Small Business Innovation Research: Agencies Need to Fully Implement Requirements for Managing Fraud, Waste, and Abuse

GAO-21-413 Published: Jun 30, 2021. Publicly Released: Jun 30, 2021.
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Fast Facts

Federal agencies awarded small businesses almost $4 billion in FY 2019 to perform research and development and commercialize technologies. The Small Business Administration oversees the programs for making these awards, which are carried out by 11 agencies.

SBA established 10 requirements to prevent fraud, waste, and abuse in these programs. For instance, SBA requires that agencies verify eligibility and certifications of ownership from businesses that receive awards. However, a number of federal agencies did not fully implement SBA's requirements.

We recommended that federal agencies fully implement all 10 of SBA's requirements.

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Highlights

What GAO Found

The 11 agencies participating in the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs largely implemented the Small Business Administration's (SBA) 10 minimum requirements for preventing fraud, waste, and abuse in the programs. Most agencies fully implemented at least eight of the 10 requirements and partially implemented the others; one agency, NASA, fully implemented all 10. The agencies used differing approaches to implement the requirements. For example, prior to making awards, agencies used different approaches to verify applicants' or awardees' eligibility to receive federal funds, including SBIR and STTR awards, and to avoid funding duplicative or essentially equivalent work.

Multiple agencies did not fully implement certain requirements, such as ones to collect eligibility certifications and to have a process for tracking referrals to Offices of Inspector General (OIG). Agency officials gave various reasons for partially implementing requirements, such as their belief that they had met a requirement's intent through other actions. However, because agencies did not fully implement all 10 requirements, they may face difficulties. For example, by not collecting program eligibility certifications, agencies may find it complicated to hold individuals and businesses accountable if they misrepresent their eligibility for SBIR and STTR awards. Further, agencies could miss opportunities to implement leading practices GAO identified in 2015 for managing fraud risks in federal programs, which align with some of SBA's requirements.

OIGs seek to mitigate risks of fraud, waste, and abuse in the SBIR and STTR programs by establishing, sharing, and using fraud detection indicators and by conducting investigations. As required under the Small Business Act, as amended, OIGs or military investigative offices at the 11 participating agencies established indicators specifically for use by the SBIR and STTR programs (see figure). OIGs or military investigative offices of all the participating agencies initiate investigations in response to referrals. Most also initiate investigations in response to information shared by investigative partners or signs of suspicious activity. Officials at most OIGs stated that they also use the indicators to train program officials and awardees and share information with other OIGs on cases undergoing investigation or prosecution for fraud.

Figure: Examples of Indicators Agencies Use to Identify Potential Fraud in SBIR and STTR Programs

Figure: Examples of Indicators Agencies Use to Identify Potential Fraud in SBIR and STTR Programs

Why GAO Did This Study

Federal agencies awarded small businesses almost $4 billion in SBIR and STTR awards in fiscal year 2019 to perform research and development and commercialize technologies. SBA oversees the programs, which are carried out by officials in 11 participating agencies.

SBA established 10 minimum requirements for participating agencies to prevent fraud, waste, and abuse in the programs. The Small Business Act, as amended, also requires efforts by the 11 agencies' OIGs to mitigate the programs' fraud risks. The Act also includes a provision that GAO study fraud, waste, and abuse in the programs and report to Congress every 4 years.

This GAO report, its third, examines (1) the extent to which the 11 agencies have implemented SBA's minimum requirements and (2) the efforts OIGs have taken to mitigate fraud, waste, and abuse in SBIR and STTR programs.

GAO reviewed agency SBIR/STTR documents and interviewed officials from SBA, the 11 participating agencies, and from the agencies' OIGs and military investigative offices.

