SMALL BUSINESS 

RESEARCH 

PROGRAMS

More Guidance and 

Oversight Needed to 

Comply with Spending 

and Reporting 

Requirements

Report to Congressional Committees

June 2014

GAO-14-431

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-431, a report to 

congressional committees

June 2014

SMALL BUSINESS RESEARCH PROGRAMS

More Guidance and Oversight Needed to Comply with

Spending and Reporting Requirements

Why GAO Did This Study

Federal agencies have awarded more 

than 156,000 contracts and grants, 

totaling nearly $40 billion, through the 

SBIR and STTR programs to small 

businesses to develop and 

commercialize innovative technologies. 

The Small Business Act requires

agencies with extramural R&D budgets 

that meet certain thresholds for 

participation—$100 million for SBIR 

and $1 billion for STTR—must spend a 

percentage of these annual budgets on 

the programs. The agencies are to 

report on their activities to SBA and, in 

turn, SBA is to report to Congress.

The 2011 reauthorization of the 

programs mandated GAO to review 

compliance with spending and 

reporting requirements, and other 

program aspects. This report 

addresses, for fiscal year 2012, (1) the 

extent to which agencies complied with 

spending requirements, (2) the extent 

to which agencies and SBA complied 

with certain reporting requirements, (3) 

the potential effects of basing spending 

requirements on agencies’ total R&D 

budgets, and (4) what is known about 

the amounts spent administering the 

programs. GAO reviewed agency 

spending data and required reports for 

fiscal year 2012 and interviewed 

program officials from SBA and the 

participating agencies.

What GAO Recommends

GAO recommends, among other 

things, that SBA revise program policy 

directives to accurately summarize 

spending requirements and request 

that agencies submit their methodology 

reports on time. SBA and participating 

agencies generally agreed with GAO’s 

findings and recommendations.

What GAO Found

Agency data indicate that 8 of the 11 agencies participating in the Small 

Business Innovation Research (SBIR) program and 2 of the 5 agencies 

participating in the Small Business Technology Transfer (STTR) program 

complied with spending requirements in fiscal year 2012. Program managers for 

agencies that did not comply with the requirements identified reasons for 

noncompliance. For example, program managers at two of the agencies told 

GAO that they believe their agencies comply with spending requirements if the 

agencies spend the total amount reserved or budgeted for the program, 

regardless of the year the funding is spent. However, the authorizing legislation 

for the programs requires agencies to “expend” a certain amount of funding each 

year. This difference in the interpretation of spending requirements occurred, in 

part, because the Small Business Administration’s (SBA) policy directives for the 

programs inaccurately state that the authorizing legislation requires agencies to 

“reserve” the minimum amount each year. Additionally, some officials told GAO

their agencies did not comply with spending requirements because the recent

reauthorization of the programs included an increased spending requirement in 

fiscal year 2012, but the reauthorization was enacted a full quarter into the fiscal 

year, after some agencies had planned their programs and made awards. 

Participating agencies and SBA did not fully comply with certain reporting 

requirements for the SBIR and STTR programs. For example, participating 

agencies are required to submit reports to SBA describing their methodologies 

for calculating their budgets for extramural research or research and 

development (R&D)—which is generally conducted by nonfederal employees 

outside of federal facilities—within 4 months of the enactment of appropriations. 

However, all 11 participating agencies were late in submitting these reports

because SBA allowed them to submit the reports later. As a result, SBA was

unable to analyze the reports and provide timely feedback to assist agencies in 

accurately calculating these budgets.

Potential effects of basing each participating agency’s spending requirement on 

its total R&D budget instead of its extramural R&D budget include an increase in 

the amount of the spending requirement—for some agencies more than others—

and, if the thresholds for participation in the programs did not change, an

increase in the number of agencies required to participate. Officials identified 

benefits of such a change, such as funding more projects, but they generally said

the drawbacks could outweigh the benefits. 

Little is known about the total amounts agencies spent administering the SBIR 

and STTR programs because agencies did not consistently collect such 

information for fiscal year 2012. Agencies are not required to track costs for 

administering the programs. Most agencies provided GAO with some data on 

such costs for fiscal year 2012, ranging from about $200,000 to about $8 million, 

but the data were wide-ranging, incomplete, and unverifiable. With the start of a 

pilot program in fiscal year 2013 that allows agencies to use up to 3 percent of 

SBIR program funds for administrative costs, agencies will be required to report 

to SBA on the amount spent for such activities. However, even with the pilot 

program, agencies will likely not identify or track all administrative costs.

View GAO-14-431. For more information, 

contact Frank Rusco at (202) 512-3841or 

ruscof@gao.gov.
Page i GAO-14-431 Small Business Research Programs

Letter 1

Background 5

Data Indicate Not All Agencies Met Spending Requirements 7

Agencies Did Not Fully Comply with Certain Reporting 

Requirements and Submitted Incorrect Data 16

Changing the Calculation Methodology Could Increase Spending 

Requirements and Participation, with Potential Benefits and 

Drawbacks 22

Little Information Is Known About Total Administrative Costs 26

Conclusions 27

Recommendations for Executive Action 29

Agency Comments and Our Evaluation 29

Appendix I Agencies’ Compliance with Spending Requirements for the Small 

Business Innovation Research Program for Fiscal Year 2012 34

Appendix II Agencies’ Compliance with Spending Requirements for the Small 

Business Technology Transfer Program for Fiscal Year 2012 36

Appendix III Affect of Different Methodologies on Calculation of Department of 

Defense Spending for Fiscal Years 2006 through 2011 37

Appendix IV Comments from the Small Business Administration 40

Appendix V Comments from the Department of Health and Human Services 41

Appendix VI Comments from the Department of Agriculture 43

Appendix VII Comments from the Department of Defense 47

Contents
Page ii GAO-14-431 Small Business Research Programs

Appendix VIII GAO Contact and Staff Acknowledgments 48

Tables

Table 1: Agencies Participating in the Small Business Innovation 

Research (SBIR) and Small Business Technology 

Transfer (STTR) Programs 2

Table 2: Agency Compliance with Small Business Innovation 

Research (SBIR) Program Spending Requirements for 

Fiscal Year 2012 34

Table 3: Agency Compliance with Small Business Technology 

Transfer (STTR) Program Spending Requirements for 

Fiscal Year 2012 36

Table 4: Comparison of GAO and DOD Calculations for Small 

Business Innovation Research (SBIR) Program Spending 

for Fiscal Years 2006 through 2011 38

Table 5: Comparison of GAO and DOD Calculations for Small 

Business Technology Transfer (STTR) Program Spending 

for Fiscal Years 2006 through 2011 39

Figures

Figure 1: Percentage of Extramural Research or Research and 

Development Budgets That Participating Agencies Spent 

for the Small Business Innovation Research Program in 

Fiscal Year 2012 9

Figure 2: Percentage of Extramural Research or Research and 

Development Budgets That Participating Agencies Spent 

for the Small Business Technology Transfer Program in 

Fiscal Year 2012 11

Figure 3: Comparison of Fiscal Year 2012 Spending 

Requirements under the Current Law and an Alternative 

Scenario Based on Agencies’ Total Research and 

Development Budgets 23
Page iii GAO-14-431 Small Business Research Programs

Abbreviations

R&D research or research and development

SBA Small Business Administration

SBIR Small Business Innovation Research

STTR Small Business Technology Transfer

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Page 1 GAO-14-431 Small Business Research Programs

441 G St. N.W.

Washington, DC 20548

June 6, 2014

Congressional Committees

Since the early 1980s, federal agencies have awarded more than 

156,000 contracts and grants totaling nearly $40 billion through two small 

business research programs: the Small Business Innovation Research 

(SBIR) and Small Business Technology Transfer (STTR) programs. The 

SBIR and STTR programs are similar in that participating agencies 

identify topics for research or research and development (R&D) projects 

and make awards to small businesses to develop and commercialize 

innovative technologies. However, for the SBIR program, a for-profit small 

business performs the work associated with an award, while the STTR 

program requires the small business to partner with a nonprofit research 

institution—such as a nonprofit college or university or federally funded 

research and development center—to perform the work. 

Federal agencies with a budget of $100 million or more for extramural 

R&D are required to establish and operate an SBIR program, while 

federal agencies with budgets of $1 billion or more for extramural R&D 

are required to establish and operate an STTR program.1

 Currently, 11 

agencies participate in the SBIR program, and 5 of these agencies also 

participate in the STTR program, as shown in table 1.

 1

Agencies’ R&D programs generally include funding for two types of R&D: intramural and 

extramural. Intramural R&D is conducted by employees of a federal agency in or through 

government-owned, government-operated facilities. Extramural R&D is generally 

conducted by nonfederal employees outside of federal facilities. Agencies are required to 

calculate their extramural R&D budget by subtracting amounts obligated for intramural 

R&D from total obligations for R&D. 
Page 2 GAO-14-431 Small Business Research Programs

Table 1: Agencies Participating in the Small Business Innovation Research (SBIR) 

and Small Business Technology Transfer (STTR) Programs

Agency

Program

SBIR STTR

Department of Agriculture (USDA) X

Department of Commerce X

Department of Defense (DOD) X X

Department of Education X

Department of Energy (DOE) X X

Department of Health and Human Services (HHS) X X

Department of Homeland Security (DHS) X

Department of Transportation (DOT) X

Environmental Protection Agency (EPA) X

National Aeronautics and Space Administration (NASA) X X

National Science Foundation (NSF) X X

Source: Small Business Administration.

The Small Business Act, which authorizes the programs, establishes the 

minimum percentage of an agency’s extramural R&D budget that must be 

spent on the programs annually.2 In fiscal year 2012, agencies 

participating in the SBIR program were required to spend at least 2.6 

percent of their extramural R&D budgets on the program and agencies 

participating in the STTR program were required to spend at least 0.35 

percent of their extramural R&D budgets on the program. The SBIR and 

STTR policy directives require participating agencies to submit data to the 

Small Business Administration (SBA) each year on the amount of their 

extramural R&D budgets and the amount obligated for awards, among 

other information. The Small Business Act also establishes certain 

reporting requirements for participating agencies and SBA. Among other 

things, agencies are to report to SBA on their methodologies for 

calculating their extramural R&D budgets within 4 months of the 

enactment of their annual appropriations. Furthermore, SBA is to annually 

report to Congress on all participating agencies’ SBIR and STTR 

programs. 

