Small Business Development Centers

SUMMARY: The Small Business Administration (SBA) is proposing

regulations governing the Small Business Development Center (SBDC)

Program. Since the enactment of Pub. L. 96-302 and the establishment of

the program in 1980, the program has been operating under direct

statutory authority, without regulations. The SBA is proposing these

regulations to establish a framework for effective and efficient

operation of the program.

DATES: Written comments should be submitted on or before December 28,

1994.

ADDRESSES: Comments should be submitted to: Johnnie L. Albertson,

Associate Administrator for Small Business Development Centers (AA/

SBDCs), U.S. Small Business Administration, 409 Third Street, SW, Fifth

Floor, Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT:

Hardy Patten, Program Manager, (202) 205-6766.

SUPPLEMENTARY INFORMATION: The SBDC Program, originally established in

1980, is administered pursuant to Section 21 of the Small Business Act,

15 U.S.C. 648. The SBDC program creates a partnership between the SBA

and organizations operating the SBDC networks. Together they provide

business development and technical assistance to small businesses in

order to promote growth, expansion, innovation, increased productivity,

and management improvement. The SBDC program has been operating under

direct statutory authority without regulations. The SBA is proposing

these regulations to establish a framework for effective and efficient

operation of the program. Many of the provisions set forth in this

proposed rule have arisen from legislation. Others codify current

procedures utilized since the inception of the program.

Section-by-Section Analysis

Proposed Sec. 130.100 would serve as the introduction, establishing

the overall objective of the SBDC program to create a broader-based

system of assistance for the small business community, and defining the

relationship between the SBA and the organizations operating the SBDC

networks, known as recipient organizations. The program operates under

the general management and oversight of the SBA, with recognition that

a partnership exists between the SBA and the recipient organization for

the provision of assistance to the small business community. That

assistance is delivered to the small business community pursuant to a

Cooperative Agreement negotiated between the SBA and the organization

operating the SBDC network.

Proposed Sec. 130.110 would provide definitions of terms relevant

to the SBDC program.

Proposed Sec. 130.200 would set forth those entities which, by

statute, are eligible to enter into a Cooperative Agreement with the

SBA for the purpose of establishing or continuing the operation of an

SBDC network.

Proposed Sec. 130.310 would provide that the area of service for

any SBDC network is the state or portion of a state in which it is

located. When more than one SBDC network is to be located in a given

state, the AA/SBDCs shall determine the general geographic areas to be

served by each SBDC network in that state.

Proposed Sec. 130.320 would discuss the location of participants in

the SBDC network, and proposed Sec. 130.330 would set forth the

operating requirements for the SBDC network.

Proposed Sec. 130.340 would provide for the establishment of State

and National Advisory Boards to advise, counsel, and confer with SBDC

directors and the AA/SBDCs on matters pertaining to the operation of

SBDC networks and the national SBDC program.

Proposed Sec. 130.350 would describe the services to be provided by

SBDC networks to ensure convenient access and effective service to

small businesses, including specialized services such as international

trade assistance, rural development, procurement assistance, capital

formation and technical assistance. It would also place certain

restrictions on SBDC assistance. SBDCs would be prohibited from making

loans, servicing loans or making credit decisions. SBDCs would also be

prohibited from making credit recommendations, unless authorized to do

so by the Administrator, or his or her designee.

Proposed Sec. 130.360 would set forth policy development

responsibilities of the SBA and performance implementation

responsibilities of the SBDC Director.

Proposed Sec. 130.400 would describe the application process for

both new and continuing applicants. Pursuant to Sec. 130.410, a new

applicant organization would be required to submit an original and two

copies of its application to the SBA District Office covering the

geographic area in which the applicant organization proposes to provide

services.

Additionally, in order to insure consistency with the current state

plan approved by SBA, an application for initial funding would be

required to include a letter from the Governor, or his or her designee,

of the State in which the applicant organization will operate, or other

evidence that it is not inconsistent with such plan. No such

requirement would be imposed on subsequent applications from current

operating SBDC organizations.

The section would further set forth the information to be contained

in the application.

Proposed Sec. 130.420 would set forth annual application procedures

for applicants continuing in the program. These would be set forth in

the annual Program Announcement, along with the due date for submission

of continuing applications.

Section 130.430 would set forth the three possible decisions in the

application process, approval, conditional approval or rejection. The

section would further describe the right of the SBA, in the event of a

conditional approval, to conditionally fund a recipient organization

for one or more specified periods not exceeding one Budget period.

Proposed Sec. 130.440 would set forth the manner by which the

maximum amount of a grant is determined, as well as the significant

factors to be considered in the allocation of national SBDC funds.

Proposed Sec. 130.450 would delineate the requirements concerning

Matching Funds. This section would explain that a recipient

organization must provide total Matching Funds equal to the total

amount of the SBDC grant and all amendments or modifications thereto.

The section would further detail responsibilities for identification of

all sources of Matching Funds, including cash and cash accounts, and

set forth types of sources which may not be used as sources of Matching

Funds. The section would finally describe the ways that overmatched

amounts (Matching Funds which exceed the required equal match) may be

utilized by the SBDC.

Proposed Sec. 130.460 would delineate the information to be

included in the proposal and in the budget justification portion of an

application. The section would include descriptions of important

concepts and principles required to be addressed by the applicant in

the proposed budget, including the percentage of federal dollars which

must be allocated to Direct costs of program delivery, the inclusion of

separate budgets and Indirect cost base and rate agreements for the

Lead Center and all SBDC service providers, principles for determining

allowable costs and expenses, limitations on the use of federal dollars

for lobbying activities, salary guidelines for SBDC Directors,

subcenter Directors and staff members and guidelines for transportation

and travel expenses. With respect to Indirect cost base rates, the

section would provide that the service provider's predetermined rate

from prior federal activity would be used, and, in the event a service

provider does not already have a predetermined rate as a result of

dealings with another federal agency, the manner in which the rate

shall be negotiated.