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Recommendations

GAO is making 21 recommendations that 10 agencies take steps to fully implement all 10 of the minimum requirements established by SBA. Eight of the agencies concurred with the recommendations. DOD concurred with four recommendations, partially concurred with one, and did not concur with two. USDA did not state whether it concurred. GAO continues to believe the recommendations are warranted.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Agriculture The Secretary of Agriculture should ensure the SBIR program collects the required certifications from new SBIR awardees, beginning in future funding opportunity announcements, without material differences from the language in the SBIR/STTR Policy Directive. (Recommendation 1)
Open
As of February 2022, USDA stated that it concurred with the recommendation and was revising its certification language for future awards. We will update the status of this recommendation once we receive documentation of USDA's actions to implement it.
National Oceanic and Atmospheric Administration The Administrator of NOAA should ensure that the SBIR program collects the required certifications from new SBIR awardees, beginning in future funding opportunity announcements, without material differences from the language in the SBIR/STTR Policy Directive. (Recommendation 2)
Closed – Implemented
In December 2021, NOAA provided documentation that it was collecting required certifications using the correct language from the SBIR/STTR Policy Directive.
Department of the Army The Secretary of the Army should ensure that the SBIR/STTR program has, and communicates, a policy for reporting suspected, fraud, waste, or abuse to the Army Office of Inspector General or other designated authorities. (Recommendation 3)
Open
The Army concurred with this recommendation and in October 2021 informed GAO that Army will, by December 31, 2021, develop and issue a SBIR/STTR policy for reporting suspected fraud, waste, or abuse to the Army Office of Inspector General or other designated authorities. . We will update the status of this recommendation once we receive documentation of the Army's actions to implement it.
Department of the Army The Secretary of the Army should ensure that the SBIR/STTR program provides information on its program website on how to report suspected fraud, waste, and abuse to the Army Office of Inspector General or other designated authorities. (Recommendation 4)
Closed – Implemented
As of August 2021, the Army addressed this recommendation by including information on its website about reporting potential fraud, waste, and abuse in the SBIR/STTR program to the Department of Defense Office of Inspector General and providing a link for making these reports and guidance on the information to include in them.
Department of the Navy The Secretary of the Navy should ensure that the SBIR/STTR program collects the required certifications from new SBIR and STTR awardees, beginning in future funding opportunity announcements, without material differences from the language in the SBIR/STTR Policy Directive. (Recommendation 5)
Open
The Navy partially concurred with this recommendation because it did not consider the differences we identified to be material. The Navy nevertheless stated that it had made changes to correct the differences. However, as of November 2021, the Navy had not provided documentation of actions to implement the recommendation. We will update the status of this recommendation once the Navy provides such documentation.
Department of the Navy The Secretary of the Navy should ensure that the SBIR/STTR program tracks referrals to the Office of Inspector General or Naval Criminal Investigative Service. (Recommendation 6)
Open
The Navy did not concur with this recommendation, stating that it was already in compliance with this requirement because the Navy OIG and Naval Criminal Investigative Service track referrals. However, the requirement is for agencies to track the referrals, not for the agency OIGs or military investigative offices to do so. In October 2021, the Navy SBIR/STTR program office said that it will institute a process for tracking fraud referrals to the Navy's investigative offices by March 2022. We will update the status of this recommendation when the Navy provides further information..
Department of the Air Force The Secretary of the Air Force should ensure that the SBIR/STTR program collects the required certifications from new SBIR and STTR awardees, beginning in future funding opportunity announcements, without material differences from the language in the SBIR/STTR Policy Directive. (Recommendation 7)
Open
The Air Force concurred with the recommendation and stated that it was taking corrective action to update the language for required certifications. As of October 2021, the Air Force had revised its certification forms to include language from the SBIR/STTR Policy Directive and provided documentation that showed it uploaded the certification forms to their SBIR/STTR website. The Air Force stated that it plans to advise contractors of the need to submit necessary certifications consistent with the SBIR/STTR Policy Directive no later than December 2021.
Department of the Air Force The Secretary of the Air Force should ensure that the SBIR/STTR program has, and communicates, a policy for reporting suspected, fraud, waste, or abuse to the Air Force Office of Inspector General or other designated authorities. (Recommendation 8)
Open
The Air Force concurred with the recommendation and stated that within one year, it would promulgate a policy on reporting suspected fraud, waste, or abuse specifically in SBIR and STTR programs to the Air Force Office of Inspector General, Air Force Office of Special Investigations, or other designated authorities. As of October 2021, the Air Force had not provided documentation of the policy. We will update the status of this recommendation when the Air Force provides further information.
Department of the Air Force The Secretary of the Air Force should ensure that the SBIR/STTR program tracks referrals to the Air Force Office of Inspector General and the suspension and debarment officials. (Recommendation 9)
Open
The Air Force concurred with the recommendation and stated that it would, within one year, promulgate a policy on tracking referrals. As of October 2021, the Air Force had not provided documentation of the policy. We will update the status of this recommendation when the Air Force provides further information.
Department of Education The Secretary of Education should ensure that the SBIR program collects the required certifications from new SBIR awardees, beginning in future funding opportunity announcements, without material differences from the language in the SBIR/STTR Policy Directive. (Recommendation 10)
Closed – Implemented
In November 2021, the Department of Education provided documentation that it was collecting required certifications using the correct language from the SBIR/STTR Policy Directive.