 2

In this report, we refer to the amounts resulting from applying these mandated 

percentages to extramural R&D budgets as “spending requirements.”
Page 3 GAO-14-431 Small Business Research Programs

In addition, the 2011 reauthorization of the programs mandates that GAO 

review the participating agencies’ compliance with spending and reporting 

requirements for the programs, as well as other aspects of the programs.3

We issued our first annual report in response to this mandate in 

September 2013, which covered fiscal years 2006 through 2011.4 In that 

report, we recommended, among other things, that SBA provide more 

guidance to agencies for calculating spending requirements under certain 

circumstances and provide more timely reports to Congress. This second 

annual report determines for fiscal year 2012 (1) the extent to which 

participating agencies complied with the programs’ spending 

requirements, (2) the extent to which participating agencies and SBA 

complied with certain reporting requirements, (3) the potential effects of 

basing the spending requirements for the SBIR and STTR programs on 

agencies’ total R&D budgets instead of their extramural R&D budgets, 

and (4) what is known about the amounts participating agencies spent for 

administering the programs.

To address these objectives, we followed the methodology that we used 

for our first annual report on these issues. To determine the extent to 

which participating agencies complied with the programs’ spending 

requirements in fiscal year 2012, we used the data that each agency 

submitted to SBA and calculated each agency’s spending requirement by 

applying the mandated percentages to the agency’s extramural R&D 

budget. We then compared the spending requirements to the total 

obligations data the agencies submitted to SBA for fiscal year 2012.

5 We 

determined that an agency complied with its spending requirement if the 

agency’s spending for these programs was equal to or greater than the 

 3

National Defense Authorization Act for Fiscal Year 2012, Pub. L. No. 112-81, 125 Stat. 

1298, § 5136. 

4

GAO, Small Business Research Programs: Actions Needed to Improve Compliance with 

Spending and Reporting Requirements, GAO-13-421 (Washington, D.C.: Sept. 9, 2013). 

In addition to our first annual report to address this mandate, we have issued several other 

reports on the SBIR and STTR programs dating back to the 1980s, including, most 

recently, Small Business Innovation Research: Data Rights Protections, GAO-14-116R

(Washington, D.C.: Nov. 4, 2013) and Small Business Research Programs: Agencies Are 

Implementing New Fraud, Waste, and Abuse Requirements, GAO-13-70R (Washington, 

D.C.: Nov. 15, 2012).

5

We used the agencies’ total program obligations data to represent spending for the 

programs, in part because obligations data were readily available from each of the 

agencies for program purposes, and because obligations provided a reasonable measure 

of the spending for the programs in each year. 
Page 4 GAO-14-431 Small Business Research Programs

calculated spending requirement.6 To assess the reliability of these data, 

we interviewed agency officials about the source of the data and data 

quality control procedures for the data, reviewed relevant documentation, 

and compared the agency’s submissions to SBA with SBA’s version of 

documents received from the agencies. We determined the data were 

sufficiently reliable for the purposes of this report. We discussed 

agencies’ compliance with spending requirements, including reasons 

agencies did not meet spending requirements, with program officials at 

each of the participating agencies.

To determine the extent to which participating agencies and SBA 

complied with certain reporting requirements for fiscal year 2012, we 

compared information in the methodology reports that each agency 

submitted to SBA to requirements in the law and SBA policy directives. 

Additionally, we requested SBA’s report to Congress for fiscal year 2012 

and discussed the status of that report with SBA program officials, who 

said it had not been submitted at the time of our review.

To determine the potential effects of basing spending requirements for 

the SBIR and STTR programs on agencies’ total R&D budgets instead of 

their extramural R&D budgets, we used fiscal year 2012 data on total 

R&D budget authority from the President’s budget to calculate potential 

spending requirements for each federal agency.7 In calculating these 

potential spending requirements, we assumed that the same spending 

percentages currently required by the Small Business Act would apply to 

total R&D budgets. We also assumed that the current spending 

thresholds that require agency participation in the SBIR and STTR 

programs when applied to extramural R&D budgets would apply to total 

R&D budgets. In other words, an agency with a total annual R&D budget 

of $100 million or more would be required to participate in the SBIR 

program, while an agency with a total annual R&D budget of $1 billion or 

 6

If an agency’s spending for the SBIR or STTR programs as a percentage of its 

extramural R&D budget was within a rounding error of the required level, we considered 

that agency to be in compliance with the spending requirement.

7

Office of Management and Budget, Fiscal Year 2014 Analytical Perspectives, Budget of 

the U.S. Government (Washington, D.C.: Apr. 10, 2013). Because agencies did not 

include their total R&D budget authority in their data submitted to SBA, and we were 

seeking information across all government agencies, we relied on the amount of budget 

authority reported in the Analytical Perspectives volume for calculation of the spending 

requirements for the alternative scenarios. 
Page 5 GAO-14-431 Small Business Research Programs

more would be required to participate in both the SBIR and STTR 

programs. We compared the spending requirements that would result 

under this scenario with the spending requirements under the current law 

to determine the potential effects that changing the methodology to 

calculate the spending requirements could have had for fiscal year 2012, 

recognizing that changes to the thresholds for participating in the 

programs or the mandated percentages could have different effects. We 

also calculated spending requirements under another scenario to 

determine whether different assumptions would lead to different 

outcomes. Under this scenario, we applied a lower percentage than is 

required under current law to each agency’s total R&D budget. 

Additionally, we discussed the effects of changing the methodology for 

calculating the spending requirements for the programs with program 

officials at each of the agencies currently participating in the programs 

and offered the agencies that could be affected by the change an 

opportunity to comment on our analysis.

To determine what is known about the amounts participating agencies 

spent for administering the programs, we collected administrative cost 

data from agencies and discussed the data with program officials. We 

determined that these data were too incomplete and from such varied 

sources that an assessment of the available data’s reliability was not 

possible. Consequently, we could not use the data to draw conclusions 

about agencies’ administrative costs in our report. 

We conducted this performance audit from November 2013 to June 2014 

in accordance with generally accepted government auditing standards. 

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 objectives. 

The SBIR program was initiated in 1982 and has four main purposes: (1) 

use small businesses to meet federal R&D needs, (2) stimulate 

technological innovation, (3) increase commercialization of innovations 

derived from federal R&D efforts, and (4) encourage participation in 

technological innovation by small businesses owned by women and 

disadvantaged individuals. The purpose of the STTR program—initiated 

Background
Page 6 GAO-14-431 Small Business Research Programs

in 1992—is to stimulate a partnership of ideas and technologies between 

innovative small businesses and research institutions through federally 

funded R&D.8 The National Defense Authorization Act for Fiscal Year 

2012, enacted on December 31, 2011, reauthorized the SBIR and STTR 

programs through September 30, 2017.9

The SBIR and STTR programs each include the following three phases:

• In phase I, agencies make awards to small businesses to determine 

the scientific and technical merit and feasibility of ideas that appear to 

have commercial potential. Phase I awards normally do not exceed 

$150,000. For SBIR, phase I awards generally last 6 to 9 months and 

for STTR these awards generally last 1 year.

• In phase II, small businesses with phase I projects that demonstrate 

scientific and technical merit and feasibility, in addition to commercial 

potential, may compete for awards of up to $1 million to continue the 

R&D for an additional period, normally not to exceed 2 years.

• Phase III is for small businesses to pursue commercialization of 

technology developed in prior phases. Phase III work derives from, 

extends, or completes an effort made under prior phases, but it is 

funded by sources other than the SBIR or STTR programs. In this 

phase, small businesses are expected to raise additional funds from 

private investors, the capital markets, or from funding sources within 

the agency that made the initial award other than its SBIR or STTR 

program. While SBIR or STTR funding cannot be used for phase III, 

agencies can participate in phase III by, for example, purchasing the 

technology developed in prior phases.10

SBA’s Office of Investment and Innovation is responsible for overseeing 

and coordinating the participating agencies’ efforts for the SBIR and 

STTR programs by setting overarching policy and issuing policy 

directives, collecting program data, reviewing agency progress, and 

reporting annually to Congress, among other responsibilities. As part of 

 8

Research institutions include nonprofit colleges or universities and federally funded 

research and development centers.

9

Pub. L. No. 112-81, Div. E.

10For examples of how one agency has used phase III awards, see GAO, Small Business 

Innovation Research: DOD’s Program Supports Weapon Systems, but Lacks 

Comprehensive Data on Technology Transition Outcomes, GAO-14-96 (Washington, 

D.C.: Dec. 20, 2013).
Page 7 GAO-14-431 Small Business Research Programs

its oversight and coordination role, SBA issued SBIR and STTR policy 

directives in September 2002 and December 2005, respectively, and 

updated them in August 2012, January 2014, and February 2014. These 

directives explain and outline additional requirements for agencies’ 

implementation of the SBIR and STTR programs. Among the topics 

discussed, the policy directives include a listing of the data that agencies 

are to submit to SBA annually—such as their extramural R&D budget 

amounts and the amounts obligated for awards for the programs—and 

call for agencies to submit reports describing their methodologies for 

calculating their extramural R&D budgets within 4 months of the 

enactment of appropriations. 

Each participating agency must manage its SBIR and STTR programs in 

accordance with program laws, regulations, and the policy directives 

issued by SBA. In general, the programs are similar across agencies. For 

those agencies that have both SBIR and STTR programs, agencies 

usually use the same process for both programs. Each participating 

agency has considerable flexibility to design and manage the specifics of 

these programs, such as determining research topics, selecting award 

recipients, and administering funding agreements. All of the agencies 

follow the same general process to obtain proposals from and make 

awards to small businesses for both the SBIR and STTR programs. At 

least annually, each participating agency issues a solicitation requesting 

proposals for projects in topic areas determined by the agency. Each 

agency uses its own process to review proposals and determine which 

proposals should receive awards. Also, each agency determines whether 

the funding for awards will be provided as grants or contracts.

Agency data indicate that not all agencies complied with the SBIR and 

STTR spending requirements for fiscal year 2012. Program managers 

identified several reasons why agencies did not comply with the spending 

requirements.

