SSBCI National Standards 

Compliance and Oversight for Participating States

Originally published May 15, 2012, revised June 20, 2014, effective July 1, 2014

Introduction and Purpose

The Small Business Jobs Act of 2010 (Pub. L. 111-240)(the Act) created the State Small Business 

Credit Initiative (SSBCI) to support State programs that provide lending to, and investment in, 

small businesses. The SSBCI program builds on new and existing models for state small business 

programs, including Capital Access Programs (CAPs), loan participation programs, loan 

guarantee programs, collateral support programs, and state-run venture capital programs. 

The purpose of this document is to set forth national standards for the compliance and 

oversight responsibilities of states, territories, the District of Columbia, and municipalities that 

have been approved to participate in the SSBCI (herein referred to as Participating States). 

Section 3009(a)(2) of the Act requires the Secretary of the U.S. Department of the Treasury 

(Treasury) to establish minimum national standards for Approved State Programs1

. Section 

3004(b)(4)(B) of the Act and Section 4.6 of the Allocation Agreement require that all 

Participating States comply with these national standards. Treasury has identified compliance 

and oversight as important areas for the establishment of national standards. 

These national compliance standards are a complement to, but not a substitute for, the 

requirements set forth in the Act, the Allocation Agreement, and the SSBCI Policy Guidelines. 

Notwithstanding the recommended best practices that this document sets forth, each 

Participating State retains responsibility for ensuring compliance with the Act, the Allocation 

Agreement (including all related documents incorporated by reference in Section 8.2) , and the 

SSBCI Policy Guidelines. 

The first section of this document, Recommended Framework for Identifying, Monitoring, and 

Managing Compliance and Oversight Risks, provides Treasury’s recommended approach for 

designing and implementing a comprehensive compliance and oversight system. This 

recommended framework is built upon the following six key elements: 

• Centralizing the coordination of compliance and oversight; 

• Identifying key compliance and oversight risks;

• Assessing the likelihood and severity of these risks;

• Developing a risk monitoring and mitigation plan; 

• Conducting periodic testing; and

• Taking corrective actions as needed. 

 

1 Capitalized terms used herein and not defined herein shall have the respective meanings ascribed to them in the 

Allocation Agreement. 

Superseded by 2021 Program Documents
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Revised June 20, 2014, effective July 1, 2014

The second section, Treasury Guidance on Key Compliance and Oversight Risks, provides further 

guidance on the mitigation of 11 specific risks. Treasury identified these 11 risks based on its 

assessment of the relative impact and likelihood of each risk, as well as a review of technical 

assistance requests from Participating States to determine which compliance and oversight 

responsibilities required further explication. For each of these risks, Treasury provides: 

• A cross reference to the related duty imposed on Participating States by the Act, the 

Allocation Agreement, or SSBCI Policy Guidelines, as applicable; 

• Treasury’s guidance related to any such duty, as applicable; and, 

• Treasury’s suggested best practices for risk mitigation. 

The Treasury Inspector General is authorized to review Participating States’ compliance with 

SSBCI program requirements and prohibitions in conjunction with the recommendations and 

best practices set forth in this document in order to identify any intentional or reckless misuse 

of funds. 

Please note that the contents of these standards may be updated periodically to reflect newly 

available guidance or information. When and if these standards are updated, Treasury will 

publish a Notice of Availability in the Federal Register and notify the Participating States’ 

Authorized Official and Point of Contact via e-mail. Participating States may also visit the U.S. 

Department of Treasury’s SSBCI website (http://www.treasury.gov/ssbci) to review and 

download the latest version.

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Revised June 20, 2014, effective July 1, 2014

Recommended Framework for Identifying, Monitoring, and 

Managing Compliance and Oversight Risks

Centralize Coordination of Compliance and Oversight 

Treasury recommends that each Participating State designate a single employee as the 

individual responsible for managing the day-to-day compliance activities for the Participating 

State’s Approved State Programs. This individual should be an employee whose responsibilities 

span all SSBCI related compliance activities and may be someone other than the Participating 

State’s Authorized Representative. This individual should coordinate all of the activities listed in 

this section. Depending on the size and scope of a Participating State’s Approved State 

Programs, this function may be performed by an individual on a less than full time basis.

Identify Key Compliance and Oversight Risks 

Treasury has identified the following 11 high-potential risks for most Approved State Programs:

1) Inadequate Borrower and Investee Certifications; 

2) Inadequate Lender/Investor2 Certifications; 

3) Inadequate Lender/Investor Adherence to Requirements; 

4) Inadequate Oversight of Administering entities and Other Entities Included in Annex 1 of 

the Allocation Agreement (if applicable); 

5) Failure to Submit Timely and Accurate SSBCI Quarterly and Annual Reports; 

6) Inadequate Control and Retention of Records;

7) Inadequate Documentation of Subsequent Private Financing;

8) Improper Usage of, and Accounting for, Allocated Funds;

9) Fraud, Waste, and Abuse; 

10) Conflicts of Interest;

11) [For municipalities only] Lack of Adequate Justification for Loans or Investments Made 

Outside of Municipal Boundaries.

Treasury recommends that Participating States actively monitor, mitigate, and manage these 

specific risks as well as any other identified risks that are unique to the design of a particular 

Approved State Program. 

 

2 For the purposes of this document, “investor” refers to any private venture capital, seed stage, 

mezzanine, or angel fund participating in an Approved State Program. This term does not refer to 

individual investors in a fund.

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Assess the Likelihood and Severity of Key Compliance and Oversight Risks

Each Participating State should assess the likelihood and impact of each key compliance and 

oversight risk (see above) as well as for each program- or state-specific risks identified. Often, 

this may result in a three-tiered rating of ”high”, ”medium”, or “low.” To determine the risk 

rating, the Participating State should make an informed judgment about the likelihood and 

impact of non-compliance by considering whether vulnerabilities exist that may result in 

instances of non-compliance with SSBCI requirements. Participating States should also consider 

how risks might arise throughout the chain of authorizations, certifications, and approvals 

among the Participating State’s implementing entity (including employees and board members, 

if applicable), any administering entities, lenders or investors, and small business 

borrowers/investees. 

 An important part of this recommended risk assessment consists of reviewing all available 

internal or external audits of the implementing entity, Approved State Program(s), or 

administering entities identified in Annex 1 of the Allocation Agreement. If the Approved State 

Program’s audit, or the audit of the entity administering a particular Approved State Program, 

contains findings, material weaknesses, or significant deficiencies, the risk rating should be 

adjusted accordingly, particularly if the finding, material weakness, or significant deficiency 

pertains to an identified risk category. Participating States should also promptly develop, 

monitor, and implement a corrective action plan. Treasury encourages Participating States to 

provide Treasury with copy of any audit containing findings, material weaknesses, or significant 

deficiencies, as well as a copy of the management response.

Develop a Risk Monitoring and Mitigation Plan 

Treasury recommends that each Participating State document its plan and detailed procedures

for monitoring, mitigating, and managing compliance and oversight risks. One effective way for 

Participating States to organize this document would be in a matrix; however, other approaches 

that trace the relationship between each risk and the associated control objectives, control 

activities, and testing protocols may be equally effective. The matrix (or an equivalent 

document) should include the 11 risks that Treasury identified as generally applicable to all 

Approved State Programs, as well as any additional risks that the Participating State believes are 

necessary to address state- or program-specific risks, and a rating for each risk, as discussed 

above. 

For each risk, Treasury recommends that the Participating State document a specific plan for 

monitoring, mitigating, and managing risk by:

1) Defining control objectives to mitigate each risk. A control objective is the specific 

target used to determine whether a control is operating effectively. It can also be 

thought of as a management goal focused on mitigating a specific compliance and 

oversight risk. For example, a control objective regarding reporting might be as follows: 

“SSBCI quarterly or annual reports are submitted on time and are complete, accurate, 

and consistent with the state’s general ledger entries and documentation.” Many of 

these control objectives can be easily derived from the 11 risks that Treasury has 

identified as high-potential for most Approved State Programs; however, Participating 

States should consider whether additional program or state-specific risks merit 

additional control objectives.

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2) Specifying control activities for each control objective. One definition of control 

activities, which is provided by the Government Accountability Office (GAO)3 , is as 

follows: “Control activities are the policies, procedures, techniques, and mechanisms 

that enforce management’s directives, such as the process of adhering to requirements.

