amount of subcontracting. He also stated that F&D had been advised that other preferred sureties were not completing any portion of the Form 994. Staff from F&D based this belief on a memorandum, dated March 1, 1996, from the Associate Administrator, Office of Surety Guarantees (AA/OSG), which stated the surety must obtain with the initial request, Form 994 with only the certification portions completed and signed by the contractor. An alternative means can be used on subsequent requests; however, each separate bond application must be documented with the amount of work that will be subcontracted
On November 20, 1996, the SBA informed F&D that a completed Form 994 should be submitted for the initial bond and an alternative means can be used by the sureties for subsequent applications. The OIG recommended that the SBA provide clarification to preferred sureties that SBA Form 994 should be completed in its entirety for the initial surety bond guarantees. Further, the OIG recommended that if alternative form is used for subsequent applications, it should require similar information and certification as the SBA Form 994. The SBA agreed with the recommendation.