Service-Disabled Veteran-Owned Small Business Program
Fraud Prevention Controls Needed to Improve Program Integrity Gao ID: GAO-10-740T May 24, 2010The Service-Disabled Veteran-Owned Small Business (SDVOSB) program is intended to provide federal contracting opportunities to qualified firms. In fiscal year 2008, the Small Business Administration (SBA) reported $6.5 billion in sole-source, set-aside, and other SDVOSB contract awards. Testimonies GAO delivered on November 19 and December 16, 2009 identified millions of dollars in SDVOSB contracts that were awarded to ineligible firms, and weaknesses in fraud prevention controls at the SBA and VA which allowed ineligible firms to receive contracts. GAO was asked to testify about the key elements of a fraud prevention framework within the SDVOSB program and to provide an update on the status of fraud referrals made based on the prior investigation of selected SDVOSB firms. To address these objectives, GAO reviewed prior findings from audits and investigations of the SDVSOB program and contacted investigative agency officials concerning the referrals GAO made on prior work. GAO also reviewed applicable guidance on internal control standards from the Comptroller General's Standards for Internal Controls in the Federal Government.
GAO founda lack of government-wide prevention controls, a lack of validation of information provided by SDVOSB firms used to substantiate their eligibility for the program, non-existent monitoring of continued compliance with program requirements, and an ineffective process for investigating and prosecuting firms found to be abusing the program. The results of GAO's investigation serve to emphasize the overall lesson that a complete fraud prevention framework is necessary in order to minimize fraud, waste, and abuse within the SDVOSB program. The most effective and most efficient part of the framework involves the institution of rigorous controls at the beginning of the process for becoming eligible to bid on SDVOSB contracts. Next, active and continual monitoring of contractors performing SDVOSB contracts is also essential. Given the examples GAO identified of firms owned by a service-disabled veteran who subcontracted 100 percent of contract work to non-SDVOSB firms, it is essential that federal agencies monitor compliance with program rules after contract performance has begun. Finally, as shown in GAO's investigation, prevention and monitoring controls are not effective unless identified fraud is aggressively prosecuted or companies are suspended, debarred or otherwise held accountable. GAO's prior investigation into allegations of fraud and abuse within SDVOSB contracts found 10 firms that were ineligible for the program but received approximately $100 million in SDVOSB contracts. Upon completion of its investigation, GAO referred all 10 cases to various agency officials who had contracts with the firms, and each agency's Inspector General (IG). Based on the referrals, agencies have taken a variety of actions including the cancellation of existing contracts, termination of future contract options, and opening of civil and criminal investigations. IG officials have stated that many of their investigations are ongoing, and therefore details cannot be provided due to the risk of jeopardizing the investigation. These 10 companies have obtained over $5 million in new SDVOSB sole-source and set-aside contact obligations since November 2009.
GAO-10-740T, Service-Disabled Veteran-Owned Small Business Program: Fraud Prevention Controls Needed to Improve Program Integrity
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Testimony:
Before the Subcommittee on Contracting and Technology, Committee on
Small Business, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 9:30 a.m. EDT:
Monday, May 24, 2010:
Service-Disabled Veteran-Owned Small Business Program:
Fraud Prevention Controls Needed to Improve Program Integrity:
Statement of Gregory D. Kutz, Managing Director:
Forensic Audits and Special Investigations:
GAO-10-740T:
GAO Highlights:
Highlights of GAO-10-740T, a testimony to the Subcommittee on
Contracting and Technology, Small Business Committee, House of
Representatives.
Why GAO Did This Study:
The Service-Disabled Veteran-Owned Small Business (SDVOSB) program is
intended to provide federal contracting opportunities to qualified
firms. In fiscal year 2008, the Small Business Administration (SBA)
reported $6.5 billion in sole-source, set-aside, and other SDVOSB
contract awards. Testimonies GAO delivered on November 19 and December
16, 2009 identified millions of dollars in SDVOSB contracts that were
awarded to ineligible firms, and weaknesses in fraud prevention
controls at the SBA and VA which allowed ineligible firms to receive
contracts.