They help ensure that actions are taken to address risks.”4 Control activities are the 

policies and procedures that organizations follow to ensure that they achieve the 

control objectives.

3) Specifying the planned test methodology, sample size, and testing frequency for each 

control activity. Treasury recommends that controls testing be conducted at least 

annually. However, for risks with a risk rating of ”medium” or ”high,“ Participating 

States should consider expanding the sample size and/or conducting more frequent 

controls testing to mitigate compliance risk and to ensure a robust control 

environment.

Treasury recommends that Participating States should conduct testing for each control 

activity using a statistically valid sample5

. Statistical samples should be designed based 

on widely accepted statistical sampling principles. The required sample size should be 

based on factors including the size of the population, the acceptable margin of error, 

and the confidence level desired. Statistical sample calculators are available on the 

Internet, and Participating States may find these useful when determining the 

appropriate sample size.

Participating States should document the statistical sampling technique, methodology, 

and rationale for the sample size and sample frequency of each test conducted. 

One effective way to organize this information, as stated above, is in a compliance and internal 

controls matrix. Such a matrix would typically include a row for each risk category, followed by 

columns for the risk rating; control objectives; control activities; planned test methodology, 

sample size, and testing frequency. Test results and the resolution of any corrective actions, if 

required, could subsequently be added to this matrix.

 

3 While this GAO document is directed at federal executive branch agencies, rather than Sates, Treasury 

has identified this as a relevant and concise definition for the term “control activities” that may be helpful 

to Participating States.

4

 GAO/AIMD-00-21.3.1 (11/99) 5 For most control activities, the universe of records will be the number of SSBCI-supported loans or 

investments. However, for some risks, the universe of records may be other types of documents. For 

example, to test compliance with the mandatory control activity for the “Inadequate oversight of 

administering entities” risk, a Participating State could evaluate the written agreement with the applicable 

entities against minimum requirements. See the next section, Treasury Guidance on Key Compliance and 

Oversight Risks, for further details on mitigating this risk.

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Revised June 20, 2014, effective July 1, 2014

Conduct Periodic Testing

Treasury recommends that Participating States test a statistically significant sample of the 

Participating State’s records on a periodic basis to determine whether the Participating State is 

adhering to the control activities listed in the Participating State’s compliance and internal 

controls matrix (or equivalent document). Treasury does not require that Participating States 

conduct any particular audit as part of its compliance system. However, Treasury does 

recommend that controls testing be conducted at least annually. Participating States should 

make a risk-based determination as to whether more frequent controls testing is warranted. In 

order to ensure objectivity, controls testing should be conducted by an individual that (1) is not 

responsible for performing any of the control activities established by the Participating State; 

and, (2) does not report to any individual responsible for performing or overseeing any of the 

Participating State’s risk mitigation control activities. Typically, the employee designated as 

responsible for overseeing compliance should also review test results. 

If a Participating State becomes aware of the fact that an ineligible loan or investment has been 

enrolled in an Approved State Program, the Participating State should contact the SSBCI 

Compliance Manager to determine the corrective actions, including whether to amend any prior 

submitted SSBCI quarterly or annual reports.

If an employee of a Participating State, administering entity, or implementing agency identifies 

any instances of fraud, waste, or abuse, he or she should contact the Treasury Office of 

Inspector General immediately. See http://www.treasury.gov/services/reportfwa/Pages/ReportFWA.aspx for more information about how to contact the Treasury Office of 

Inspector General.

Take Corrective Actions as Needed

If test results indicate isolated and non-repeating instances of non-compliance, the Participating 

State should take all necessary steps to bring these applicable records into compliance. 

However, if test results indicate systematic non-compliance with a particular control activity, 

rather than an isolated instance of non-compliance, the Participating State should assess the 

results to determine the cause and take corrective actions. Corrective actions may include, but 

are not limited to, enhanced staff training, enhanced training or technical assistance for 

lenders/investors or administering entities, the development of checklists, the development or 

enhancement of IT systems to identify non-compliant records, or updated policies and 

procedures.

Participating States should document test results and assess whether test results suggest the 

need for increased frequency or scope of compliance and internal controls testing.

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Revised June 20, 2014, effective July 1, 2014

Treasury Guidance on Key Compliance and Oversight Risks

This section is organized around the risks that Treasury identified as high-potential for most Approved 

State Programs.6

 For each of these risks, Treasury references the related applicable sections of the 

Allocation Agreement and/or SSBCI Policy Guidelines, any applicable FAQs or other official

interpretation of these requirements, and recommended best practices to mitigate these risks. 

Risk: Inadequate Small Business Borrower/Investee Certifications

Use of Proceeds Certifications (Small Business Borrower/ Investee)

Article IV of the Allocation Agreement and Sections VI, VII, and XII of the SSBCI Policy Guidelines outline 

the restrictions on the acceptable uses of loan and investment proceeds. Specifically, these provisions 

require that small business borrowers (or investees) must make a certification to the lender or investor

regarding the use of loan or investment proceeds for each SSBCI-supported transaction.

Participating States (or, as applicable, administering entities, lenders, or investors) may design their own 

certification forms but at a minimum the small business borrower or investee must certify, to the 

standards established in the SSBCI Policy Guidelines, that:

• Proceeds will be used for an eligible business purpose;

• Proceeds will not be used to pay for any purposes prohibited by the SSBCI Policy Guidelines; 

• The small business borrower (or investee) is not an executive officer, director, or principal 

shareholder (or a member of the immediate family or a related interest of such individual) of 

the lender (or investor); and, 

• The small business borrower (or investee) is not engaged in any of the activities or sources of 

income prohibited in the SSBCI Policy Guidelines.

As noted above, standards and examples of such terms as “business purpose”, “principal”, “lender”, and 

prohibited loan purposes are included in the SSBCI Policy Guidelines.

Treasury has provided a sample use of proceeds certification form in Appendix A of this document. 

Participating States may combine this use of proceeds certification with the small business borrower’s or 

investee’s sex offender certification into a single form. 

While Treasury does not require Participating States (or administering entities, lenders, or investors, if 

so designated) to independently verify the representations made by the authorized representative of 

 

6 There are nine risks that Treasury believes are applicable to all Participating States. Two additional risks may not 

be applicable to all Participating States: (1) ”Inadequate Oversight of Administering Entities” only applies to those 

Participating States that have an entity other than the implementing entity listed in Section 1B of the Participating 

State’s application administering the program(s). Administering entities are listed in Annex 1 of the Participating 

State’s Allocation Agreement. (2)”Lack of Adequate Justification for Loans or Investments Made Outside of 

Municipal Boundaries” applies only to municipalities participating in SSBCI.

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Revised June 20, 2014, effective July 1, 2014

the small business borrower or investee with respect to the use of proceeds, Treasury does expect 

Participating States, as part of their compliance monitoring procedures, to establish a process to 

determine whether these required certifications have been adequately documented. 

Treasury believes that Participating States could meet this expectation by either:

• Obtaining, reviewing, and maintaining a copy of each small business borrower’s (or investee’s) 

certification7 itself; or, 

• Executing an agreement that requires the administering entity, or each lender or investor (as 

applicable), to obtain, review, and maintain copies of the small business borrower’s (or 

investee’s) use of proceeds certifications. Participating States should exercise appropriate 

oversight of the administering entity, lenders, or investors, tasked with this responsibility. One 

means of exercising this oversight would be to conduct an annual audit of each lender or 

investor’s transaction files to verify that the use of proceeds certifications are on file and 

properly executed.

Sex Offender Certifications (Small Business Borrower/ Investee)

Section 3011(c)(2) of the Act requires, “any private entity that receives a loan, a loan guarantee, or other 

financial assistance using [SSBCI] funds,” must certify that their principals have not been convicted of a 

sex offense against a minor (as such terms are defined in section 111 of the Sex Offender 

Registration and Notification Act (42 U.S.C. 16911)). The SSBCI Policy Guidelines and Section 4.9(c) of 

the Allocation Agreement implement this requirement by specifying that the Participating State has the 

responsibility to obtain a certification regarding sex-offender status covering all principals of a small 

business receiving an SSBCI-supported loan or investment. Section 1.1 of the Allocation Agreement

defines the following covered individuals under the definition of “principal” for the sole purpose of 

collecting the sex offender certification: 

“’Principal‘ shall mean, for purposes of Section 4.9, if a sole proprietorship, the 

proprietor; if a partnership, each managing partner and each partner who is a natural 

person and holds a 20% or more ownership interest in the partnership; and if a 

corporation, limited liability company, association or a development company, each 

director, each of the five most highly compensated executives or officers of the entity, 

and each natural person who is a direct or indirect holder of 20% or more of the 

ownership stock or stock equivalent of the entity.” 

