U.S. SMALL BUSINESS ADMINISTRATION
 

OFFICE OF INSPECTOR GENERAL
 

ADVISORY MEMORANDUM 

REPORT NO. 13-21 

DATE: September 26, 2013 

TO: Frederick Baldassaro, Assistant Administrator for Communications and Public Liaison 

Robert Hill, Associate Administrator for Field Operations 

Sara Lipscomb, General Counsel 

SUBJECT: SBA Enterprise-wide Controls over Cosponsored Activities 

This advisory memorandum presents issues that we identified during our limited scope audit of the 

Small Business !dministration’s (SBA or Agency) enterprise-wide controls over its cosponsored activities. 

Our objective was to determine the adequacy of controls over the S!’s cosponsored activities in 

accordance with federal laws, regulations, 1 and policies. We did not assess the validity and eligibility of 

individual expenses for the cosponsored activities. 

Summary 

We determined that for its cosponsored activities, the SBA did not fully implement effective controls to 

comply with the requirements stipulated in Title 13, Part 106 of the Code of Federal Regulations (CFR) 

and Standard Operating Procedure (SOP) 90 75 3, Outreach Activities. Specifically, the SBA did not 

(1) consistently vet and perform conflicts of interest determinations, (2) report on the results of its 

activities within established timeframes, and (3) control excess funds that remained at the conclusion of 

those activities. 

We concluded that opportunities exist to strengthen S!’s controls over cosponsored activities that 

include: 

 Fully implementing additional controls over cosponsorship approval and closeout procedures; 

 Strengthening controls over the maintenance of official cosponsorship files to ensure that all 

required documentation is obtained; and 

 Performing effective Quality Service Reviews2 on all cosponsored activities to ensure that 

laws, regulations, and SBA policy were followed. 

1 The Honorable Jeanne Shaheen, U.S. Senate Committee on Small Business and Entrepreneurship, requested the Inspector General to 

perform an audit of SBA conference expenses to ensure that taxpayer dollars had been spent in accordance with laws and regulations. Our 

audit of conferences prompted this separate audit of five SBA cosponsored lenders conferences. 2 The Federal Managers’ Financial Integrity !ct (FMFIA) requires agencies, on an ongoing basis, to evaluate the ability of their internal 

control systems to protect federal programs against fraud, waste, abuse, and mismanagement. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

To help implement stronger controls and oversight of cosponsored activities, we made eight 

recommendations to several SBA officials. 

Scope and Methodology 

To perform the audit, we reviewed five SBA cosponsored activities that occurred since January 1, 2005, 

and were included in the data call that the SBA submitted to the Congress.3 We obtained an 

understanding of relevant federal laws, regulations, and SBA policies. We interviewed relevant SBA 

officials and cosponsors. We also evaluated and performed analyses using certain financial records and 

other documents obtained from SBA officials and cosponsors. Throughout the audit, we relied on files, 

reports, and other data provided by SBA program officials and cosponsors. 

We conducted our audit in accordance with Government Auditing Standards prescribed by the 

Comptroller General of the United States, from June 2012 to September 2013. Those standards require 

that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We believe that the evidence 

obtained provides a reasonable basis for our findings and conclusions based on our audit objective. 

Background 

Section 4(h) of the Small Business Act authorizes the Agency to provide assistance for the benefit of 

small businesses through cosponsored activities with any eligible entity. This assistance must be for the 

benefit of U.S. businesses and further the mission of the Agency. Assistance generally includes training, 

education, or dissemination of information. Agency policies and procedures applicable to cosponsored 

activities are contained in SOP 90 75 3, Outreach Activities and 13 CFR Part 106. 

According to the SOP, the Responsible Program Official accountable for a specific cosponsorship activity 

will be a senior management official from the office originating the activity, i.e., a district director at the 

district office level or a management board member at the headquarters level. The Office of Strategic 

Alliances has the general duty to monitor all cosponsorships and address problems and concerns of 

which the Director is made aware. 

In a 2004 audit4 the OIG noted that improvements were needed in the compliance, guidance, and 

oversight of SBA-sponsored and cosponsored activities. More specifically, noncompliance issues were 

categorized in three general areas: soliciting and accepting gifts and fees; planning, conducting, and 

reporting activities; and accounting for funds and non-cash assets. However, despite the addition of 

SOP 90 75 3, we concluded that the Agency had not fully implemented or effectively monitored its 

corrective actions because we found the same or similar conditions continued to exist during this year’s 

audit. The OIG is making eight recommendations in this report. 

3

Source: Letter to the Honorable Darrell E. Issa in response to a congressional inquiry on SBA conferences dated April 30, 

2012. 4

OIG Audit Report 4-44, Summary Audit of SBA-Sponsored and Cosponsored Events by District Offices dated September 24, 

2004. 

2
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Results 

The SBA did not Always Vet and Perform Conflicts of Interest Determinations for Cosponsors 

The SOP 90 75 3 stipulates that all potential cosponsors must be vetted by the originating office or the 

Office of Strategic Alliances.5 The General Counsel or designee must sign SBA Form 1615, Cosponsorship 

Approval Request, to document that a legal review was performed, which includes a finding that the 

cosponsorship is legally sufficient and a conflict of interest determination was performed. This is to 

ensure that a potential cosponsor’s participation in the cosponsored activity would not create an actual 

or apparent conflict of interest with the SBA. 

