Small Business Programs
Efforts to Address Internal Control Weaknesses and Potential Duplication Gao ID: GAO-11-558T June 16, 2011Economic development programs-- administered efficiently and effectively--can contribute to the well-being of the economy at the least cost to taxpayers. Such programs can encompass small business development and contracting. To encourage such contracting, Congress created programs--such as the Historically Underutilized Business Zone (HUBZone), service-disabled veteran-owned small business, and 8(a) Business Development programs--that give contracting preferences to some types of small businesses: in economically distressed communities; to those owned by service-disabled veterans; and to those with eligible socially and economically disadvantaged owners. This testimony addresses (1) potential duplication in economic development programs and (2) internal controls weaknesses in three small business programs. This testimony is based on related GAO work from 2008 to the present and updates it as noted. GAO examined programs at the Departments of Commerce, Housing and Urban Development, and Agriculture and the Small Business Administration (SBA) to assess program overlap, collaboration, and measures of effectiveness (GAO-11-477R). GAO also reviewed data from SBA and the Department of Veterans Affairs (VA) and conducted site visits. The reports identified opportunities to increase program efficiencies and made recommendations to improve internal controls and develop outcome-oriented measures.
Results of GAO's work on 80 economic development programs at the four agencies indicate that the design of each appears to overlap with that of at least one other in terms of the economic development activities they can fund. For example, the agencies administer 54 programs that fund "entrepreneurial efforts," which include business development. SBA has 19 such economic development programs. To address issues arising from potential overlap and fragmentation, GAO relied on previously identified collaborative practices agencies should consider using to maximize performance and results. GAO found that agencies' collaborative efforts were not comprehensive but conducted on a case-by case basis. Further, the agencies generally have not measured outcomes. For instance, SBA has not yet developed outcome measures that directly link to the mission of its HUBZone program. In 2005 and 2008, GAO made recommendations to Commerce and SBA, respectively, aimed at improving the data and methods they rely on to measure the outcomes of some of their economic development programs. Generating key information on outcomes (that measure effectiveness) could help agencies better manage programs. Such information also would enable decision makers to better identify opportunities to realign resources, and if necessary, consolidate or eliminate some programs. As GAO has reported, three small business programs have had varying degrees of internal control weaknesses that affected program oversight. First, in a June 2008 report, GAO determined that SBA's mechanisms for certifying and monitoring firms in the HUBZone program gave limited assurance that only eligible firms participated. For certification and recertification (of initial and continued eligibility), SBA requested documentation or conducted site visits to validate self-reported data in limited instances. In response to GAO's recommendations, SBA has issued guidance requiring supporting documentation upon application and conducted site visits to certified firms. Second, in a May 2010 report, GAO reported that VA has faced challenges in effectively responding to a 2006 statutory mandate to verify the eligibility of small businesses owned by service-disabled or other veterans. Although such businesses self-certify their contracting eligibility, VA (unique among federal agencies) must maintain a database of these firms, verify their status, and only give contracting preferences to verified firms. GAO reported that VA had verified only about 14 percent of firms in its database. Since GAO recommended that VA develop a plan for a more effective verification program, VA stated that it has taken steps to improve its verification process, including awarding contracts to expedite the processing of applications. And finally, in a March 2010 report, GAO found that while SBA conducts annual reviews of 8(a) firms to help ensure continued eligibility, GAO found that key controls needed to be strengthened. GAO's review of a sample of 8(a) firms identified an estimated 55 percent in which SBA staff failed to complete required procedures to assess eligibility criteria. In response to GAO's recommendation that SBA provide more guidance to staff on annual review procedures, SBA stated that it issued a new guide in August 2010.
GAO-11-558T, Small Business Programs: Efforts to Address Internal Control Weaknesses and Potential Duplication
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United States Government Accountability Office:
GAO:
Testimony:
Before the Committee on Small Business and Entrepreneurship, U.S.
Senate:
For Release on Delivery:
Expected at 10:00 a.m. EDT:
Thursday, June 16, 2011:
Small Business Programs:
Efforts to Address Internal Control Weaknesses and Potential
Duplication:
Statement of William B. Shear, Director:
Financial Markets and Community Investment:
GAO-11-558T:
GAO Highlights:
Highlights of GAO-11-558T, a testimony before the Committee on Small
Business and Entrepreneurship, U.S. Senate.
Why GAO Did This Study:
Economic development programs”-administered efficiently and
effectively-”can contribute to the well-being of the economy at the
least cost to taxpayers. Such programs can encompass small business
development and contracting. To encourage such contracting, Congress
created programs”-such as the Historically Underutilized Business Zone
(HUBZone), service-disabled veteran-owned small business, and 8(a)
Business Development programs”-that give contracting preferences to
some types of small businesses: in economically distressed
communities; to those owned by service-disabled veterans; and to those
with eligible socially and economically disadvantaged owners. This
testimony addresses (1) potential duplication in economic development
programs and (2) internal controls weaknesses in three small business
programs. This testimony is based on related GAO work from 2008 to the
present and updates it as noted.
GAO examined programs at the Departments of Commerce, Housing and
Urban Development, and Agriculture and the Small Business
Administration (SBA) to assess program overlap, collaboration, and
measures of effectiveness (GAO-11-477R). GAO also reviewed data from
SBA and the Department of Veterans Affairs (VA) and conducted site
visits. The reports identified opportunities to increase program
efficiencies and made recommendations to improve internal controls and
develop outcome-oriented measures.
What GAO Found:
Results of GAO‘s work on 80 economic development programs at the four
agencies indicate that the design of each appears to overlap with that
of at least one other in terms of the economic development activities
they can fund. For example, the agencies administer 54 programs that
fund ’entrepreneurial efforts,“ which include business development.
SBA has 19 such economic development programs. To address issues
arising from potential overlap and fragmentation, GAO relied on
previously identified collaborative practices agencies should consider
using to maximize performance and results. GAO found that agencies‘
collaborative efforts were not comprehensive but conducted on a case-
by case basis. Further, the agencies generally have not measured
outcomes. For instance, SBA has not yet developed outcome measures
that directly link to the mission of its HUBZone program. In 2005 and
2008, GAO made recommendations to Commerce and SBA, respectively,
aimed at improving the data and methods they rely on to measure the
outcomes of some of their economic development programs. Generating
key information on outcomes (that measure effectiveness) could help
agencies better manage programs. Such information also would enable
decision makers to better identify opportunities to realign resources,
and if necessary, consolidate or eliminate some programs.