It is the Participating State’s responsibility to obtain the certification, either electronically or in paper 

copy, and verify that it is complete and duly executed prior to transferring funds. Treasury 

recommends that this certification be collected prior to the loan or investment closing so that there is 

no delay in the transfer of funds to the borrower post-closing.

 

7 While certifications may be scanned PDFs, they must contain a signature.

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SSBCI National Standards for Compliance and Oversight 9 

Revised June 20, 2014, effective July 1, 2014

Treasury does not require Participating States (or administering entities, if so designated) to 

independently verify the certified sex offender status of borrowers or investees. For record retention 

purposes, Participating States may elect to have the certifications stored with the lender’s or investor’s 

transaction files. However, Treasury recommends that Participating States retain the sex offender 

certifications in order to mitigate risks associated with record retention requirements.

If the Participating State delegates any of these responsibilities to an administering entity, the 

Participating State must exercise oversight to verify compliance. One means of exercising this oversight 

would be to conduct an annual audit of the certifications to verify that the documents are in order and 

are being maintained pursuant to the records retention requirements discussed later in this document. 

Treasury has provided a sample sex offender certification form in Appendix B of this document. As 

noted above, Participating States may combine the sex offender certification along with the borrower’s

(or investee’s) use of proceeds certifications on a single form. However, Participating States must obtain

a sex offender certification that covers each principal whereas the use of proceeds certification is only

required from a single authorized representative of the small business. This may make administration of

a combined certification form impractical in some cases.

Risk: Inadequate Lender/Investor8 Certifications

Use of Proceeds Certifications (Lender/ Investor)

As noted above, Article IV of the Allocation Agreement and Sections VI, VII, and XII of the SSBCI Policy 

Guidelines outline the restrictions on the acceptable uses of loan and investment proceeds. Use of 

proceeds assurances are required of all lenders that provide SSBCI funds to a borrower or investee or 

that receive direct SSBCI support through a guarantee, purchase loan participation, collateral support, or 

CAP reserve fund. Use of proceeds assurances are not required from lenders and co-investors that do 

not provide, administer, or receive direct support through SSBCI funds. Therefore, in addition to the use 

of proceeds certification made by the small business borrower (or investee), as described above, the 

lender (or investor, or in the case of a state-run direct loan9 or venture capital program, the Participating 

State itself) must also certify to the Participating State that: 

 

8 As noted previously, for the purposes of this document, “investor” refers to any private venture capital, seed 

stage, mezzanine, or angel fund participating in an Approved State Program. This term does not refer to individual 

investors in a fund.

9 When a Participating State makes a direct loan or a companion loan under an approved direct loan or loan 

participation program, two use of proceeds forms must be executed: one by the borrower (see the 

section Risk: Inadequate Small Business Borrower/Investee Certifications above) and one by the Participating State 

or the relevant contracting entity (since the Participating State or contracting entity is a lender in this case). 

Similarly, if the Participating State makes a direct venture capital investment in a small business, two use of 

proceeds forms must be executed: one by the investee and one by the Participating State or relevant contracting 

entity as the investor. The Participating State should contact Treasury with any questions on this issue.

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SSBCI National Standards for Compliance and Oversight 10

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• The loan or investment has not been made in order to place under the protection of the 

Approved State Program prior debt that is not covered under the Approved State Program and 

that is or was owed by the borrower to the lender or to an affiliate of the lender; and,

• The loan or investment is not a refinancing of a loan previously made to that borrower by the 

lender or an affiliate of the lender; and, 

• The lender is not attempting to enroll any portion of an SBA-guaranteed loan (applicable to loan 

programs only). 

It is the Participating State’s responsibility to obtain this use of proceeds certification, either 

electronically or in paper copy, and to verify that it is complete and duly executed prior to transferring 

funds. Treasury has provided a sample certification in Appendix C of this document.

Treasury does not require Participating States (or administering entities, if so designated) to 

independently verify the representations made by a lender or investor regarding the use of proceeds. 

However, Treasury does expect that Participating States, as part of their compliance monitoring 

procedures, will establish a process to determine whether these required certifications have been 

adequately documented. For record retention purposes, Participating States may elect to store the 

certifications with the lender’s or investor’s transaction files. However, Treasury recommends that 

Participating States retain the use of proceeds certifications in order to mitigate risks associated with 

record retention requirements.

If the Participating State delegates the responsibility to obtain this certification to an administering 

entity, the Participating State must exercise appropriate oversight of the administering entity. One 

means of exercising this oversight would be to conduct an annual audit of each lender or investor’s 

transaction files to verify that the use of proceeds certifications are on file and signed by an authorized 

representative of the lender or investor. 

It is not sufficient for a lender or investor to provide a one-time certification of compliance with these 

requirements as part of a lender or investor participation agreement; the lender or investor must 

certify the use of proceeds for each individual loan or investment. 

Treasury also recommends that Participating States: 

• Require the lender or investor to describe the loan or investment purpose on a transaction 

enrollment form (see Timely and Accurate SSBCI Quarterly and Annual Reports, below), and 

review this description for conformity with SSBCI requirements prior to enrolling the transaction 

in an Approved State Program.

• Include a clause in each lender (or investor) participation agreement prohibiting the lender or 

investor from enrolling a transaction that violates SSBCI’s restrictions on the use of proceeds.

Sex Offender Certifications (Lender/Investor)

Section 3011(c)(2) of the Act requires that, “any private entity that receives a loan, a loan guarantee, or 

other financial assistance using [SSBCI] funds,” must certify that their principals have not been convicted 

of a sex offense against a minor (as such terms are defined in section 111 of the Sex Offender 

Registration and Notification Act (42 U.S.C. 16911)). 

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SSBCI National Standards for Compliance and Oversight 11

Revised June 20, 2014, effective July 1, 2014

The SSBCI Policy Guidelines and Section 4.9(c) of the Allocation Agreement implement this requirement

by specifying that the Participating State has the responsibility to obtain a certification regarding 

sex-offender status, and that the term “private entity” includes all lenders or investors10 enrolling a loan 

or investment in an SSBCI Approved State Program. The definition of “private entity” also encompasses 

private or non-profit administering entities that make loans or investments directly to 

borrower/investees through an approved direct lending program, loan participation program, or 

state-run venture capital program. Certifications are required of private lenders and investors that 

provide SSBCI funds to a borrower or investee or that receive direct SSBCI support through a guarantee, 

purchase loan participation, collateral support, or CAP reserve fund. This means that when a 

Contracting Entity operates an approved direct loan or loan participation program on behalf of a 

Participating State, two certifications generally are required: one from the borrower (see the section 

Risk: Inadequate Small Business Borrower/Investee Certifications above) and one from the relevant 

Contracting Entity that is administering the program as the lender. Similarly, if a Contracting Entity 

operates an approved direct venture capital program on behalf of a Participating State, two 

certifications generally are required: one from the investee and one from the relevant Contracting Entity 

as the investor. The Participating State should contact Treasury with any questions on this issue.

Like with the small business borrower or investee sex offender certification, a certification covering all 

principals of the lender or investor must be obtained by the Participating State. This certification may be 

made by all principals individually, or may be made by an individual acting in an official capacity (e.g. a 

Chief Risk Officer, etc.) who is authorized to make the certification on behalf of the principals of the

lender or investor. Section 1.1 of the Allocation Agreement defines “principal”, for the sole purpose of 

collecting the sex offender certification:

“‘Principal’ shall mean, for purposes of Section 4.9, if a sole proprietorship, the 

proprietor; if a partnership, each managing partner and each partner who is a natural 

person and holds a 20% or more ownership interest in the partnership; and if a 

corporation, limited liability company, association or a development company, each 

director, each of the five most highly compensated executives or officers of the entity, 

and each natural person who is a direct or indirect holder of 20% or more of the 

ownership stock or stock equivalent of the entity.”