Our audit found that SBA officials did not always perform their due diligence for lenders, grantees, and 

other entities that cosponsored its activities. Specifically, for one of the cosponsored activities, cash 

contributions were accepted from lenders and grantees without a documented vetting and conflicts of 

interest determination. This condition occurred because the Responsible Program Official did not timely 

request checks on cosponsors added by a joinder agreement.6 Not properly vetting all cosponsors prior 

to soliciting and accepting their cash or in-kind contributions could cause an apparent or potential 

conflict of interest between the two entities. 

Official Cosponsorship Files were not Complete 

In accordance with SOP 90 75 3, within 60 calendar days after the cosponsored activity occurred, the 

Responsible Program Official must ensure that all proper documentation and paperwork is completed 

and submitted to the OSA for the official cosponsorship file which includes7 the SBA Form 2299, Final 

Cosponsorship Report, final budget, and fiscal agent’s final accounting report.8 The Responsible Program 

Official is accountable for all income and expenses related to the activity and should use the fiscal 

agent’s final accounting report to prepare SBA Form 2299 and report on the results of the activity. 

Based on our review of the official files, we determined that for the cosponsored activities in our 

sample, required documentation was not always included in the file. For example, the: 

 Fiscal agent’s final accounting report was missing from all the files; and 

 SBA Form 2299, which includes the actual final budget, was missing from three files, and two 

Responsible Program Officials did not submit their reports to OSA within 60 days following the 

conclusion of the activity. 

During this audit, we requested and received the required post activity documentation from the fiscal 

agents and the Responsible Program Officials. The Responsible Program Officials, however, did not 

always obtain or submit the fiscal agent’s final accounting report for their respective activities, as 

required by S!’s guidance. In some cases, the Responsible Program Officials did not report the excess 

funds that remained from these cosponsored activities on the SBA Form 2299 or to the OSA. We 

5

Vetting entails gathering information about each potential cosponsor in order for the General Counsel or designee to 

make a conflict of interest determination. 6

The S! added cosponsors to an event with a document titled “Joinder !greement/” The new cosponsors were not 

included in the Cosponsorship Agreement that the SBA originally executed, but became cosponsors by operation of the Joinder 

Agreement. 7

The file should include a copy of the fully executed osponsorship !greement- S! Form 1615, “osponsorship !pproval 

Form-” S! Form 2299, “Final osponsorship Report-” and any additional correspondence or documents reviewed by OSA. 8

This report includes total income (listing of cash contributions from all cosponsors and participant fees collected) and 

itemized list of expenses paid by the fiscal agent. 

3
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

summarized our review of the SBA Form 2299 and fiscal agent’s final accounting report for the five 

cosponsored activities in our scope (see Appendix A.) 

For the cosponsored activities that we reviewed, the Responsible Program Officials did not comply with 

the SOP requirement to submit the S! Form 2299, fiscal agent’s final accounting report, and final 

budget to the responsible Headquarters official within 60 days after the conclusion of the cosponsored 

activity. The Responsible Program Officials submitted these reports between three months and five 

years after the cosponsored activity occurred. This occurred because the (1) OSA did not perform 

sufficient oversight for these cosponsored activities; (2) cosponsorship agreements refer to the SBA SOP 

rather than specifying critical closeout roles and responsibilities; (3) fiscal agents did not submit an 

accounting to the Responsible Program Officials at the conclusion of the cosponsored activities; and (4) 

Responsible Program Officials did not consistently follow-up with the fiscal agents within a reasonable 

timeframe to obtain an accounting of the cosponsored activities. 

The SBA Did Not Always Properly Account for Excess Funds from Cosponsored Activities 

In accordance with SOP 90 75 3, all cosponsorship agreements must be accompanied by a proposed 

budget to demonstrate the cosponsor(s) will not make a profit or accumulate excess funds from the 

cosponsored activity. However, in the event that excess funds remain in the cosponsorship account 

after all the expenses are paid, the cosponsors must decide how to handle the excess funds in 

accordance with this SOP. When the sources of excess funds are cash contributions from cosponsors, 

the SOP provides that excess funds may be returned to the cosponsors on a pro rata basis. 

Alternatively, the cosponsors may agree in writing that excess cosponsorship funds will be a gift to the 

SBA.9 ash gifts must be placed in S!’s usiness Assistance Trust (BAT) Fund. The SOP also provides 

that a cosponsor may solicit and accept donations on its own behalf for the purpose of meeting its share 

of the costs of the cosponsored activity. 

Our audit showed that in four of the five cosponsored activities, excess funds were not returned to the 

cosponsors pro rata, or gifted to the SBA and deposited in the BAT Fund. In addition, the remaining 

fiscal agent, who solicited donations on its own to cover its share of costs, accumulated funds in excess 

of the expenses paid. We estimated and summarized the amount of funds remaining at the conclusion 

of the cosponsored activity based on the information provided (see Appendix A). We also determined 

the status of those funds, and determined whether the funds were accounted for in accordance with the 

provisions in SOP 90 75 3 (see Appendix B). The OSA was unaware of the final accounting of these 

cosponsored activities and did not ensure that activities were closed out in accordance with SBA policy. 

In addition, some excess funds remained in the custody of the fiscal agents. 

While our objective was not to determine the validity and eligibility of expenses that were paid, our 

review of closeout documentation showed that certain transactions were not processed in accordance 

with guidance. For example, one of the fiscal agents billed $8,500 to pay itself an activity management 

fee and $2,508 for web site alterations and maintenance.10 A second fiscal agent reimbursed itself 

$6,000 in payroll costs for staff hours charged to the respective cosponsored activity. The SOP states 

that cosponsored funds must not be used to pay a cosponsor’s overhead costs, including salaries, or 

other indirect costs of the activity. Further, up to 16 months after the activity occurred, a third fiscal 

agent issued checks totaling $8,417 to pay expenses that appear unrelated to the cosponsored activity. 