Data Indicate Not All 

Agencies Met 

Spending 

Requirements
Page 8 GAO-14-431 Small Business Research Programs

The data agencies submitted to SBA indicates that 8 of the 11 

participating agencies met or exceeded their fiscal year 2012 spending 

requirements for the SBIR program, while 3 of the agencies did not meet 

the requirements (see fig. 1 and app. I for additional data).11 According to 

the agencies’ data, the 8 agencies that met or exceeded the requirements 

spent between 2.6 percent and 4.0 percent of their extramural R&D 

budgets on the program, and the remaining 3 agencies spent between 

2.3 percent and 2.5 percent. In comparison, agency data indicated that 10 

of the 11 agencies met or exceeded spending requirements in fiscal year 

2011, and that 3 of the 11 agencies complied with spending requirements 

each fiscal year from 2006 through 2011, as we found in September 

2013.12 

 11For the purposes of this report, we defined compliance as spending at least 2.6 percent 

of an agency’s extramural R&D budget on the SBIR program in fiscal year 2012, as 

required by the Small Business Act. This method is consistent with SBA’s approach for 

determining compliance with spending requirements in its annual report to Congress on 

the program. We used the agencies’ obligations data to represent spending for the 

programs, in part because obligations data were readily available from each of the 

agencies for program purposes, and because obligations provided a reasonable measure 

of the spending for the programs in each year. 

12See GAO-13-421. NSF was the agency that did not comply with SBIR spending 

requirements in fiscal year 2011. DHS, Education, and HHS complied with their SBIR 

spending requirements each fiscal year from 2006 to 2011. The agency data we reported 

differed from some of the data included in SBA’s report to Congress for fiscal years 2009 

to 2011, which SBA issued in December 2013. According to SBA officials, some agencies 

submitted updated data to SBA for those years after they provided the data to us. These 

changes did not affect the number of agencies that complied with spending requirements 

in fiscal year 2011 or in all 6 fiscal years from 2006 through 2011. For SBA’s annual report 

to Congress, see SBA: The Small Business Innovation Research (SBIR) and Small 

Business Technology Transfer (STTR) Program Annual Report Fiscal Years 2009-2011 

(Washington, D.C.: December 2013).

Agency Data Indicate 

Most Agencies Complied 

with SBIR Spending 

Requirements
Page 9 GAO-14-431 Small Business Research Programs

Figure 1: Percentage of Extramural Research or Research and Development 

Budgets That Participating Agencies Spent for the Small Business Innovation 

Research Program in Fiscal Year 2012

Note: We defined compliance as spending at least 2.6 percent of an agency’s extramural research or 

research and development (R&D) budget on the Small Business Innovation Research (SBIR) 

program in fiscal year 2012, as required by the Small Business Act. This method is consistent with 

SBA’s approach for determining compliance with spending requirements in its reports to Congress on 

the program. We used the agencies’ obligations data to represent spending for the programs, in part 

because obligations data were readily available from each of the agencies for program purposes, and 

because obligations provided a reasonable measure of the spending for the programs in each year. 

a

Officials from one subunit within the Department of Commerce—the National Institute of Standards 

and Technology—said that they calculate their spending requirement for the program based on their 

actual obligations for extramural R&D for the previous fiscal year, rather than their extramural R&D 

budget for the current fiscal year, but they do not report this figure to SBA. We used the data that the 

Department of Commerce submitted to SBA to calculate its spending requirements.
Page 10 GAO-14-431 Small Business Research Programs

Our analysis of the data agencies submitted to SBA indicates that two of 

the five agencies participating in the STTR program met or exceeded 

their fiscal year 2012 spending requirements, while the remaining three 

agencies did not meet the requirements (see fig. 2 and app. II for 

additional data).13 According to the agencies’ data, the two agencies that 

complied with the requirements spent between 0.35 percent and 0.38 

percent of their extramural R&D budgets on their STTR programs, and 

the three agencies that did not comply spent between 0.30 percent and 

0.32 percent. In comparison, the data that agencies submitted to SBA 

indicated that two of the five agencies, HHS and NASA, complied with 

spending requirements in fiscal year 2011, and one of the agencies—

HHS—complied with spending requirements each fiscal year from 2006 

to 2011, as we found in September 2013.14 

 13For the purposes of this report, we defined compliance as spending at least 0.35 percent 

of an agency’s extramural R&D budget on the STTR program in fiscal year 2012, as 

required by the Small Business Act. This method is consistent with SBA’s approach for 

determining compliance with spending requirements in its reports to Congress on the 

program. We used the agencies’ obligations data to represent spending for the programs, 

in part because obligations data were readily available from each of the agencies for 

program purposes, and because obligations provided a reasonable measure of the 

spending for the programs in each year.

14See GAO-13-421. The agency data that we reported differed from some of the data 

included in SBA’s report to Congress for fiscal years 2009 to 2011, which SBA issued in 

December 2013. According to SBA officials, some agencies submitted updated data to 

SBA for those years after they provided the data to us. These changes did not affect the 

agencies that complied with spending requirements in fiscal year 2011 or in all 6 fiscal 

years from 2006 through 2011. For SBA’s report, see SBA: SBIR and STTR Program 

Annual Report Fiscal Years 2009-2011.

Agency Data Indicate Two 

Agencies Complied with 

STTR Spending 

Requirements
Page 11 GAO-14-431 Small Business Research Programs

Figure 2: Percentage of Extramural Research or Research and Development 

Budgets That Participating Agencies Spent for the Small Business Technology 

Transfer Program in Fiscal Year 2012

Note: We defined compliance as spending at least 0.35 percent of an agency’s extramural R&D 

budget on the STTR program in fiscal year 2012, as required by the Small Business Act. This method 

is consistent with SBA’s approach for determining compliance with spending requirements in its 

reports to Congress on the program. We used the agencies’ obligations data to represent spending 

for the programs, in part because obligations data were readily available from each of the agencies 

for program purposes, and because obligations provided a reasonable measure of the spending for 

the programs in each year.

Program managers at the agencies that did not comply with spending 

requirements for fiscal year 2012 identified reasons that the agencies did 

not comply: (1) some agencies reserved funds to spend in a subsequent 

fiscal year without spending the minimum required amount in fiscal year 

2012; (2) the spending requirement increased part of the way through the 

year, after agencies made spending plans; (3) agencies did not submit 

data on all of their spending; and (4) the amount agencies spent on 

extramural R&D was higher than estimated at the beginning of the fiscal 

year. Some of these circumstances also applied to agencies that 

complied with spending requirements in fiscal year 2012.

Program Managers 

Identified Reasons 

Agencies Did Not Comply 

with Spending 

Requirements
Page 12 GAO-14-431 Small Business Research Programs

Two of the agencies that did not comply with spending requirements—

DOD and USDA—reserved funds to spend in a subsequent fiscal year

without spending the minimum required amount in fiscal year 2012.

15 The 

Small Business Act requires participating agencies to “expend” the 

minimum percentages of their extramural R&D budgets with small 

businesses annually. Additionally, SBA officials said they expect agencies 

to spend at least the minimum required percentages on the programs 

each year. However, program officials at DOD and USDA told us that 

they believe their agencies comply with spending requirements if the 

agencies spend the total amount reserved or budgeted for the program, 

regardless of the year the funding is spent. We found that these two 

agencies did not implement the annual program spending requirements 

as written in the Small Business Act, in part because SBA’s SBIR and 

STTR policy directives inaccurately summarize the law. Specifically, the 

policy directives say that the relevant statutory provision requires 

participating agencies to “reserve” the minimum percentages for awards 

to small businesses each year.

Some of the participating agencies receive multiyear appropriations and 

choose to carry over some funding from one fiscal year to the next, in part 

because of this misinterpretation of the spending requirements. For 

example, if the amount of funding remaining in the program account is 

less than the amount of a phase I or phase II award, program managers 

said they carry over the funding to the next year, rather than make a 

smaller award to a recipient. An agency can carry over funding from one 

year to the next and comply with spending requirements if the agency 

spends the minimum required amount during the fiscal year, regardless of 

the year the funding was appropriated.

Carrying over funds to the next fiscal year without spending the minimum 

required amount contributed to two agencies—DOD and USDA—not 

complying with spending requirements in fiscal year 2012. Program 

managers from DOD and USDA said their agencies did not meet 

spending requirements using our method of calculating compliance, but 

DOD and USDA officials said they will spend all of the funding that was 

 15We determined that an agency complied with spending requirements for the SBIR or 

STTR programs if the agency spent at least the minimum required percentage of the 

extramural R&D budget. We used the data that each agency submitted to SBA for total 

program obligations for fiscal year 2012, regardless of the year the funding was 

appropriated, to represent program spending for the year.

Some Agencies Reserved 

Funds to Spend in a 

Subsequent Fiscal Year 
Page 13 GAO-14-431 Small Business Research Programs

budgeted for the programs before the funding expires, which they believe 

meets the intent of the law. Program managers from both agencies 

explained that they receive multiyear appropriations for research and 

development funding, which would generally allow them to carry over 

funds from one year to the next. However, if an agency carries over 

funding from one year to the next without spending the minimum required 

amount on the program in each fiscal year, then the agency is not in 

compliance with the spending requirements. According to SBA officials, 

SBA agrees with our methodology for calculating compliance and 

interprets the Small Business Act as requiring agencies to spend, rather 

than reserve, the required percentages each year.

Carrying over funds from one year to the next without spending the 

minimum required amount in fiscal year 2012 also contributed to at least 

one agency—DOD—not complying with spending requirements in prior 

years. To demonstrate the effect that carrying over funds can have, we 

made the following calculations for DOD for fiscal years 2006 to 2011 

using two different methodologies for calculating program spending.16

First, we determined the amount spent in a specific year, regardless of 

the year the funding was appropriated, from DOD’s total program 

obligations data submitted to SBA; this is the method that we used to 

calculate compliance with spending requirements for this report and the 

method SBA uses. Second, we calculated the amount of the funding 

appropriated in a fiscal year that was spent in that year or the next year; 

this is how DOD believes it should determine its compliance. We found 

that DOD complied with SBIR spending requirements in 2 of the 6 years 

from fiscal years 2006 through 2011 and with STTR spending 

requirements in 4 of the 6 years using our method. DOD’s method is 

incorrect; however, if it were correct, it would yield a compliance 

determination in each of the 6 years for SBIR and in 5 years for STTR 

(see app. III for additional detail on our analysis).

 16We used DOD for this comparison because DOD is the only agency that submitted its 

spending data to SBA in a way that allowed us to determine the year that funding was 

appropriated and spent. We could not perform the analysis for DOD’s fiscal year 2012 

data because the amount of DOD’s fiscal year 2012 appropriation that was obligated in 

fiscal year 2013 will be included in DOD’s fiscal year 2013 data submission to SBA, which 

had not yet been submitted at the time of our review. Agencies’ data submissions are 

typically due to SBA in the March following the end of the fiscal year, but SBA officials said 

they extended the deadline for the fiscal year 2013 data submissions.
Page 14 GAO-14-431 Small Business Research Programs

Increases to the spending requirements partway through fiscal year 2012 

contributed to two agencies not complying with spending requirements in 

fiscal year 2012, according to program managers. The 2011 

reauthorization of the SBIR and STTR programs increased the minimum 

percentages to be spent for the programs for fiscal year 2012, but the law 

was enacted on December 31, 2011—a full quarter into fiscal year 2012. 