GAO was asked to testify about the key elements of a fraud prevention
framework within the SDVOSB program and to provide an update on the
status of fraud referrals made based on the prior investigation of
selected SDVOSB firms.
To address these objectives, GAO reviewed prior findings from audits
and investigations of the SDVSOB program and contacted investigative
agency officials concerning the referrals GAO made on prior work. GAO
also reviewed applicable guidance on internal control standards from
the Comptroller General‘s Standards for Internal Controls in the
Federal Government.
What GAO Found:
GAO found a lack of government-wide prevention controls, a lack of
validation of information provided by SDVOSB firms used to
substantiate their eligibility for the program, non-existent
monitoring of continued compliance with program requirements, and an
ineffective process for investigating and prosecuting firms found to
be abusing the program. The results of GAO's investigation serve to
emphasize the overall lesson that a complete fraud prevention
framework is necessary in order to minimize fraud, waste, and abuse
within the SDVOSB program. The most effective and most efficient part
of the framework involves the institution of rigorous controls at the
beginning of the process for becoming eligible to bid on SDVOSB
contracts. Next, active and continual monitoring of contractors
performing SDVOSB contracts is also essential. Given the examples GAO
identified of firms owned by a service-disabled veteran who
subcontracted 100 percent of contract work to non-SDVOSB firms, it is
essential that federal agencies monitor compliance with program rules
after contract performance has begun. Finally, as shown in GAO's
investigation, prevention and monitoring controls are not effective
unless identified fraud is aggressively prosecuted or companies are
suspended, debarred or otherwise held accountable. The figure below
provides an overview of how preventive controls would help screen out
the ineligible firms, and how monitoring controls and prosecutions can
help further minimize the extent to which a program is vulnerable to
fraud.
Figure: Framework Designed to Minimize Fraud, Waste, and Abuse:
[Refer to PDF for image: illustration]
Potential fraud, waste, and abuse:
Preventive controls applied: Lessons learned influence future use of
preventive controls;
Potential fraud, waste, and abuse (smaller amount):
Detection and monitoring: Lessons learned influence future use of
preventive controls;
Potential fraud, waste, and abuse (smaller amount):
Investigations and prosecutions: Lessons learned influence future use
of preventive controls.
Source: GAO.
[End of figure]
GAO's prior investigation into allegations of fraud and abuse within
SDVOSB contracts found 10 firms that were ineligible for the program
but received approximately $100 million in SDVOSB contracts. Upon
completion of its investigation, GAO referred all 10 cases to various
agency officials who had contracts with the firms, and each agency‘s
Inspector General (IG). Based on the referrals, agencies have taken a
variety of actions including the cancellation of existing contracts,
termination of future contract options, and opening of civil and
criminal investigations. IG officials have stated that many of their
investigations are ongoing, and therefore details cannot be provided
due to the risk of jeopardizing the investigation. These 10 companies
have obtained over $5 million in new SDVOSB sole-source and set-aside
contact obligations since November 2009.
View [hyperlink, http://www.gao.gov/products/GAO-10-740T] or key
components. For more information, contact Gregory D. Kutz at (202) 512-
6722 or kutzg@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to discuss fraud prevention within the
Service-Disabled Veteran-Owned Small Business (SDVOSB) program. The
federal government's long-standing policy has been to use its buying
power--the billions of dollars it spends through contracting each
year--to maximize procurement opportunities for small businesses. The
SDVOSB program is an extension of this policy. It is also intended to
honor the extraordinary service rendered to the United States by
veterans with disabilities incurred or aggravated in the line of duty
during active service in the armed forces. The Veterans Benefits Act
of 2003,[Footnote 1] which established the 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. Executive Order 13360 also requires federal
procurement officials and prime contractors to provide opportunities
for these firms to increase their federal contracting and
subcontracting. In order to be eligible for a set-aside or sole-source
SDVOSB contract, a firm must meet certain criteria. It must be
majority-owned[Footnote 2] by one or more service-disabled veterans
who manage and control[Footnote 3] daily business operations. A firm
must also qualify as a small business under the North American
Industry Classification System (NAICS)[Footnote 4] industry-size
standards. Currently, in the governmentwide SDVOSB program, firm
officials are allowed to self-certify themselves as being SDVOSB by
attesting that they meet the criteria.