9

SOP 90 75 3 states that excess funds that are given to the !gency must be applied as directed in the S!’s gift procedures 

outlined in SOP 90 53, Gifts to the Agency. However, the SBA deleted this SOP in 2007 and has not had permanent procedures 

on cash gift acceptance and disposition since that time. OIG Report 12-13, Review of the S!’s &iscal Year 2011 ash 'ifts, 

dated March 30, 2012, contains a recommendation that the SBA issue permanent policies on Agency acceptance of gifts. 10 Upon request, the fiscal agent did not provide a third party invoice for the web site alterations and maintenance. 

4
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A fourth fiscal agent invested various increments of the excess $36,941. The Responsible Program 

Officials should have, but did not, ensure that the excess funds from their activities were returned to the 

cosponsors pro rata, or deposited in the S!’s AT Fund. 

The fifth fiscal agent conducted fund raising activities to meet its share of the budgeted costs for this 

specific cosponsorship activity. The final accounting provided by the fiscal agent showed funds received 

in excess of expenses totaling $34,454. However, SOP 90 75 3 states that a cosponsor should not make 

a profit on these activities. These conditions occurred because the (1) Responsible Program Officials did 

not perform sufficient oversight of these cosponsored activities; (2) cosponsorship agreements did not 

adequately specify all closeout roles and responsibilities; (3) fiscal agents did not timely provide an 

accounting of income and expenses at the end of the cosponsored activity; (4) Responsible Program 

Officials did not follow-up with the fiscal agent to receive the reports, and (5) SOP 90 75 3 did not clearly 

stipulate a specific timeframe for disposing of excess funds. Consequently, neither the Responsible 

Program Officials nor the fiscal agents complied with S!’s policy regarding the reporting on and closing 

out of SBA cosponsored activities. In addition, the SBA had limited assurance that the fiscal agents 

spent $106,47911 of private funds on authorized purposes, in accordance with SBA regulations and 

policies. Lastly, $52,558 remained in the custody of the fiscal agents at-risk of misuse or fraud. 

Conclusion 

Given the S!’s current focus on increasing its market and outreach responsibilities with its lenders, 

stakeholders, and small business concerns, correction of the issues in this report is imperative. All SBA 

officials have a responsibility to be prudent in spending12 private sector dollars on its cosponsored 

activities. Implementing sound and rigorous controls to plan, carry out, and report on these activities is 

essential in meeting these responsibilities. Key to this is ensuring that staff, who plan these 

cosponsored activities, are trained and knowledgeable regarding their fiduciary responsibilities including 

the laws, regulations, and policies that govern cosponsored activities. Responsible Program Officials 

have a responsibility to oversee and account for all funds collected in support of their respective 

cosponsored activities. Further, Responsible Program Officials and the designated fiscal agent must 

ensure the disposition of excess cosponsorship funds in accordance with SBA guidance. 

By not effectively implementing adequate policies and procedures to address these issues, the SBA will 

be less able to identify areas of unnecessary spending or opportunities for greater efficiency or cost 

savings when cosponsoring these activities with public funds. Because of these conditions, SBA 

personnel did not comply with regulations and SBA policies, and did not ensure that private funds were 

spent in accordance with the intended purpose. 

Recommendations: 

We recommend the Assistant Administrator for the Office of Communications and Public Liaison: 

1.	 Collaborate with the General Counsel to update the cosponsorship agreement template to 

clearly include all specific roles and responsibilities for fiscal agents and all other accountable 

parties in accordance with SOP 90 75 3. 

11Our objective was not to test all expenses and determine whether they were allowable in accordance with SBA policy. 

12Cosponsored activities are often funded by fees paid by private sector participants, and/or funds contributed by the 

cosponsors. The Agency rarely uses appropriated funds to pay for cosponsored activities; however, the five lenders 

conferences reviewed in this audit do represent an anomaly as SBA did pay a registration fee for some of its employees to 

attend. 

5
 
 

 

 

 

 

 

 

 

 

 

 

 

 

We recommend the Office of Strategic Alliances Director: 

2.	 Establish controls, such as a reporting system, to ensure that all activities are timely and 

properly closed out, and that all required documents and reports, as specified in SOP 90 75 3, 

are obtained. 

3.	 Conduct periodic reviews of the official cosponsorship files for completeness and compliance 

with SOP requirements. 

4.	 Provide training for staff that plan cosponsored activities to reinforce their roles and 

responsibilities. 

5.	 Collaborate with the District Counsel and the General Counsel to ensure that all potential 

cosponsors are properly vetted prior to soliciting and accepting their cash contributions. 

We recommend the Associate Administrator for the Office of Field Operations: 

6.	 Initiate actions to properly account for, and dispose of $36,941 remaining from the 2009 

America East Conference and $15,617 remaining from the 2010 Mid-America Lender Conference 

in accordance with the provisions of SOP 90 75 3. 

7.	 Under the provisions of FMFIA, perform periodic quality service reviews to include 

cosponsorship files and funds disposition, verifying any expenses paid out of cosponsored 

income are appropriate. 

We recommend the General Counsel: 

8. Revise SOP 90 75 3 to include specific procedures and timeframes regarding the disposition of 

any excess funds that result from SBA-cosponsored activities. 

Agency Comments and OIG Response 

On February 21, 2013, we provided a draft of this report to the Assistant Administrator for 

Communications and Public Liaison, Associate Administrator for Field Operations and General Counsel 

for comment. On September 6, 2013, the Office of General Counsel provided a consolidated response 

to the draft report, which is included in its entirety in Appendix C. Management provided some 

technical comments on certain information contained in the draft report, as well as comments on each 

of the eight recommended actions/ ! summary of management’s technical comments, 

recommendation-specific comments, and our responses follows. 