Participating States may meet their obligation to obtain these sex-offender status certifications in one of 

two ways. Participating States may either:

• Obtain newly executed sex offender certifications11 covering all principals of a lender or investor 

prior to enrolling each loan or investment in an SSBCI Approved State Program; or, 

• Obtain sex offender certifications covering all principals of a lender or investor prior to enrolling 

any loans or investments originated by that lender or investor in the Approved State Programs

 

10 As noted above, for the purposes of this document, “investor” refers to any private venture capital, seed stage, 

mezzanine, or angel fund participating in an Approved State Program. This term does not refer to individual 

investors in a fund. However, each principal of the private fund must execute a sex offender certification. 11 While certifications may be scanned PDFs, they must contain a signature.

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SSBCI National Standards for Compliance and Oversight 12

Revised June 20, 2014, effective July 1, 2014

and execute a written agreement with the lender or investor (which may be part of a larger 

lender, or investor, participation agreement) that creates a positive requirement to notify the 

Participating State if and when an event occurs that renders the prior certifications obsolete. 

Such event could be a change in principals or a conviction of an existing principal for a sex 

offense against a minor. The Participating State may also consider adding a requirement to this 

written agreement for a periodic resubmission of the certifications, perhaps on an annual basis, 

even absent a material event. 

Under either of the options above, it is the Participating State’s responsibility to obtain the 

certification, either electronically or in paper copy, in order to verify that it is complete and duly 

executed prior to transferring funds. Treasury does not require Participating States (or administering 

entities, if so designated) to independently verify the certified sex offender status of covered principals. 

Treasury has provided a sample sex offender certification form as Appendix B to this document. 

If the Participating State delegates these responsibilities to an administering entity, the Participating 

State must exercise oversight to ensure compliance. One means of ensuring oversight would be to 

conduct an annual audit of the certifications to ensure that the documents are in order and are 

maintained pursuant to the records retention requirements discussed later in this document. 

Risk: Inadequate Lender/Investor Adherence to Requirements

In addition to the required certification of sex offender status, Section 4.9 of the Allocation Agreement 

requires that, prior to providing any financial assistance using Allocated Funds to a lender or investor, 

the Participating State must obtain the following: (a) a binding agreement regarding Treasury’s right to 

access records related to SSBCI-supported loans and investments and (b) certification that the lender or 

investor is in compliance with the requirements of the Right to Financial Privacy Act (12 U.S.C. § 3401 

et seq.), and 31 C.F.R. § 103.121, if applicable. 

Treasury recommends that, prior to enrolling any loan originated by a private lender, and prior to 

enrolling any investment made by a venture capital investor, the Participating State (or administering 

entity) should execute a signed lender/investor participation agreement to clarify lender/investor 

responsibilities and reduce the likelihood of non-compliance. This agreement should: 

• Specify lender/investor responsibilities regarding SSBCI’s restrictions on use of proceeds; 

• Specify lender/investor responsibilities regarding sex offender certifications; 

• Require that the lender/investor make all books and records related to the use of allocated 

funds available to Treasury and/or the Treasury Inspector General; 

• Specify all eligibility requirements for loans/investments for each applicable Approved State 

Program; and

• Specify consequences for non-compliance with the terms of the agreement.

If a lender/investor is specifically identified in Annex 1 of the Allocation Agreement as an administering

entity, then this agreement must also adhere to the requirements of Articles IV and VI of the Allocation 

Agreement, as described in the following section.

Recommended additional provisions may also include: 

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Revised June 20, 2014, effective July 1, 2014

• Mandate the use of a transaction enrollment form; and

• Specify any required data reporting elements from the lender/investor to the Participating 

State (or its administering entity).

These best practices are designed to assist the Participating State in tracking the use of Allocated Funds

and gathering data for the required SSBCI quarterly and annual reports.

Participating States should consider adding to this list any additional activities that may be useful to 

provide additional mitigating controls associated with this risk.

Risk: Inadequate Oversight of Administering Entities and Other Entities Included in Annex 1 

of the Allocation Agreement

Note: if none of the Approved State Programs are operated by contracting/administering entities, this 

risk category may not apply. Regardless of direct applicability, Treasury expects that Participating States 

will provide due diligence and oversight over all contract entities that may perform work ancillary to an 

Approved State Program. 

Participating States that contract with one or more entities to administer specific aspects of Approved 

State Programs must execute and maintain a written agreement with each of these entities that 

requires compliance with the provisions of Articles IV and VI of the Allocation Agreement. 

Prior to disbursing any funds to an administering entity, the Participating State must execute a written 

agreement applying the provisions of Articles IV and VI to the administering entity.12 Treasury calls 

special attention the following requirements that must be incorporated into the agreement: 

• The administering entity must make all books and records related to the use of allocated funds 

available to Treasury and/or the Treasury Inspector General;

• The administering entity is prohibited from enrolling any portion of an SBA-guaranteed loan 

(note: this provision does not apply to venture capital programs); 

• The administering entity must comply with all administrative expense requirements, including 

OMB Circular A-87, and maintain substantiating documentation for all expenses; and

• The administering entity must comply with all data collection and reporting responsibilities. The 

agreement should specify the respective roles of the administering entity and the Participating 

State in meeting all data collection and reporting responsibilities, and include the Participating 

State’s transaction enrollment form, if applicable. 

Recommended best practices include: 

 

12 The Participating State should do so by using the same language that is included in Articles IV and VI of the 

Allocation Agreement, except for substituting the name of the administering entity for the name of the 

Participating State.

Superseded by 2021 Program Documents
SSBCI National Standards for Compliance and Oversight 14

Revised June 20, 2014, effective July 1, 2014

• Inserting additional contract provisions that: 

o Specify the administering entity’s responsibilities regarding use of proceeds and sex 

offender certifications;

o Specify all eligibility requirements for loans/investments for each applicable Approved 

State Program; 

o Prohibit, or require disclosure of, an administering entity underwriting or approving a 

loan to, or an investment in, any firm in which the administering entity or any of its 

principals or affiliates has a direct or indirect financial interest; and

o Specify consequences for non-compliance with the terms and conditions of the contract. 

• Reviewing third-party audits of the administering entity for findings, material weaknesses, or 

significant deficiencies, and require the administering entity to take corrective actions. 

• Performing site visits, requiring periodic status update reports, and/or conducting regular 

conference calls with the administering entity to monitor progress and provide early warning of 

any implementation challenges.

Participating States should consider adding to this list any additional activities that may be useful to 

provide additional mitigating controls associated with this risk.

Risk: Failure to Submit Timely and Accurate SSBCI Quarterly and Annual Reports 

Sections 4.7, 4.8, and Annexes 4, 5, and 7 of the Allocation Agreement set forth SSBCI’s reporting 

requirements. Failure to submit complete and timely reports is an event of default, as described in 

Section 6.1 of the Allocation Agreement. 

In order to improve the accuracy of the underlying data reported in these reports, Treasury strongly 

recommends that prior to enrolling a loan or investment in an Approved State Program, the 

Participating State (or administering entity) collects a transaction enrollment form from the lender or 

investor (or directly from the small business borrower/investee if the Participating State or its 

administering entity makes direct loans or investments). The Participating State should also verify that 

all data fields required to record the transaction in the SSBCI annual report template—including small 

business borrower-provided estimates of job creation and retention—have been provided. 

Treasury recommends receiving this enrollment form prior to disbursing funds in order to ensure that 

each transaction meets the eligibility criteria for enrollment in an Approved State Program. Section II of 

the SSBCI Policy Guidelines establishes eligibility criteria for small businesses to receive loans or 

investments.

Treasury recommends that Participating States undertake the following control activities to mitigate the 

potential for inaccurate data reporting:

• Review the accuracy of transaction enrollment forms by conducting a periodic audit of an 

appropriately sized sample and confirming that the data on the form matches the data on 

the underlying loan or investment documents; 

Superseded by 2021 Program Documents
SSBCI National Standards for Compliance and Oversight 15

Revised June 20, 2014, effective July 1, 2014

• Perform a quality control check in which an employee not responsible for the Participating 

State’s reporting function compares individual transactions listed on the annual report to 

the transaction enrollment forms and/or underlying loan or investment documents; and, 

• Reconcile each calendar year’s four SSBCI quarterly reports to the SSBCI annual report and 

Federal Financial Report (SF-425).