The Small Business Administration (SBA) which, along with federal
procuring agencies, administers the SDVOSB program, reported in fiscal
year 2008 that $6.5 billion[Footnote 5] in federal contracts were
awarded to firms that self-certified themselves as SDVOSBs. Government
contracts to SDVOSBs accounted for only 1.5 percent of all government
contract dollars paid in fiscal year 2008. Since the SDVOSB program
began, the government has not met its annual mandated goal of 3
percent.[Footnote 6] In addition to SBA's statutory authority over
administration of the SDVOSB program, several other government
agencies have separate authority over issues related to the SDVOSB
program. The Veterans Benefits, Health Care, and Information
Technology Act[Footnote 7] requires the Department of Veterans Affairs
(VA) to maintain a database of SDVOSBs and Veteran-Owned Small
Businesses (VOSB) so a contractor's eligibility can be verified, and
requires VA to determine the eligibility of firms bidding on VA SDVOSB
and VOSB contracts. In addition, the Office of Federal Procurement
Policy (OFPP), within the Office of Management and Budget, provides
overall direction for governmentwide procurement policies,
regulations, and procedures to promote economy, efficiency, and
effectiveness in the acquisition processes. The Procurement Policy
Office's primary focus is on the Federal Acquisition Regulation (FAR),
the governmentwide regulation governing agency acquisitions of goods
and services, including actions on SDVOSB set-aside and sole-source
contracts.
Testimonies we presented on November 19 and December 16, 2009,
[Footnote 8] identified millions of dollars in SDVOSB contracts that
were awarded to ineligible firms and weaknesses in fraud prevention
controls at the SBA and VA that allowed ineligible firms to receive
contracts. Problems highlighted in the testimonies included a lack of
governmentwide controls, a lack of validation of information provided
by SDVOSB firms used to substantiate their eligibility for the
program, non-existent monitoring of continued compliance with program
requirements, and an ineffective process for investigating and
prosecuting firms found abusing the program. In addition, our work
also found that VA's process for validating a firm's eligibility may
not be effective because two of the firms we identified as ineligible
were certified as SDVSOB program eligible firms through VA's
verification process. The various areas of control weaknesses resulted
in little or no assurance that firms receiving contracts met SDVOSB
criteria. Based on these findings, we made recommendations to the SBA
and the VA to explore the feasibility of improving program controls
and institute consequences for firms that misrepresent their
eligibility for the program. VA and the SBA generally agreed with our
recommendations and VA has begun developing a validation process for
VOSBs and SDVOSBs receiving VA contracts. Yet at the conclusion or our
prior investigation, SBA had not yet taken action to implement a
governmentwide comprehensive fraud prevention framework for the SDVOSB
program. Additionally, we provided a matter for congressional
consideration that Congress should consider providing VA with the
authority and resources necessary to expand its SDVOSB eligibility
verification process to all contractors seeking to bid on SDVOSB
contracts governmentwide.
Given the Federal government's emphasis on providing contract dollars
to SDVOSB firms, the billions of dollars spent annually on SDVOSB
contracts, and weakness identified by GAO, it is imperative that the
SBA, VA, and federal-agency contracting offices work together to
implement comprehensive fraud prevention controls. My testimony today
will (1) describe the key elements of a fraud prevention framework
that is needed within the SDVOSB program and (2) provide an update on
the status of fraud referrals we made based on our prior investigation
of selected SDVOSB contractors.
To address our objectives, we reviewed prior findings from GAO audits
and investigations of the SDVSOB program. We also reviewed applicable
guidance on internal control standards from the Comptroller General's
Standards for Internal Controls in the Federal Government.[Footnote 9]
We contacted SBA to determine changes since the issuance of our
report. SBA reported conducting meetings with the VA and is setting up
a task force to address SDVOSB program weaknesses. Due to the short
time frame on this request we were unable to determine whether SBA's
actions will adequately address weaknesses previously identified. We
conducted our audit work in May 2010 in accordance with U.S. 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 objectives.