These increases were the first increases in many years for the programs: 

the SBIR levels had remained at a minimum of 2.5 percent of the 

extramural R&D budget from 1997 through 2011, and STTR levels had 

remained at a minimum of 0.3 percent from 2004 through 2011. 

Appropriations for fiscal year 2012 were enacted in November and 

December 2011, so some agencies had already planned their spending 

for the programs and had started to make awards to meet the prior 

percentages of 2.5 percent of their extramural R&D budgets for SBIR 

awards and 0.3 percent for STTR awards. For some agencies, this 

increase totaled millions of dollars. For example, NASA’s SBIR spending 

requirement increased by about $5.5 million, and its STTR spending 

requirement increased by about $2.7 million over its estimates at the 

beginning of the fiscal year due to the higher percentages included in the 

reauthorization. If the spending requirements had remained at fiscal year 

2011 levels, one of the three agencies that did not meet SBIR spending 

requirements for the year would have met the requirements, and the 

remaining two agencies would have been much closer to meeting the 

SBIR spending requirements, and all five agencies would have met the 

STTR requirements.

The increased spending requirements also affected agencies that 

complied with spending requirements for the year. For example, program 

managers at one agency that met SBIR spending requirements told us it 

was difficult to spend SBIR and STTR funds at the increased levels in the 

remaining portion of the fiscal year because the agencies had already 

begun to make awards, and their spending plans for the programs 

included funding a certain number of projects at a certain level. Program 

officials at one agency said that, as a result of the increased spending 

requirements, they increased the amounts of their awards for fiscal year 

2013. The officials anticipate that the increased award amounts will help 

them meet their minimum spending requirements in future years. 

Program managers from two agencies that met SBIR spending 

requirements also told us it was difficult to obtain additional funding within 

their agency to meet the increased spending requirements for the 

programs because the reauthorization act and resulting increased 

spending requirements became effective after appropriations were 

enacted for the year. 

Spending Requirements 

Increased Partway Through 

the Year
Page 15 GAO-14-431 Small Business Research Programs

Program managers at two agencies said that they did not include 

technical assistance funds as part of their total spending data for the 

SBIR program, which contributed to the appearance that agencies were 

more out of compliance than they were for fiscal year 2012. Program 

managers from three other agencies also told us they could not submit 

these data. In certain circumstances, amounts spent for discretionary 

technical assistance count as part of the agency’s funding for SBIR or 

STTR.17 However, SBA’s policy directives for the programs call for 

agencies to submit data on the amounts spent for awards, but not the 

amount spent on technical assistance. According to SBA officials, they 

did not request information on the amounts that agencies spent for 

technical assistance because SBA does not report the information to 

Congress. 

Program officials at seven agencies—DOD, DOE, DHS, EPA, HHS, NSF, 

and USDA—said that they provided between about $125,000 and $3.5 

million for discretionary technical assistance to certain SBIR or STTR 

award recipients in fiscal year 2012. Only two of the agencies—DOD and 

NSF—included this assistance in their total spending data.18 Several 

program managers indicated that they did not submit data to SBA on the 

amounts spent for discretionary technical assistance because SBA did 

not provide written guidance on whether or how such spending should be 

included in their data. As a result, agencies did not report the total 

amounts that they spent on the programs and, therefore, Congress does 

not have access to complete and accurate information about the amounts 

spent on the SBIR and STTR programs. For the two agencies that 

 17Agencies are allowed to spend up to $5,000 of program funds per year for each phase I 

or phase II award through the SBIR or STTR programs for discretionary technical 

assistance. According to the program policy directives, the purpose of technical 

assistance is to assist the award recipients in making better technical decisions, solving 

technical problems that arise during the project, minimizing technical risks associated with 

the project, and commercializing the product of the research. This funding can be provided 

either to a vendor that provides the technical assistance to the award recipient or directly 

to the award recipient. The policy directives also state that funding for technical assistance 

will be in addition to the award, but counts as part of the agency’s funding for SBIR or 

STTR, unless the agency funds the technical assistance using funds outside of those set 

aside for SBIR or STTR.

18Three agencies—DOE, EPA, and HHS—provided us revised spending data for fiscal 

year 2012 based on adding in their funding for discretionary technical assistance. We did 

not include the revised data in our analysis because we used the data that agencies 

submitted to SBA, and the agencies had not provided the updated total spending data to 

SBA at the time of our review.

Agencies Did Not Submit 

Complete Information on 

Program Spending
Page 16 GAO-14-431 Small Business Research Programs

provided technical assistance to award recipients but did not comply with 

spending requirements, including the amount spent on technical 

assistance in their total spending figures would have brought the 

agencies closer to meeting their spending requirements, but it would not 

have brought the agencies into compliance for the year. 

Program officials at one agency said that changes to the amount of the 

agency’s extramural R&D budget between the estimates early in the fiscal 

year and the actual amount obligated, which is determined at the end of 

the year, contributed to the agency not complying with the spending 

requirements. The Small Business Act requires agencies to calculate their 

extramural R&D budget by subtracting amounts obligated for intramural 

R&D from total obligations for R&D. However, the total amount obligated 

for extramural R&D is not known until the end of the fiscal year. For fiscal 

year 2012, NASA estimated its extramural R&D budget at the beginning 

of the year as about $5.5 billion and developed a spending plan for the 

SBIR and STTR programs based on this budget. However, according to 

program officials, NASA’s extramural R&D budget increased to about 

$5.7 billion based on the total amount obligated for extramural R&D 

during the fiscal year. This increase in the extramural R&D budget 

throughout the year led to an unexpected increase in NASA’s minimum 

spending requirements of about $6.3 million. The officials said that they 

had no way of knowing what the final extramural R&D budget number 

would be until after the end of the fiscal year, and by then it was too late 

to adjust their spending plan for the SBIR or STTR programs. As a result, 

the increase contributed to NASA’s noncompliance with spending 

requirements in fiscal year 2012. 

Participating agencies and SBA did not fully comply with certain reporting 

requirements for the SBIR and STTR programs. Specifically, participating 

agencies did not comply with requirements related to reporting their 

methodologies for calculating their extramural R&D budgets, and two 

agencies submitted incorrect data to SBA on the size of their extramural 

R&D budgets for the STTR program. Additionally, SBA has not yet 

submitted its report on the programs to Congress for fiscal year 2012. 

Extramural R&D Was Higher 

Than Estimated at the 

Beginning of the Fiscal Year

Agencies Did Not 

Fully Comply with 

Certain Reporting 

Requirements and 

Submitted Incorrect 

Data
Page 17 GAO-14-431 Small Business Research Programs

Each of the agencies submitted its required report on the methodology for 

calculating the extramural R&D budget to SBA later than required by the 

Small Business Act and at least 6 of the agencies did not itemize and 

explain all exclusions from their calculations of their extramural R&D 

budgets, as called for in the policy directives.19 Agencies are required by 

the Small Business Act to submit their methodology reports to SBA within 

4 months of enactment of their annual appropriations. However, for fiscal 

year 2012, the 11 agencies included their methodology reports as part of 

their data submissions to SBA. Agencies generally submitted their data to 

SBA from March to July 2013—more than a year after agency

appropriations for fiscal year 2012 were enacted on November 18, 2011, 

and December 23, 2011—because SBA allowed them to submit the 

reports later.20 SBA officials said that, as in previous years, they did not 

need the methodology reports before the program data were due 

because the officials use the methodology reports to prepare SBA’s 

report to Congress, which cannot be completed without the program data. 

As we found in our first annual report on these issues, as a result of not 

having the methodology reports earlier in the year, SBA does not have an 

opportunity to promptly analyze these methodologies and provide the 

agencies with timely feedback to assist agencies in accurately calculating 

their spending requirements.21 Without such review and feedback, 

agencies may be calculating their extramural R&D budgets incorrectly, 

which could lead to agencies spending less than the required amounts on 

the programs. We recommended in that report that SBA provide timely 

annual feedback to each agency following submission of its methodology 

report on whether its method for calculating the extramural R&D budget 

complies with program requirements. SBA officials said as of May 2014 

that they plan to provide feedback to agencies on their methodology 

reports for fiscal year 2013 shortly after they receive the reports from the 

agencies, which are expected in June 2014.

 19The remaining five agencies did not indicate in their methodology reports to SBA 

whether they had exclusions for some or all of their programs. Agencies are not explicitly 

required to do so. However, we cannot judge whether these agencies may have had 

exclusions that were not included in the report to SBA.

20See Consolidated and Further Continuing Appropriations Act, 2012, Pub. L. No. 112-55, 

125 Stat. 552; Consolidated Appropriations Act, 2012, Pub. L. No. 112-74, 125 Stat. 786. 

21GAO-13-421.

Agencies Did Not Fully 

Comply with Methodology 

Reporting Requirements
Page 18 GAO-14-431 Small Business Research Programs

Additionally, at least six agencies did not itemize and explain exclusions 

from their calculations of their extramural R&D budgets. Agencies are 

required to exclude certain subunits or programs in calculating the 

extramural R&D budget. For example, agencies with subunits in the 

intelligence community are to exclude those subunits from their 

extramural R&D budget.22 SBA’s policy directives call for agencies to 

itemize their exclusions and their reasons for such exclusions in their 

reports to SBA. Six of the 11 agencies’ methodology reports—DOD, 

DOE, EPA, NASA, NSF, and DOT—noted that the agencies excluded 

some programs from their calculations, but these agencies either did not 

itemize the specific programs that they excluded, did not specify the 

reasons why they excluded the programs, or both. In the case of DOD, 

the agency’s report stated that some of its programs were exempted by 

the section of the Small Business Act described above, which exempts 

programs in the intelligence community. However, DOD’s report does not 

itemize the specific programs or subunits that were excluded, as required 

by the policy directives. Also, DOE, EPA, NASA, and NSF provided 

general categories of exclusions but not particular itemized programs. 

DOT excluded the research expenditures of the Federal Aviation 

Administration and the Federal Highway Administration from its 

extramural R&D budget without explanation in the report about why the 

programs were excluded.

