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July 19, 2011

Cost Report

Report to Congress submitted pursuant to Section 4106(2) 

of the Small Business Jobs Act of 2010

Introduction

Small businesses are a vital part of the American economy. Their success is a critical component of the 

economic recovery. Currently, many small businesses face challenges in accessing the credit they need. 

Established by the Small Business Jobs Act of 2010 (the “Jobs Act”) to increase small business lending, 

the Small Business Lending Fund (“SBLF” or the “Fund”) is a dedicated fund designed to provide capital 

to qualified community banks and other eligible financial institutions. Its purpose is to encourage Main 

Street banks and small businesses to work together, help create jobs, and promote economic growth in 

local communities across the Nation.

This report is submitted pursuant to Section 4106(2) of the Jobs Act, which directs the Secretary to 

provide a semiannual written report on all projected costs and liabilities, all operating expenses, 

including compensation for financial agents, and all transactions made by the Fund. It reflects these 

projected costs based on actual costs as of March 31, 2011, six months following the date of the 

statute’s enactment. As of that date, there were no transactions made by the Fund.

The application window for eligible institutions to participate in SBLF has closed. 926 institutions 

applied for $11.8 billion in SBLF funding. As of July 8, Treasury has provided $123 million in capital to six

institutions through the Fund. The first funding occurred on June 21, 2011, with subsequent 

investments on June 30 and July 6. Treasury is currently reviewing and evaluating applications, and 

expects to complete all funding by September 27, 2011, the statutory deadline for funding.

Operating Expenses

Treasury is committed to implementing the SBLF in a cost-effective manner to protect taxpayers while 

achieving the program’s objectives.

The figures shown in the following table reflect costs and commitments incurred as of March 31, 2011 

and projected operating costs for the remainder of FY 2011. These figures reflect significant savings 

versus budgeted amounts driven by Treasury’s ability to build upon existing resources and employ 

contract specialists for certain temporary and volume-dependent tasks.

With respect to future operating expenses, the Fund’s core investment activities will be completed by 

September 27, 2011. As a result, expenses for the Fund in FY 2012 will relate primarily to monitoring 

the performance and compliance of institutions participating in the program, reporting on program 

performance and costs, maintaining program accounts, and managing and disposition of securities 

purchased. Descriptions of the operating expenses follow the table.
 

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Operating Expenses: Table

Operating Expenses: Descriptions

The Fund’s program office is now fully staffed. Because many of these employees joined the Fund 

during the 2011 fiscal year, actual salary expense incurred to March 31 is substantially less than the 

budgeted amount. Treasury is utilizing existing administrative infrastructure available through the 

Treasury Departmental Offices to further minimize expenses.

Travel expenses to date relate primarily to outreach activities to build awareness and provide education 

to eligible institutions regarding the Fund.

The cost of legal services and financial agents (including custody of securities, payments, credit analysis, 

and market research) is largely proportionate to the volume of applications and the number of closings.

• Legal Support: These expenses are for legal services relating to investment transactions and 

reflect the potential for 1,000 transactions. Actual expenses will depend on the number of

transactions completed.

• Financial Agents (Custodian and Infrastructure Provider, Asset Managers): These expenses 

relate to (i) Treasury’s custodian bank, which handles securities certificates received by 

Treasury, outreach to eligible institutions, and payments processing for Fund participants, (ii) 

financial analysis, and (iii) sector-specific market research. These costs are primarily volumeand activity-dependent.

[1] [2] [3] [4]

Commitments,

Obligations,

Expenditures Expenditures and Expenditures Expenditures

FY 2011 Budgeted as of 3/31/11 as of 3/31/11 FY 2011 Projected

Salaries and benefits 7,025,000 922,111 922,111 3,407,830

Travel 187,000 6,501 11,370 33,000

Contracts and other

Legal support n/a 104,744 9,793,466 9,438,742

Custodian and infrastructure provider n/a 3,940,000 8,314,439 12,163,493

Asset managers n/a 282,000 5,040,000 9,489,000

Internal controls n/a 1,717,541 3,153,919 4,276,032

Office of the Treasury Inspector General n/a 330,000 987,000 987,000

Other (equipment, supplies) n/a 14,160 14,160 23,190

Subtotal (contracts and other) 47,437,000 6,388,445 27,302,984 36,377,457

Total 54,649,000 7,317,057 28,236,465 39,818,287

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[1] As presented in the President's Fiscal Year 2012 Budget.

[2] Includes actual expenditures from the beginning of the program (9/27/10) through 3/31/11.

[3] Includes all financial commitments, obligations and expenditures as of 3/31/11. Reflects 1,000 SBLF closings.

[4] Includes all financial commitments, obligations, expenditures, and projections as of 3/31/11 through 9/30/11. Reflects 1,000 SBLF closings.
 

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• Internal Controls: These expenses relate principally to the design of processes and internal 

controls associated with application review and decision making. This activity includes advice 

regarding the development of procedures, information databases and other documentation for 

the processing of applications. These contractual expenses will be significantly reduced in future 

years, as the Fund’s operational processes and controls will have been established. This cost is 

not volume-dependent.

• Office of the Treasury Inspector General: These expenses relate to the internal cost of 

$987,000 to the Treasury Inspector General for two audits of the SBLF program. This cost is not 

volume-dependent.