Framework for Fraud Prevention, Detection, and Prosecution:
The results of our investigation serve to emphasize the overall lesson
that a complete fraud prevention framework is necessary in order to
minimize fraud, waste, and abuse within the SDVOSB program. The most
effective and most efficient part of the framework involves the
institution of rigorous controls at the beginning of the process for
becoming eligible to bid on SDVOSB contracts. Specifically, controls
that validate firms' eligibility, including ownership and control by
one or more service-disabled veterans, is the first and most important
control. Next, active and continual monitoring of contractors
performing SDVOSB contracts is also essential. Given the numerous
examples we identified of firms owned by a service-disabled veteran
who subcontracted 100 percent of contract work to non-SDVOSB firms, it
is essential that program officials monitor compliance with program
rules after contract performance has begun. Finally, as shown in our
investigation, preventive and monitoring controls are not effective
unless identified abusers are aggressively prosecuted and/or face
other consequences such as suspension, debarment or termination of
contracts and future contract options. The examples we identified of
cases where SBA found a firm misrepresented its eligibility for the
SDVOSB program, but failed to penalize the firm, undermine the
positive effects of the few controls currently in place. Figure 1
provides an overview of how preventive controls serve as the first and
most important part of the frame work because they are designed to
screen out ineligible firms before they get service-disabled sole
source or set-aside contracts. Monitoring controls and prosecution or
other consequences also helps minimize the extent to which a program
is vulnerable to fraud.
Figure 1: Framework Designed to Minimize Fraud, Waste, and Abuse:
[Refer to PDF for image: illustration]
Potential fraud, waste, and abuse:
Preventive controls applied: Lessons learned influence future use of
preventive controls;
Potential fraud, waste, and abuse (smaller amount):
Detection and monitoring: Lessons learned influence future use of
preventive controls;
Potential fraud, waste, and abuse (smaller amount):
Investigations and prosecutions: Lessons learned influence future
use of preventive controls.
Source: GAO.
[End of figure]
Preventive Controls Reduce the Potential for Fraud through Limiting
Access to SDVOSB Contracts:
Preventive controls are a key element of an effective fraud prevention
framework and are also described in the Standards for Internal
Controls in the Federal Government.[Footnote 10] Preventive controls
are especially important because they limit access to program
resources through front-end controls. Our experience shows that once
contracts are awarded and money disbursed to ineligible SDVOSB
contractors, it is unlikely that any money will be recovered or even
that the contract will be terminated. Preventive controls for the
SDVOSB program should, at a minimum, be designed to verify that a firm
seeking SDVOSB status is eligible for the program. However, during our
investigation, we found that there are no governmentwide controls that
verify whether firms who self-certify as SDVOSBs meet program
requirements. VA performs some level of validation of contractors
claiming to be SDVOSBs that bid on VA contracts, but even that process
was primarily based on a review of self-reported data. The key to the
validation process within the SDVOSB program must be verifying self-
reported contractor data with independent third-party sources. Key
data to validate with preventive controls should include whether the
owner or owners are service-disabled veterans, whether the service-
disabled veteran owner(s) manage and control daily operations, and
whether the business qualifies as a small business under the primary
NAICS industry-size standards for the SDVOSB contract awarded.
Validation of whether a business owner is a service-disabled veteran
must be the first step in the SDVOSB prevention framework.
Coordination between VA, SBA, and potentially DOD will be necessary to
ensure an accurate determination is made. VA already maintains a
database of service-disabled veterans, and therefore, it appears that
data necessary for this validation are already available. However,
during our investigation, we found that 1 of the 10 firms we
investigated was owned by an individual who was not a service-disabled
veteran, but received more than $7.5 million dollars in Federal
Emergency Management Agency (FEMA) contracts. This firm is a prime
example of why the relatively simple process of validating an
individual's status as a service-disabled veteran can prevent fraud
within the SDVOSB program.