As GAO has reported, three small business programs have had varying
degrees of internal control weaknesses that affected program
oversight. First, in a June 2008 report, GAO determined that SBA‘s
mechanisms for certifying and monitoring firms in the HUBZone program
gave limited assurance that only eligible firms participated. For
certification and recertification (of initial and continued
eligibility), SBA requested documentation or conducted site visits to
validate self-reported data in limited instances. In response to GAO‘s
recommendations, SBA has issued guidance requiring supporting
documentation upon application and conducted site visits to certified
firms. Second, in a May 2010 report, GAO reported that VA has faced
challenges in effectively responding to a 2006 statutory mandate to
verify the eligibility of small businesses owned by service-disabled
or other veterans. Although such businesses self-certify their
contracting eligibility, VA (unique among federal agencies) must
maintain a database of these firms, verify their status, and only give
contracting preferences to verified firms. GAO reported that VA had
verified only about 14 percent of firms in its database. Since GAO
recommended that VA develop a plan for a more effective verification
program, VA stated that it has taken steps to improve its verification
process, including awarding contracts to expedite the processing of
applications. And finally, in a March 2010 report, GAO found that
while SBA conducts annual reviews of 8(a) firms to help ensure
continued eligibility, GAO found that key controls needed to be
strengthened. GAO‘s review of a sample of 8(a) firms identified an
estimated 55 percent in which SBA staff failed to complete required
procedures to assess eligibility criteria. In response to GAO‘s
recommendation that SBA provide more guidance to staff on annual
review procedures, SBA stated that it issued a new guide in August
2010.
View [hyperlink, http://www.gao.gov/products/GAO-11-558T] or key
components. For more information, contact William B. Shear at (202)
512-8678 or shearw@gao.gov.
[End of section]
Chair Landrieu, Ranking Member Snowe, and Members of the Committee:
I am pleased to be here to discuss (1) potential duplication in
economic development programs and (2) internal controls in place to
help ensure that only eligible small businesses participate in federal
procurement programs that provide them certain contracting preferences
such as set-asides. In March 2011 and more recently in May 2011, we
reported on potential duplication among federal economic development
programs, and in this statement I will discuss this work.[Footnote 1]
We focused on this area because economic development programs that are
administered efficiently and effectively can contribute to the well-
being of the nation's economy at the least cost to taxpayers. Absent a
common definition for economic development, we previously developed a
list of nine activities most often associated with economic
development. These activities include: planning and developing
strategies for job creation and retention, developing new markets for
existing products, building infrastructure by constructing roads and
sewer systems to attract industry to undeveloped areas, and
establishing business incubators to provide facilities for new
businesses' operations.[Footnote 2]
We recently completed an examination of 80 economic development
programs at four agencies--the Departments of Commerce (Commerce),
Housing and Urban Development (HUD), and Agriculture (USDA) and the
Small Business Administration (SBA)--where we assessed potential for
overlap in the design of the programs, the extent to which the four
agencies collaborate to achieve common goals, and the extent to which
the agencies have developed measures to determine the programs'
effectiveness. SBA administers 19 of the 80 programs. According to the
agencies, funding provided for these 80 programs in fiscal year 2010
amounted to $6.2 billion, of which about $2.9 billion was for economic
development efforts, largely in the form of grants, loan guarantees,
and direct loans.[Footnote 3] The 80 programs and their fiscal year
2010 funding are listed in appendix I.
Small business contracting programs are a subset of the 80 economic
development programs we examined. To encourage small business
contracting, Congress has created programs--such as the Historically
Underutilized Business Zone (HUBZone), service-disabled veteran-owned
small business, and 8(a) Business Development programs--that give
contracting preferences to specific categories of small businesses.
The HUBZone program provides set-aside and other contracting
preferences to small businesses in economically distressed
communities, or HUBZones, with the intent of stimulating economic
development in those areas. The service-disabled veteran-owned small
business program permits awards of set-aside and sole-source contracts
to any small business owned and controlled by one or more service-
disabled veterans. The 8(a) program helps eligible socially and
economically disadvantaged small businesses by providing business
development support, such as counseling and technical assistance, and
providing opportunities to obtain federal contracts on a set-aside
basis or noncompetitively up to specified dollar amounts.
SBA is responsible for administering the HUBZone and 8(a) programs.
SBA, along with federal procuring agencies, also administers the
service-disabled veteran-owned small business program. Pursuant to the
Veterans Benefits, Health Care, and Information Technology Act of 2006
(or 2006 Act), the Department of Veterans Affairs (VA) has the unique
authority to award contracts to veteran-owned small businesses and
service-disabled veteran-owned small businesses on a priority basis.
The 2006 Act also requires VA to maintain a database of veteran-owned
and service-disabled veteran-owned small businesses and verify the
ownership, control, and veteran or service-disabled status of
businesses listed in its database.
My testimony today discusses several reports we have issued in the
past few years. Specifically, I will discuss our work on (1) potential
duplication and fragmentation in economic development programs and (2)
internal controls in small business contracting programs. My
discussion of internal controls in small business contracting programs
will focus on the HUBZone program, VA's efforts to verify the veteran-
owned and service-disabled veteran-owned small businesses to which it
awards contracts, and the 8(a) program.
This testimony draws primarily from reports we issued from 2008
through May 2011, and updates that information where noted. For our
March 2011 and May 2011 reports on potential duplication and
fragmentation in economic development programs, we relied on our
previous work, ongoing work following up on recommendations from the
previously issued reports, and the preliminary results of our ongoing
evaluation of economic development programs at four federal agencies.
[Footnote 4] For example, for the most recent work we gathered new
information related to program missions, targeted populations, and
funding for the programs. Agency officials self reported the data on
program funds, which were determined to be sufficiently reliable for
the purposes of this review. We focused on Commerce, HUD, SBA, and
USDA. Using the Catalog of Federal Domestic Assistance and other
agency documents, we identified 80 federal programs administered by
the four agencies that could fund economic development activities. We
also met with officials from each of the agencies to discuss each
program and the program missions. Because SBA officials view all of
their programs as being related to economic development, we included
all SBA programs in this review.
For our June 2008 report on internal controls in the HUBZone program,
we compared the actions that SBA takes to certify HUBZone firms with
its policies and procedures and selected internal control standards.
[Footnote 5] For example, we reviewed data for 125 applications to
determine the extent to which SBA requested documentation from firms
to support applications. We also compared HUBZone performance measures
with our guidance on the attributes of effective performance measures.