Proposed Sec. 130.470 would describe the activities and services

for which an SBDC may charge a fee.

Proposed Sec. 130.480 would provide that program income must be

utilized to accomplish program objectives and would include directions

concerning reporting requirements and limitations on the use of program

income for Matching Funds contributions.

Section 130.500 would provide that federal dollars are transferred

to the SBDC through the SBA internal ``Letter of Credit Replacement

System'', and would set forth the standard forms to be utilized to draw

down funds and to report drawdowns and cash transactions to the SBA.

Proposed Sec. 130.600 would describe the Cooperative Agreement

entered into between the recipient organization and the SBA, as well as

the procedures established to resolve Disputes and Conflicts.

Section 130.610 would describe the general terms to be included in

the Cooperative Agreement.

Section 130.620 would provide the procedure for amending or

revising a Cooperative Agreement due to changes in the scope, work or

funding of an SBDC during the budget year, and would set forth those

changes which require an amendment. The section would further set forth

those revisions or changes which do not require an amendment to the

Cooperative Agreement, such as budget revisions or reallocations of

funds in accordance with applicable OMB circulars.

Proposed Secs. 130.630, 130.640 and 130.650 would respectively set

forth Dispute resolution procedures, Conflict resolution procedures and

the non-renewal procedure to be utilized by SBA in the event of non-

performance or poor performance on the part of an SBDC.

Proposed Sec. 130.700 would explain the grounds and procedures for

suspending or terminating a recipient organization. After the SBA has

entered into a Cooperative Agreement with a recipient organization, the

SBA would not suspend or terminate any such agreement unless the SBA

provides the recipient organization with written notification setting

forth the reasons for the proposed action and affording the recipient

organization an opportunity for a hearing, appeal, or other

administrative proceeding under the provisions of the Administrative

Procedure Act, 5 U.S.C. 553 et seq.

The general procedures that would be applicable are contained in 13

CFR 143.43 and 143.44, Enforcement and Termination for Convenience,

Uniform Administrative Requirements for Grants and Cooperative

Agreements to State and Local Governments, and in OMB Circular A-110,

Attachment L, Suspension and Termination Procedures for Grants and

Agreements with Institutions of Higher Education, Hospitals, and other

Nonprofit Organizations, Uniform Administrative Requirements.

Proposed Sec. 130.800 would explain that the SBA would have the

authority to review and oversee the Cooperative Agreement and ongoing

operations of the SBDC network. In addition, the SBA would have the

authority to make programmatic and financial review visits to Lead

Centers and SBDC service providers to analyze and assess training,

counseling and any other SBDC related activities. Furthermore, an on-

site evaluation of an SBDC network would be conducted by the SBA, with

SBDC participation, as required by law.

Additionally, this section would provide that the recordkeeping

requirements of the SBDC network shall be as set forth in OMB Circulars

A-128 and A-133.

Proposed Sec. 130.830 would also state that all audits are to be

conducted in accordance with provisions governing audits contained in

applicable OMB Circulars.

Compliance With Executive Orders 12612, 12778 and 12866; Regulatory

Flexibility Act, 5 U.S.C. 601 et seq.; and the Paperwork Reduction

Act, 44 U.S.C. ch. 35

The SBA certifies that this proposed rule, if promulgated in final,

would not be considered a significant rule within the meaning of

Executive Order 12866 because it would not have an annual economic

effect in excess of $100 million, result in a major increase in costs

for individuals or governments, or have a significant adverse effect on

competition. The SBA has made this determination based upon the fact

that this proposed rule would establish regulations which conform to

the existing parameters under which the program is already functioning.

Further, pursuant to Public Law 103-121, the Departments of Commerce,

Justice, and State, the Judiciary, and the Related Agencies

Appropriations Act of 1994, the total amount of funds designated for

the SBDC Program is $71,266,000.

For purposes of Executive Order 12612, the SBA certifies that this

proposed rule would have federalism implications. As such, the SBA

offers the following Federalism Assessment.

This proposed rule would implement Section 21 of the Small Business

Act, 15 U.S.C. 648, and is designed to allow the States participating

in the SBDC Program maximum policymaking and administrative discretion

within the requirements of the law and sound program management. In

formulating and implementing the policies governing the SBDC Program

set forth in this proposed rule, the SBA has encouraged the State

participants to develop their own methods of achieving program

objectives and has refrained, to the maximum extent practicable, from

establishing uniform national requirements for the program.

For purposes of Executive Order 12778, the SBA certifies that this

proposed rule is drafted, to the extent practicable, in accordance with

the standards set forth in section 2 of that Order.

For purposes of the Regulatory Flexibility Act, the SBA certifies

that this proposed rule, if promulgated in final, would not have a

significant economic effect on a substantial number of small entities

for the same reason that it is not a significant rule.