Participating States should consider adding to this list any additional activities that may be useful to 

provide mitigating controls associated with this risk. When developing control objectives and control 

activities, and when designing the testing methodology for these control activities, Participating States 

should pay particular attention to risks introduced by administering entities, lenders/investors, and 

small business borrowers/investees in the program.

Risk: Inadequate Control and Retention of Records

Section 4.13 of the Allocation Agreement establishes that Participating States shall retain all financial 

records, supporting documents, statistical records, and all other records pertinent to the Allocation for a 

period of three years from the date of submission of the final quarterly report, except as otherwise 

provided in the grants management common rule at §__.42. Section 42 of the grants management 

common rule states that if any litigation, claim, negotiation, audit, or other action involving the records 

has been started before the expiration of the retention period, the records must be retained until the 

completion of the action and resolution of all issues or the end of the retention period, whichever is 

later. 

Participating States must therefore retain all financial records and supporting documents at least 

through January 30, 2020. Financial records and supporting documents include, but are not limited to: 

all loan and investment agreements; loan or investment commitment letters; all sex offender and use of 

proceeds certifications retained by the Participating State; any transaction enrollment forms; all general 

ledger entries pertaining to Allocated Funds; all statements for accounts containing Allocated Funds, 

including bank statements if applicable; any contracts or memorandum of agreement (MOA) with 

administering entities; any records of all transfers of funds to administering entities; all invoices and 

receipts for administrative expenses; and, documentation of private leverage and subsequent private 

financing. Furthermore, if lenders and investors, or an administering entity, are required to retain any 

records rather than submitting these records to the Participating State or administering entity—the 

Participating State must have a written agreement in place requiring the maintenance of these records 

until at least January 30, 2020, and the Participating State must exercise oversight to verify compliance. 

One means of exercising this oversight would be to conduct an annual audit of a random sample of each 

lender’s or investor’s (or the administering entity’s) financial records.

Participating States should consider adding any additional activities that may be useful to provide 

additional mitigating controls associated with records retention. 

Risk: Inadequate Documentation of Subsequent Private Financing

Section 4.8 of the Allocation Agreement requires, under circumstances described in Annex 7 of the 

Allocation Agreement, Participating States to report the amount of additional private financing that 

occurs after the closing of the original SSBCI-supported transaction. This term of the Allocation 

Agreement means that the Participating State must maintain documentation of the amount of 

Superseded by 2021 Program Documents
SSBCI National Standards for Compliance and Oversight 16

Revised June 20, 2014, effective July 1, 2014

subsequent private financing, as well as the rationale for determining that the subsequent private 

financing is the “cause and result” of the original SSBCI-supported transaction, when required by Annex 

7. 

If the enrollment of loans or investments is handled by an administering entity, the Participating State 

may delegate the responsibility for obtaining and retaining this documentation to the administering 

entity pursuant to a written contract, provided that the Participating State exercises oversight of the 

administering entity to ensure compliance with this requirement. One means of exercising this 

oversight would be to conduct an annual audit of a random sample of loans or investments for which 

subsequent private financing has been recorded.

Treasury recommends that Participating States undertake the following additional control activities 

based on the guidance provided in Annex 7 of the Allocation Agreement: 

• Verify that no subsequent private financing for loans enrolled in a loan guarantee or 

collateral support program is recorded, unless the Participating State has received 

documented permission from Treasury; 

• Verify that subsequent private financing is recorded only when the initial loan/investment is 

a form of subordinate, mezzanine, or equity financing.

Participating States should consider adding to this list any additional activities that may be useful to 

provide additional mitigating controls associated with this risk.

Risk: Improper Usage of, and Accounting for, Allocated Funds

Section 4.2 of the Allocation Agreement establishes that the Participating State shall only “use” the 

Allocated Funds for the purposes and activities specified in the Allocation Agreement and in accordance 

with the cost principles set forth in OMB Circular A-87 (Cost Principles for State, Local, and Indian Tribal 

Governments) and codified in 2 C.F.R. Part 225. These cost principles stipulate that administrative costs 

must be allowable, allocable, reasonable, and documented, and that all indirect costs be in accordance 

with the indirect cost rate proposal approved by the Participating State’s cognizant agency13. 

It is also important to note that the Allocation Agreement includes Annex 1, which specifies the 

administering entities and the Approved State Programs authorized by Treasury, and Annex 3, which 

establishes the maximum amount available to the Participating State to pay for direct and indirect 

administrative costs pertaining to the Approved State Programs. Additionally, Section 8.2 of the 

 

13 The cognizant agency for all Participating States and most municipalities is the Department of Health and Human 

Services.

Superseded by 2021 Program Documents
SSBCI National Standards for Compliance and Oversight 17

Revised June 20, 2014, effective July 1, 2014

Allocation Agreement also incorporates a number of other documents and representations, including

the Participating State’s Application, by reference.14

For the purposes of Section 4.2 of the Allocation Agreement, the phrase “use” means any expenditure, 

obligation or transfer of Allocated Funds for the purpose of carrying out the Approved State Programs, 

as described in Annex 1 of the Participating State’s Allocation Agreement, as well as the Participating 

State’s Application. 

As such, Allocated Funds may not be used, under any circumstances, to provide services or make loans, 

grants, or investments under any program other than those specifically listed in Annex 1 of the 

Allocation Agreement, or to pay for direct or indirect administrative expenses related to any non-SSBCI 

program. Treasury cautions Participating States to pay particular attention to the requirement in OMB 

Circular A-87 that costs be allocable. If, for example, staff assigned to the Approved State Program also 

work on other non-SSBCI programs, the Participating State must ensure that staff accurately record the 

number of hours spent on the Approved State Program and only use Allocated Funds to pay salaries and 

benefits in proportion to the number of hours worked. For example, if an employee spends 45 percent 

of her time on an SSBCI Approved State Program, the Participating may only charge 45 percent of her 

salary and benefits to Allocated Funds. 

Furthermore, Section 4.6 of the Allocation Agreement requires Participating States to comply with the 

standards of financial management systems outlined in the grants management rule at §__.20, with the 

exception of the cash management requirements. (See Appendix D for the excerpted Section 20 of the 

grants management common rule.) Treasury draws Participating States’ attention to the accounting 

requirements set forth in §__.20(b)(2) of the grants management common rule. According to this term, 

Participating States must keep detailed records of its receipt of Allocated Funds, and be able to trace the 

use of these funds to specific expenditures, obligations, or transfers for the purposes of carrying out an

Approved State Program. 

Allocated Funds that have been disbursed to the Participating State, but not yet expended, obligated, or 

transferred for allowable program purposes, should be maintained as cash or a cash equivalent15. The 

movement of Allocated Funds in and out of the implementing entity’s bank account must be tracked 

separately from the remainder of the funds in this account. Participating States may not expend 

Allocated Funds for any non-allowable purpose and then “reimburse” the Allocated Funds at a later 

date.

Participating States should also consider it a best practice to develop the following controls: 

• Segregate Allocated Funds in a separate bank account; 

 

14 Section 8.2 of the Allocation Agreement states that the “application including any attachments, exhibits, 

appendices and supplements thereto, any attachments, schedules, annexes, appendices, and supplements to the 

Allocation Agreement, and said Allocation notice letter are incorporated in and made a part of this Agreement.” 15 Cash equivalents are very low risk, highly liquid assets, such as money market holdings, short-term government 

bonds or Treasury bills, marketable securities and commercial paper. The maturity period must be no more than 3 

months. 