In addition to the validation of firm owners' status as service-
disabled veterans, preventive controls should also validate whether
firm owners actually manage and control daily operations. This must be
accomplished in order to prevent "rent-a-vet" situations where a firm
finds a willing service-disabled veteran to pose as the "owner" of a
firm while in reality, other ineligible firm members manage and
control the daily operations of a business. One case uncovered during
our investigation found that the service-disabled veteran owner
actually played no part in business operations related to the primary
government contracts won by the firm, and worked from home on non-
government related contracts. The alleged owner also did not receive
any salary from the firm and tax returns showed that he received less
in Internal Revenue Service (IRS) 1099 distributions than the 10
percent minority owner. In order to identify these types of
situations, controls must utilize a variety of tools including a
review of independent third-party information such as individual and
company tax returns obtained directly from the IRS. Other processes
such as performing unannounced site visits to an applicant's place of
business can provide evidence to indicate management and control of
daily operations, whether the firm is a shell company operating with a
mail box as an address or a legitimate firm with employees and assets
and whether a firm is co-located with another non-SDVOSB firm that
will likely perform all contract work. In our previous work, we used
unannounced site visits when conducting our investigations of the 10
firms that through various fraudulent schemes, obtained $100 million
in service-disabled sole-source and set-aside contracts.
Verification of whether a firm meets NAICS's industry-size standards
is another part of preventive controls that can help minimize fraud
and abuse within the program. During our investigation, we found that
one company had violated small business size standards and received
more than $171 million in federal contracts between fiscal years 2003
and 2009. We were able to identify the company's information through a
review of contract obligation information within the Federal
Procurement Data System-Next Generation (FPDS-NG). FPDS-NG is a
publicly available database that allows a user to search for federal
contracts awarded to specific firms. As part of comprehensive
preventive controls, a review of these types of databases as well as
company IRS tax returns will provide information to ensure a
prospective SDVOSB firm is not already a large business. Beyond
validation of data and checks with independent third parties, it is
also important that personnel performing the validation of a firm's
SDVOSB status are well trained and aware of the potential for fraud.
Fraud awareness training with frontline personnel is crucial to
stropping fraud before it gains access to the program. Additionally,
when implementing any new set of controls, it is important that
agencies field test new controls and provide a safety net to deal with
firms who feel they were inappropriately rejected from the SDVOSB
program. Finally, a properly managed and staffed prevention program
should not create a large backlog of legitimate firms attempting to be
certified. Unfortunately, as GAO testified at the end of April,
[Footnote 11] VA's certification program has a large backlog of
businesses awaiting site visits and some higher-risk businesses have
been verified months before their site visits occurred or were
scheduled to occur. Verifying businesses prior to site visits may
allow ineligible firms to appear as eligible and to receive SDVOSB set-
aside and sole-source contracts.
Monitoring and Detection Controls Provide Assurance That Firms in the
SDVOSB Program Continue to Adhere to Eligibility Requirements:
Even with effective preventive controls, there is substantial residual
risk that firms that may have appeared to meet SDVOSB program
requirements initially will violate program rules after being awarded
SDVOSB contracts. Monitoring and detection are not as efficient or
effective as prevention because once a contractors are in the program
and fraudulently receive a SDVOSB sole-source or set-aside contract,
there are few if any consequences if they are caught. Detection and
monitoring efforts, which are addressed in the Standards for Internal
Control in the Federal Government,[Footnote 12] include data-mining of
transactions and other reviews. Our investigation found cases where
firms may have initially been able to meet a program's eligibility
criteria, but subsequently violated subcontracting rules of the
program after subcontracting 100 percent of the SDVOSB contract work
to a non-SDVOSB firm. Our findings therefore emphasize why it is
important for a comprehensive fraud prevention framework to have
detection and monitoring controls in place to identify violations. For
the SDVOSB program, there are several areas that require periodic
review, including monitoring of a firms compliance with industry-size
standards and monitoring of the performance of required percentage of
work on SDVOSB contracts.