For purposes of the Paperwork Reduction Act, the SBA certifies that

this proposed rule, if promulgated in final, would impose no new

reporting or recordkeeping requirements. This proposed rule does,

however, codify, at Secs. 130.800 through 130.830, paperwork

requirements previously cleared by the Office of Management and Budget

under OMB control numbers 3245-0075 (SBA Form 20, National Training

Participant Evaluation Questionnaire); 3245-0090 (SBA Project Officer's

Checklist utilized in monitoring the SBDC); 3245-0091 (SBA Form 641,

Request for Counselling Services); 3245-0108 (SBA Form 1062, Management

Assistance Control Record utilized by the counsellor for each client as

a running record of counselling activity); 3245-0123 (SBA Form 888,

Management Training Form completed as a summary of a training event);

3245-0169 (Standard Forms 269 and 272, financial reporting forms

completed by the SBDC); 3245-0183 (SBA Form 1419, counselling

evaluation form completed by the client); and 3245-0221 (SBA Form 1496,

utilized in the SBDC on-site review process).

List of Subjects in 13 CFR Part 130

Business development, Small businesses, Small Business Development

Center (SBDC), Technical assistance.

For the reasons set out above, Title 13 of Code of Federal

Regulations, Chapter 1 is proposed to be amended by adding a new Part

130 as follows:

PART 130--SMALL BUSINESS DEVELOPMENT CENTERS

Sec.

130.100 Introduction.

130.110 Definitions.

130.200 Entities eligible to establish an SBDC network.

130.300 Small Business Development Centers (SBDCs). [Reserved]

130.310 Area of service.

130.320 Location of lead center and SBDC service providers.

130.330 Operating requirements.

130.340 SBDC Advisory Boards.

130.350 SBDC services and restrictions on service.

130.360 Specific program responsibilities.

130.400 Application procedure. [Reserved]

130.410 New applications.

130.420 Continuing applications.

130.430 Application decisions.

130.440 Maximum amount of grant.

130.450 Matching funds.

130.460 Proposal preparation--Budget justification.

130.470 Fees.

130.480 Program income.

130.500 Funding. [Reserved]

130.510 Transfer of funds.

130.600 Cooperative agreement. [Reserved]

130.610 General terms.

130.620 Amendments and revisions to cooperative agreement.

130.630 Dispute resolution procedures.

130.640 Conflict resolution procedures.

130.650 Non-renewal procedures for non-performance.

130.700 Suspension and termination causes and procedures.

130.800 Oversight of the SBDC program. [Reserved]

130.810 SBA review authority.

130.820 Recordkeeping requirements.

130.830 Audits and investigations.

Authority: Sections 5(b) (6) and (21) of the Small Business Act,

as amended, 15 U.S.C. 634(b)(6) and 648; Pub. L. 101-515, 101 Stat.

2101; Pub. L. 101-574, 104 Stat. 2814; Pub. L. 102-366, 106 Stat.

986; and Pub. L. 102-395, 106 Stat. 1828.

Sec. 130.100 Introduction.

(a) Objectives. (1) The overall objective of the SBDC program is to

create a broad-based system of assistance for the small business

community. To accomplish these objectives, SBDCs link resources of the

Federal, State and local governments with the resources of the

educational community and the private sector to meet the specialized

and complex needs of the small business community.

(2) SBDCs are intended to be responsive to local needs in providing

assistance to the small business community as mutually identified by

the SBA Project Officer and the SBDC Director.

(b) Overview. The SBDC program shall be under the general

management and oversight of the SBA. However, in keeping with the

legislative authority for the SBDC program, the SBA recognizes that a

partnership exists between the SBA and the recipient organization for

the delivery of assistance to the small business community. Services

shall be provided pursuant to a Cooperative Agreement. The SBA shall

also consult with SBDC Directors and recognized organizations

representing SBDCs in the formulation of the annual Program

Announcement and the development of other program guidelines.

(c) Incorporation of amended references. All references in these

regulations to OMB Circulars, Standard Operating Procedures, other SBA

regulations, and other sources of SBA policy guidance are intended to

incorporate all ensuing changes or amendments to such sources.

Sec. 130.110 Definitions.

(a) Applicant organization: The eligible entity under Sec. 130.200

which applies for Federal funding to operate an SBDC network.

(b) Budget period: The 12-month period in which expenditure

obligations are incurred by a SBDC. This period must coincide with

either the calendar year or the Federal fiscal year.

(c) Cash match: Non-Federal funds allocated specifically to the

operation of the SBDC network equaling no less than fifty percent of

the Federal contribution. Cash Match includes Direct costs committed by

the applicant or recipient organization and SBDC service providers, to

the extent that such costs are committed as part of the specific line

item Direct costs verified by their certifying representative prior to

funding. As an example, Cash Match would include non-Federal salaries

and fringe benefits paid to employees of the SBDC. Cash Match does not

include:

(1) Funds contributed from other Federal sources;

(2) Program income or fees collected from small businesses

receiving assistance; or

(3) Indirect costs, overhead costs or in-kind contributions.

(d) Cognizant agency: The Federal agency, other than the SBA, which

has established an indirect cost rate for budgetary and funding

purposes for a recipient organization or sponsoring SBDC organization.

Normally, this is the agency from which the organization has its

largest grant or receives its greatest amount of Federal funding. Once

established for an organization, its Indirect cost rate is universal

throughout the Federal government.

(e) Conflict: For purposes of this part, Conflict means all

programmatic disagreements, whether pre or post award, between an

applicant or recipient organization and the SBA.

(f) Cooperative agreement: The legal instrument pursuant to the

terms of which the SBA awards Federal funds to recipient organizations

and recipient organizations provide services to the small business

community. Cooperative agreements are used because there is substantial

involvement between the funding agency and the recipient organizations.

It is also known at times as a Notice of Award.

(g) Cosponsorship: A ``Cosponsorship'' as defined in and governed

by Sec. 8(b)(1)(A) of the Small Business Act, 15 U.S.C. 637(b)(1)(A),

and SBA's Standard Operating Procedures.