General Management Comments 

The SBA officials appreciated the opportunity to meet with OIG staff to provide clarification on S!’s law 

and policy governing cosponsored activities prior to the issuance of the draft report. Management’s 

review of the report and underlying files led them to conclude that OIG’s findings about the failings of 

S!’s cosponsorship program as a whole are too broadly stated since the five agreements represent less 

than one percent of all the cosponsored activities, which took place during that time. Management also 

emphasized that certain terms of art should not be used interchangeably with SBA cosponsored 

activities and gifts to the Agency. 

6
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OIG Response 

We met with Agency officials on the specific issues addressed in this report between February 2013 and 

May 2013. ased on the !gency’s response, we added language to clarify the number of fiscal agents 

having excess funds remaining at the conclusion of the cosponsored events. For example, we added 

criteria, which provides that a cosponsor may solicit and accept donations on its own behalf for meeting 

its share of the costs of the cosponsored activity and these funds should be limited to its share of the 

budgeted costs for the activity. Further, we received additional documentation after we issued the draft 

report and thus, revised some amounts and uses of excess funds that we reported in the finding and 

appendices. Lastly, we revised the number of cosponsors who were not vetted or a conflicts of interest 

determination did not exist. 

Management generally concurred with the findings related to reporting and accounting for excess 

funds. Management disagreed with our finding regarding the vetting and conflict of interest 

determinations for some cosponsors. We consider management’s comments to be generally responsive 

to six recommendations and partially responsive to two recommendations. 

Recommendation 1 - Collaborate with the General Counsel to update the cosponsorship agreement 

template to clearly include all specific roles and responsibilities for fiscal agents and all other 

accountable parties in accordance with SOP 90 75 3. 

Agency Comments and OIG Response 

Management agrees with the intent behind this recommendation but did not agree with the actual 

recommendation. Management contends that roles are currently identified but what is evident from 

this audit is that people need to better understand the terms and need more instruction on what and 

how to report and what to monitor. We consider management’s comments to be generally responsive 

to this recommendation. Above the specific discussion of the individual recommendation, the OIG will 

evaluate the agency’s responsiveness through the audit resolution process/ 

Recommendation 2 - Establish controls, such as a reporting system, to ensure that all activities are 

timely and properly closed out, and that all required documents and reports, as specified in SOP 90 75 

3, are obtained. 

Agency Comments and OIG Response 

Management concurs with this recommendation. The SBA has a reporting system that relies heavily on 

human resources. The Agency is exploring ways to use technology it already owns to collect 

cosponsorship information and track agreements from conception and approval to close-out. We 

consider management’s comments to be generally responsive to this recommendation/ !bove the 

specific discussion of the individual recommendation, the OIG will evaluate the agency’s responsiveness 

through the audit resolution process. 

Recommendation 3 - Conduct periodic reviews of the official cosponsorship files for completeness and 

compliance with SOP requirements. 

7
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Comments and OIG Response 

Management concurs with this recommendation. The Office of General Counsel (OGC) and OSA will 

explore ways to leverage OGC staff to assist OSA with this task. We consider management’s comments 

to be generally responsive to this recommendation. Above the specific discussion of the individual 

recommendation, the OIG will evaluate the agency’s responsiveness through the audit resolution 

process. 

Recommendation 4 - Provide training for staff that plan cosponsored activities to reinforce their roles 

and responsibilities. 

Agency Comments and OIG Response 

Management concurs with this recommendation. The SBA currently provides annual cosponsorship 

training to employees and plans to supplement this with some specialized training focusing on roles and 

responsibilities of fiscal agents. !ll supplemental materials will be made available through the !gency’s 

intranet website. We consider management’s comments to be generally responsive to this 

recommendation. Above the specific discussion of the individual recommendation, the OIG will 

evaluate the agency’s responsiveness through the audit resolution process/ 

Recommendation 5 - Collaborate with the District Counsel and the General Counsel to ensure that all 

potential cosponsors are properly vetted prior to soliciting and accepting their cash contributions. 

Agency Comments and OIG Response 

Management agrees that vetting is important so they generally agree with this recommendation. While 

management did not explicitly agree or disagree with this recommendation, we consider the comments 

responsive to the recommendation. 

Recommendation 6 - Initiate actions to properly account for, and dispose of $36,941 remaining from 

the 2009 America East Conference and $15,617 remaining from the 2010 Mid-America Lender 

Conference in accordance with the provisions of SOP 90 75 3. 

Agency Comments and OIG Response 

Management agrees to dispose of $15,617 from the 2010 Mid-America Lender Conference by placing it 

in the Business Assistance Trust Fund. Management stated that $36,941 from the 2009 America East 

Lender Conference did not exist or is not available as described in the Draft Report. We consider 

management’s comments to be partially responsive to this recommendation since management 

concurred with disposing $15,617 remaining from the 2010 conference. However, management 

contends they are not aware of $36,941 remaining from the 2009 America East Conference. We 

recommend the District Director immediately collaborates with the fiscal agent, and SCORE, to confirm 

the status of these funds and, accordingly, follows the provisions of SOP 90 75 3 to ensure the 

disposition of these excess funds. 

Recommendation 7 - Under the provisions of FMFIA, perform periodic quality service reviews to 

include cosponsorship files and funds disposition, verifying any expenses paid out of cosponsored 

income are appropriate. 

