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Statement of the Hon. Judy Chu on SBA Management and Oversight of the SCORE Program

Washington, July 11, 2019

SCORE was first established in 1964 as a national, volunteer nonprofit organization, whose mission is to foster vibrant small business communities through mentoring and education. Over the years, it has grown to one of the largest networks of volunteers, with more than 11,000 expert business advisors at 350 chapters nationwide. SCORE provides free or low-cost mentoring and training to small business owners throughout the country to help them draft business plans, market products, and manage cash flow. 

SBA reported that SCORE volunteers mentored and trained 600,000 clients in FY 2018 and helped launch more than 54,000 businesses in FY 2017. These statistics are impressive. And because of the past success, Congress increased funding for the program from $3.5 million in Fiscal Year 2000 to $11.7 million in FY 2019 – a more than 230 percent increase.

And with the additional funding came expectations that SCORE would help thousands more entrepreneurs thrive and achieve new levels of success that help grow the economy and strengthen our communities. Congress also expected the leadership of SBA and SCORE to use taxpayers’ dollars wisely and ensure that the program operates effectively and efficiently. 

Unfortunately, SBA’s Office of the Inspector General’s recent audit of the program uncovered systemic issues with SCORE’s use of federal funds and SBA’s management and oversight of the program.  This is unacceptable. Sadly, the OIG found that SCORE commingled restricted funds with unrestricted funds, despite federal rules and accounting standards restricting this practice. This is a result of haphazard oversight by SBA and a failure of SCORE’s national office to enforce the accounting standards. SCORE’s chapters used 300 separate accounting systems, some on volunteer’s laptops, making effective oversight next to impossible.

And because of the lack of appropriate financial oversight by SBA, federal funds used for excessive employee bonuses went unnoticed and improperly awarded contracts to vendors were made, lessening the likelihood that the prices paid for the goods and services were reasonable. I am particularly troubled by these findings.  As an elected official, I fully expect the SBA and its resource partners will be good stewards of taxpayers’ dollars.

Moreover, the problems identified in audit may just be a starting point. The audit only examined $2 million of a $10 million federal award for FY 2017, and part of an award for FY2018. This is just a snapshot of the funding SCORE has received over the past 55 years.  I am concerned that this may just be the tip of the iceberg, and that SBA’s lack of financial management of the SCORE program could be endemic of the program and possibly more widespread throughout the agency.

Even more troubling is the lack of senior leadership at the top of SBA that puts a strain on the agency’s ability to effectively resolve these issues. The fact that SBA has been without an Administrator since March 2019 and without a Deputy Administrator since April 2018 is particularly disconcerting. While acting heads of agencies can keep the lights on, the SBA needs strong leadership at the helm to restore integrity and accountability.

Today, we will have an opportunity to learn more about the findings of the audit and to hear directly from SBA about the steps the Office of Entrepreneurial Development is taking to address the IG’s recommendations and restore confidence in the SCORE program. I look forward to hearing from Mr. Ware and Mr. Gutierrez.  While I understand that the financial irregularities in the program preceded Mr. Gutierrez’ tenure at SBA, I trust that you are making it a priority to restore public confidence in SCORE and in the SBA’s role to ensure that the taxpayers’ dollars are used effectively, efficiently, and in accordance with long-standing federal accounting standards.

SCORE’s mission has always been to foster vibrant small business communities through mentoring and education and to give every person the support they need to thrive as a small business owner. But when there is misuse and abuse of taxpayer dollars, the real victims are the small business owners and entrepreneurs who are not getting the service they deserve.

 

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