For our May 2010 report on VA's efforts to contract with veteran-owned
and service-disabled veteran-owned small businesses, we reviewed the
agency's verification guidelines and procedures for reviewing
applications and conducting site visits to determine VA's progress in
verifying the veteran status, control, and ownership of
businesses.[Footnote 6] We also reviewed files for a sample of
verified businesses to determine how well VA followed its procedures
and to identify any deficiencies in the process. For our March 2010
report on internal controls in the 8(a) program, we visited 5 of the
68 SBA districts and reviewed files of 136 8(a) firms to assess SBA's
compliance with its eligibility review procedures.[Footnote 7] We
collected recent annual review information from each file, including
evidence supporting eligibility criteria. For more information on our
scope and methodology, see the referenced reports.
The work on which this statement is based was performed from August
2007 to May 2011 in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit
objectives.
Background:
The purpose of the HUBZone program, established by the HUBZone Act of
1997, is to stimulate economic development in economically distressed
communities (HUBZones) by providing federal contracting preferences to
eligible small businesses.[Footnote 8] The types of areas in which
HUBZones may be located are defined by law and consist of census
tracts, nonmetropolitan counties, Indian reservations, redesignated
areas (that is, census tracts or nonmetropolitan counties that no
longer meet the criteria but remain eligible until after the release
of the first results from the 2010 census or 3 years after they ceased
being qualified), and base closure areas.[Footnote 9]
To be certified to participate in the HUBZone program, a firm must
meet the following four criteria:
* must be small by SBA size standards;[Footnote 10]
* must be at least 51 percent owned and controlled by U.S. citizens;
[Footnote 11]
* principal office--the location where the greatest number of
employees perform their work--must be located in a HUBZone; and:
* at least 35 percent of the full-time (or full-time equivalent)
employees must reside in a HUBZone.
The Veterans Benefits Act of 2003, which established the service-
disabled veteran-owned small business program, permits contracting
officers to award set-aside and sole-source contracts to any small
business concern owned and controlled by one or more service-disabled
veterans.[Footnote 12] Veteran means a person who served in the active
military services, and who was discharged or released under conditions
other than dishonorable. Service-disabled means that the disability
was incurred or aggravated in the line of duty in active service.
[Footnote 13] A firm also must qualify as a small business under the
North American Industry Classification System (NAICS) industry-size
standards.[Footnote 14]
A firm must meet several initial eligibility requirements to qualify
for the 8(a) program (a process known as certification), and then meet
other requirements to continue participation. A concern meets the
basic requirements for admission to the program if it is a small
business that is unconditionally owned and controlled by one or more
socially and economically disadvantaged individuals who are of good
character and U.S. citizens, and demonstrates the potential for
success.[Footnote 15]
What GAO Has Found to Indicate Potential Duplication, Overlap, or
Fragmentation among Economic Development Programs:
Our work involving 80 economic development programs at four agencies--
Commerce, HUD, SBA, and USDA--indicates that the design of each of
these fragmented programs appears to overlap with that of at least one
other program in terms of the economic development activities that
they are authorized to fund. For example, as shown in table 1, the
four agencies administer a total of 54 programs that can fund
"entrepreneurial efforts," which include helping businesses to develop
business plans and identify funding sources. SBA accounts for 19 of
these 54 programs, and it administers programs contained in six of the
nine economic activities. (The 19 SBA programs are listed in the table
in appendix I.)
Table 1: Overlap and Fragmentation Among Selected Agencies Authorized
to Fund Economic Development Activities:
Activity: Entrepreneurial efforts;
Programs by Agency:
Commerce: 9;
HUD: 12;
SBA: 19;
USDA: 14;
Total: 54.
Activity: Infrastructure;
Programs by Agency:
Commerce: 4;
HUD: 12;
SBA: 1;
USDA: 18;
Total: 35.
Activity: Plans and strategies;
Programs by Agency:
Commerce: 7;
HUD: 13;
SBA: 13;
USDA: 7;
Total: 40.
Activity: Commercial buildings;
Programs by Agency:
Commerce: 4;
HUD: 12;
SBA: 4;
USDA: 7;
Total: 27.
Activity: New markets;
Programs by Agency:
Commerce: 6;
HUD: 10;
SBA: 6;
USDA: 6;
Total: 28.
Activity: Telecommunications;
Programs by Agency:
Commerce: 3;
HUD: 11;
SBA: 2;
USDA: 8;
Total: 24.
Activity: Business incubators;
Programs by Agency:
Commerce: 5;
HUD: 12;
SBA: 0;
USDA: 7;
Total: 24.
Activity: Industrial parks;
Programs by Agency:
Commerce: 5;
HUD: 11;
SBA: 0;
USDA: 5;
Total: 21.
Activity: Tourism;
Programs by Agency:
Commerce: 5;
HUD: 10;
SBA: 0;
USDA: 4;
Total: 19.
Source: GAO analysis of information from Commerce, HUD, SBA, and USDA.
Note: In December 2010, USDA officials provided us information on the
economic activities that each of their economic development programs
can fund, which we reported in our March 2011 report (GAO-11-318SP).
In April 2011, they provided revised information for six of their
programs that we incorporated into our May 2011 report (GAO-11-477R).
[End of table]
Our prior work going back more than 10 years also identified potential
overlap and fragmentation in economic development programs. Among
other things, we found that legislative or regulatory restrictions
that target funding on the basis of characteristics such as geography,
income levels, and population density (rural or urban) differentiated
many programs.
While some of the 80 programs we assessed fund several of the nine
economic development activities, almost 60 percent (46 of 80) fund
only one or two activities. These smaller, narrowly scoped programs
appear to be the most likely to overlap because many can only fund the
same, limited types of activities. For example, narrowly scoped
programs comprise 21 of 54 programs that can fund entrepreneurial
efforts. Moreover, most of the 21 programs target similar geographic
areas.
To address issues arising from potential overlap and fragmentation in
economic development programs, we previously have identified
collaborative practices agencies should consider using to maximize the
performance and results of federal programs that share common
outcomes.[Footnote 16] These practices include leveraging physical and
administrative resources, establishing compatible policies and
procedures, monitoring collaboration, and reinforcing agency
accountability for collaborative efforts through strategic or annual
performance plans. Preliminary findings from our ongoing work show
that Commerce, HUD, SBA, and USDA appear to have taken actions to
implement some of the collaborative practices, such as defining and
articulating common outcomes, for some of their related programs.
However, the four agencies have offered little evidence so far that
they have taken steps to develop compatible policies or procedures
with other federal agencies or searched for opportunities to leverage
physical and administrative resources with their federal partners.