As we found in our first annual report on these issues, agencies 

submitted different levels of detail on their methodologies, such as the 

programs excluded from the extramural budget and the reasons for the 

exclusions, and SBA did not raise questions about details of the 

methodologies.23 SBA officials told us they would like agencies to include 

more information about exclusions in their methodology reports. In our 

first annual report, we concluded that, without guidance from SBA, 

participating agencies are likely to continue to provide SBA with broad, 

incomplete, or inconsistent information on their methodologies for 

calculating their extramural R&D budgets. At that time, we recommended 

that SBA provide additional guidance on the format agencies are to 

include in their methodology reports, among other issues. As of May

2014, SBA said that a working group of program managers had 

developed a template for agencies to use to submit their methodology 

 2215 U.S.C. § 638 (e)(2) (2012).

23GAO-13-421.
Page 19 GAO-14-431 Small Business Research Programs

reports. Agencies will be encouraged to use the template for their fiscal 

year 2013 submission and required to use it beginning in fiscal year 2014.

Two agencies—DOD and HHS—submitted incorrect figures to SBA for 

the size of their extramural R&D budgets for the STTR program for fiscal 

year 2012.24 The Small Business Act requires federal agencies to spend a 

certain amount of their extramural R&D budgets on the SBIR and STTR 

programs if the agency meets certain thresholds for participation. The 

threshold for participating in the programs is based on the entire agency’s 

extramural R&D budget and not that of the specific subunits within the 

agency. Additionally, the extramural R&D budget figures for the SBIR and 

STTR programs should be consistent because the budget must be 

calculated the same way for both programs under the act. However, DOD 

submitted an extramural R&D budget for SBIR that was about $2.7 billion 

more than its budget for STTR, and HHS submitted an extramural R&D 

budget for SBIR that was about $337 million more than its budget for 

STTR. This occurred because the two agencies incorrectly excluded the 

budgets of subunits within the agencies that spent less than $1 billion per 

year on extramural R&D from the budget calculation for the STTR 

program. For example, HHS calculated its extramural R&D budget data 

for STTR using the amount of the extramural R&D budget of the National 

Institutes of Health and excluded the extramural R&D funding from the 

other subunits that participate in the SBIR program—the Centers for 

Disease Control and Prevention, the Food and Drug Administration, and 

the Administration for Children and Families—from its calculation. 

As a result of the incorrect data, DOD and HHS underestimated their 

STTR spending requirements by about $9.3 million and $1.2 million, 

respectively, for fiscal year 2012. Using the correct extramural R&D 

budget figures did not change our assessment of DOD’s or HHS’s 

compliance with spending requirements for fiscal year 2012 because 

DOD did not meet its spending requirement using the lower extramural 

R&D budget figure and HHS’s spending for the STTR program was high 

enough that it met its spending requirements even using the higher 

 24These agencies also submitted incorrect figures for their extramural R&D budgets for 

the STTR program in previous years, as we found in our September 2013 report. Because 

we determined that the STTR extramural R&D budget figures were incorrect, we used the 

SBIR extramural R&D budget figures, which were higher than the STTR figures, to 

determine DOD’s and HHS’s compliance with STTR spending requirements for this report.

Two Agencies Submitted 

Incorrect Data for the 

STTR Program
Page 20 GAO-14-431 Small Business Research Programs

extramural R&D budget amount from its SBIR report. However, since

spending requirements are calculated as a percentage of the extramural 

R&D budget, using an incorrect budget figure could lead to an agency not 

spending the required amount for the programs in the future. For 

example, the National Institutes of Health is the only subunit that 

participated in HHS’s STTR program in fiscal year 2012. If the National 

Institutes of Health had not exceeded the minimum spending 

requirements for HHS in fiscal year 2012, HHS would not have complied 

with its agencywide spending requirements.

DOD officials said they were aware of the problem because we identified 

it in our first annual report, but it was too late for them to correct it for 

fiscal year 2012. The officials said that they have corrected the problem 

and plan to use the same extramural R&D budget numbers for the SBIR 

and STTR programs starting with the data submitted for fiscal year 2013. 

HHS officials told us they did not correct the budget numbers for fiscal 

year 2012 because it was too late to do so. However, they also said that 

they have not corrected this problem for fiscal years 2013 or 2014 

because HHS has not received guidance from SBA to do so. SBA officials 

said they have discussed this issue with HHS. According to SBA’s report 

to Congress for fiscal years 2009 through 2011, SBA and HHS were 

discussing the appropriate extramural budget figure. 

SBA has not issued its report to Congress on the programs for fiscal year 

2012. The Small Business Act requires SBA to report to certain 

congressional committees on the SBIR and STTR programs—including 

an analysis of the agencies’ methodology reports—not less than annually, 

but the act does not specify a date that the report is due. SBA officials 

said that they had begun drafting the report for fiscal year 2012 but, early 

in 2014 two agencies—DOD and EPA—notified SBA that they needed to 

submit updated data, so SBA postponed its work on the report. According 

to SBA officials, SBA’s report to Congress depends on the timeliness and 

quality of the participating agencies’ submissions to SBA, and they 

delayed the submission of the last report and the fiscal year 2012 report 

to provide Congress with more accurate information on the SBIR and 

STTR programs. SBA officials told us they planned to submit their report 

for fiscal year 2012 by the end of fiscal year 2014—2 years after the 

subject fiscal year. 

In our first annual report on these issues, we found that SBA had issued 

reports on 3 of the 6 years covered by our review—2006 through 2008—

and those reports contained limited analyses of the agencies’ 

SBA Has Not Submitted 

Its Annual Report for 

Fiscal Year 2012
Page 21 GAO-14-431 Small Business Research Programs

methodologies, and some of the analyses were inaccurate.25 SBA issued 

its report to Congress for fiscal years 2009 through 2011 in December 

2013, making the data available to Congress about 2 to 4 years after the 

end of the subject year. In that report, we concluded that, without more 

rigorous oversight by SBA, and more timely and detailed reporting on the 

part of both SBA and participating agencies, it will be difficult for SBA to 

ensure that intended benefits of these programs are being attained and 

that Congress receives critical information to oversee these programs. 

Consequently, we recommended that SBA provide Congress with a 

timely annual report that includes a comprehensive analysis of the 

methodology each agency used for calculating the SBIR and STTR 

spending requirements. SBA agreed with our recommendation and stated 

in its comments on the report that it planned to implement the 

recommendation. SBA’s policy directives for the programs call for 

agencies to submit their program data to SBA by March 15 each year.26

However, SBA officials said that they have no enforcement mechanism to 

ensure that agencies submit their final data by that date. SBA introduced 

a scorecard in its report to Congress for fiscal years 2009 through 2011 to 

document agencies’ timeliness in submitting data for fiscal year 2011. 

SBA officials expect that publishing the information in the report to 

Congress will encourage the agencies to submit their data on time, which, 

according to the officials, should improve SBA’s timeliness in reporting to 

Congress.

 25GAO-13-421.

26According to SBA officials, they extended the deadline for fiscal year 2013 data 

submissions. As of May 2014, SBA officials expected that agencies would submit their 

data for fiscal year 2013 in June 2014.
Page 22 GAO-14-431 Small Business Research Programs

Potential effects of basing each participating agency’s spending 

requirement on its total R&D budget instead of its extramural R&D budget 

include an increase in the amount of the spending requirement—for some 

agencies more than others—and, if the thresholds for participation in the 

programs did not change, an increase in the number of agencies required 

to participate. Agency officials identified some benefits and drawbacks of 

changing the methodology for calculating the spending requirements for 

the SBIR and STTR programs. 

If the methodology for calculating the spending requirements had been 

changed so that the same percentages and thresholds for participating in 

the programs as under current law were applied to an agency’s total R&D 

budget rather than to its extramural R&D budget in fiscal year 2012, all 

but one agency would have been required to spend more than under 

current law, according to our analysis of budget data and data submitted 

to SBA. 27 The change would have had this effect because an agency’s 

extramural R&D budget is a part of and, therefore, smaller than its total 

R&D budget, and the same percentages would have been applied to a 

larger amount of funding. Figure 3 shows a comparison of the agencies’ 

spending requirements for the SBIR and STTR programs in fiscal year 

2012 under the current law, based on an agency’s extramural R&D 

budget, and this alternative methodology. These figures are generally 

consistent with the findings in our first annual report on these issues.

 27NSF’s total R&D budget authority in the Analytical Perspectives volume of the 

President’s budget is less than its extramural R&D budget data submitted to SBA for fiscal 

year 2012 because the data are drawn from different sources, according to NSF officials. 

NSF officials said that the amount reported in the Analytical Perspectives is based only on 

the actual budget authority for that particular year, while the amount submitted to SBA is 

based on total obligations resulting from budget authority provided in previous years.

Changing the 

Calculation 

Methodology Could 

Increase Spending 

Requirements and 

Participation, with 

Potential Benefits and 

Drawbacks 

Changing the Calculation 

Methodology Could 

Increase Spending 

Requirements and 

Participation in the 

Programs
Page 23 GAO-14-431 Small Business Research Programs

Figure 3: Comparison of Fiscal Year 2012 Spending Requirements under the Current Law and an Alternative Scenario Based 

on Agencies’ Total Research and Development Budgets

Note: Calculations may be affected by rounding.

a

Each agency’s total research and development budget authority is from the Analytical Perspectives

volume of the President’s budget. The category of “Facilities and Equipment” is not included in the 

total shown in this table.

b

Each agency’s extramural research or research and development (R&D) budget is the amount the 

agency submitted to SBA.

c

Each agency’s spending requirement under the current law for the Small Business Innovation 

Research (SBIR) program is calculated as 2.6 percent of its extramural R&D budget.

d

Each agency’s SBIR spending requirement under the alternative scenario is calculated as 2.6 

percent of the total research and development budget authority and assumes no reductions for 

excluded programs.

e

Each agency’s spending requirement under the current law for the Small Business Technology 

Transfer (STTR) program is calculated as 0.35 percent of its extramural R&D budget.

f

Each agency’s STTR spending requirement under the alternative scenario is calculated as 0.35

percent of the total research and development budget authority and assumes no reductions for 

excluded programs. 
Page 24 GAO-14-431 Small Business Research Programs

g

NSF’s total research and development budget authority is less than its extramural R&D budget due 

to differences in the sources of data, according to NSF officials. NSF officials said that the amount 

reported in the Analytical Perspectives is based only on the actual budget authority for that particular 

year, while the amount submitted to SBA is based on total obligations resulting from budget authority 

provided in previous years.

h

Agency did not participate in the program in fiscal year 2012.

i

The agency’s total research and development budget authority did not meet the threshold for 

participating in the STTR program for this alternative scenario.