8
 
 

 

 

 

 

 

 

 

 

 

 

 

Agency Comments and OIG Response 

Management concurs with this recommendation. Cosponsored activities are one of the activities 

already included in the Field Accountability Review (formerly called QSRs) and the Agency agrees to 

revisit the list of cosponsorship-related questions to see if there are ways to improve this portion of its 

peer-to-peer review process. We consider management’s comments to be responsive to this 

recommendation 

Recommendation 8 – Finalize and issue the draft Gift SOP including specific procedures and 

timeframes regarding the disposition of any excess funds that result from SBA-cosponsored activities. 

Agency Comments and OIG Response 

Management agrees to finalize and issue the Gift SOP. Management stated that the Gift SOP will cross 

reference SOP 90 75 3 as appropriate. We consider management’s comments to be partially responsive 

to this recommendation. Management contends that SOP 90 75 3, not the Gift SOP, is the appropriate 

place to address the procedures for disposing of these funds since they stem from cosponsored 

activities. Accordingly, we will change the wording of this recommendation as follows: Revise 

SOP 90 75 3 to include specific procedures and timeframes regarding the disposition of any excess funds 

that result from SBA-cosponsored activities. Above the specific discussion of the individual 

recommendation, the OIG will evaluate the agency’s responsiveness through the audit resolution 

process. 

Action Required 

Please provide your management decision for each recommendation on the attached SBA Form 1824, 

Recommendation Action Sheets, within 30 days from the date of this report. Your decision should 

identify the specific action(s) taken or planned for each recommendation and the target date(s) for 

completion. Consistent with OMB Circular A‐50, Audit Follow-up, your response should include the 

corrective action(s) taken or planned for each recommendation and the target date(s) for completion. 

We appreciate the courtesies extended to staff during this audit. If you have any questions regarding 

this report, please contact Jeffrey R. Brindle, Director, Information Technology and Financial 

Management, on (202) 205-7490. 

*** 

/s/ 

Robert A. Westbrooks 

Deputy Inspector General 

9
 
 

 

 

Appendix A. Summary of Required Documentation for Cosponsored Activities 

Cosponsored 

Activity 

Fiscal Agent Report SBA Form 2299 Funds 

Remaining 

After 

Activity as 

Noted by 

OIG 

Excess Funds 

Reported by the 

Responsible 

Program Official 

2010 America *Portland Regional hamber’s final Dated 5/25/11 represented $52,600 $46,600 

East Lenders accounting report dated 9/12/12 $160,175 as the final budget 

Conference showed total income $160,175, total 

expenses $113,688.41, and excess funds 

$46,600.34. However, our review of the 

report showed that an additional $6,000 

was used to reimburse the fiscal agent 

for staff hours spent planning and 

coordinating the America East 

Conference. 

amount, which is the same 

amount reported for cash 

collected, and notation that 

“Excess funds would be spent 

on education and training 

programs for small business 

customers. 

2009 America *SORE’s final accounting report dated *Dated 9/17/12 represented $36,941 $0 

East Lenders 8/22/12 showed total income $97,243 as the final budget 

Conference $134,183.21, total expenses $97,242.60, 

and $36,941 excess funds. 

and $134,183 as cash 

collected; no dollar amount for 

excess funds and notation that 

“SORE has not disposed of 

any of the excess funds and 

has deposited those funds in a 

separate account/” 

2010 Mid- *Louisiana Minority Supplier *Dated 10/5/12 represented $24,034 $0 

America Lenders Development ouncil’s final accounting $118,453.18 as the final 

Conference report dated 10/3/12 showed a ledger 

of in- and outgoing cash transactions 

that occurred between 2/28/10 and 

4/13/12, and $15,617.45 excess funds. 

However, our review of the report 

showed that between 2/11/11 and 

4/13/12 an additional $8,417 was used 

to pay expenses that appear unrelated 

to the cosponsored activity. 

budget; total cash collected 

$118,150; no dollar amount 

for excess funds; and notation 

that “Funds will be transferred 

to BAT Fund for LA District 

Office/” 

2011 America *SORE’s final accounting report dated Dated 11/21/11 represented $11,008 $0 

East Lenders 10/26/11 showed total income $167,592 as the final budget 

Conference $167,592 and total expenses $167,592. 

Invoice for final check issued to SCORE 

indicates $11,008 for SCORE direct costs 

regarding an activity management fee 

and for web site alterations and 

maintenance. 

amount; total cash collected 

$167,592; and a notation 

“Excess funds. Due to lesser 

than expected attendance, 

final budget came in lower 

than projected/” 

2007 America *Rhode Island Small Business *Dated 9/7/12 represented $34,454 $0 

East Lenders Development Center at Johnson and $93,209.06 as the final budget; (rounded) 

Conference Wales University’s final accounting 

report dated 12/4/07 showed total 

income $127,011, total expenses 

$92,557.16, and net income $34,453.84. 

$93,209.06 as cash collected 

and no reference to excess 

funds. 

Total $159,037 $46,600 

*Received in response to OIG audit request. 

10 
Appendix B. Status of Excess Cosponsorship Funds 

Cosponsored 

Activity 

Name of Fiscal 

Agent 

Status of Excess Funds Were Excess Funds 

Accounted for in 

Accordance with 

Regulations and SBA 

Policy? 

2010 America East Portland Regional These funds were spent on the No. Excess funds should 

Lenders Conference hamber’ fiscal agent’s payroll cost and 

other activities to support small 

business education and 

consulting activities. 

have been returned to 

cosponsors pro rata or 

gifted to the SBA and 

deposited in the BAT 

Fund. 