(h) Counseling: Individual advice, guidance or instruction given to

a person or entity concerning the formation, management, financing and

operation of small business enterprises. Counseling may be provided by

different modes of transmission, including face-to-face, electronic

media, publications and video.

(i) Direct costs: ``Direct costs'' as defined in Office of

Management and Budget (OMB) Circular A-21, A-87 or A-122, as

appropriate. Under these Circulars, SBDC recipient organizations are

required to allocate at least 80 percent of the Federal funds provided

through the Cooperative Agreement to the Direct costs of program

delivery.

(j) Dispute: For purposes of this part, Dispute means any financial

disagreement arising between a recipient organization and the SBA.

(k) Full-time employee: An employee of the recipient organization

who is assigned to the SBDC and who performs work for it during the

full customary work week of the recipient organization.

(l) Grants/cooperative agreement appeals committee: The SBA

committee responsible for, among other things, resolving appeals

arising from disputes between an applicant or recipient organization

and the SBA. The membership of the Committee and its Chairperson are

designated by the SBA Administrator.

(m) Grants management specialist: An individual in the SBA's

Central Office designated by the SBA Administrator to be responsible

for the financial review, negotiation, award, and administration of one

or more SBDC Cooperative Agreements.

(n) Host: See ``Recipient Organization''.

(o) Indirect costs: ``Indirect costs'' as defined in Office of

Management and Budget (OMB) Circular A-21, A-87, or A-122, as

appropriate.

(p) In-kind contributions: Property, facilities, services or other

non-monetary contributions from non-Federal sources. Some examples of

in-kind contributions are donated printing, supplies, or the value of

volunteer services (except that SCORE services cannot be used as in-

kind match). See OMB Circular A-87, A-102, or A-110, as appropriate.

(q) Key SBDC employee: Any employee in the SBDC network having

managerial or budgetary control over the activities of the Lead Center

or its SBDC service providers.

(r) Lead Center: The entity of the SBDC network which administers

and operates the SBDC network. The Lead Center may also provide

assistance directly to the small business community.

(s) Lobbying: As applied to the recipient organization of a Federal

grant, loan, or cooperative agreement, ``lobbying'' shall have the

meaning given in OMB Circulars A-21, A-87 and A-122, and Pub. L. 101-

121, section 319.

(t) Matching funds: The statutorily required amount of non-Federal

contribution to SBDC project costs. In the SBDC program, this required

amount is equal to the Federal contribution. At least 50% of the

statutorily required matching funds must be provided in the form of

Cash Match. The remaining 50% of the statutorily required matching

funds may be provided through any allowable combination of additional

cash, in-kind contributions, or indirect costs. Any non-Federal

contributions in excess of the statutorily required amount are

considered Overmatched Amounts. No portion of the matching funds may be

from Federal sources or be program income or fees collected from

clients or attendees.

(u) Notice of award: See ``Cooperative agreement''.

(v) Overmatched amount: That amount of indirect, in-kind or cash

contributions by the recipient organization or by a third party to the

recipient organization which exceeds the statutorily required non-

Federal contribution.

(w) Part-time employee: An employee of the recipient organization

who is assigned to and who performs work for the SBDC for less than the

full customary work week of the recipient organization.

(x) Program announcement: The SBA's annual publication of items

which an applicant organization must address in its application in

order to be considered for SBDC funding by the SBA.

(y) Program income: Income earned or received by the SBDC recipient

organization or SBDC subrecipient from any SBDC supported activity as

defined in Attachment D of OMB Circular A-100 and Attachment E of OMB

Circular A-102.

(z) Program manager: An individual in the SBA's Central Office

designated by the AA/SBDC to oversee the operations of one or more

SBDCs.

(aa) Project officer: An individual designated by the AA/SBDCs who

negotiates the annual Cooperative Agreement and monitors the ongoing

operations of an SBDC.

(bb) Project period: The period of time in which an SBDC actively

participates with the SBA in providing assistance to the small business

community served by the SBDC. A project period begins on the day of

award and normally continues over a number of budget periods, in twelve

(12) month increments.

(cc) Proposal: The written submission by a proposed or existing

SBDC explaining its projected SBDC activities for an upcoming budget

period and requesting that the Small Business Administration provide

funding for use in its operations.

(dd) Recipient organization: After funding is approved and the

applicant enters into a Cooperative Agreement with the SBA, the

applicant organization becomes the recipient organization. The

recipient organization receives the Federal funds and is responsible

for establishing the Lead Center. The recipient organization is also at

times referred to as the Host.

(ee) SBDC: An abbreviated name for a Small Business Development

Center network, created pursuant to Sec. 21 of the Small Business Act,

15 U.S.C. 648.

(ff) SBDC Director: The full-time senior manager designated by each

recipient organization and approved by the SBA.

(gg) SBDC network: The combination of the Lead Center or recipient

organization, extension offices, satellite locations, subcenters, and

any other directly affiliated entity officially authorized to perform

SBDC services. An SBDC network may be statewide or, in states having

more than one recipient organization, may be regional.

(hh) SBDC service providers: The term used to describe all SBDC

network participants. This term would include extension offices,

satellite locations, subcenters, and any other directly affiliated

entity officially authorized to perform SBDC services as part of the

SBDC network.

(ii) Sponsoring SBDC organizations: Organizations or entities which

sponsor SBDC service providers as part of the SBDC network under a

contract or agreement with the recipient organization.

(jj) Training: The process of teaching individuals or entities in

group sessions concerning the formation, management, financing and

operation of small business enterprises. Training methods may include

in-person group sessions or other communication modes including

teleconferences, videos, publications and electronic media.