In order to confirm that an SDVOSB firm continues to comply with NAICS
standards, agencies should periodically data-mine FPDS-NG and other
relevant federal procurement data to determine the number and size of
contracts awarded and funds obligated to SDVOSB firms. A thorough
review of this data is important so that all contacts awarded to a
firm or its joint ventures are identified. During our investigation,
we found one firm that received more than $171 million in federal
funds through more than five different joint ventures. This example
shows why data-mining efforts must be creative and thorough in order
to effectively prevent fraud. In addition, data mining can also be
done to review existing contracts with company information to
determine whether a company could reasonably perform contracts given
its area of expertise. For example, through data mining we found one
firm during our investigation that initially listed its area of
expertise as construction. However, the firm had recently been
performing multiple janitorial service contracts across the country.
While this was not a definite indicator of fraud, subsequent on-site
unannounced site visits found that the firm was subcontracting 100
percent of the contract work to an international firm with more than
$12 billion in annual revenues.
Monitoring of the firms active participation in contracts is another
way to ensure SDVOSB program requirements are being met. During our
work, we identified cases where firms, which may have initially
appeared legitimate on paper, that actually functioning as pass-
throughs and subcontracting 100 percent of the work to non-SDVOSB
firms. Controls to help identify these situations would include
conducting unannounced site visits to contract performance locations
and contacting local contracting officers to determine with whom they
interact during the contract performance period. In addition, a
periodic review of the types of contracts awarded to a firm compared
with company information can help identify firms requiring further
review. Finally, when fraudulent activity is identified through data
mining and monitoring controls, agencies should also use that
information to help improve future preventive controls when
appropriate.
Investigations and Prosecutions Serve as a Deterrent for Potential
Future Abuse:
The final element of a comprehensive fraud prevention framework is the
aggressive investigation and prosecution of firms that abuse the
SDVOSB program or other consequences such as suspension, debarment,
and termination of contracts and cancellation of contract options.
These back-end controls are often the most costly and least effective
means of reducing fraud in a program. However, the deterrent value of
prosecuting those who commit fraud sends the message that the
government will not tolerate firms that falsely represent themselves
as SDVOSB firms. Our investigation found that while the SBA has
successfully identified multiple firms that falsely certified
themselves as SDVOSB firms, in October of 2009 when we issued our
report, SBA had not attempted to suspend or debar the problem firms.
In addition, during our investigation, we could not find any examples
of referrals for prosecution of these firms to the Department of
Justice by the VA or SBA Inspectors General for fraud within the
SDVOSB program. In order for the SBA and VA to ensure the highest
level of compliance with SDVOSB program requirements, there must be
consequences for those firms that chose to fraudulently misrepresent
themselves as SDVOSB firms. Agencies have tools available such as
suspension, debarment, and removal from the program, termination of
contracts and cancellation of future contract options. Finally, as
with fraud found through monitoring controls, lessons learned from
investigations and prosecutions should be utilized to strengthen
controls earlier in the process and improve the overall fraud
prevention framework.
Referrals from GAO's Investigation Have Resulted in Action from Agency
Inspector General Offices:
Our prior investigation into allegations of fraud and abuse within
SDVOSB contracts found 10 firms that were ineligible for the program
but received approximately $100 million in SDVOSB contracts. Upon
completion of our investigation, we referred all 10 cases to various
agency officials who had contracts with the firms and to each agency's
IG. Based on our referrals, agencies have taken a variety of actions
including the termination of existing contracts, the decision not to
extend contract performance by exercising future contract options, and
the opening of civil and criminal investigations. IG officials have
stated that most of their investigations are ongoing and that
therefore, details cannot be provided because of the risk of
jeopardizing the investigation. However, in at least one case, the
future contract options under a janitorial services contract were not
exercised and, the firm was not allowed to perform work beyond the
initial contract performance period. In addition, this firm's
subcontractor, which performed 100 percent of the contact work,
initiated its own investigation. The subcontractor's investigation
determined one of its employees helped to perpetrate the fraud by
creating fictitious documents at the request of the SDVOSB firm's
owner. In another case, the SDVOSB firm was found to be intentionally
overcharging a federal agency by inflating the hourly labor rate of
unapproved subcontracted employees from a temporary employment agency.