Moreover, we found that most of the collaborative efforts performed by
program staff on the front line that we have been able to assess to
date have occurred only on a case-by-case basis. As a result, the
agencies do not appear to be consistently monitoring or evaluating
these collaborative efforts in a way that allows them to identify
areas for improvement. We reported in September 2008 that the main
causes for limited agency collaboration include few incentives to
collaborate and lack of a guide on which agencies could rely for
consistent and effective collaboration. In that same report, we
recommended that SBA and USDA take steps to adopt a formal approach to
encourage further collaboration. To date, the two agencies have
entered into a memorandum of understanding and USDA has recently taken
some action to monitor the collaborative efforts of its field office
staff. In failing to find ways to collaborate more, agencies may miss
opportunities to leverage each other's unique strengths to more
effectively promote economic development and efficiently use taxpayer
dollars set aside for that purpose.
In addition, a lack of information on program outcomes has been a long-
standing concern. This information is needed to determine if potential
overlap and fragmentation has resulted in ineffective or inefficient
programs. More specifically:
* Commerce's Economic Development Administration (EDA), which
administers eight of the programs we reviewed, continues to rely on a
potentially incomplete set of variables and self-reported data to
assess the effectiveness of its grants. This incomplete set of
variables may lead to inaccurate claims about program results, such as
the number of jobs created. Moreover, in only limited instances have
EDA staff requested documentation or conducted site visits to validate
the self-reported data provided by grantees. We first reported on this
issue in March 1999 and issued a subsequent report in October 2005. In
response to a recommendation we made in 2005, EDA issued revised
operational guidance in December 2006 that included a new methodology
that regional offices were to use to calculate estimated jobs and
private-sector investment attributable to EDA projects. However,
during our recently-completed review we found that the agency still
primarily relies on grantee self-reported data and conducts a limited
number of site visits to assess the accuracy of the data. While
acknowledging these findings, EDA officials stated that they do employ
other verification and validation methods in lieu of site visits.
These methods include reviews to ensure the data are consistent with
regional trends and statistical tests to identify outliers and
anomalies.
* SBA has not yet developed outcome measures that directly link to the
mission of its HUBZone program, or implemented its plans to evaluate
the program based on variables tied to program goals. We reported in
June 2008 that while SBA tracks a few performance measures, such as
the number of small businesses approved to participate in the program,
the measures do not directly link to the program's mission. Therefore,
we recommended that the agency further develop measures and implement
plans to assess the effectiveness of the program. While SBA continues
to agree that evaluating the outcomes of the HUBZone program is
important, to date the agency has not yet committed resources for such
an evaluation.
* The USDA's Office of Rural Development, which administers 31 of the
programs we reviewed, has yet to implement the USDA Inspector
General's (IG) 2003 recommendation on ensuring that data exist to
measure the accomplishments of one of its largest rural business
programs--the Business and Industry loan program, which cost
approximately $53 million to administer in fiscal year 2010. USDA
officials stated that they have recently taken steps to address the
IG's recommendation, including requiring staff to record actual jobs
created rather than estimated jobs created. However, an IG official
stated that these actions are too recent to determine whether they
will fully address the recommendation.
Without quality data on program outcomes, these agencies lack key
information that could help them better manage their programs. In
addition, such information would enable congressional decision makers
and others to make decisions to better realign resources, if
necessary, and identify opportunities for consolidating or eliminating
some programs.
Building on our past work, we are in the planning phase of a new, more
in-depth review that will focus on a subset of these 80 programs,
including a number of SBA programs. We plan to evaluate how funds are
used, identify additional opportunities for collaboration, determine
and apply criteria for program consolidation, and assess how program
performance is measured.
More generally, as the nation rises to meet the current fiscal
challenges, we will continue to assist Congress and federal agencies
in identifying actions needed to reduce duplication, overlap, and
fragmentation; achieve cost savings; and enhance revenues. As part of
current planning for our future annual reports, we are continuing to
look at additional federal programs and activities to identify further
instances of duplication, overlap, and fragmentation as well as other
opportunities to reduce the cost of government operations and increase
revenues to the government. We will be using an approach to ensure
governmentwide coverage through our efforts by the time we issue of
our third report in fiscal year 2013. We plan to expand our work to
more comprehensively examine areas where a mix of federal approaches
is used, such as tax expenditures, direct spending, and federal loan
programs. Likewise, we will continue to monitor developments in the
areas we have already identified. Issues of duplication, overlap, and
fragmentation will also be addressed in our routine audit work during
the year as appropriate and summarized in our annual reports.
Control Weaknesses Hinder the Effectiveness of Small Business
Contracting and Business Development Programs:
As GAO has reported, three small business programs have had varying
degrees of internal control weaknesses that affected program
oversight. For example, in a June 2008 report, GAO determined that
SBA's mechanisms for certifying and monitoring firms in the HUBZone
program gave limited assurance that only eligible firms participated.
SBA Has Taken Some Steps to Improve Administration of the HUBZone
Program, but the Agency Has Yet to Evaluate Its Effectiveness:
In our June 2008 report on the HUBZone program, we found that (1)
SBA's mechanisms for certifying and monitoring firms provided limited
assurance that only eligible firms participated in the program and (2)
the agency had not evaluated the effectiveness of the program.
[Footnote 17] Specifically, for certification and recertification,
firms self-reported information on their applications and SBA
requested documentation or conducted site visits of firms to validate
the self-reported data in limited instances. Our analysis of the 125
applications submitted in September 2007 showed that SBA requested
supporting documentation for 36 percent of the applications and
conducted one site visit. To address these deficiencies, we
recommended that SBA develop and implement guidance to more
consistently obtain supporting documentation upon application and
conduct more frequent site visits to help ensure that firms applying
for certification were eligible.
SBA has made some progress in better ensuring that participating firms
are eligible for the HUBZone program. According to agency officials,
SBA conducted 911 site visits to certified firms in fiscal year 2009
and made 1,142 site visits in fiscal year 2010. In March 2010, SBA
issued a guide for analysts to use when reviewing applications to help
ensure a standardized and more efficient review of applications. The
guidance provides examples of the types of documentation that SBA
staff should collect from applicants and also offers tips for
identifying fraudulent claims and documents.
We also reported that SBA had not followed its policy of recertifying
firms (the process through which SBA can monitor firms' continued
eligibility) every 3 years and as a result had a backlog of more than
4,600 firms that had gone unmonitored for more than 3 years. We
recommended that the agency eliminate the backlog and take the
necessary steps to better ensure recertifications were completed in a
more timely fashion. In September 2008, SBA eliminated the backlog by
hiring more staff. The agency recently provided us with a flow chart
that describes the most recent steps they had taken to recertify firms
in a timely manner and the resources that they planned to dedicate to
this effort.