(kk) Working days: All days except Saturdays, Sundays and those

holidays designated in a Cooperative Agreement.

Sec. 130.200 Entities eligible to establish an SBDC network.

(a) The following entities are eligible to enter into a Cooperative

Agreement with the Small Business Administration for the purpose of

establishing the operation of an SBDC network:

(1) Any public or private institution of higher education;

(2) Any land-grant college or university;

(3) Any college or school of business, engineering, commerce or

agriculture;

(4) Any community or junior college; or

(5) Any entity formed by two or more of the above entities.

(b) In addition to the entities shown in subparagraph (a) of this

section, any entity which was operating as a recipient organization as

of December 31, 1990, is eligible to continue to serve as a recipient

organization.

(c) Other SBDC service providers are not required to meet the

eligibility requirements of a recipient organization. However, the

recipient organization shall primarily utilize institutions of higher

education to provide services to the small business community.

Sec. 130.300 Small Business Development Centers (SBDCs). [Reserved]

Sec. 130.310 Area of service.

(a) Generally, the area of service for any recipient organization

shall be the State in which it is located. In exceptional

circumstances, more than one recipient organization may be located in

any State in which the AA/SBDCs determines it is necessary or

beneficial to effectively implement the program and to provide services

to all interested small businesses.

(b) Where more than one recipient organization is to be located in

a given State, the AA/SBDCs shall determine in writing the general

geographic areas to be served by each recipient organization in that

State. Such determination shall be consistent with the State plan. Each

recipient organization shall provide assistance and services to those

small businesses of the State located in the general area to which it

is assigned.

Sec. 130.320 Location of Lead Centers and SBDC service providers.

(a) The facilities and staff of each Lead Center and SBDC service

provider shall be located so as to provide maximum accessibility and

benefits to the small businesses which the SBDC network is intended to

serve.

(b) Lead Centers and SBDC service providers should be organized and

located to serve the needs of the small business community of the

service area.

(c) The locations of the Lead Center and the SBDC service providers

will be reviewed as a part of the application review process for each

budget period. Addresses and telephone numbers of existing or new

locations shall be noted in the annual application proposal.

(d) A request for approval of any SBDC service provider not in the

application proposal which is to be funded in whole or in part by

Federal funds must be submitted as an amendment to the Cooperative

Agreement to the appropriate SBA district office, and shall be

processed according to the procedures used for approving amendments to

applications.

Sec. 130.330 Operating Requirements.

(a) The Lead Center shall operate as an independent entity within

the state or regional sponsoring organization.

(b) The Lead Center shall have a full-time staff, including a full-

time SBDC Director.

(c) The Lead Center and other SBDC service providers shall have a

conflict of interest policy applicable to their SBDC consultants,

employees, instructors and volunteers.

(d) One-to-One counseling shall be provided to small businesses

without charge.

(e) Training courses that respond to the needs of the small

business community shall be provided throughout the geographical area

serviced by the SBDC network.

(f) The Lead Center is responsible for the overall management and

coordination of the SBDC network. The administrative services the Lead

Centers are required to provide include, but are not limited to:

program development, program management, financial management, reports

management, promotion and public relations, program assessment and

evaluation, and internal quality control.

(g) The SBDC network shall extend its service to the public on a

nondiscriminatory basis in accordance with 13 CFR parts 112, 113 and

117 of the Regulations issued by the SBA. 13 CFR parts 112, 113 and 117

require that no person shall be excluded on the grounds of age, color,

handicap, marital status, national origin, race, religion or sex from

participation in, be denied the benefits of, or otherwise be subjected

to discrimination under any program or activity for which the recipient

organization received Federal financial assistance from the SBA.

(h) The Lead Center shall be open to the public twelve months each

year, operating on a 40 hour week basis or during the normal business

hours of the recipient organization. Anticipated closures for holidays

and other organizational shutdowns shall be included in the annual

application submitted by the SBDC. Emergency closures shall be reported

to the SBA Project Officer as soon as is feasible. Other SBDC service

providers shall operate during the normal business hours of their

sponsoring SBDC organizations.

Sec. 130.340 SBDC Advisory Boards.

(a) State/Regional Advisory Boards. (1) The Lead Center shall

establish an advisory board to advise, counsel, and confer with the

SBDC Director on matters pertaining to the operation of the SBDC

network.

(2) The advisory board shall be referred to as a State SBDC

Advisory Board in a State having only one recipient organization.

(3) The advisory board shall be referred to as a Regional SBDC

Advisory Board in a State having more than one recipient organization.

(b) These boards shall represent the entire service area and shall

include, among others, small business owners.

(c) New Lead Centers are required to establish a State or Regional

SBDC Advisory Board no later than the second budget period.

(d) A State or Regional SBDC Advisory Board member may also be a

member of the National SBDC Advisory Board.

(e) Travel of Advisory Board Members. Travel of any Board member

for official Board activities may be paid for out of the SBDC's

budgeted funds.

(f) National SBDC Advisory Board. (1) The SBA shall establish a

National SBDC Advisory Board consisting of nine members who are not

part of the Federal workforce, appointed by the SBA Administrator.

Three members of the National SBDC Board shall be from universities or

their affiliates and six shall be from small businesses or associations

representing small businesses. All Board members serve three year

terms. Terms are staggered with three Board members appointed each

year. The Administrator may also appoint successors to fill unexpired

terms.

