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 Report 2-25: Audit of Georgia District Office Sponsorship Activities
On August 26, 2002, the OIG issued Audit Report 2-25, Audit of Georgia District Office Sponsorship Activities. In a letter dated January 23, 2002, the Deputy Associate Administrator for Field Operations requested that the Office of Inspector General review allegations of fiscal improprieties involving gift acceptance and cosponsorship authority at the Georgia District Office (district). Because of the letter, an audit was initiated with the objective of determining if district sponsored events were conducted and funds were accounted for in accordance with SBA and Federal policies and procedures. The OIG reviewed five district events conducted during September 1999 to January 2002.
The OIG determined that funding for the events was not managed in accordance with SBA and Federal policies and procedures. The OIG did not evaluate the district's compliance with cosponsorship requirements because none of the district's events were cosponsorships, as defined by the Small Business Act. Three of the reviewed events qualified as SBAsponsored and the remaining two events did not meet criteria for cosponsored or SBAsponsored. The OIG, however, noted the following deficiencies:
- Gifts totaling about $25,700 were solicited and accepted from Small Business Lending Companies, proscribed sources, and from the fiscal transfer agent for the 7(a) guaranteed loan program, a source requiring a conflict of interest determination. The OIG found no evidence that a conflict of interest determination was made. In addition, gifts totaling about $23,075 were solicited and accepted from section 7(a) lenders without conflict of interest determinations.
- Gifts received for the events were not deposited into the Business Assistance Trust Fund (BAT Fund), as required. About $59,325 were received as gifts and deposited in a SCORE checking account pursuant to an agreement between the district and the local SCORE chapter. As of January 31, 2002, the checking account had a balance of $24,601.
- Gift funds were used for prohibited purposes. At least $12,714 in excess of registration fees were paid from the custodial checking account to purchase prohibited items, such as shirts and alcohol for event participants.
- Excess gift funds totaling $12,619 were expended for items and services unrelated to the sponsored events without notification to the donors and without use of proper procurement documents.
- Registration and vendor fees totaling about $79,660 were collected and used by the district even though the SBA did not have specific authority to charge fees.
- The district and SCORE, its fiscal agent, did not have adequate controls in place to ensure full accountability of funds. The OIG was able to account for all funds deposited in and disbursed from the custodial account. However, proper use of the BAT Fund would improve accountability.
The OIG determined that these deficiencies occurred because senior district office management personnel stated that they did not believe the requirements of SOP 90 75 2 were applicable to any of the district's events. Additionally, the OIG concluded that oversight by regional and headquarters personnel were not adequate. The OIG recommended that the Associate Administrator for Field Office Operations provide better guidance to district office staff and improve its oversight over district office SBA-sponsored and cosponsored activities. Specifically, the guidance should address the:
(a) distinction between the types of events and the appropriate procedures for planning and conducting cosponsored and SBA-sponsored events;
(b) appropriate sources from whom to solicit and accept gift;
(c) requirement to obtain conflict of interest case-by-case determinations;
(d) proper procedures for disbursing excess gift funds;
(e) remission of gift funds to the BAT Fund at the U.S. Treasury;
(f) proper accountability of event funds, and
(g) appropriateness of charging fees.
The SBA agreed with six recommendations but disagreed with the recommendation to provide clear instructions to the Georgia District Office. While management's response indicated it disagreed with this recommendation, it did describe planned actions to update legal opinions relevant to the discussed issues and to provide guidance to the field in regular conference calls. In addition, the SBA disagreed with OIG conclusions in the draft report. The OIG evaluated the SBA’s comments revised this report to accept their comment about cosponsorships. The OIG also modified other parts of the report as a result of the comments and revised recommendations.