Finally, as discussed previously, we found that SBA had not
implemented plans to assess the effectiveness of the HUBZone program
and recommended that SBA develop performance measures and implement
plans to do so. In August 2008, SBA issued a notice of methodology in
the Federal Register for measuring the impact of the HUBZone program.
However, the proposed methodology was not well developed. For example,
it did not incorporate expert input or a previous study conducted by
SBA's Office of Advocacy. We do not believe that this effort was
useful for addressing our recommendation. While SBA continues to agree
that evaluating program outcomes is important, to date the agency has
not yet committed resources for such an evaluation.
VA Faced Challenges in Verifying Veteran-Owned and Service-Disabled
Veteran-Owned Firms:
In May 2010, we reported that VA had made limited progress in
implementing an effective verification program.[Footnote 18] The 2006
Act requires that VA give priority to veteran-owned and service-
disabled veteran-owned small businesses when awarding contracts to
small businesses and provides for the use of sole-source and set-aside
contracts to achieve contracting goals VA must establish under the
Act.[Footnote 19] The Act also requires VA to maintain a database of
veteran-owned and service-disabled veteran-owned small businesses and
verify the ownership, control, and veteran or service-disabled status
of businesses in the database. The database would be available to
other federal agencies. Furthermore, businesses conducting contract
work for VA must be listed in the database to receive contracting
preferences for veteran-owned and service-disabled veteran-owned small
businesses. This verification requirement is unique to VA. For other
federal agencies, the service-disabled veteran-owned small business
program is a self-certification program and therefore is susceptible
to misrepresentation (that is, ineligible firms participating in the
program).
While the 2006 Act requires VA to use the veteran preferences
authorities to award contracts only to verified businesses, VA's
regulation did not require that this take place until January 1, 2012.
Since our May 2010 report, Congress passed the Veterans Small Business
Verification Act requiring VA to accelerate its time frame for
verifying all businesses in its mandated database. VA has set a target
date of July 31, 2011, to do so.[Footnote 20] In fiscal year 2009, 25
percent of the contracts awarded using veteran preference authorities
went to verified businesses. At the time of our report, VA had
verified about 2,900 businesses--approximately 14 percent of
businesses in its database of veteran-owned and service-disabled
veteran-owned small businesses. Among the weaknesses we identified in
VA's verification program were files missing required information and
explanations of how staff determined that control and ownership
requirements had been met. VA's procedures call for site visits to
further investigate the ownership and control of higher-risk
businesses, but the agency had a large and growing backlog of
businesses awaiting site visits. Furthermore, VA contracting officers
awarded contracts to businesses that were denied after the
verification process. Finally, although site visit reports indicate a
high rate of misrepresentation, VA had not developed guidance for
referring cases of misrepresentation for investigation and enforcement
action. Such businesses would be subject to debarment under the 2006
Act.
To help address the requirement to maintain a database of verified
businesses, we recommended that VA develop and implement a plan for a
more thorough and effective verification program. More specifically,
we recommended that the plan address actions and milestone dates for
improving the program, including updating data systems to reduce
manual data entry and adding guidance on how to maintain appropriate
documentation, on when to request documentation from business owners
or third parties, and on how to conduct an assessment that addresses
each eligibility requirement. We also recommended that VA conduct
timely site visits at businesses identified as higher risk and take
actions based on site visit findings, including prompt cancellation of
verified status.
According to VA officials, they have taken a number of actions to
address our recommendations. For example, VA officials told us they
had awarded contracts to help expedite the processing of applications,
including conducting site visits and reviewing documentation supplied
by applicants. As of March 29, 2011, they said that 607 site visits
had been conducted and 195 of the applicants visited (32 percent) did
not meet the control requirement. Also, VA officials reported a queue
of 6,431 active applications pending verification and said they had
acquired the capability to process 500 applications per week and
expected to have processed about 15,000 applications by July 31, 2011.
Furthermore, VA officials told us that as part of their implementation
of the requirements of the Veterans Small Business Verification Act,
all applicants are now required to submit specified documents
establishing their eligibility with respect to ownership and control
before a verification decision can be made. VA officials told us they
were in the process of testing a new case management system that will
reduce the manual input of data, which they plan to implement by June
1, 2011. VA's development of an effective verification program could
provide an important tool for SBA's oversight of the governmentwide
contracting program for service-disabled veteran-owned small
businesses. That is, VA's database could serve as a resource for
federal agencies to use when assessing whether a firm is actually
service-disabled veteran-owned.
SBA's Key Controls for Determining Continued 8(a) Eligibility Needed
to Be Strengthened:
We reported in March 2010 that while SBA relies primarily on its
annual reviews of 8(a) firms to help ensure the continued eligibility
of firms in the program, we observed inconsistencies and weaknesses in
annual review procedures related to determinations of continued
eligibility.[Footnote 21] For example, SBA did not consistently notify
or graduate 8(a) firms that exceeded industry averages for economic
success or graduate firms that exceeded the net worth threshold of
$750,000 (see table 2). We noted that the lack of specific criteria in
the current regulations and procedures may have contributed to the
inconsistencies that we observed and that SBA had taken steps to
clarify some, but not all, of these requirements in a proposed rule
change.[Footnote 22]
Table 2: Estimated Percentage of Time That SBA Did Not Complete
Selected Annual Review Procedures Relating to 8(a) Eligibility:
Requirement not met: Taking action when a firm exceeded industry
averages for economic success by notifying firms that exceeded four of
seven industry averages for 1 year;
Estimated percentage: Taking action when a firm exceeded industry
averages for economic success by: 26%.
Requirement not met: Taking action when a firm exceeded industry
averages for economic success by graduating or explaining retention of
firms that exceeded four of seven industry averages for 2 consecutive
years;
Estimated percentage: Taking action when a firm exceeded industry
averages for economic success by: 4%.
Requirement not met: Reviewing net worth or graduating firms in which
individuals exceeded adjusted net worth limitations;
Estimated percentage: Taking action when a firm exceeded industry
averages for economic success by: 7%.
Requirement not met: Performing required eligibility reviews because
of a change in the firms' ownership;
Estimated percentage: Taking action when a firm exceeded industry
averages for economic success by: 4%.
Requirement not met: Completing required annual reviews;
Estimated percentage: Taking action when a firm exceeded industry
averages for economic success by: 2%.
Requirement not met: Documenting supervisory reviews;
Estimated percentage: Taking action when a firm exceeded industry
averages for economic success by: 23%.
Requirement not met: Imposing remedial actions or obtaining waivers
for firms not meeting business activity targets;
Estimated percentage: Taking action when a firm exceeded industry
averages for economic success by: 10%.