(2) The National SBDC Advisory Board shall elect a Chairman and

shall advise, counsel, and confer with the SBA's AA/SBDCs on policy

matters pertaining to the operation of the SBDC program. The Board

shall meet, with the AA/SBDCs, at least semiannually at the call of the

Chairman.

Sec. 130.350 SBDC Services and Restrictions on Service.

(a) General. The SBDC network shall maximize accessibility to small

businesses by providing extension services and utilizing satellite

locations when necessary. To the extent possible, the SBDC shall make

full use of other Federal, State, and local government programs that

are concerned with aiding small business. Under the direction and

administration of the SBDC Director, the SBDC network shall provide:

(1) Access to business analysts to counsel, assist and inform small

business clients;

(2) Access to technology transfer agents to provide state-of-the-

art technology to small businesses;

(3) Access to information specialists to assist in providing

information searches and referrals to small business;

(4) Access to part-time professional specialists to conduct

research or to provide counseling assistance whenever the need arises;

(5) Access to laboratory and adaptive engineering facilities;

(6) Access to international trade assistance; and

(7) Access to procurement assistance.

(b) Services. (1) The assistance provided through the SBDC network

shall reflect local small business needs. Services should be

periodically assessed and improved to keep pace with changing small

business needs. The SBDC network shall provide prospective and existing

small business owners and managers with comprehensive small business

assistance. These services may include, but are not limited to, help

with financing, marketing, production, organization, engineering and

technical problems, research and feasibility studies. Special SBDC

programs and economic development activities may include, but are not

limited to advocacy, technology assessment, transfer and

commercialization, international trade centers and programs to

encourage exporting, business law information and guidance, procurement

assistance, rural development, agribusiness, convention, tourism and

small business incubators. SBDCs shall provide free one-on-one

counseling. SBDCs may also sponsor or cosponsor training for

individuals interested in going into a small business or improving or

expanding an existing small business.

(2) SBDCs are encouraged to provide financial counseling services

that increase a small business concern's access to capital. For

example, SBDCs are encouraged to assist small business concerns in

areas such as business plan development, financial statement

preparation and analysis, and cash flow preparation and analysis. These

services are considered ``counseling'' and shall be provided to clients

free of charge.

(c) Restrictions on SBDC assistance.

(1) SBDCs are not authorized to make loans, service loans or make

credit decisions regarding the award of loans. SBDCs are also

prohibited from making credit recommendations unless specifically

authorized to do so by the Administrator, or his or her designee.

(2) In assisting small businesses with the preparation of financial

packages, SBDCs must ensure that their clients are sufficiently

involved in the process to gain the knowledge to represent themselves

to the lending institution. While the SBDCs may attend meetings with

lenders for the purpose of assisting the client in the preparation of

the financial package, the SBDCs may not take a direct role in

representing clients in loan negotiations.

(3) SBDCs must ensure that their clients know that any financial

packaging assistance provided does not in any way guarantee receipt of

a loan.

(4) In terms of SBA financial assistance, SBDCs may assist in

completing forms for submitting loan applications and may assist a

client in formulating a business plan and preparing financial

statements. A representative of an SBDC may appear before the SBA with

an applicant for SBA financial assistance. Unless authorized by the

Administrator with respect to a specific program, an SBDC may not

advocate, recommend approval or otherwise attempt in any manner to

influence the SBA to provide financial assistance to any of its

clients. In addition, an SBDC cannot collect fees for assisting a

client in preparing an application for SBA financial assistance.

(d) Special emphasis groups. From time to time, the SBA shall

identify special groups to be targeted for assistance by SBA grantees.

Support of SBA special emphasis groups should be negotiated each year

as part of the application proposal process and included in the

Cooperative Agreement when appropriate. SBDCs shall endeavor to serve

small business owners from all populations represented in the

geographic area served by the SBDC.

Sec. 130.360 Specific program responsibilities.

(a) Policy development. The SBA shall be responsible for the

development of policies relating to the management of the national SBDC

program and for the development of practices to ensure compliance with

applicable laws, regulations, OMB Circulars and Executive Orders. For

those policies and practices directly affecting the operation of an

SBDC, the SBA should consult, to the extent practicable, with

recognized organizations representing SBDCs to ensure that the policies

or practices promote the effective and efficient delivery of services

to the small business community by the SBDC.

(b) Responsibilities of the SBDC Directors. Subject to SBA's

oversight responsibilities, performance of the Cooperative Agreement is

the responsibility of the SBDC Director. The SBDC Director shall direct

and monitor the activities of the SBDC network to ensure compliance

with the law, regulations, OMB Circulars, Executive Orders and the

terms and conditions of the Cooperative Agreement. The SBDC Director

shall direct the programmatic activities and financial affairs of the

SBDC network to deliver effective services to the small business

community in the geographic region included in the Cooperative

Agreement. The SBDC Director shall serve as the recipient organization

official responsible for program implementation, evaluation, and

program adjustments necessary to meet the needs of the small business

community. The SBDC Director shall have authority to make expenditures

under the Lead Center's budget. SBDC Directors may manage other

programs in addition to the SBDC Program as long as these programs

serve small businesses and do not unnecessarily duplicate the services

provided through the Cooperative Agreement with the SBA. However, SBDC

Directors may not receive additional compensation from these other

programs for managing them. The SBDC Director shall serve as the

principal contact point for all matters involving the SBDC network.

Sec. 130.400 Application procedure. [Reserved]

Sec. 130.410 New applications.

