Small Business Research Programs:

Additional Actions Needed to Implement Fraud, Waste, and Abuse Prevention Requirements

GAO-17-337: Published: Apr 25, 2017. Publicly Released: Apr 25, 2017.

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For decades, federal agencies have made awards to fund research and development through the Small Business Innovation Research and Small Business Technology Transfer programs. In 2012, the Small Business Administration developed requirements to help agencies prevent fraud, waste, and abuse in the programs.

However, we found that the 11 participating agencies have varied in their implementation of these fraud prevention requirements. We recommended that SBA confirm that agencies are fully implementing these requirements.

Number of Participating Agencies that Implemented SBA's Fraud, Waste, and Abuse Prevention Requirements

Bar graph that shows how federal agencies implemented the SBA's fraud prevention requirements.

Bar graph that shows how federal agencies implemented the SBA's fraud prevention requirements.

Additional Materials:

Contact:

John Neumann
(202) 512-3841
neumannj@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

The 11 agencies participating in the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs have varied in their implementation of the fraud, waste, and abuse prevention requirements developed by the Small Business Administration (SBA) after the programs were reauthorized in 2011. SBA, which oversees the programs, amended the SBIR and STTR policy directives in 2012, as required by the reauthorization act, to include 10 minimum requirements to help agencies prevent potential fraud, waste, and abuse in the programs. GAO found that the extent to which the agencies have fully implemented each of the requirements in the directives varies. For example, all 11 agencies have fully implemented 2 requirements, more than half of the agencies have fully implemented 6 other requirements, and 1 and 3 agencies, respectively, have fully implemented the remaining 2 requirements. Officials from 9 agencies told GAO they have implemented other activities beyond the minimum requirements included in the directives, such as conducting site visits to small businesses to confirm that the necessary facilities exist for technical research and development work. Although SBA issued the policy directives, it has taken few actions to oversee agencies' efforts to implement the requirements. SBA officials said they checked on the implementation of one of the requirements, but did not know whether the participating agencies were implementing the other requirements because they had not confirmed this information. Without confirming that each participating agency is implementing the fraud, waste, and abuse prevention requirements in the policy directives, SBA does not have reasonable assurance that each agency has a system in place to reduce its' vulnerability to fraud, waste, and abuse.

Similarly, Offices of Inspectors General (OIG) varied in their implementation of the fraud, waste, and abuse prevention requirements specifically assigned to them in the reauthorization act, with between 5 and 11 OIGs implementing each requirement. For example, OIGs at each of the 11 agencies have shared information on fraud, waste, and abuse. Of the 11 participating agencies, the Department of Defense (DOD) is the only one whose oversight and audit responsibilities are separated between its various OIGs and specific investigative services, so that DOD has both an OIG as well as an investigative service as do each of the military services. By law, the OIGs of each military service within DOD—Army, Navy, and Air Force—are each required to implement these requirements. However, GAO found that none of the three military service OIGs had taken actions to implement the requirements, although the DOD OIG had taken some steps to implement them. The division of duties between the military services' OIGs and their respective investigative services makes it difficult to track the implementation of these requirements at DOD. Without the three military services' OIGs implementing the requirements themselves or delegating the implementation of the requirements to the investigative services, the DOD OIGs may not be able to detect fraud, waste, and abuse in DOD's SBIR and STTR programs, which have the largest budgets for these programs.

Why GAO Did This Study

For about 35 years, federal agencies have made awards to small businesses for technology research and development through the SBIR program and, for the last 25 years, through the STTR program. Following a 2009 congressional hearing about fraud in the programs, the SBIR/STTR Reauthorization Act of 2011 included separate requirements for SBA and OIGs to address and prevent fraud, waste, and abuse.

The act also included a provision for GAO to review what the agencies and their OIGs have done to address fraud, waste, and abuse in the programs. This report examines (1) the extent to which SBA and the participating agencies have implemented measures to prevent fraud, waste, and abuse for the SBIR and STTR programs and (2) the extent to which the agencies' OIGs have implemented the act's requirements.

GAO compared documentation from SBA, the 11 participating agencies, and the agencies' OIGs to their respective requirements and interviewed SBA, agency, and OIG officials.

What GAO Recommends

GAO is making six recommendations, including that SBA confirm agency implementation of the fraud, waste, and abuse requirements, and that the Army, Navy, and Air Force OIGs implement the OIG requirements or delegate them to the investigative services. These agencies generally agreed with the recommendations addressed to them.

For more information, contact John Neumann at (202) 512-3841 or neumannj@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: In its comments on the draft report, SBA concurred with this recommendation. In its June 2017 letter on plans for implementing the recommendation, SBA stated that it will request that each participating agency confirm their implementation of its minimum fraud, waste, and abuse prevention requirements by forwarding an email to each agency requesting confirmation of their compliance. In May 2019, we requested additional information and will update the recommendation when we receive the information.

    Recommendation: To help improve agencies' implementation of the fraud, waste, and abuse prevention requirements in the policy directives, the Administrator of SBA should confirm that each SBIR and STTR agency is implementing the minimum fraud, waste, and abuse prevention requirements in the policy directives, by, for example, requesting documentation from agencies.