As shown in figure 3, some agencies’ spending requirements would 

increase more than others’ under the alternative scenario. This variation 

is due to differences in the relative proportions of the extramural and 

intramural R&D budgets among agencies. Under the alternative scenario, 

agencies with a larger proportion of their total R&D budget for extramural 

R&D would experience a smaller increase in their spending requirements 

relative to the other agencies, as discussed in the following examples:

• DHS used about 84 percent of its total R&D budget for extramural 

R&D in fiscal year 2012 and was required to spend about $8 million 

on its SBIR program in that year. The agency would have a relatively 

small increase in its SBIR spending if the spending requirement were 

based on its total R&D budget instead of its extramural R&D budget: 

DHS would have been required to spend about $2 million more in 

fiscal year 2012 if the calculation methodology changed. 

• The Department of Commerce used a relatively small percentage of 

its total R&D budget—about 17 percent—for extramural R&D in fiscal 

year 2012, and its spending requirement for SBIR would have 

increased more than five times, from about $5 million to $27 million in 

fiscal year 2012 if the calculation methodology had changed. While 

Commerce did not participate in the STTR program in fiscal year 

2012, it would have been required to participate in the STTR program 

if the calculation methodology had changed and the thresholds for 

participating in the program had remained the same. Its spending 

requirement for the STTR program would have been $4 million rather 

than $0. Consequently, if the funding percentage required in law in 

fiscal year 2012 applied to the total R&D budget instead of the 

extramural budget, Commerce’s SBIR and STTR spending would 

have increased by a total of about $26 million. 

Changing the calculation methodology to the total R&D budget instead of 

the extramural R&D budget would also increase the number of agencies 

that would be required to participate in the SBIR and STTR programs, 

assuming the dollar thresholds for participating in the programs remained 

the same. Two additional agencies—the Departments of Veterans Affairs 

and the Interior—would have been required to participate in the SBIR 
Page 25 GAO-14-431 Small Business Research Programs

program in fiscal year 2012 if the dollar thresholds for participating in the 

programs applied to the total R&D budgets.28 Adding these two agencies 

to the other agencies that participated in the SBIR program in fiscal year 

2012 would have increased total federal SBIR spending requirements by 

about $51 million, in addition to the increased spending requirements for 

the other agencies. For STTR, three additional agencies—Commerce, 

USDA, and the Department of Veterans Affairs—would have been 

required to participate in the STTR program for fiscal year 2012 if the 

dollar thresholds for participating in the programs were applied to the total 

R&D budgets.29 Adding these three agencies to the other agencies that 

participated in the STTR program in fiscal year 2012 would have 

increased total federal STTR spending requirements by about $16 million, 

in addition to the increased spending requirements for the other agencies. 

We recognize that other scenarios could have different effects on the 

spending requirements. For example, basing the SBIR and STTR 

spending requirement on an agency’s total R&D budget and applying a 

lower percentage than under current law could result in reduced spending 

requirements for some agencies. Specifically, if the percentage applied to 

the total R&D budget had been 1.5 percent instead of 2.6 percent, and 

the thresholds for participating in the programs had remained the same, 

the spending requirement for the total SBIR programs would have slightly 

decreased in fiscal year 2012.30 Using this lower percentage, the 

spending requirements for some agencies, such as Commerce and DOD, 

would have increased, while the spending requirements for other 

agencies, such as DHS and NSF, would have decreased. 

 28Based on data in the President’s budget, these two agencies had total R&D budget 

authority in excess of $100 million; federal agencies with a budget of $100 million or more 

for extramural R&D are required to establish and operate an SBIR program.

29These agencies reported total R&D budget authority in excess of $1 billion; federal 

agencies with budgets of $1 billion or more for extramural R&D are required to establish 

and operate an STTR program. 

30We selected 1.5 percent as an alternative percentage because it is roughly equal to the 

average of the agencies’ spending requirements for fiscal year 2012 as a percentage of 

the total R&D budgets.
Page 26 GAO-14-431 Small Business Research Programs

Program managers identified benefits and drawbacks that basing the 

methodology for calculating the spending requirements on the total R&D 

budget could have for their agencies’ programs. For example, several 

program managers indicated that more funding for the programs would 

allow their agencies to fund more projects, which was viewed as a benefit 

because the agencies tend to receive more proposals than they can fund 

in a year under current budgets. Additionally, several program managers 

told us that basing the SBIR and STTR spending requirements on the 

total R&D budget could improve transparency and reduce complexity in 

determining the SBIR and STTR spending requirements because the 

agencies would no longer need to identify the extramural portion of their 

R&D budgets, which the agencies have to determine internally. Similarly, 

program managers at some agencies said that the calculation to 

determine the agency’s extramural R&D budget can be complex or 

difficult and that avoiding it would save time and effort, which would be a 

benefit. 

Program managers also identified drawbacks to changing the 

methodology for calculating the spending requirements, with most 

program managers indicating that the potential drawbacks of such a 

change could outweigh the benefits. For example, most program 

managers said that increasing the amount of funding for the SBIR and 

STTR programs could be a drawback because funding used to support 

the agency’s other R&D efforts would have to be spent on the SBIR and 

STTR programs. In addition, most program managers said that changing 

the methodology for calculating spending requirements for these 

programs could affect agency operations, depending on how the change 

is implemented within the agency. For example, several program 

managers said that basing spending requirements on the total R&D 

budget could increase SBIR and STTR budgets, which may lead to a 

decision within the agency to reduce intramural R&D programs and, in 

turn, lead to reductions in staffing of these programs. Most program 

managers also said that basing spending requirements on the total R&D 

budget could mean shifting money from other extramural R&D projects 

currently funded within the agency to SBIR and STTR. 

Little is known about the total amounts agencies spent administering the 

SBIR and STTR programs because agencies do not consistently collect 

such information. Agencies are not required to track or estimate all costs 

for administering the programs. In response to our requests to agencies 

for data on their fiscal year 2012 administrative costs, most agencies 

provided information on some categories of administrative costs and 

Program Managers 

Identified Benefits and 

Drawbacks of Changing 

the Calculation 

Methodology 

Little Information Is 

Known About Total 

Administrative Costs 
Page 27 GAO-14-431 Small Business Research Programs

partial estimates of costs.31 Agencies provided information on several 

types of administrative costs, such as staff, contractor, and travel costs 

for preparing and awarding contracts and grants and for monitoring them. 

Administrative cost estimates that the agencies provided for fiscal year 

2012 ranged from about $200,000 to about $8 million. As with the data on 

fiscal year 2011 for our first annual report, these data were wide-ranging, 

incomplete, and unverifiable. 

The 2011 reauthorization of the programs created a pilot program 

beginning in fiscal year 2013 that allows agencies to spend up to 3 

percent of SBIR funds for administrative costs of the programs beginning 

in fiscal year 2013. The SBIR policy directive requires agencies to submit 

information to SBA on the funding used for administrative costs through 

the pilot program. As such, we anticipate that agencies that participate in 

the pilot program will have additional information on administrative costs 

for fiscal year 2013, which we will examine in our next annual review of 

the programs. As of May 2014, SBA officials expected that agencies 

would submit their data for fiscal year 2013 in June 2014. According to 

SBA’s policy directives, funding under the pilot program must not replace 

current agency administrative funding for SBIR. Consequently, even with 

the pilot program, agencies will likely not identify or track all administrative 

costs for SBIR.

Federal agencies have awarded billions of dollars to small businesses 

under the SBIR and STTR programs to develop and commercialize 

innovative technologies. In our first annual report on these issues, we 

identified some areas where SBA could take actions to ensure that 

agencies comply with spending and reporting requirements. Our report 

was issued in September 2013, after agencies’ fiscal year 2012 data and 

reports were due to SBA, and, as a result, some of the issues we 

 31One additional agency—Commerce —provided administrative cost data for fiscal year 

2012 that did not provide data for previous years. However officials at two agencies, HHS 

and DOD, said they could not provide administrative costs for fiscal year 2012. HHS 

officials said it would be very difficult to determine how much is spent on the administrative 

costs of the program since such funding for salaries, expenses, training, and travel, comes 

from accounts other than the SBIR and STTR programs. DOD officials said they do not 

have an estimate of administrative costs largely because thousands of employees 

throughout the department are involved with the SBIR and STTR programs and DOD 

does not have the ability to track the percentage of these employees’ workload to support 

the two programs. HHS did not provide an estimate for fiscal year 2011 for our last report, 

but DOD provided an estimate of about $30 million for fiscal year 2011.

Conclusions
Page 28 GAO-14-431 Small Business Research Programs

identified in the data and reports for fiscal years 2006 through 2011 

remained in fiscal year 2012. For example, in our prior report, we found 

that the agencies submitted different levels of detail in their methodology 

reports, such as the programs excluded from the extramural R&D budget 

and the reasons for the exclusions. In that report, we recommended that 

the SBA Administrator provide the format for agencies to include in their 

methodology reports and to provide timely annual feedback to agencies 

on whether their methodology calculations for extramural R&D budgets 

comply with program requirements. We found similar issues with 

agencies’ reports for fiscal year 2012 and continue to believe that this 

oversight is needed and that the recommendation is valid and should be 

fully implemented. Additionally, as part of its oversight role, SBA is 

required to provide Congress with annual reports on the SBIR and STTR 

programs. However, SBA has faced challenges in submitting its report in 

a timely manner—particularly with agencies revising their data 

submissions well after the fiscal year is over—leading to reports that are 

submitted between 2 and 4 years after the subject year. In our September 

2013 report, we recommended that SBA provide Congress with a timely 

annual report that includes a comprehensive analysis of the methodology 

each agency used for calculating the SBIR and STTR spending 

requirements. We continue to believe that providing a timely report to 

Congress is important and that the recommendation continues to have 

merit and should be fully implemented. Moreover, such a report could 

demonstrate SBA’s oversight to help ensure that the programs are 

meeting their intended goals. 