Superseded by 2021 Program Documents
SSBCI National Standards for Compliance and Oversight 18

Revised June 20, 2014, effective July 1, 2014

• Require dual control for the approval of all expenditures, obligations, or transfers of Allocated 

Funds. For example, one individual may prepare and track these expenditures, obligations or 

transfers, and a second individual may approve them. These employees should not be in each 

other’s supervisory chain of command; 

• Conduct a monthly reconciliation of all invoices, receipts, loan and investment agreements, and 

other documentation of SSBCI expenditures, obligations, and transfers; general ledger entries; 

and bank account statements. Verify that all deposits and withdrawals of Allocated Funds

match general ledger entries, and that these general ledger entries are supported by the 

substantiating documentation. To ensure segregation of duties, this reconciliation should be 

performed by an employee that is neither the individual responsible for cash transactions, nor in 

the supervisory chain of the individual responsible for cash transactions;

• Require an employee other than the employee recording and tracking administrative expenses 

to verify that each direct expense is accompanied by an invoice or receipt, that the amount 

shown on the invoice or receipt matches the expense recorded, and that the service or item 

purchased is directly related to an Approved State Program; 

• Require all employees to maintain time records showing the number of hours spent on SSBCI 

Approved State Programs each pay period; and

• Require that purchase requests and contracts be approved only after staff verified that the 

purchase or contract will not cause total administrative expenses to exceed the maximum 

amounts set forth in Annex 3 of the Allocation Agreement, unless administrative expenses will 

be paid for using non-Allocated Funds. 

Risk: Prevention of Fraud, Waste, and Abuse

Preventing fraud, waste, and abuse is an important part of preventing the misuse of Allocated Funds. 

Participating State should consider it a best practice to develop the following controls:

• Require all loans or investments to be approved by a board or committee, with meeting 

minutes documenting the basis for the underwriting/enrollment decision; 

• Require all contracts to be awarded pursuant to a formal Request for Proposals, with clearly 

established evaluation criteria and a transparent bidding and award process; 

• Maintain strict controls over access to bank accounts; 

• Maintain strict controls over access to documents, records, and assets;

• Maintain strict information technology security protocols to prevent unauthorized access to 

IT systems and unauthorized manipulation of data; 

• Require all staff to complete anti-fraud and ethics training; 

• Require staff overseeing administering entities to verify that work was performed before 

paying an administering entity’s invoice; 

• Maintain segregation of duties (e.g., employees who perform cash functions should not 

reconcile bank account statements); 

• Reconcile invoices to purchase orders and contracts; and 

Superseded by 2021 Program Documents
SSBCI National Standards for Compliance and Oversight 19

Revised June 20, 2014, effective July 1, 2014

• In the event of cash transactions, compare cash receipt transactions to a cash receipt log 

and bank deposit records to minimize the possibility of theft, fraud or abuse

Participating States should consider adding to this list any additional activities that may be useful to 

provide additional mitigating controls associated with this risk.

Risk: Conflicts of Interest for CAPs and OCSPs except Venture Capital Programs

Preventing conflicts of interest in underwriting, enrollment, contracting, and lender/investor 

participation decisions is important to prevent the misuse of allocated funds as well as any appearance 

of impropriety. The Allocation Agreement and SSBCI Policy Guidelines address certain conflict of 

interest issues. For example, Section 4.4 of the Allocation Agreement specifically prohibits using 

Allocated Funds for lobbying, or for making a loan, investment, or contract to a member of Congress or a 

resident U.S. Commissioner. In addition, Section VI and VII of the SSBCI Policy Guidelines prohibits funds 

from being used to make loans to borrowers who are executive officers, directors, or principal 

shareholders of the lender or investor, or a family member of related interest of an executive officer, 

director, or principal shareholder of the lender of investor. However, Treasury believes that additional 

conflicts of interest could arise, and that Participating States should carefully assess whether other 

conflicts of interest should be identified, monitored, and mitigated. 

Participating State should also consider it a best practice to develop the following controls: 

• Require all individuals involved in the underwriting or approval process to disclose any potential 

or actual conflicts of interest, in accordance with the Participating State’s written conflict of 

interest policy, and to recuse him or herself if a conflict of interest occurs; 

• Require all individuals involved in the contracting process to disclose any potential or actual 

conflicts of interest, in accordance with the Participating State’s written conflict of interest 

policy, and to recuse him or herself if a conflict of interest occurs; and 

• Require all individuals involved in evaluating and executing lender/investor participation 

agreements to disclose any potential or actual conflicts of interest, in accordance with the 

Participating State’s written conflict of interest policy, and to recuse him or herself if a conflict of 

interest occurs. 

 

Participating States should consider adding to this list any additional activities that may be useful to 

provide additional mitigating controls associated with this risk.

Risk: Conflicts of Interest for Venture Capital Programs

Effective as of July 1, 2014.

The U.S. Department of the Treasury (Treasury) strives to maintain high standards of conduct in 

connection with the use of SSBCI funds, including preventing conflicts of interest. Treasury recognizes 

that the decision to invest equity in a company depends to a greater degree than commercial lending 

Superseded by 2021 Program Documents
SSBCI National Standards for Compliance and Oversight 20

Revised June 20, 2014, effective July 1, 2014

does on an assessment of qualitative factors such as how a company’s products, management, 

competitors and regulators will act in business conditions that are nascent and evolving. Given the 

necessary reliance on more qualitative judgments in venture capital investing, Treasury believes the 

appearance of conflicts of interest can raise questions about the fairness of the decision-making.16

Compliance issues with SSBCI Venture Capital Programs have arisen when SSBCI funds were used to 

invest in a company or venture capital fund in which a program insider from a Participating State or 

Participating Municipality (collectively referred herein as “Participating State”) had a personal financial 

interest. Participating States should be most alert for situations where those involved in or with control 

over SSBCI investment decisions have a personal financial interest in venture capital funds, companies or 

subcontractors that receive SSBCI funds. These situations must be avoided to maintain the program’s 

integrity, both real and perceived. 

Within 60 days of the publication of this Treasury policy, Participating States with SSBCI Venture Capital 

Programs should adopt a conflict-of-interest policy consistent with the principles below where 

practicable. Treasury believes that every Participating State can meet this requirement. However, 

should the adoption of such a policy conflict with state law or impose an extreme hardship on the SSBCI 

Venture Capital Program, Treasury reserves the right to waive this requirement. 

I. SSBCI Venture Capital Program Conflicts of Interest Principles: 

A. General Rule. SSBCI funds may not be used by SSBCI Venture Capital Programs to make or 

support investments in a company or venture capital fund when an SSBCI insider, or a family member or 

business partner of an SSBCI insider, has a personal financial interest in the company or venture capital 

fund. An individual cannot avoid the prohibitions of these conflict of interest rules by disclosing the 

conflict of interest or recusing herself or himself from the vote to approve a transaction that creates the 

conflict of interest.

B. Rule Applicable to Governmental Entities and State-Sponsored Non-Profit Entities that Invest 

SSBCI Funds for Follow-On Investments. A governmental entity or a State-sponsored non-profit entity 

may use SSBCI funds for follow-on investments in companies or venture capital funds when the entity 

has an existing ownership or voting interest resulting from a prior investment of SSBCI funds or nonSSBCI funds. Furthermore, the entity may authorize investments where an SSBCI insider serves on the 

board of directors of the company or venture fund provided that the entity’s prior financial interest is 

 

16 The new Treasury policy set forth in this section applies only to investments made 60 days after publication. 

Treasury is aware that up until now, a State could only have operated its venture capital program in good faith and 

consistent with its originally approved application and the conflict of interest rules then in effect. Treasury 

believes States that operated in this way made acceptable and sound decisions. Treasury will deem all decisions 

that a State made about individual investments or the design of their program based on its approved application 

and the previous rules to be compliant.––––

Superseded by 2021 Program Documents
SSBCI National Standards for Compliance and Oversight 21

Revised June 20, 2014, effective July 1, 2014

fully aligned with the Participating State’s interest and an SSBCI insider does not have a personal 

financial interest in the company or venture capital fund.

C. Rule Applicable to Independent Non-Profit and For-Profit Entities that Invest SSBCI Funds for 

Follow-On and Crossover Investments. An independent non-profit or for-profit entity managing or 

investing SSBCI funds for an SSBCI Venture Capital Program is not precluded from authorizing follow-on 

investments using SSBCI funds in a company or venture capital fund in which the entity previously 

invested SSBCI funds and may have appointed a representative to serve on the board of directors in 

stewardship of the investment. However, such independent non-profit or for-profit entity may not 

authorize (or seek approval from the Participating State for) a crossover investment, that is, an 

investment of SSBCI funds in a company or venture capital fund in which the entity holds any type of 

financial interest resulting from a prior investment made with non- SSBCI funds. 