Finally, in one case, multiple federal investigative agencies have an
ongoing criminal investigation and are working together on a grand
jury indictment. Additionally, these 10 case-study firms have received
more than $5 million in new contract obligations[Footnote 13] on
SDVOSB sole-source and set-aside contacts and more than $10 million in
other new contract obligations since November 2009.
Conclusions:
Our investigation of the SDVOSB program shows that existing controls
are ineffective at minimizing the risk for fraud and abuse. Our 10
cases alone show that approximately $100 million in SDVOSB contracts
have gone to ineligible firms. With billions of dollars being spent
annually on SDVOSB contracts, agency officials should use lessons
learned to implement a comprehensive fraud prevention framework.
Controls at each point in the process are the key to minimizing the
government's risk. With a comprehensive framework in place, the
government can be more confident that the billions of dollars meant to
help provide opportunities to our nation's service-disabled veterans
actually make it to the intended beneficiaries.
Mr. Chairman and Members of the Subcommittee, this concludes my
statement. I would be pleased to answer any questions that you or
Members of the Subcommittee have at this time.
Contacts and Acknowledgments:
For additional information about this testimony, please contact
Gregory D. Kutz at (202) 512-6722 or kutzg@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this statement.
[End of section]
Footnotes:
[1] Pub. L. No. 108-183, § 308, 117 Stat. 2651, 2662 (2003).
[2] If the business is publicly owned, at least 51 percent of the
stock must be held by one or more service-disabled veterans.
[3] In the case of a veteran with a permanent and severe disability,
the spouse or permanent caregiver of such veteran may control the
business.
[4] The North American Industry Classification System is the standard
used by federal statistical agencies in classifying business
establishment for the purpose of collecting, analyzing, and publishing
statistical data related to the U.S. business economy.
[5] SBA calculates its SDVOSB total by including all dollars awarded
to SDVOSBs, not just those received through set-aside or sole-source
contracts.
[6] SBA's Small Business Procurement Scorecards report the annual
percentage share of SDVOSB awards.
[7] Veterans Benefits, Heath Care, and Information Act of 2006, Pub.
L. No. 109-461, 120 Stat. 3433 (2006).
[8] GAO, Service-Disabled Veteran-Owned Small Business Program: Case
Studies Show Fraud and Abuse Allowed Ineligible Firms to Obtain
Millions of Dollars in Contracts, [hyperlink,
http://www.gao.gov/products/GAO-10-255T] (Washington, D.C.: Nov. 19,
2009); and Service-Disabled Veteran-Owned Small Business Program: Case
Studies Show Fraud and Abuse Allowed Ineligible Firms to Obtain
Millions of Dollars in Contracts, [hyperlink,
http://www.gao.gov/products/GAO-10-306T] (Washington, D.C.: Dec. 16,
2009).
[9] The Federal Managers' Financial Integrity Act of 1982 (FMFIA)
required that GAO issue standards for internal controls in government
resulting in the issuance of Internal Control: Standards for Internal
Control in the Federal Government, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-98-21.3.1] (Washington, D.C.:
November. 1999).
[10] [hyperlink, http://www.gao.gov/products/GAO/AIMD-98-21.3.1].
[11] GAO, Department of Veterans Affairs: Preliminary Observations on
Issues Related to Contracting Opportunities for Veteran-Owned Small
Businesses, [hyperlink, http://www.gao.gov/products/GAO-10-673T]
(Washington, D.C.: Apr. 29, 2010).
[12] [hyperlink, http://www.gao.gov/products/GAO/AIMD-98-21.3.1].
[13] Obligations made by federal agencies for new SDVOSB sole-source
and set-aside contracts signed between November 20, 2009 and May 1,
2010 by the 10 case-study firms.
[End of section]
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