In addition to those issues that could be addressed by implementing our 

prior recommendations, we identified four additional issues that—if left 

unaddressed—could affect compliance with spending and reporting 

requirements in the future. First, some agencies did not comply with the 

requirement to spend program funds annually because SBA’s policy 

directives inaccurately summarize the requirement. Without correct 

information in the policy directives, such misinterpretations could lead to 

agencies spending less than required. Second, agencies did not report 

the total amounts spent on the programs because SBA has not provided 

guidance on whether or how to submit information on spending for 

reasons other than awards, such as technical assistance. As a result, 

Congress does not have access to complete and accurate information on 

the amounts spent on the programs. Third, agencies have continued to 

submit their methodology reports to SBA significantly later than required 

by law. In fiscal year 2012, most agencies submitted their methodology 

reports more than a year after the deadline established in the Small 

Business Act. Without holding agencies to the deadlines in the law, SBA 
Page 29 GAO-14-431 Small Business Research Programs

did not have an opportunity to perform timely oversight by analyzing these 

methodologies and providing the agencies with feedback, if needed, to 

correct problems with the calculations and help to ensure that agencies 

meet mandated spending requirements. Fourth, two agencies have 

calculated their extramural R&D budgets for the STTR program 

incorrectly. DOD officials told us that they will use the same extramural 

R&D budget figure for both programs moving forward, but HHS officials 

do not plan to do so. Using the wrong figure could lead to spending less 

than the required amount for the programs in the future.

To improve compliance with the Small Business Act and enhance SBA’s 

ability to provide oversight of the programs, we recommend that the SBA 

Administrator take the following three actions: 

• Revise the language in the SBIR and STTR policy directives to 

accurately summarize the statutory provisions that describe the 

program spending requirements.

• Provide written guidance to agencies clarifying whether and how 

agencies should submit data to SBA on spending outside of awards 

that is allowed under the programs, such as discretionary technical 

assistance.

• Request that the agencies submit their methodology reports within 4 

months of the enactment of appropriations, as required by the Small 

Business Act and the program policy directives.

To help ensure that the agency continues to spend the required amount 

for the STTR program, we recommend that the Secretary of Health and 

Human Services include all of the agency’s extramural R&D budget in the 

calculation of STTR spending requirements and in the data submitted to 

SBA.

We provided a draft of this report to the Secretaries of Health and Human 

Services, Agriculture, Commerce, Defense, Education, Energy, 

Homeland Security, and Transportation; the Administrators of the Small 

Business Administration, the Environmental Protection Agency, and the 

National Aeronautics and Space Administration; and the Director of the 

National Science Foundation for review and comment. In response, six of 

the agencies—Commerce, Education, DOE, DHS, DOT, and EPA—

stated by email that they had no technical or written comments. Two 

agencies—NASA and NSF—provided technical comments by e-mail but 

did not provide formal written comments. We incorporated these technical 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
Page 30 GAO-14-431 Small Business Research Programs

comments, as appropriate. The remaining four agencies—SBA, HHS, 

USDA, and DOD—provided written comments, which are reproduced in 

appendixes IV through VII and discussed below.

In written comments, reproduced in appendix IV, SBA generally agreed 

with the issues and recommendations included in our report. The letter 

states that SBA does not believe that the policy directive inaccurately 

summarizes the law and that the use of the term “reserve” refers to the 

allocation of the extramural budget. SBA officials plan to start using the 

term “extramural obligations” instead of “extramural budget” to address 

confusion with participating agencies, but they will review all language in 

the policy directives to ensure that the funding requirements are clear. 

SBA’s proposed change could help address some confusion among 

participating agencies, but we continue to believe that SBA should 

implement our first recommendation to revise the language in the SBIR 

and STTR policy directives to accurately summarize the statutory 

provisions that describe the program spending requirements. Specifically, 

the policy directives currently say that the relevant statutory provision 

requires participating agencies to “reserve” a minimum percentage of 

their extramural budget for awards to small businesses each year,

whereas the law requires participating agencies to “expend” the minimum 

percentages. As reflected in USDA’s agency comments (see app. VI), the 

use of the term “reserve” is a specific point of confusion for at least one of 

the participating agencies.

In written comments, reproduced in appendix V, HHS concurred with our 

recommendation regarding the inclusion of all of the agency’s extramural 

R&D budget in the calculation of the STTR spending requirements and in 

the data submitted to SBA. HHS plans to ensure that the agency’s 

extramural R&D budget is calculated the same way for the SBIR and 

STTR programs beginning in fiscal year 2015, as funding for the 

programs in fiscal year 2014 is already under way.

In written comments, reproduced in appendix VI, USDA’s Director of the 

National Institute of Food and Agriculture, stated that USDA generally 

agrees with our report, but the agency does not agree that it did not 

comply with the spending requirements for the SBIR program. USDA’s 

written comments state that USDA has not always obligated the minimum 

percentage of its extramural R&D budget for the SBIR program in a single 

fiscal year because some of the funds used for the program are available 

without fiscal year limitations, referred to as “no-year money.” USDA’s 

written comments explain that USDA did not obligate the required 

amounts due to the language in the program policy directive, which 
Page 31 GAO-14-431 Small Business Research Programs

directs federal agencies to “reserve” the minimum percentage of their 

extramural R&D budgets for awards to small business concerns. This is 

consistent with what officials told as during our review. We recognize that 

agencies with multiyear appropriations are generally allowed to carry 

funds over from one year to the next and that there are benefits to doing 

so, but we continue to believe that the Small Business Act requires 

participating agencies to spend at least the minimum percentage of their 

extramural R&D budgets on the program each year, regardless of the 

year the dollars spent were appropriated. In other words, an agency can 

use a mix of funds from different fiscal years, consistent with the 

limitations specific to its appropriations, to meet the spending requirement 

in any given fiscal year, but it must still meet the spending requirement in 

each fiscal year. Conversely, as we state in the report, if an agency 

carries over funding from one year to the next without spending, or at 

least obligating, the minimum required amount on the program in each 

fiscal year, then the agency is not in compliance with spending 

requirements. As noted above, we continue to believe that a change to 

the program policy directives is needed to address this misinterpretation 

of the spending requirements.

In written comments, reproduced in appendix VII, the DOD Administrator 

for the SBIR and STTR programs stated that DOD concurs with our 

finding that DOD does not expend all SBIR and STTR funds appropriated 

to the department in the same fiscal year that they are received, but DOD 

believes that the agency is in compliance with the law in that it obligates 

the minimum percentage of SBIR and STTR funds each year in 

accordance with the obligation authority conferred by Congress and longstanding DOD procedures. We neither state in the report, nor do we 

believe, that agencies are required to spend all of the SBIR or STTR 

funds appropriated in the same year that they are received. As we state in 

the report, we used the total obligations data that agencies submitted to 

SBA to calculate compliance with spending requirements. These data 

represent the amount obligated in a specific year, regardless of the year 

the funding was appropriated. Additionally, we agree that an agency is in 

compliance with program spending requirements if it obligates the 

minimum percentage of program funds each year. However, using the 

spending data that DOD submitted to SBA for fiscal year 2012, DOD did 

not comply with the spending requirements for the STTR program.

We are sending copies of this report to the Secretaries of Health and 

Human Services, Agriculture, Commerce, Defense, Education, Energy, 

Homeland Security, and Transportation; the Administrators of the Small 
Page 32 GAO-14-431 Small Business Research Programs

Business Administration, the Environmental Protection Agency, and the 

National Aeronautics and Space Administration; the Director of the 

National Science Foundation; the appropriate congressional committees; 

and other interested parties. In addition, the report is available at no 

charge on the GAO website at http://www.gao.gov.

If you or your staff members have any questions about this report, please 

contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix VIII.

Frank Rusco

Director, Natural Resources and Environment
Page 33 GAO-14-431 Small Business Research Programs

List of Committees

The Honorable Maria Cantwell

Chairwoman

The Honorable James E. Risch 

Ranking Member 

Committee on Small Business & Entrepreneurship 

United States Senate 

The Honorable Lamar Smith 

Chairman 

The Honorable Eddie Bernice Johnson 

Ranking Member 

Committee on Science, Space and Technology 

House of Representatives 

The Honorable Sam Graves 

Chairman 

The Honorable Nydia M. Velázquez 

Ranking Member 

Committee on Small Business

House of Representatives
Appendix I: Agencies’ Compliance with 

Spending Requirements for the Small 

Business Innovation Research Program for 

Fiscal Year 2012

Page 34 GAO-14-431 Small Business Research Programs

Our analysis of the data that the agencies submitted to the Small 

Business Administration (SBA) indicate that the amounts that 8 of the 11 

participating agencies spent for the Small Business Innovation Research 

(SBIR) program met or exceeded their fiscal year 2012 spending 

requirements, while spending for the remaining 3 agencies did not meet

the requirements. See table 2 for data on agency compliance.

Table 2: Agency Compliance with Small Business Innovation Research (SBIR) Program Spending Requirements for Fiscal 

Year 2012

Dollars in millions

Agency

Extramural 

research or 

research and 

development 

(R&D) budget Amount spenta

Calculated 

spending 

requirementb

Difference 

between amount 

spent and 

spending 

requirement

Percentage of 

extramural R&D 

budget spent for 

SBIR

Department of Defense (DOD) $38,816 $1,080.3 $ 1,009.2 $ 71.1 2.8%

Department of Health and 

Human Services (HHS) 24,763 648.6c 643.8 4.7 2.6%

Department of Energy (DOE) 6,143 169. 8c 159.7 10.1 2.8%

National Aeronautics and 

Space Administration (NASA) 5,728 140.0 148.9 (9.0) 2.4%

National Science Foundation

(NSF) 5,111 131.3 132. 9 (1.6)d 2.6%

U.S. Department of Agriculture 

(USDA) 746 16.9 19.4 (2.5) 2.3%

Department of Education 

(Education) 327 13.1 8.5 4.6 4.0%

Department of Homeland 

Security (DHS) 322 12.9 8.4 4.5 4.0%

Department of Transportation

(DOT) 330 9.1 8.6 0.6 2.8%

Department of Commerce 

(Commerce) 175 4.5 4.5e (0.0)d 2.6%

Environmental Protection 

Agency (EPA) 174 4.3c 4.5 (0.2) 2.5%

Total $82,634 $2,230.7 $2,148.5 $82.3 2.7%

Source: GAO analysis of agency data reported to SBA.

Notes: Calculations may be affected by rounding. 

