Small Business Research Programs:

Agencies Are Implementing New Fraud, Waste, and Abuse Requirements

GAO-13-70R: Published: Nov 15, 2012. Publicly Released: Nov 15, 2012.

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What GAO Found

SBA issued revised policy directives for the SBIR and STTR programs in August 2012 that included new requirements designed to help agencies identify and prevent potential fraud, waste, and abuse in the SBIR and STTR programs--changes that SBA developed in consultation with agencies that participate in the programs and a working group of inspectors general. Among other changes, the revised SBIR and STTR policy directives each include a new section on preventing fraud, waste, and abuse in the programs. They also include 10 minimum requirements related to fraud, waste, and abuse that the 11 participating agencies must meet, such as providing information on how to report fraud, waste, and abuse on their program websites and in solicitations. The revised policy directives include elements of our fraud-prevention framework. Based on our prior work, an effective fraud-prevention framework should include up-front preventive controls, detection and monitoring, and investigations and prosecutions. The 10 requirements in the revised directives include elements of the framework, but the effectiveness of the requirements in helping agencies identify and prevent potential fraud, waste, and abuse will depend on how participating agencies implement the requirements. SBA incorporated input from key stakeholders, specifically the SBIR and STTR program managers and representatives from an inspectors general working group, when developing the revised policy directives. Additionally, SBA chose to solicit comments through a 60-day public comment period on the revised directives.

Agencies that participate in the SBIR and STTR programs vary in their plans to implement the new fraud, waste, and abuse requirements; however, none of the agencies anticipate challenges in doing so. Each of the participating agencies already had in place some tools to address or partially address the new fraud, waste, and abuse requirements in the revised policy directives before SBA issued them. According to our analysis of the requirements and the tools agencies had in place, each of the agencies needs to modify some existing tools and implement additional tools to meet all of the requirements in the revised policy directives. The act and revised directives do not establish time frames by which agencies must implement the new requirements. At the time of our review, most agencies were in the process of determining their planned time frames for implementing the new requirements. Program managers at each of the agencies that participate in one or both of the programs told us that they do not anticipate significant challenges to implementing most of the new fraud, waste, and abuse requirements.

Why GAO Did This Report

For 30 years, federal agencies have made awards to small businesses for technology research and development through the Small Business Innovation Research (SBIR) program and, more recently, through the Small Business Technology Transfer (STTR) program. Over the past 6 years, agencies have obligated about $2.4 billion annually for these two programs. Federal agencies with a budget of more than $100 million for extramural research or research and development--which is conducted by nonfederal employees outside of federal facilities--must establish and operate an SBIR program. Eleven federal agencies currently participate in the SBIR program: the departments of Agriculture, Commerce, Defense (DOD), Education, Energy, Health and Human Services, Homeland Security, and Transportation; the Environmental Protection Agency (EPA); the National Aeronautics and Space Administration (NASA); and the National Science Foundation. Federal agencies with a budget of more than $1 billion for extramural research or research and development must establish and operate an STTR program, in addition to their SBIR program. Five of the 11 federal agencies that participate in the SBIR program also participate in the STTR program: DOD, the departments of Energy and of Health and Human Services, NASA, and the National Science Foundation.

Each participating agency must manage its SBIR and STTR programs in accordance with program laws, regulations, and policy directives issued by the Small Business Administration (SBA), whose Office of Technology oversees and coordinates agency efforts for the programs by setting overarching policy and issuing policy directives, collecting program data, reviewing agency progress, and reporting annually to Congress, among other responsibilities. Each participating agency has considerable flexibility to design and manage the specifics of these programs, such as determining research topics, selecting award recipients, and administering funding agreements.

The National Defense Authorization Act for Fiscal Year 2012 (the act), enacted on December 31, 2011, reauthorized the SBIR and STTR programs through September 30, 2017. Among other things, the act required SBA to make certain changes by March 30, 2012, to its SBIR and STTR policy directives to prevent fraud, waste, and abuse. The act did not specify time frames for agencies to implement the revised policy directives. According to the SBIR and STTR policy directives, potential fraud, waste, and abuse in the programs include, among others, misrepresentation of the use of funds expended under an award, misuse of award funds, falsification in reporting results from an award, or extravagant or needless spending of an award.

In addition to reauthorizing the programs, the act directed GAO to establish a baseline of changes made to the SBIR and STTR programs to fight fraud, waste, and abuse by December 31, 2012, and identified additional areas for future evaluation. In this context, this report summarizes (1) the status of the revised SBIR and STTR policy directives; information regarding fraud, waste, and abuse included in the revised directives; and steps taken to revise the directives and (2) participating agencies' plans for implementing the new fraud, waste, and abuse requirements in the revised policy directives, including whether participating agencies anticipate challenges to implementing the changes.

For more information, contact Frank Rusco, Director, at (202) 512-3841 or ruscof@gao.gov.

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