Source: GAO analysis of a random sample of 123 8(a) firms.
Note: These estimates are based upon a random sample. For information
on our methodology, see GAO-10-353.
[End of table]
We also reported that SBA's program offices did not maintain
comprehensive data on or have a system in place to track complaints
about the eligibility of firms in the 8(a) program. District staff
were not aware of the types and frequency of complaints across the
agency. As a result, SBA staff lacked information that could be used
to help identify issues relating to program integrity and help improve
the effectiveness of SBA oversight. Although complaint data are not a
primary mechanism to ensure program eligibility, continuous monitoring
is a key component in detecting and deterring fraud.
We recommended that SBA provide more guidance to help ensure that
staff more consistently follow annual review procedures and more fully
utilize third-party complaints to identify potentially ineligible
firms. According to SBA officials, they have taken some actions to
address these recommendations. For example, SBA officials told us that
in August 2010 they had provided staff with a new guide for conducting
annual reviews of the continuing eligibility of firms in the 8(a)
program. Additionally, SBA officials said they were providing training
to staff on the recently published revisions to regulations governing
the 8(a) program. These revisions provided more clarification on
factors that determine economic disadvantage (such as total assets,
gross income, retirement accounts) for continuing eligibility in the
program. SBA officials also said that they have been incorporating
changes into their Web site that will allow third parties to submit
complaints about potentially ineligible firms in the 8(a) program.
Chair Landrieu, Ranking Member Snowe, this concludes my prepared
statement. I would be happy to respond to any questions you or other
Members of the Committee may have at this time.
Contacts and Staff Acknowledgments:
For further information on this testimony, please contact me at (202)
512-8678 or shearw@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this statement. Key contributors to this testimony include
Paige Smith, Assistant Director; Tania Calhoun; Andy Finkel; Janet
Fong; Triana McNeil; Harry Medina; Barbara Roesmann; Kathryn Supinski;
and Bill Woods.
[End of section]
Appendix I: Economic Development Programs:
Table 3 lists the 80 economic development programs and provides
information about their funding, when available. Using the Catalog of
Federal Domestic Assistance and other agency documents, we identified
80 federal programs administered by the four agencies listed below--
the Departments of Commerce (Commerce), Housing and Urban Development
(HUD), and Agriculture (USDA) and the Small Business Administration
(SBA)--that could fund economic development activities. We did not
include tax credit programs aimed at economic development in this
review.
Table 3: FY 2010 Funding for Economic Development Programs:
Agency: Commerce;
Program Name: Community Trade Adjustment Assistance;
FY 2010 Funding[A]: $0.
Agency: Commerce;
Program Name: Grants for Public Works and Economic Development
Facilities;
FY 2010 Funding[A]: $158,930,000.
Agency: Commerce;
Program Name: Economic Development/Support for Planning Organizations;
FY 2010 Funding[A]: $31,391,000.
Agency: Commerce;
Program Name: Economic Development/Technical Assistance;
FY 2010 Funding[A]: $9,800,000.
Agency: Commerce;
Program Name: Economic Adjustment Assistance;
FY 2010 Funding[A]: $45,270,000.
Agency: Commerce;
Program Name: Research and Evaluation Program;
FY 2010 Funding[A]: $1,963,000.
Agency: Commerce;
Program Name: Trade Adjustment Assistance;
FY 2010 Funding[A]: $18,987,000.
Agency: Commerce;
Program Name: Global Climate Change Mitigation Incentive Fund;
FY 2010 Funding[A]: $25,000,000.
Agency: Commerce;
Program Name: Minority Business Enterprise Centers;
FY 2010 Funding[A]: $8,601,193.
Agency: Commerce;
Program Name: Native American Business Enterprise Centers;
FY 2010 Funding[A]: $1,351,500.
Agency: Commerce;
Program Name: Minority Business Opportunity Center;
FY 2010 Funding[A]: $1,512,500.
Agency: USDA;
Program Name: Empowerment Zones;
FY 2010 Funding[A]: $500,000.
Agency: USDA;
Program Name: Woody Biomass Utilization Grant Program;
FY 2010 Funding[A]: $5,000,000.
Agency: USDA;
Program Name: 1890 Land Grant Institutions Rural Entrepreneurial
Outreach Program/Rural Business Entrepreneur Development
Initiative/BISNET;
FY 2010 Funding[A]: $0.
Agency: USDA;
Program Name: Distance Learning and Telemedicine Loans and Grants;
FY 2010 Funding[A]: $33,300,000.
Agency: USDA;
Program Name: Rural Telephone Loans and Loan Guarantees;
FY 2010 Funding[A]: $0.
Agency: USDA;
Program Name: Public Television Station Digital Transition Grants;
FY 2010 Funding[A]: $4,500,000.00.
Agency: USDA;
Program Name: Community Connect Program;
FY 2010 Funding[A]: $18,000,000.00.
Agency: USDA;
Program Name: Rural Broadband Access Loans and Loan Guarantees;
FY 2010 Funding[A]: $29,000,000.00.
Agency: USDA;
Program Name: Rural Electrification Loans and Loan Guarantees;
FY 2010 Funding[A]: $0.
Agency: USDA;
Program Name: Assistance to High Energy Cost Rural Communities;
FY 2010 Funding[A]: $17,500,000.
Agency: USDA;
Program Name: Denali Commission Loans and Grants;
FY 2010 Funding[A]: $0.
Agency: USDA;
Program Name: State Bulk Fuel Revolving Fund Grants;
FY 2010 Funding[A]: $0.
Agency: USDA;
Program Name: Small Business Innovation Research;
FY 2010 Funding[A]: $22,000,000.
Agency: USDA;
Program Name: Biomass Research and Development Initiative Competitive
Grants Program;
FY 2010 Funding[A]: $0.
Agency: USDA;
Program Name: Schools and Roads--Grants to States;
FY 2010 Funding[A]: $0.
Agency: USDA;
Program Name: Schools and Roads--Grants to Counties;
FY 2010 Funding[A]: $0.
Agency: USDA;
Program Name: Community Facilities Loans and Grants;
FY 2010 Funding[A]: $36,800,000.
Agency: USDA;
Program Name: Water and Waste Disposal Loans and Grants (Section 306C);
FY 2010 Funding[A]: $489,100,000.
Agency: USDA;
Program Name: Water and Waste Disposal Systems for Rural Communities;
FY 2010 Funding[A]: $0.
Agency: USDA;
Program Name: Emergency Community Water Assistance Grants;
FY 2010 Funding[A]: $13,000,000.