Cells shaded gray indicate the agency did not meet its spending requirement in fiscal year 2012.

a

The amount spent is the total obligations that the agency submitted to the Small Business 

Administration (SBA).

b

We calculated the spending requirement as 2.6 percent of the agency’s extramural R&D budget.

c

Three agencies—DOE, EPA, and HHS—provided us revised spending data for fiscal year 2012 

based on adding in their funding for discretionary technical assistance. We did not include the revised 

Appendix I: Agencies’ Compliance with 

Spending Requirements for the Small Business 

Innovation Research Program for Fiscal Year 

2012
Appendix I: Agencies’ Compliance with 

Spending Requirements for the Small 

Business Innovation Research Program for 

Fiscal Year 2012

Page 35 GAO-14-431 Small Business Research Programs

data in our analysis because we used the data that agencies submitted to SBA and the agencies had 

not provided the updated data to SBA at the time of our review.

d

If an agency’s spending for the SBIR program as a percentage of its extramural R&D budget was 

within a rounding error of the required level, we considered that agency to be in compliance with the 

spending requirement. This was the case with NSF and Commerce. In the latter case, the amount 

spent was slightly below $4.5 million.

e

Officials from one subunit within Commerce—the National Institute of Standards and Technology—

said that they calculate the spending requirement for the program based on its actual spending on 

extramural R&D for the previous fiscal year, rather than the extramural R&D budget for the current 

fiscal year, but did not report this figure to SBA. We used the data that Commerce submitted to SBA 

to calculate its spending requirements.
Appendix II: Agencies’ Compliance with 

Spending Requirements for the Small 

Business Technology Transfer Program for 

Fiscal Year 2012

Page 36 GAO-14-431 Small Business Research Programs

Our analysis of the data that the agencies submitted to the Small 

Business Administration (SBA) indicate that two of the five agencies 

participating in the Small Business Technology Transfer (STTR) program 

met or exceeded their fiscal year 2012 spending requirements, while the 

remaining three agencies did not. See table 3 for data on agency 

compliance.

Table 3: Agency Compliance with Small Business Technology Transfer (STTR) Program Spending Requirements for Fiscal 

Year 2012

Dollars in millions

Agency

Extramural research 

or research and 

development (R&D) 

budget

Amount 

spenta Calculated spending 

requirementb

Difference between 

amount spent and 

spending 

requirement

Percentage of 

extramural R&D 

budget spent for 

STTR

Department of Defense 

(DOD) $38,816c $118.8 $135.9 $(17.0) 0.31%

Department of Health 

and Human Services 

(HHS) 24,763c 86.9 86.7 0.3 0.35%

Department of Energy 

(DOE) 6,143 23.5 21.5 2.0 0.38%

National Space and 

Aeronautics 

Administration (NASA) 5,728 18.5 20.0 (1.5) 0.32%

National Science 

Foundation (NSF) 5,111 15.6 17.9 (2.3 ) 0.30%

Total $80,560 $ 263.3 $282.0 $(18.6) 0.32%

Source: GAO analysis of agency data reported to SBA.

Notes: Calculations may be affected by rounding. 

Cells shaded gray indicate the agency did not meet its spending requirement in fiscal year 2012.

a

The amount spent is the total obligations that the agency submitted to the Small Business 

Administration (SBA).

b

We calculated the spending requirement as 0.35 percent of the agency’s extramural R&D budget.

c

We found that two agencies—DOD and HHS—submitted different figures to SBA for their extramural 

R&D budgets for the SBIR and STTR programs for fiscal year 2012. The difference in the extramural 

R&D budget figures would not have affected our assessment of DOD’s or HHS’s compliance with 

spending requirements for fiscal year 2012. Specifically, DOD did not meet its STTR spending 

requirements using either the higher or lower extramural R&D budget figures, and HHS’s spending for 

the STTR program was high enough that it met its spending requirements even using the higher 

figure. Because we determined that the STTR extramural R&D budget figures were incorrect for DOD 

and HHS, we used the SBIR extramural R&D budget figures to determine DOD’s and HHS’s 

compliance with STTR spending requirements for this report.

Appendix II: Agencies’ Compliance with 

Spending Requirements for the Small Business 

Technology Transfer Program for Fiscal Year 

2012
Appendix III: Affect of Different Methodologies 

on Calculation of Department of Defense 

Spending for Fiscal Years 2006 through 2011

Page 37 GAO-14-431 Small Business Research Programs

Differences in how agencies interpret the spending requirements for the 

Small Business Innovation Research (SBIR) and Small Business 

Technology Transfer (STTR) programs can lead to different results when 

calculating compliance with spending requirements. To demonstrate the 

effect that these differences can have, we made the following calculations 

for the Department of Defense (DOD). First, we used the methodology we 

used for this report, as well as our first annual report on these issues, in 

which we compared the agency’s spending in each year to the spending 

requirements for that year. Second, we used the methodology that DOD 

uses to calculate its spending. DOD calculates its spending for the year 

as the funding that was appropriated in one year and spent in the same 

year and the following year. For example, for fiscal year 2006, DOD 

calculated its spending as the sum of the funding appropriated in fiscal 

year 2006 and spent in fiscal year 2006 and the funding appropriated in 

fiscal year 2006 and spent in fiscal year 2007. We used DOD for this 

comparison because DOD is the only agency that submits its spending 

data to the Small Business Administration (SBA) in a way that allows us 

to determine the year that funding was appropriated and spent.1 We 

found that DOD complied with SBIR spending requirements in 2 of the 6 

fiscal years from 2006 to 2011 and with STTR spending requirements in 4 

of the 6 years using our method. DOD’s method is incorrect, but if it were 

correct, it would yield a compliance determination in each of the 6 years 

for both the SBIR and STTR programs (see tables 4 and 5).

 1

We could not perform the analysis for DOD’s fiscal year 2012 data because the amount 

of DOD’s fiscal year 2012 appropriations that were obligated in fiscal year 2013 will be 

included in DOD’s fiscal year 2013 data submission to SBA, which had not yet been 

submitted at the time of our review. Agencies’ data submissions are typically due to SBA 

in the March following the end of the fiscal year, but SBA officials said they are extending 

the deadline for the fiscal year 2013 data submissions.

Appendix III: Affect of Different Methodologies 

on Calculation of Department of Defense 

Spending for Fiscal Years 2006 through 2011 
Appendix III: Affect of Different Methodologies 

on Calculation of Department of Defense 

Spending for Fiscal Years 2006 through 2011

Page 38 GAO-14-431 Small Business Research Programs

Table 4: Comparison of GAO and DOD Calculations for Small Business Innovation Research (SBIR) Program Spending for 

Fiscal Years 2006 through 2011

Dollars in millions

Year

Extramural research or 

research and 

development (R&D) 

budget

Spending 

requirementa

GAO’s method DOD’s method

Dollars 

spent

Spending as a 

percentage of 

extramural R&D 

budget 

Dollars 

spent

Spending as a 

percentage of 

extramural R&D 

budget 

2006 $45,437 $1,136 $1,159 2.6% $1,196 2.6%

2007 46,782 1,170 1,107 2.4% 1,218 2.6%

2008 46,857 1,171 1,101 2.4% 1,230 2.6%

2009 48,884 1,222 1,150 2.4% 1,251 2.6%

2010 47,955 1,199 1,154 2.4% 1,241 2.6%

2011 $41,678 $1,042 $1,082 2.6% $1,081 2.6%

Source: GAO analysis of agency data reported to the Small Business Administration (SBA).

Notes: Calculations may be affected by rounding. 

Cells shaded gray indicate the agency did not meet its spending requirement. 

These figures may differ from the figures presented in SBA’s report to Congress for fiscal years 2009 

through 2011 because DOD submitted updated to data to SBA after it provided the data to us and we 

needed the level of detail in the agency’s data to SBA to perform the analysis.

a

The spending requirement for fiscal years 2006 through 2011 was 2.5 percent of the extramural R&D 

budget.
Appendix III: Affect of Different Methodologies 

on Calculation of Department of Defense 

Spending for Fiscal Years 2006 through 2011

Page 39 GAO-14-431 Small Business Research Programs

Table 5: Comparison of GAO and DOD Calculations for Small Business Technology Transfer (STTR) Program Spending for 

Fiscal Years 2006 through 2011

Dollars in millions

Year

Extramural research or 

research and 

development (R&D) 

budget

Spending 

requirementa

GAO’s method DOD’s method

Dollars 

spent

Spending as a 

percentage of 

extramural R&D 

budget 

Dollars 

spent

Spending as a 

percentage of 

extramural R&D 

budget 

2006 $45,437 $130.9 $134.3 0.31% $133.0 0.31%

2007 46,782 134.1 134.8 0.31% 137.7 0.31%

2008 46,857 133.8 116.9 0.26% 139.2 0.31%

2009 48,884 139.1 136.0 0.29% 137.2 0.30%

2010 47,955 135.2 149.6 0.33% 138.0 0.31%

2011 $41,678 $117.7 $120.9 0.31% $122.6 0.31%

Source: GAO analysis of agency data reported to the Small Business Administration (SBA).

Notes: Calculations may be affected by rounding. 

Cells shaded gray indicate the agency did not meet its spending requirement. 

These figures may differ from the figures presented in SBA’s report to Congress for fiscal years 2009 

through 2011 because DOD submitted updated to data to SBA after it provided the data to us and we 

needed the level of detail in the agency’s data to SBA to perform the analysis.

a

The spending requirement for fiscal years 2006 through 2011 was 0.3 percent of the extramural R&D 

budget. Unlike the assessment in the body of the report, we used the extramural R&D budget figure 

DOD submitted for the STTR program because that was the amount the agency planned to spend for 

the year.
Appendix IV: Comments from the Small 

Business Administration

Page 40 GAO-14-431 Small Business Research Programs

Appendix IV: Comments from the Small 

Business Administration
Appendix V: Comments from the Department 

of Health and Human Services

Page 41 GAO-14-431 Small Business Research Programs

Appendix V: Comments from the Department 

of Health and Human Services
Appendix V: Comments from the Department 

of Health and Human Services

Page 42 GAO-14-431 Small Business Research Programs
Appendix VI: Comments from the Department 

of Agriculture

Page 43 GAO-14-431 Small Business Research Programs

Appendix VI: Comments from the 

Department of Agriculture
Appendix VI: Comments from the Department 

of Agriculture

Page 44 GAO-14-431 Small Business Research Programs
Appendix VI: Comments from the Department 

of Agriculture

Page 45 GAO-14-431 Small Business Research Programs
Appendix VI: Comments from the Department 

of Agriculture

Page 46 GAO-14-431 Small Business Research Programs
Appendix VII: Comments from the Department 

of Defense

Page 47 GAO-14-431 Small Business Research Programs

Appendix VII: Comments from the 

Department of Defense
Appendix VIII: GAO Contact and Staff 

Acknowledgments

Page 48 GAO-14-431 Small Business Research Programs

Frank Rusco, (202) 512-3841 or ruscof@gao.gov

In addition to the individual named above, Hilary Benedict, Assistant 

Director; Antoinette Capaccio; Cindy Gilbert; Richard Johnson; Armetha 

Liles; Rebecca Makar; Cynthia Norris; and Daniel Semick made key 

contributions to this report.

Appendix VIII: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(361530)
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