2009 America East SCORE Bank statements reflect No. Excess funds should 

Lenders Conference $38,702.07 as follows: 

$21,729.08 invested in muni 

funds, $9,998 invested in 

securities, and $6,974.99 held in 

a checking account. Three years 

after the conclusion of the 

activity, the District Director 

asserted to us that he was 

unaware these excess funds 

existed. 

have been returned to 

cosponsors pro rata or 

gifted to the SBA and 

deposited in the BAT 

Fund. 

2010 Mid-America Louisiana Minority Of this amount, $8,417 was used No. Excess funds should 

Lenders Conference Supplier 

Development 

Council 

to pay expenses that appear 

unrelated to the cosponsored 

activity, and the residual 

$15,617 remains in the custody 

of the fiscal agent. The District 

Director asserted to us that he 

was unaware that excess funds 

remained from this activity. 

have been returned to 

cosponsors pro rata or 

gifted to the SBA and 

deposited in the BAT 

Fund. 

2011 America East SCORE The fiscal agent paid itself an No. Excess funds should 

Lenders Conference $$8,500 activity management 

fee and $2,508 for web site 

alterations and maintenance. 

have been returned to 

cosponsors pro rata or 

gifted to the SBA and 

deposited in the BAT 

Fund. 

2007 America East Rhode Island Small Funds were used to pay for No. Donations collected 

Lenders Conference Business 

Development 

Center at Johnson 

and Wales 

University 

consulting services to small 

businesses from October to 

December 2007. 

by the cosponsor should 

have been limited to 

meeting the share of its 

costs for the cosponsored 

activity. 

11
 
 

 

 

 

 

Appendix C: Agency Comments 

U.S. SMALL BUSINESS ADMINISTRATION 

WASHINGTON, DC 20416 

Date: September 6, 2013 

To: John K. Needham, Assistant Inspector General for Auditing 

From: Frederick Baldassaro, Associate Administrator for Communications and Public 

Liaison 

Robert Hill, Associate Administrator for Field Operations 

Sara D. Lipscomb, General Counsel 

Subject: Advisory Memorandum Assignment 12013: Draft Report on SBA Enterprise-wide 

Controls over Cosponsored Activities 

This is SBA’s initial response to the Office of Inspector General’s (OIG) Draft Report entitled 

“Draft Report on SBA Enterprise-wide Controls over Cosponsored Activities.” We appreciate 

the opportunity to comment on this Draft Report. 

General Comments 

SBA appreciated the opportunity to meet with OIG staff prior to the issuance of this Draft Report 

to clarify SBA’s law and policy governing cosponsored activities. Nevertheless, the Draft Report 

still reflects a misunderstanding of the nuances of SBA’s cosponsorship program. For example, 

the Appendices reflect excess funds from America East 2007 when under SBA policy, there 

weren’t any excess funds. The Appendices also provide some incorrect assumptions as to 

fiscal agents’ use of cosponsorship funds. The Conclusion references the need for adequate 

policies to identify areas of unnecessary spending or opportunities for greater efficiency or cost 

savings, but these concepts apply to appropriated funds not cosponsorships, which are 

supported with private dollars. Finally, there seems a misunderstanding of SBA’s vetting and 

conflict of interest determination requirements. 

SBA’s cosponsorship authority is a tool to leverage public and private resources to provide a 

benefit for U.S. small businesses at little or no cost to taxpayers. The Draft Report summarizes 

what OIG characterizes as failures by SBA officials to implement effective controls to comply 

with its applicable regulations and policy. Our review of the report and underlying files leads us 

to conclude that OIG’s findings about the failings of SBA’s cosponsorship program as a whole 

are too broadly stated. From 2007 to 2011, SBA executed more than 600 cosponsorship 

agreements. The five agreements that are the subject of this audit represent less than one 

12
 
 

 

 

 

percent of all the cosponsored activities which took place during that time period. It is not clear 

to us why such sweeping statements would be made about a program given the statistically 

insignificant number of activities examined. 

It’s important to note SBA uses the terms “cosponsor,” “donor” and “gift” as terms of art. SBA’s 

ability to conduct cosponsored activities stems from one section of the Small Business Act (15 

USC 633(h)) and its ability to solicit and accept gifts from another (15 USC 633(g)). These are 

two distinct authorities and programs. To avoid confusion, SBA does not use the associated 

terms interchangeably. The Draft Report, at times, confuses the authorities and issues, which is 

perhaps one reason SBA and OIG have obtained different conclusions. A section-by-section 

analysis of the Draft Report follows. 

Background 

In the background section, OIG mentions a 2004 audit and states the three, broad 

noncompliance categories highlighted in that audit still exist today: soliciting and accepting gifts 

and fees; planning, conducting and reporting activities, and accounting for funds and non-cash 

assets. While we understand OIG reviews its previous audits as part of a current audit, to avoid 

confusion we note the many changes that have occurred since the 2004 audit. 

While comparison of isolated issues that cross over from 2004 to today may be warranted, it is 

not accurate and potentially confusing to the uninformed reader to categorically compare the 

OIG 2004 audit of SBA-sponsored activities, cosponsorships and gifts with five cosponsored 

activities conducted under the new law and policy. 

First, none of the gift issues or recommendations raised in the 2004 audit are applicable to this 

audit. Therefore, the first category of noncompliance, “soliciting and accepting gifts and fees” 

should not be referenced in this Draft Report. Second, the noncompliances listed in the 2004 

audit do not directly correlate to the 2004 findings or recommendations so it is difficult to 

understand what from the 2004 audit is relevant or still applicable to the current cosponsorship 

law and policy13. Last, SBA implemented recommendations from the 2004 audit. The 2004 

recommendations largely focused on the need to develop additional policy on SBA-sponsored 

and cosponsored activities. A side-by-side comparison of SOP 90 75 2 (on which the 2004 

audit is based) and the revised cosponsorship policy in SOP 90 75 3 demonstrates that SBA 

made the applicable recommended policy changes from the 2004 audit. 