Department of Energy The Secretary of Energy should ensure that ARPA-E's SBIR/STTR program collects the required certifications from new SBIR and STTR awardees, beginning in future funding opportunity announcements, without material differences from the language in the SBIR/STTR Policy Directive. (Recommendation 11)
Closed – Implemented
The Department of Energy concurred with the recommendation and stated that ARPA-E was taking steps to update the certification language. In October 2021, the department provided documentation of the changes and use of the revised certifications.
Department of Energy The Secretary of Energy should ensure that the Office of Science's SBIR/STTR program collects the required certifications from SBIR and STTR awardees, beginning in future funding opportunity announcements, without material differences from the language in the SBIR/STTR Policy Directive. (Recommendation 12)
Closed – Implemented
The Department of Energy concurred with the recommendation and stated that the Office of SBIR/STTR Programs in the Office of Science updated the certification language. In October 2021, the department provided documentation of the changes and use of the revised certifications.
Department of Energy The Secretary of Energy should ensure that the Office of Science's SBIR/STTR program tracks SBIR and STTR fraud, waste, and abuse referrals to the Office of Inspector General. (Recommendation 13)
Closed – Implemented
The Department of Energy concurred with the recommendation and stated that the Office of SBIR/STTR Programs in the Office of Science created a folder and tracking sheet that the office will use to track fraud, waste, and abuse referrals that the SBIR/STTR Office submits to the Office of Inspector General. In October 2021, the department provided documentation of the tracking sheet.
Department of Health and Human Services The Secretary of Health and Human Services should ensure that the National Institutes of Health's SBIR/STTR program collects the required certifications from new SBIR and STTR awardees, beginning in future funding opportunity announcements, without material differences from the language in the SBIR/STTR Policy Directive. (Recommendation 14)
Open
NIH concurred with the recommendation and as of March 2022 had updated one certification form with correct language from the SBIR/STRR Policy Directive, but not another form that we identified as not matching the directive. We will update the status of this recommendation once we have received documentation of the changes.
Department of Homeland Security The Secretary of Homeland Security should ensure that the SBIR program collects the required certifications from new SBIR awardees, beginning in future funding opportunity announcements, without material differences from the language in the SBIR/STTR Policy Directive. (Recommendation 15)
Closed – Implemented
DHS concurred with the recommendation and stated that it had updated the language for future awards to use the certification language in the SBIR/STTR Policy Directive. DHS incorporated the language required by the SBIR/STTR Policy Directive into its published solicitation documents dated November 16, 2021, which will be completed and submitted by SBIR applicants.
Department of Homeland Security The Secretary of Homeland Security should ensure that collaboration occurs between the SBIR program office and the Office of Inspector General to establish fraud indicators and train applicants. (Recommendation 16)
Closed – Implemented
DHS concurred with this recommendation and stated that the program office and OIG were working to develop a webinar on fraud, waste, and abuse. In addition, DHS stated that future SBIR solicitations would include directions to view the webinar as part of preparations for submitting a proposal. In its November 2021 pre-solicitation, DHS included a link to a YouTube webinar run by its SBIR Program and Office of Inspector General. GAO confirmed that this training is collaborative and provided to SBIR/STTR applicants.
Department of Transportation The Secretary of Transportation should ensure that the SBIR program collects the required certifications from new SBIR awardees, beginning in future funding opportunity announcements, without material differences from the language in the SBIR/STTR Policy Directive. (Recommendation 17)
Closed – Implemented
The Department of Transportation concurred with the recommendation and stated that it had updated the awardee certification language for new SBIR contracts and that new SBIR contracts and funding announcements would include the updated certification language. In October 2021, the department provided documentation of the changes and we confirmed that they collected the updated certifications as part of its new contracts.
Department of Transportation The Secretary of Transportation should ensure that collaboration occurs between the SBIR program office and the Office of Inspector General to establish fraud indicators and provide required training on fraud, waste, and abuse for SBIR awardees. (Recommendation 18)
Closed – Implemented
The Department of Transportation concurred with the recommendation and stated that it was working with the Office of Inspector General (OIG) to develop fraud indicators and conduct training for new awardees. In November 2021, the department provided documentation, and GAO confirmed, that the department had worked with the OIG to develop fraud indicators and conduct training for new awardees.
Environmental Protection Agency The Administrator of the Environmental Protection Agency should ensure that the SBIR program collects the required certifications from new SBIR awardees, beginning in future funding opportunity announcements, without material differences from the language in the SBIR/STTR Policy Directive. (Recommendation 19)
Closed – Implemented
The EPA issued a solicitation for SBIR awards on June 16, 2021 that included the language required by the SBIR/STTR Policy Directive. We are therefore closing this recommendation as implemented.
Environmental Protection Agency The Administrator of the Environmental Protection Agency should ensure that collaboration occurs between the SBIR program office and the Office of Inspector General to establish fraud indicators and train applicants. (Recommendation 20)
Closed – Implemented
EPA's SBIR program office implemented this recommendation by meeting with the Office of Inspector General in October 2021 to discuss fraud indicators; training on fraud, waste and abuse; and plans for future meetings. In addition, EPA included information on fraud, waste and abuse in a June 2022 informational webinar for applicants and posted the information to its website as part of the webinar's slide presentation.
National Science Foundation The Director of the National Science Foundation should take appropriate steps to ensure that the SBIR/STTR program collects the required certifications from new SBIR and STTR awardees, beginning in future funding opportunity announcements, without material differences from the language in the SBIR/STTR Policy Directive. (Recommendation 21)
Closed – Implemented
In December 2021, the National Science Foundation provided documentation that it was collecting required certifications using the correct language from the SBIR/STTR Policy Directive.

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