D. Existing Financial Interests of SSBCI Insiders. Accepting a role as an SSBCI insider does not 

require a person to divest financial interests in a company or venture capital fund resulting from 

previous employment or personal investment activity. However, once a person becomes an 

SSBCI insider, any company or venture capital fund in which the insider has a personal financial interest 

is prohibited from receiving investments or financial support from SSBCI funds. 

II. Definitions: 

A. An “SSBCI insider” of an SSBCI Venture Capital Program is a person who, in the 12-month period 

preceding the date on which SSBCI support for a specific investment in a venture capital fund or 

company is closed or completed: 

1. Performed the role(s) of:

a. program manager or staff member, whether by employment or contract, in a 

Participating State’s SSBCI Venture Capital Program; 

b. a government official with direct oversight of an SSBCI Venture Capital Program 

and that official’s immediate supervisors; 

c. a Board member of a State-sponsored non-profit entity who, through 

committee or board service, has the authority to vote on decisions to invest 

SSBCI funds or possesses authority over the employment or compensation of 

the staff managing processes related to the investment of SSBCI capital;

d. a Board member of an independent non-profit or for-profit entity that operates 

an SSBCI Venture Capital Program; or

e. an employee, volunteer, or contractor on an investment committee or 

equivalent entity that approves SSBCI investments under an SSBCI Venture 

Capital Program; or

2. Exercised a controlling influence on Participating State policy decisions regarding:

a. the allocation of SSBCI funds among Approved State Programs, 

b. eligibility criteria for SSBCI venture capital program participation, or

c. the processes for approving investments of SSBCI funds under an SSBCI Venture 

Capital Program.

Superseded by 2021 Program Documents
SSBCI National Standards for Compliance and Oversight 22

Revised June 20, 2014, effective July 1, 2014

B. A “business partner” of an SSBCI insider is a person who owns 10 percent or more of equity 

interests on a fully-diluted basis in a private entity in which an SSBCI insider also owns 10 percent or 

more of equity interests on a fully-diluted basis.

C. A “family member” of an SSBCI insider includes:

1. Immediate family (a spouse, domestic partner, or significant other), parents and 

grandparents, children and grandchildren, brothers and sisters, step-brothers and 

step-sisters; and 

2. More distant relatives, such as aunts and uncles and first and second cousins if they live in 

the same household as the SSBCI insider. 

D. An “independent non-profit entity” means any nonprofit entity that is not State-sponsored.

E. A “personal financial interest” is any financial interest derived from ownership or right to 

ownership of or investment in a private, for-profit company eligible to receive an SSBCI investment 

(including any financial interest derived from ownership or right to ownership of or investment in a 

venture capital fund). 

F. A “State-sponsored” non-profit entity is a nonprofit entity created by state legislation to pursue 

policies of the state government and over which state officials exercise a controlling influence through 

budgetary decisions or other legislative action or direction. 

G. “Fully-aligned” refers to operations in accordance with state statutes and policies and 

recognition that the entity has no ownership interest that may conflict with the state’s interests.

H. An “SSBCI Venture Capital Program” is a Other Credit Support Program designated in the 

Participating State’s Application and Allocation Agreement as a state-run venture capital program. 

I. A “venture capital fund” refers to any type of investment fund managing capital from individual 

or institutional investors that makes equity or equity-like investments in private companies, such as, but 

not limited to a limited liability venture capital fund, fund-of funds, a family office fund, foundation, or 

an angel investor fund.

Risk: Lack of Adequate Justification for Loans or Investments Made outside of Municipal 

Boundaries (Applies to Municipalities Only)

Section 4.4(f) of the Allocation Agreement for municipalities includes the following term:

 “The Participating Municipality shall not use Allocated Funds outside the geographic 

borders of the Participating Municipality unless the Authorized Municipal Official or chief 

executive of the Participating Municipality warrants, in writing, that the loan or 

investment will result in significant economic benefit to the Participating Municipality.” 

The Municipality FAQs offer the following additional guidance:

Superseded by 2021 Program Documents
SSBCI National Standards for Compliance and Oversight 23

Revised June 20, 2014, effective July 1, 2014

“When evaluating criteria to determine if a loan or investment made outside of its 

geographic borders yields significant economic benefit, Participating Municipalities 

should consider the impacts that the transaction will have on a) jobs created or 

maintained within the Participating municipality; b) increasing the amount of sales, 

income, or other tax revenue to the Participating Municipality; or c) the benefit of the 

goods or services provided by the small business to the Participating Municipality or 

businesses within the Participating Municipality. “ 

As a result of this term of the Allocation Agreement and the guidance in the FAQ , prior to enrolling any 

loan to, or investment in, a small business located outside the municipal boundaries described in the 

Application, the mayor or chief executive of the Participating Municipality must warrant, in writing, that 

the loan or investment will yield a significant economic benefit to the Participating Municipality. If more 

than one municipality is participating in a consortium of municipalities receiving SSBCI funding, the

mayor or chief executive of the municipality that anticipates an economically significant benefit should 

sign the warranty. Should more than one Participating Municipality derive benefit from a single loan or 

investment in a small business that is outside the boundaries of any Participating Municipality, then 

each mayor or chief executive of the Participating Municipalities expected to derive a significant

economic benefit from the loan or investment may sign the warranty. The warranties should be 

maintained with the loan or investment files. 

If the enrollment of loans and investments is handled by an administering entity, the Participating 

Municipality (or consortium of Participating Municipalities) may, alternatively, delegate the 

responsibility for retaining the warranties signed by the mayor or chief executive of the Participating 

Municipality to the administering entity pursuant to a written contract, provided that the Participating 

Municipality (or consortium of Participating Municipalities) exercises oversight of the administering 

entity to ensure this requirement is complied with. One means of exercising this oversight would be to 

conduct an annual audit of a random sample of loans or investments made outside the specified 

municipal boundaries.

Participating States should consider adding to this list any additional activities that may be useful to 

provide additional mitigating controls associated with this risk.

Superseded by 2021 Program Documents
Appendix A – Sample Small Business Borrower/Investee Certification for Use of Proceeds 

SSBCI National Standards for Compliance and Oversight A-1 

Revised June 20, 2014, effective July 1, 2014

Sample Small Business Borrower/Investee Certification for Use of Proceeds

These assurances reference Section 3005(e)(7) and Section 3011(c)(2) of the Small Business Jobs Act of 

2010. 

Legal name of borrower or investee: ________________________________________________________

The borrower or investee hereby certifies the following to the lender or investor: 

1. The loan or investment proceeds will be used for a “business purpose.” Business purpose includes, 

but is not limited to, start up costs, working capital, business procurement, franchise fees, 

equipment, inventory, as well as the purchase, construction renovation or tenant improvements of 

an eligible place of business that is not for passive real estate investment purposes. The definition of 

business purpose excludes: activities that relate to acquiring or holding passive investments, such as 

commercial real estate ownership and the purchase of securities; and lobbying activities, as defined 

in Section 3(7) of the Lobbying Disclosure Act of 1995, P.L. 104-65, as amended.

2. The loan or investment proceeds will not be used to:

a. repay a delinquent federal or state income taxes unless the Borrower has a payment plan in 

place with the relevant taxing authority; or

b. repay taxes held in trust or escrow, e.g. payroll or sales taxes; or

c. reimburse funds owed to any owner, including any equity injection or injection of capital for 

the business’ continuance; or

d. to purchase any portion of the ownership interest of any owner of the business.

3. The borrower or investee is not:

a. an executive officer, director, or principal shareholder of the lender; or

b. a member of the immediate family of an executive officer, director, or principal shareholder 

of the lenders; or

c. a related interest of an such executive officer, director, principal shareholder, or member of 

the immediate family.

For the purposes of these three restrictions, the terms “executive officer”, “director”, “principal 

shareholder”, “immediate family”, and “related interest” refer to the same relationship to a 

lender as the relationship described in part 215 of title 12 of the Code of Federal Regulations, or 

any successor to such part.

4. The borrower or investee is not:

a. a business engaged in speculative activities that develop profits from fluctuations in price 

rather than through normal course of trade, such as wildcatting for oil and dealing in 

commodities futures, unless those activities are incidental to the regular activities of the 

business and part of a legitimate risk management strategy to guard against price 

fluctuations related to the regular activities of the business; or

Treasury has created this sample self-certification that a participating state, territory or municipality may use 

in order to obtain certification from small business borrowers or investees. This certification is not intended 

to replace or supersede any internal controls the participating state, territory, or municipality has in place. 