Results 

A.	 The SBA Did Not Always Take Measures to Document Whether Conflicts of Interest Existed for 

Cosponsors 

SBA’s policy requires all potential cosponsors to be vetted and a conflict of interest 

determination performed by the General Counsel or designee. Vetting an entity and 

making a conflict of interest determination are two different processes. Vetting is the 

process of gathering information about an entity to see if it has any relationship with 

SBA. The conflict of interest determination is the legal determination of whether a 

potential cosponsor has an actual or apparent conflict of interest with SBA. The results 

13 In December 2004 SBA cosponsorship and gifts laws changed and subsequent regulations and new policy were 

issued. 

13
 
 

 

 

 

of the vetting process are used by the General Counsel or designee during the conflict of 

interest determination. Vetting results are included in the cosponsorship file. SBA policy 

does not require the conflict of interest determinations to be documented anywhere other 

than on Form 1615 (Part Two is for signature of legal counsel). 

Vetting results for all cosponsors, with the exception of one activity in Louisiana14, are 

available in the cosponsorship files (which were reviewed by the OIG). Additionally all 

five activities have a Form 1615 signed by the appropriate legal counsel. Legal counsel 

performed conflict of interest reviews for all original cosponsors and all additional 

cosponsors joined to the agreement at a later date, with the exception of Louisiana. 

SBA policy does not require legal counsel to draft a legal memorandum for each conflict 

of interest determination performed. 

B.	 Official Cosponsorship Files were not Complete 

We agree that four of the five Final Cosponsorship Reports, SBA Form 2299, were not 

submitted to the Office of Strategic Alliances (OSA) in a timely manner. We also agree 

that the Responsible Program Officials need to be reminded of their responsibilities to 

close out a cosponsored activity. We disagree that adding the specific roles and 

responsibilities of a fiscal agent to the cosponsorship agreements is more effective than 

a cross reference to the governing document (SOP 90 75 3). We believe the SOP and 

supplemental guidance are the better vehicles to provide this detailed information. This 

is further addressed in Recommendation 1. 

C.	 The SBA Did Not Always Properly Account for Excess Funds from Cosponsored Activities 

We agree that in several cases the funds remaining after all activity expenses were paid 

were not handled in accordance with SBA policy; however, we disagree with the Draft 

Report’s characterization of some of the funds as outlined in Appendices A and B. SBA 

independently reviewed the activities. In some instances, we found different results than 

those reflected in the Draft Report. Each activity Iisted in the Draft Report Appendices A 

and B is addressed below and reflects the findings of our internal review. We also note 

that the Draft Report has several inconsistencies between data reported in this section 

and data reported in the Appendices. We provide our event-by-event analysis below. 

1.	 2007 America East Lenders Conference (Rhode Island): The Draft Report indicates that 

event expenses were $92,557 and event income was $127,011 yielding excess funds of 

$34,454. There was only one cosponsor for this event (the SBDC). The sources of the funds 

to pay for this event were registration fees ($65,511) and the SBDC (the balance, $27,046). 

Since there were no additional cosponsors of the event, there were no excess funds to be 

returned to a cosponsor. The SBDC (through its host institution) is authorized to raise funds 

to support its program. The mistake and source of confusion was with the reporting obtained 

from the SBDC. The SBDC erroneously included its internal funding efforts on the 

cosponsorship final report. In the future, SBA will provide supplemental information to 

cosponsors/fiscal agents as to what and how they need to report to SBA. As a result, the 

Draft Report should be updated to reflect $0 excess funds for this event. 

2.	 2009 America East Lenders Conference (Rhode Island): The Draft Report states there is 

$36,941 in excess funds which the fiscal agent deposited into a muni fund “under an SBA 

account.” SBA’s review of the fiscal agent’s bank statements shows the fiscal agent does 

14 The file for the 2010 Mid-America Lenders Conference in Louisiana shows that the vetting and conflict of interest 

for the primary cosponsors was completed and a Form 1615 was signed. The District Office joined additional 

cosponsors later but documentation on additional vetting is missing from the file. 

14
 
 

 

 

 

 

 

maintain an investment account but the account is in its own name (SCORE). It is not in 

SBA’s name and it is not an account for SBA. 

3.	 2010 American East Lenders Conference (Maine): The Draft Report says the fiscal agent 

reimbursed itself $8,970 based on the final accounting report showing two expenses labeled 

“internal transfer.” SBA asked the fiscal agent for more detail regarding these transfers. The 

fiscal agent provided documentation illustrating $2,970 was to pay for the 3% credit card 

transaction fees directly associated with the registration of this activity. This is an allowable 

expense under SBA’s policy. The $6,000 transfer was confirmed to be event management 

services provided by the cosponsor/fiscal agent which is not allowed under SBA policy. 

Appendices in the Draft Report should be updated to reflect this information. 

4.	 2010 Mid-America Lenders Conference (Louisiana): The Draft Report states there were 

$24,033 in excess funds which remained in the hands of the fiscal agent. Of that $24,033, 

$8,416 was used to pay for other non-conference related expenses, leaving $15,617 still in 

the cosponsor’s account. SBA confirmed that although the intent of the cosponsors was to 

donate the excess funds to SBA, the transfer of funds to SBA’s Business Assistance Trust 

Fund (BATF) never occurred. If the transfer had occurred, the non-conference expenditures 

would have been appropriate as all expenses supported SBA initiatives. We also found a 

slight correction to the numbers in the Draft Report. Upon request for clarification of the 

$8,416 spent after the conference, it was discovered that $371 was spent on conferencerelated expenses (replacing damaged awards). The final numbers should be $24,034 in 

excess funds with $8,045 spent on non-conference expenses and $15,617 remaining in the 

fiscal agent’s account. 