Agency: USDA;
Program Name: Technical Assistance and Training Grants;
FY 2010 Funding[A]: $19,500,000.
Agency: USDA;
Program Name: Grant Program to Establish a Fund for Financing Water
and Waste Water Projects;
FY 2010 Funding[A]: $500,000.
Agency: USDA;
Program Name: Solid Waste Management Grants;
FY 2010 Funding[A]: $3,400,000.
Agency: USDA;
Program Name: Value Added Producer Grants;
FY 2010 Funding[A]: $19,400,000.
Agency: USDA;
Program Name: Biobased Products and Bioenergy Program;
FY 2010 Funding[A]: $2,000,000.
Agency: USDA;
Program Name: Agriculture Innovation Center;
FY 2010 Funding[A]: $0.
Agency: USDA;
Program Name: Small Socially-Disadvantaged Producer Grants;
FY 2010 Funding[A]: $3,500,000.
Agency: USDA;
Program Name: Intermediary Re-lending;
FY 2010 Funding[A]: $8,500,000.
Agency: USDA;
Program Name: Business and Industry Loans;
FY 2010 Funding[A]: $52,900,000.
Agency: USDA;
Program Name: Rural Business Enterprise Grants;
FY 2010 Funding[A]: $38,700,000.
Agency: USDA;
Program Name: Rural Cooperative Development Grants;
FY 2010 Funding[A]: $8,300,000.
Agency: USDA;
Program Name: Rural Business Opportunity Grants;
FY 2010 Funding[A]: $2,500,000.
Agency: USDA;
Program Name: Rural Economic Development Loans and Grants;
FY 2010 Funding[A]: $0.
Agency: USDA;
Program Name: Biorefinery Assistance Program;
FY 2010 Funding[A]: $245,000,000.
Agency: USDA;
Program Name: Rural Energy for America Program;
FY 2010 Funding[A]: $99,400,000.
Agency: USDA;
Program Name: Rural Microentrepreneur Assistance Program;
FY 2010 Funding[A]: $9,000,000.
Agency: HUD;
Program Name: Community Development Block Grant (CDBG)/Entitlement
Grants;
FY 2010 Funding[A]: $2,760,223,970.
Agency: HUD;
Program Name: CDBG/Special Purpose/Insular Areas;
FY 2010 Funding[A]: $6,930,000.
Agency: HUD;
Program Name: CDBG/States;
FY 2010 Funding[A]: $1,176,594,747.
Agency: HUD;
Program Name: CDBG/Non-entitlement CDBG Grants in Hawaii;
FY 2010 Funding[A]: $5,791,797.
Agency: HUD;
Program Name: CDBG/Brownfields Economic Development Initiative;
FY 2010 Funding[A]: $17,500,000.
Agency: HUD;
Program Name: CDBG/Section 108 Loan Guarantees;
FY 2010 Funding[A]: $6,000,000.
Agency: HUD;
Program Name: Section 4 Capacity Building for Affordable Housing and
Community Development;
FY 2010 Funding[A]: $50,000,000.
Agency: HUD;
Program Name: Rural Innovation Fund;
FY 2010 Funding[A]: $25,000,000.
Agency: HUD;
Program Name: CDBG Disaster Recovery Grants;
FY 2010 Funding[A]: $100,000,000.
Agency: HUD;
Program Name: Indian CDBG;
FY 2010 Funding[A]: $65,000,000.
Agency: HUD;
Program Name: Hispanic Serving Institutions Assisting Communities;
FY 2010 Funding[A]: $6,250,000.
Agency: HUD;
Program Name: Alaska Native/Native Hawaiian Institutions Assisting
Communities;
FY 2010 Funding[A]: $3,265,000.
Agency: HUD;
Program Name: Sustainable Communities Regional Planning Grant Program;
FY 2010 Funding[A]: $98,000,000.
Agency: HUD;
Program Name: Community Challenge Planning Grant Program;
FY 2010 Funding[A]: $40,000,000.
Agency: SBA[B];
Program Name: 8(a) Business Development Program;
FY 2010 Funding[A]: $56,817,000.
Agency: SBA;
Program Name: 7(j) Technical Assistance;
FY 2010 Funding[A]: $3,400,000.
Agency: SBA;
Program Name: Procurement Assistance to Small Businesses;
FY 2010 Funding[A]: $3,164,000.
Agency: SBA;
Program Name: Small Business Investment Companies;
FY 2010 Funding[A]: $24,262,000.
Agency: SBA;
Program Name: 7(a) Loan Program;
FY 2010 Funding[A]: $95,090,000.
Agency: SBA;
Program Name: Surety Bond Guarantee Program;
FY 2010 Funding[A]: $1,000,000.
Agency: SBA;
Program Name: SCORE;
FY 2010 Funding[A]: $7,000,000.
Agency: SBA;
Program Name: Small Business Development Centers;
FY 2010 Funding[A]: $113,000,000.
Agency: SBA;
Program Name: 504 Loan Program;
FY 2010 Funding[A]: $36,232,000.
Agency: SBA;
Program Name: Women's Business Centers;
FY 2010 Funding[A]: $14,000,000.
Agency: SBA;
Program Name: Veterans' Businesses Outreach Centers;
FY 2010 Funding[A]: $2,500,000.
Agency: SBA;
Program Name: Microloan Program;
FY 2010 Funding[A]: $25,315,000.
Agency: SBA;
Program Name: PRIME;
FY 2010 Funding[A]: $8,000,000.
Agency: SBA;
Program Name: New Markets Venture Capital Program;
FY 2010 Funding[A]: $0.
Agency: SBA;
Program Name: 7(a) Export Loan Guarantees;
FY 2010 Funding[A]: $0.
Agency: SBA;
Program Name: HUBZone;
FY 2010 Funding[A]: $2,200,000.
Agency: SBA;
Program Name: Small Business Technology Transfer Program;
FY 2010 Funding[A]: $0.
Agency: SBA;
Program Name: Small Business Innovation Research Program;
FY 2010 Funding[A]: $0.
Agency: SBA;
Program Name: Federal and State Technology Partnership Program;
FY 2010 Funding[A]: $2,000,000.
Grand Total:
FY 2010 Funding[A]: $6,238,641,707.
Source: GAO analysis of information from Commerce, HUD, SBA, and USDA.
[A] According to agency officials, the programs listed above that did
not receive funding in fiscal year 2010 are still active programs and
are denoted with "0."
[B] SBA officials provided revised fiscal year 2010 funding figures
for 18 of their 19 economic development programs since their original
submission to us in December 2010.