Rather, this certifications is provided for illustrative purposes and is available for use by the participating 

state, territory, or municipality according to their discretion. These sample certifications are also attached as 

Annexes to the SSBCI Frequently Asked Questions Document available at www.treasury.gov/ssbci.

Superseded by 2021 Program Documents
Appendix A – Sample Small Business Borrower/Investee Certification for Use of Proceeds 

SSBCI National Standards for Compliance and Oversight A-2 

Revised June 20, 2014, effective July 1, 2014

b. a business that earns more than half of its annual net revenue from lending activities; unless 

the business is a non-bank or non-bank holding company Community Development Financial 

Institutions; or

c. a business engaged in pyramid sales, where a participant's primary incentive is based on the 

sales made by an ever-increasing number of participants; or

d. a business engaged in activities that are prohibited by federal law or applicable law in the 

jurisdiction where the business is located or conducted. (Included in these activities is the 

production, servicing, or distribution of otherwise legal products that are to be used in 

connection with an illegal activity, such as selling drug paraphernalia or operating a motel 

that knowingly permits illegal prostitution); or

e. a business engaged in gambling enterprises, unless the business earns less than 33% of its 

annual net revenue from lottery sales.

5. If the business is receiving the benefit of SSBCI funds through an OCSP other than an SSBCI Venture 

Capital Program, the borrower is not: 

a. a. an executive officer, director, or principal shareholder of the financial institution lender or 

non-financial institution lender; or 

b. b. a member of the immediate family of an executive officer, director, or principal 

shareholder of the financial institution lender or non-financial institution lender; or 

c. c. a related interest of an such executive officer, director, principal shareholder, or member 

of the immediate family. 

For the purposes of these three borrower restrictions, the terms “executive officer”, “director”, 

“principal shareholder”, “immediate family”, and “related interest” refer to the same relationship to 

a financial institution lender or non-financial institution lender as the relationship described in part 

215 of title 12 of the Code of Federal Regulations, or any successor to such part. 

If the business is receiving the benefit of SSBCI funds through an OCSP that is an SSBCI Venture 

Capital Program, no “SSBCI insider” has a “personal financial interest” in the business as those terms 

are defined in the SSBCI National Standards for Compliance and Oversight.

Legal Name:

 

By: 

Authorized Signatory

Name: 

Title: 

Date: 

Superseded by 2021 Program Documents
Appendix B – Sample Sex Offender Certification

SSBCI National Standards for Compliance and Oversight B-1 

Revised June 20, 2014, effective July 1, 2014

Example Sex Offender Certification 

(May be Used for Both Borrowers/Investees and Lenders/Investors)

This certification is required by Section 3011(c)(2) of the Small Business Jobs Act of 2010 from any private 

entity that receives a loan, a loan guarantee, or other financial assistance using funds received by a 

participating State under the State Small Business Credit Initiative. 

Legal name of entity: 

___________________________________________________________________

As required by Section 3011(c)(2) of the Small Business Jobs Act of 2010, the private entity hereby 

certifies to the participating State that the Principals of the private entity have not been convicted of a sex 

offense against a minor (as such terms are defined in section 111 of the Sex Offender Registration and 

Notification Act (42 U.S.C. 16911)). For the purposes of this Certification, Principal means the following: if 

a sole proprietorship, the proprietor; if a partnership, each managing partner and each partner who is a 

natural person and holds a 20% or more ownership interest in the partnership; and if a corporation, 

limited liability company, association or a development company, each director, each of the five most 

highly compensated executives or officers of the entity, and each natural person who is a direct or 

indirect holder of 20% or more of the ownership stock or stock equivalent of the entity.

Legal Name:

 

By: 

Authorized Signatory

Name: 

Title: 

Date: 

Treasury has created this sample self-certification that a participating state, territory or municipality may use 

in order to obtain certification from lenders, investors, and small business borrowers or investees. This

certification is not intended to replace or supersede any internal controls the participating state, territory, or 

municipality has in place. Rather, this certifications is provided for illustrative purposes and is available for 

use by the participating state, territory, or municipality according to their discretion. These sample 

certifications are also attached as Annexes to the SSBCI Frequently Asked Questions Document available at 

www.treasury.gov/ssbci.

Superseded by 2021 Program Documents
Appendix C – Example Lender/Investor Certification for Use of Proceeds

SSBCI National Standards for Compliance and Oversight C-1 

Revised June 20, 2014, effective July 1, 2014

Example Lender/Investor Certification for Use of Proceeds

This Assurance is referenced by Section 3005(e)(7) of the Small Business Jobs Act of 2010.

Legal name of lender or investor: 

___________________________________________________________________

The Lender/Investor hereby certifies to the Participating State the following: 

1. The loan or investment has not been made in order to place under the protection of the 

approved state program prior debt that is not covered under the approved state program and 

that is or was owed by the borrower to the lender or to an affiliate of the lender. 

2. The loan or investment is not a refinancing of a loan or investment previously made to that 

borrower by the lender or an affiliate of the lender. 

3. The lender is not attempting to enroll any portion of an SBA-guaranteed loan

4. [For investment under SSBCI Venture Capital Programs] The investment complies with 

the conflict of interest rules set forth in the National Standards for Compliance and 

Oversight.

Legal Name:

 

By: 

Authorized Signatory

Name: 

Title: 

Date: 

Effective as of July 1, 2014.

Treasury has created this sample self-certification that a participating state, territory or municipality may use 

in order to obtain certification from lenders or investors. This certification is not intended to replace or 

supersede any internal controls the participating state, territory, or municipality has in place. Rather, this

certifications is provided for illustrative purposes and is available for use by the participating state, territory, 

or municipality according to their discretion. These sample certifications are also attached as Annexes to the 

SSBCI Frequently Asked Questions Document available at www.treasury.gov/ssbci.

Superseded by 2021 Program Documents
Appendix D – Financial Management Systems Requirements from the Grants Management Common 

Rule

SSBCI National Standards for Compliance and Oversight D-1 

Revised June 20, 2014, effective July 1, 2014

§__.20 Standards for financial management systems.

(a) A State must expand and account for grant funds in accordance with State laws and 

procedures for expending and accounting for its own funds. Fiscal control and 

accounting procedures of the State, as well as its subgrantees and cost-type 

administering entities, must be sufficient to— 

(1) Permit preparation of reports required by this part and the statutes 

authorizing the grant, and

(2) Permit the tracing of funds to a level of expenditures adequate to establish 

that such funds have not been used in violation of the restrictions and 

prohibitions of applicable statutes.

(b) The financial management systems of other grantees and subgrantees must meet the 

following standards:

(1) Financial reporting. Accurate, current, and complete disclosure of the 

financial results of financially assisted activities must be made in accordance 

with the financial reporting requirements of the grant or subgrant.

(2) Accounting records. Grantees and subgrantees must maintain records which 

adequately identify the source and application of funds provided for financiallyassisted activities. These records must contain information pertaining to grant or 

subgrant awards and authorizations, obligations, unobligated balances, assets, 

liabilities, outlays or expenditures, and income.

(3) Internal control. Effective control and accountability must be maintained for 

all grant and subgrant cash, real and personal property, and other assets. 

Grantees and subgrantees must adequately safeguard all such property and 

must assure that it is used solely for authorized purposes.

(4) Budget control. Actual expenditures or outlays must be compared with 

budgeted amounts for each grant or subgrant. Financial information must be 

related to performance or productivity data, including the development of unit 

cost information whenever appropriate or specifically required in the grant or 

subgrant agreement. If unit cost data are required, estimates based on available 

documentation will be accepted whenever possible.

(5) Allowable cost. Applicable OMB cost principles, agency program regulations, 

and the terms of grant and subgrant agreements will be followed in determining 

the reasonableness, allowability, and allocability of costs.

(6) Source documentation. Accounting records must be supported by such source 

documentation as cancelled checks, paid bills, payrolls, time and attendance 

records, contract and subgrant award documents, etc.

(c) An awarding agency may review the adequacy of the financial management system 

of any applicant for financial assistance as part of a preaward review or at any time 

subsequent to award.

Superseded by 2021 Program Documents