5.	 2011 American East Lenders Conference (Buffalo): The Draft Report states the fiscal agent 

paid itself $11,148 as a management fee. SBA asked the fiscal agent for clarification of the 

$11,148, marked as paid to SCORE (the fiscal agent) on the final accounting report. SBA 

received a break-down of the $11,148 and found that $2,508 was spent on conference 

website maintenance, $140 on Pay Pal expenses (Pay Pal was used to collect conference 

registration fees) and $8,500 on administrative costs for registration. Of the $11,148, only 

$8,500 was confirmed to be services provided directly by the cosponsor/fiscal agent. 

Conclusion 

SBA’s ability to cosponsor activities with non-Federal entities stems from statutory authority in 

the Small Business Act. Cosponsored activities are collaborative activities between SBA and 

one or more outside entities. The purpose is to leverage public and private resources in order to 

provide a benefit to small businesses. With this understanding of cosponsored activities, we 

find the Draft Report’s conclusions to be confusing and potentially misleading but agree that 

SBA bears responsibility to ensure these activities are executed as contemplated in the 

cosponsorship agreement. 

Recommendations 

1.	 [AA/OCPL] Collaborate with General Counsel to update the cosponsorship agreement template 

to clearly include all specific roles and responsibilities for fiscal agents and other accountable 

parties in accordance with SOP 90 75 3. 

a.	 Agree with the intent behind this recommendation but do not agree with the actual 

recommendation. Based on our review of the files we have concluded that supplemental 

guidance is a better approach than including roles and responsibilities in the actual 

cosponsorship agreement template because we can provide examples and explanations 

in a way that is not appropriate in the cosponsorship agreement. Roles are currently 

identified but what is evident from this audit is that people need to better understand the 

terms and need more instruction on what and how to report. 

15
 
 

 

 

2.	 [OSA] Establish controls, such as a reporting system, to ensure that all activities are timely and 

properly closed out and that all required documents and reports as specified in SOP 90 75 3 are 

obtained. 

a.	 Agree. SBA has a reporting system that relies heavily on human resources. The Agency 

is exploring ways to use technology it already owns to collect cosponsorship information 

and track agreements from conception and approval to close-out. 

3.	 [OSA] Conduct periodic review of the official cosponsorship files for completeness and 

compliance with SOP requirements. 

a.	 Agree. OSA would like to be more proactive; however, it needs more staff in order to 

accomplish these tasks. OGC and OSA will explore ways to leverage OGC staff to assist 

OSA with this task. 

4.	 [OSA] Provide training for staff that plan cosponsored activities to reinforce their roles and 

responsibilities. 

a.	 Agree. SBA currently provides annual cosponsorship training to employees and plans to 

supplement this training with some specialized training focusing on roles and 

responsibilities of fiscal agents. All supplemental materials will be made available through 

the Agency’s intranet website. OGC and OSA will also explore ways to leverage OGC 

staff to assist OSA with this task. 

5.	 [OSA] Collaborate with OGC to ensure that all potential cosponsors are properly vetted prior to 

soliciting or accepting their cash contributions. 

a.	 We agree vetting is important but we disagree with this recommendation as the audit 

does not demonstrate a deficiency with the vetting process. Only one cosponsorship file 

did not contain all the requisite vetting information. 

6.	 [AA/OFO] Initiate actions to properly account for, and dispose of $36,941 remaining from the 

2009 America East Conference and $15,617 remaining from the 2010 Mid-America Lender 

Conference in accordance with the provisions of SOP 90 75 3. 

a.	 Agree. SBA will dispose of the $15,617 from the 2010 Mid-America Lender Conference 

by placing it in the Business Assistance Trust Fund. All cosponsors have indicated it was 

their intent that excess funds be donated to SBA and will complete documentation to 

demonstrate their intent. 

b.	 Existence of excess funds of $36,941 from 2009 America East Conference is still unclear, 

as according to our internal review, these funds do not exist or are not available as 

described in the Draft Report. 

7.	 [AA/OFO] Under the provisions of FMFIA, perform periodic quality service reviews to include 

cosponsorship files and funds disposition, verifying any expenses paid out of cosponsored 

income are appropriate. 

a.	 Agree. Cosponsored activities are one of the activities already included in the Field 

Accountability Review (formerly called QSRs) and the Agency agrees to revisit the list of 

cosponsorship-related questions to see if there are ways to improve this portion of its 

peer-to-peer review process. 

8.	 [GC] Finalize and issue the draft gifts SOP including specific procedures and timeframes 

regarding the disposition of any excess funds that result from SBA-cosponsored activities. 

a.	 Disposition of excess cosponsorship funds is outlined in SOP 90 75 3, Outreach 

Activities. There is no requirement that excess funds be gifted to SBA. Funds can also 

be refunded to the cosponsors. Because of the options available, we think SOP 90 75 3 

is the appropriate place to address the procedures for disposing of these funds since they 

stem from cosponsored activities. If cosponsors decide to make a gift to the Agency of 

any remaining cosponsorship funds, such funds are treated like any other cash gift to the 

Agency. The Agency is in the process of issuing a new Gift SOP which cross references 

SOP 90 75 3 as appropriate. 

16