    Agency Affected: Small Business Administration

  2. Status: Open

    Comments: In its comments on the draft report, SBA concurred with this recommendation. In its June 2017 letter on plans for implementing the recommendation, SBA stated that it plans to discuss the issue with program managers at an upcoming meeting and will also contact all agencies in writing to inquire if additional clarity is needed regarding any of the fraud, waste, and abuse requirements. SBA said that additional guidance will be provided, if necessary. In May 2019, we requested additional information and will update the recommendation when we receive the information.

    Recommendation: To help improve agencies' implementation of the fraud, waste, and abuse prevention requirements in the policy directives, the Administrator of SBA should request input from the participating agencies regarding the clarity of the requirements; review all of the SBIR and STTR minimum fraud, waste, and abuse prevention requirements, including the agency requirement to post information about successful SBIR or STTR fraud prosecutions; determine whether any additional guidance is needed; and revise the policy directives accordingly.

    Agency Affected: Small Business Administration

  3. Status: Closed - Implemented

    Comments: SBA concurred with this recommendation. In April 2019, SBA published a revised version of the SBIR and STTR Policy Directives in the Federal Register, which went into effect on May 2, 2019. The revised Directives reflect the definition of essentially equivalent work in the section on "Fraud, Waste, and Abuse;" this definition is consistent with the definition previously used in an earlier section of the policy directives. In the revised Directives, SBA also requires participating agencies to check for essentially equivalent work that they fund as well as such work funded by other agencies.

    Recommendation: To help improve agencies' implementation of the fraud, waste, and abuse prevention requirements in the policy directives, the Administrator of SBA should revise the fraud, waste, and abuse provisions in the policy directives to reflect the definition of essentially equivalent work used elsewhere in the policy directives and require participating agencies to check for essentially equivalent work that they fund as well as such work funded by other agencies.

    Agency Affected: Small Business Administration

  4. Status: Open

    Comments: SBA concurred with this recommendation. In May 2019, SBA told us that they have evaluated the requirements and received feedback from varying SBIR Program Managers as a result of a questionnaire forwarded to each agency on this topic. However, SBA has not yet evaluated the participating SBIR and STTR agencies' fraud, waste, and abuse outcomes. We requested additional information on the results of the questionnaire and SBA's efforts to evaluate the fraud, waste, and abuse outcomes and we will update the status when we receive that information.

    Recommendation: To help improve agencies' implementation of the fraud, waste, and abuse prevention requirements in the policy directives, the Administrator of SBA should evaluate SBIR and STTR agencies' fraud, waste, and abuse outcomes to ensure the fraud, waste, and abuse prevention requirements are appropriate and meet their intended purpose for the SBIR and STTR programs.

    Agency Affected: Small Business Administration

  5. Status: Closed - Implemented

    Comments: In October 2018, HHS announced that it will require all SBIR and STTR awardees to submit life cycle certification forms, effective January 1, 2019. The notice also specifies the consequences of an SBIR or STTR awardee failing to provide HHS with all required completed certifications, including corrective actions by HHS, withholding of further awards, suspension, or termination, among other things.

    Recommendation: To help improve the implementation of the fraud, waste, and abuse prevention requirements, the Secretary of Health and Human Services (HHS) should direct the HHS SBIR and STTR program offices to collect copies of the self-certification forms from its SBIR and STTR awardees.

    Agency Affected: Department of Health and Human Services

  6. Status: Open

    Comments: DOD concurred with the recommendation in its comments on the draft report and confirmed its concurrence in its May 2017 letter on the final report. In June 2019, the Air Force OIG confirmed that the law includes specific requirements for the OIGs, but did not discuss the steps the Air Force OIG has taken to implement our recommendation. GAO followed up again with the Air Force OIG in August 2019, but the Air Force OIG did not respond. When we confirm what actions DOD has taken, we will provide updated information.

    Recommendation: To help ensure that DOD is implementing the fraud, waste, and abuse prevention requirements to the OIGs, the Inspectors General of the Army, Navy, and Air Force should implement the requirements themselves or delegate the implementation of the requirements to the investigative services.

    Agency Affected: Department of Defense: Department of the Air Force: Office of the Inspector General

  7. Status: Open

    Comments: DOD concurred with the recommendation in its comments on the draft report and confirmed its concurrence in its May 2017 letter on the final report. As of August 2019, DOD did not respond to our requests for information on their efforts to implement this recommendation. When we confirm what actions DOD has taken, we will provide updated information.

    Recommendation: To help ensure that DOD is implementing the fraud, waste, and abuse prevention requirements to the OIGs, the Inspectors General of the Army, Navy, and Air Force should implement the requirements themselves or delegate the implementation of the requirements to the investigative services.

    Agency Affected: Department of Defense: Department of the Navy: Naval Inspector General

  8. Status: Open

    Comments: DOD concurred with the recommendation in its comments on the draft report and confirmed its concurrence in its May 2017 letter on the final report. As of August 2019, Army told us that they would work on responding to our requests for information on their efforts to implement this recommendation. When we confirm what actions DOD has taken, we will provide updated information.

    Recommendation: To help ensure that DOD is implementing the fraud, waste, and abuse prevention requirements to the OIGs, the Inspectors General of the Army, Navy, and Air Force should implement the requirements themselves or delegate the implementation of the requirements to the investigative services.

    Agency Affected: Department of Defense: Department of the Army: Office of the Inspector General

 

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