(a) When the SBA declines to renew an existing recipient

organization or the recipient organization declines to reapply, the SBA

may accept applications from other organizations interested in becoming

a recipient organization. An eligible entity may apply to participate

in the Small Business Development Center Program by submitting an

original and two copies of an application to the SBA district office

covering the state or portion of a state (when there is more than one

SBDC located or authorized in a state) in which the applicant proposes

to provide services. The application shall meet the requirements set

forth in Executive Order 12372. The application shall indicate which

officials are authorized to amend the application with regard to all or

particular parts of such application.

(b) An application for the initial funding of a new SBDC network

must include a letter by the Governor, or his or her designee, of the

State in which the SBDC will operate, or other evidence, confirming

that the applicant's designation as an SBDC would be consistent with

the plan adopted by the State government and approved by the SBA. No

such requirement is imposed on subsequent applications from existing

recipient organizations.

(c) The application shall set forth the eligible entity or entities

operating or proposing to operate in the SBDC network; a list of the

Lead Center and SBDC service providers by name and address; the

geographic areas to be serviced; the resources to be used; the services

that will be provided; the method for delivering the services,

including a description of how and to what extent academic, private and

public resources will be used; a budget; a listing of the proposed

members of the State or Regional Advisory Board and other relevant

information set forth in the Program Announcement.

(d) The applicant should make every effort to ensure an application

is complete when filed. Authorized SBA officials may request that the

applicant amend an application. At any time, an applicant or recipient

organization may file an amendment for the SBA's review and approval.

An amendment shall be signed by the official of the applicant or

recipient organization authorized to do so on the original application.

(e) Upon written recommendation for approval by the SBA District

Director, the proposal shall be submitted through appropriate SBA

channels to the AA/SBDCs for review.

Sec. 130.420 Continuing applications.

(a) The SBA shall announce the due date for submission of all

continuing applications in an annual Program Announcement. This Program

Announcement shall include a due date for SBDCs funded on a Federal

fiscal year basis and a due date for SBDCs funded on a calendar year

basis. SBDCs shall meet these due dates to receive consideration of

their application. However, an extension may be granted by the SBA

Project Officer with the concurrence of the Program Manager.

(b) Eligible entities shall submit an original and two (2) copies

of a proposal to the appropriate SBA district office covering the state

or portion of a state (when there is more than one SBDC located in a

state) in which the applicant proposes to continue to provide service.

(c) The proposal format shall correspond to the annual SBDC Program

Announcement.

(d) The applicant should make every effort to ensure an application

is complete when filed. Authorized SBA officials may request that the

applicant amend an application.

(e) A timetable for appropriate SBA review will be included as a

part of the annual Program Announcement.

(f) A proposal shall be reviewed by the SBA Project Officer in the

SBA district office.

(g) Upon written recommendation for approval by the SBA District

Director, the proposal shall be submitted through appropriate SBA

channels to the AA/SBDCs for review. Project Officers may request

further information to ensure the proposal conforms to all

administrative, budgetary and programmatic requirements of the Program

Announcement.

(h) The Office of SBDCs Grants Management Specialist shall

negotiate and determine that all dollars committed are reasonable,

allowable and allocable, to assure conformity of the application with

applicable statutory, financial, and regulatory requirements, and OMB

Circulars. The Grants Management Specialist may request additional

information or amendments to the application prior to issuing the

Cooperative Agreement.

(i) At any time, an applicant or recipient organization may file an

amendment for the SBA's review and approval. An amendment shall be

signed by the official of the applicant or recipient organization

authorized to do so on the original application. Amendments must be

reviewed and incorporated into the Cooperative Agreement by the Central

Office Grants Management Specialist before they may take effect.

Sec. 130.430 Application decisions.

(a) The AA/SBDCs or his or her designee may approve, conditionally

approve, or reject any application or amendment to an application. If

the application or amendment is rejected, the AA/SBDCs shall

communicate the reasons for rejection simultaneously to the applicant

and any appropriate SBA field office. If the approval is conditional,

the conditions shall be set forth in the Cooperative Agreement. Upon

approval or conditional approval, a Cooperative Agreement may be issued

by the Grants Management Specialist.

(b) In considering the application, significant factors shall

include:

(1) The ability of the applicant to contribute Matching Funds; and

(2) For applicants who have been previously funded, the quality of

their performance in the previous Budget period.

(c) In the event of a conditional approval, SBA reserves the right

to conditionally fund a recipient organization for one or more

specified periods of time up to a maximum of one Budget period in order

to provide the recipient organization with time to resolve the

conditions set forth in the conditional approval. When the SBA

conditionally funds a recipient organization, the specific conditions

and applicable remedies which must be addressed will be set forth as

special terms and conditions in the Cooperative Agreement. In the event

the recipient organization fails to resolve such conditions to SBA's

satisfaction within the time period provided by SBA, SBA has the right

to determine not to continue to fund the SBDC, subject to the

provisions of Sec. 130.700(a).

Sec. 130.440 Maximum amount of grant.

No recipient of funds shall receive an SBDC grant which would

exceed the greater of:

(a) The minimum statutory amount, or

(b) Its pro rata share of all SBDC grants as determined by the

statutory formula set forth in section 21(a)(4) of the Small Business

Act.

Sec. 130.450 Matching Funds.

(a) As a condition of any Cooperative Agreement or amendment or

modification thereof, the recipient organization must provide total

Matching Funds equal to the total amount of the SBA funding and all

amendments or modifications thereof.

(b) All sources of Matching Funds must be identified as

specifically as possible. In the case of cash, sources shall be

identified by name and account number in the budget proposal and shall

be certified by an authorized official of the recipient organization or

by any sponsoring SBDC organization providing a Cash Match through a

sub-contract agreement. The account containing such cash must be under

the direct management of the SBDC Director, or, if provided by a

sponsoring SBDC organization, by its SBDC employee. If the State is

providing such cash, and if the State appropriation cycle permits, the

recipient organization must verify that sufficient funds will be

available prior to the use of Federal dollars.