[End of table]
[End of section]
Footnotes:
[1] See GAO, Opportunities to Reduce Potential Duplication in
Government Programs, Save Tax Dollars, and Enhance Revenue,
[hyperlink, http://www.gao.gov/products/GAO-11-318SP] (Washington,
D.C.: Mar. 1, 2011); GAO, List of Selected Federal Programs That Have
Similar or Overlapping Objectives, Provide Similar Services, or Are
Fragmented Across Government Missions, [hyperlink,
http://www.gao.gov/products/GAO-11-474R] (Washington, D.C.: Mar. 18,
2011); and GAO, Efficiency and Effectiveness of Fragmented Economic
Development Programs Are Unclear, [hyperlink,
http://www.gao.gov/products/GAO-11-477R] (Washington D.C.: May 19,
2011).
[2] In commenting on our May 2011 report [hyperlink,
http://www.gao.gov/products/GAO-11-477R], the Department of Commerce
stated, among other things, that prior GAO reports have focused on the
types of investments made without an appropriate definition of
economic development. Because federal agencies do not have a standard
definition of what constitutes economic development, we identified
programs using a list of activities that are generally accepted as
being directly related to economic development.
[3] In March 2011, we reported that the funding provided for these 80
programs in fiscal year 2010 amounted to $6.5 billion, of which about
$3.2 billion was for economic development efforts, according to data
received from the agencies [hyperlink,
http://www.gao.gov/products/GAO-11-318SP] and [hyperlink,
http://www.gao.gov/products/GAO-11-474R]. We are reporting different
funding figures in this product because SBA revised the original
information they provided to us in December 2010.
[4] See [hyperlink, http://www.gao.gov/products/GAO-11-318SP];
[hyperlink, http://www.gao.gov/products/GAO-11-474R]; [hyperlink,
http://www.gao.gov/products/GAO-11-477R]; GAO, Rural Economic
Development: Collaboration between SBA and USDA Could Be Improved,
[hyperlink, http://www.gao.gov/products/GAO-08-1123] (Washington,
D.C.: Sep.18, 2008); GAO, Small Business Administration: Additional
Actions Are Needed to Certify and Monitor HUBZone Businesses and
Assess Program Results, [hyperlink,
http://www.gao.gov/products/GAO-08-643] (Washington, D.C.: Jun. 17,
2008); GAO, Rural Economic Development: More Assurance Is Needed That
Grant Funding Information Is Accurately Reported, [hyperlink,
http://www.gao.gov/products/GAO-06-294] (Washington, D.C.: Feb. 24,
2006); GAO, Economic Development Administration: Remediation
Activities Account for a Small Percentage of Total Brownfield Grant
Funding, [hyperlink, http://www.gao.gov/products/GAO-06-7]
(Washington, D.C.: Oct. 27, 2005); GAO, Economic Development: Multiple
Federal Programs Fund Similar Economic Development Activities,
[hyperlink, http://www.gao.gov/products/GAO/RCED/GGD-00-220]
(Washington, D.C.: Sep. 29, 2000); and GAO, Economic Development:
Observations Regarding the Economic Development Administration's May
1998 Final Report on its Public Works Program, [hyperlink,
http://www.gao.gov/products/GAO/RCED-99-11R] (Washington, D.C.: Mar.
23, 1999).
[5] [hyperlink, http://www.gao.gov/products/GAO-08-643].
[6] GAO, Department of Veterans Affairs: Agency Has Exceeded
Contracting Goals for Veteran-Owned Small Businesses, but It Faces
Challenges with Its Verification Program, [hyperlink,
http://www.gao.gov/products/GAO-10-458] (Washington, D.C.: May 28,
2010).
[7] GAO, Small Business Administration: Steps Have Been Taken to
Improve Administration of the 8(a) Program, but Key Controls for
Continued Eligibility Need Strengthening, [hyperlink,
http://www.gao.gov/products/GAO-10-353] (Washington, D.C.: Mar. 30,
2010).
[8] HUBZone Act of 1997, Pub L. No. 105-135, Title VI, 111 Stat. 2592,
2627-2636 (1997).
[9] See [hyperlink, http://www.gao.gov/products/GAO-08-643] for a
definition of each type of area.
[10] SBA's size standards are almost always stated either as the
average employment or average annual receipts of a business concern
and vary by industry.
[11] Qualified HUBZone firms also can be owned and controlled by
Alaskan Native Corporations, Indian tribal governments, community
development corporations, and agricultural cooperatives.
[12] If the business is publicly owned, at least 51 percent of the
stock must be held by one or more service-disabled veterans. The
service-disabled veteran(s) must manage and control daily business
operations. In the case of a veteran with permanent and severe
disability, the spouse or permanent caregiver of such veteran may
control the business.
[13] 38 U.S.C. §§ 101(2), 101(16).
[14] Federal statistical agencies use NAICS as the standard in
classifying business establishments for the purpose of collecting,
analyzing, and publishing statistical data related to the U.S.
business economy.
[15] For more information on key eligibility requirements for 8(a)
program participation, see [hyperlink,
http://www.gao.gov/products/GAO-10-353].
[16] GAO, Results-Oriented Government: Practices That Can Help Enhance
and Sustain Collaboration among Federal Agencies, [hyperlink,
http://www.gao.gov/products/GAO-06-15] (Washington, D.C.: Oct. 21,
2005). Also see [hyperlink, http://www.gao.gov/products/GAO-08-1123].
[17] [hyperlink, http://www.gao.gov/products/GAO-08-643].
[18] [hyperlink, http://www.gao.gov/products/GAO-10-458].
[19] Pub. L. No. 109-461, § 502, 120 Stat. 3403, 3431 (2006), codified
at 38 U.S.C. § 8127, as amended.
[20] The Veterans Small Business Verification Act, Pub. L. No. 111-
275, § 104, 124 Stat. 2864, 2867 (2010), requires that effective
October 13, 2010, no new small business applicant may appear in VA's
database unless it has been verified as owned and controlled by a
veteran or service-disabled veteran. Additionally, VA was required to
notify all unverified businesses in its veteran-owned small business
and service-disabled veteran-owned small business database as of
October 13, 2010, about the need to provide supporting business
documents that establish the veteran ownership and control of the
small business. Firms were required to do so by 90 days of receipt of
the notification in order to avoid removal from VA's database.
[21] [hyperlink, http://www.gao.gov/products/GAO-10-353].
[22] The proposed rule has since been finalized. See 76 Fed. Reg. 8222
(Feb. 11, 2011) (to be codified at 13 C.F.R. pts. 121 and 124). This
rule became effective on March 14, 2011.
[End of section]
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