Advisory Memorandum 12-22: The SBA’s Ratification Process May Lead to Anti-Deficiency Act Violations

This advisory memorandum presents an issue the OIG identified during an on-going audit of the Small Business Administration’s (SBA) Unauthorized Commitments.  The OIG determined that the SBA had ratified four unauthorized commitments associated with an expired postage meters contract without determining whether unobligated funds were available when the unauthorized commitment initially occurred.  Without such a determination, these ratifications appear to be invalid under Federal Acquisition Regulations (FAR) and U.S. Government Accountability Office guidance.  Additionally, the ratifications may put the SBA at risk for an Anti-Deficiency Act violation.  The OIG did not determine how widespread this deficiency is, but wanted to provide SBA management with an early notification of this issue so the Agency can expeditiously implement corrective action, if needed.  Further, the OIG previously discussed these concerns with SBA officials in May and August 2012.  As a result of these discussions, the Agency updated its ratification template to ensure that funds existed at the time the unauthorized commitment was made for all ratifications since May 2012 and all future ratifications.  Since raising these concerns with management, the SBA is in the process of reviewing all ratifications made between February 2011 and May 2012 to ensure that they comply with all of the requirements outlined in the FAR.

The audit team recommended that the SBA, more specifically the Chief Financial Officer: (1) continue to review the remaining ratification actions that have been taken using the previous template to determine if they contain similar deficiencies, and undertake appropriate corrective action to ensure that all ratifications approved by the SBA are valid under the FAR; and (2) review and determine if any Anti-Deficiency Act violations occurred in the previously ratified unauthorized commitments.