(c) The Grants Management Specialist is responsible for determining

Matching Funds or Cash Match meet the requirements of the statute and

appropriate OMB circulars.

(d) Overmatched amounts. (1) SBDCs are encouraged to furnish

Overmatched Amounts.

(2) Once approved as part of the budget, any Overmatched Amount can

be applied to any additional Matching Funds requirements that would be

necessary in the case of a supplemental funding increase received by

the SBDC during the budget period, as long as the total Cash Match

being provided by the SBDC remains at 50% or more of the total SBA

funds provided during the budget period.

(3) If used in the manner described in paragraph (d)(2) of this

section, such Overmatched Amount is reclassified as committed Matching

Funds.

(4) Allowable Overmatched Amounts which have not been used in the

manner described in paragraph (d)(2) of this section may, with the

approval of the AA/SBDCs, be used as a credit to offset any confirmed

audit disallowances applicable to the Budget period in which the

Overmatched Amount exists. Offsetting funds shall be considered to be

used as Matching Funds and are not again allowable as Matching Funds

for past or future Budget periods.

(5) Overmatched Amounts applicable to one Budget period cannot be

used as Matching Funds for a different Budget period, except that

Overmatched Amounts applicable to one Budget period may be used as a

credit to offset audit disallowances of the previous two Budget periods

only.

(6) Impermissible sources of Matching Funds. Under no circumstances

may the following be used as sources of the Matching Funds of the

recipient organization:

(i) Uncompensated student labor;

(ii) SCORE, ACE, or SBI volunteers;

(iii) Program income;

(iv) Funds or indirect or in-kind contributions from any other

Federal program.

Sec. 130.460 Proposal preparation--Budget justification.

(a) General requirements. The proposal must include all items

required by the Program Announcement. The AA/SBDCs shall send the

Program Announcement to each SBDC immediately after issuance.

(b) Submission of budget justification. The budget justification

for the upcoming Budget period must be prepared and submitted (as a

part of the proposal package) to the SBA Project Officer in the SBA

district office by the SBDC Director on behalf of the recipient

organization, or by the applicant organization's authorized

representative in the case of a first time SBDC application. The budget

shall be reviewed annually upon submission of a renewal proposal and

shall be considered during the course of negotiation of the renewal

Cooperative Agreement. All budgets are subject to appropriation of the

necessary funds by Congress.

(1) Direct costs. Unless otherwise provided for in applicable OMB

circulars, at least eighty percent (80%) of any funding provided by SBA

must be allocated to Direct costs of program delivery. In the event

that all Indirect costs are waived by the applicant organization in

order to meet the Matching Funds requirement, one hundred percent

(100%) of the SBA funding provided must be allocated to program

delivery. If some, but not all, Indirect costs are waived to meet the

Matching Funds requirement, the lesser of the following may be

allocated as Indirect costs of the program and charged against SBDC

funding provided by SBA:

(i) Twenty percent (20%) of SBDC funding provided to the recipient

organization by SBA, or

(ii) The amount remaining after the waived portion of Indirect

costs is subtracted from the total indirect costs.

(2) SBDC service provider costs. (i) As a separate attachment to

the budget, the applicant organization shall include separate budgets

for all sub-contracted SBDC service providers in conformity with OMB

financial requirements. Applicable Indirect cost base and rate

agreements shall be included for the Lead Center and all SBDC service

providers. The rate used shall be equal to or less than the negotiated

predetermined rate. If no such rate exists, then one shall be

negotiated between the sponsoring SBDC organization or SBDC service

provider and its Cognizant Agency. In the event the sponsoring SBDC

organization or SBDC service provider does not have a Cognizant Agency,

the rate shall be negotiated with the SBA Project Officer. The rate

shall be negotiated and agreed upon in accordance with OMB Circular A-

21.

(ii) The amount of cash, in-kind contributions and indirect costs

for the Lead Center and all sub-contracted SBDC service providers shall

be indicated in accordance with OMB financial requirements.

(iii) Expenses. (A) Cost principles. Principles for determining

allowable costs are contained in OMB Circulars A-21 (cost principles

for grants, contracts, and other agreements with educational

institutions), A-87, (cost principles for programs administered by

State and local governments), and A-122 (cost principles for nonprofit

organizations).

(B) Costs associated with lobbying. No portion of the Federal

dollars received by an SBDC may be used for lobbying activities, either

directly by the SBDC or indirectly through outside organizations,

except those activities permitted by the provisions of OMB Circular A-

122. Restrictions on and reports of lobbying activities by the SBDC

recipient of a Federal grant, loan or cooperative agreement shall be in

accordance with OMB Circulars A-21, A-87, and A-122, Section 319 of

Public Law No. 101-121, and the annual Program Announcement.

(C) Salaries. (1) If an SBDC is based in a university or college,

the SBDC Director's salary should approximate the average annualized

salary of a full professor in the school or department in which the

SBDC is located organizationally (e.g., School of Business, School of

Engineering). The salary of the subcenter Director should approximate

the average annualized salary of an assistant professor in such school

or department.

(2) If an SBDC is based in an entity other than a university or

college, the annualized salaries of the SBDC Director and the subcenter

Director should approximate the average salaries of parallel positions

within the recipient organization. Salaries for all other positions

within the SBDC shall be established based upon the level of

responsibility, and shall be comparable to salaries for similar

positions in the area served by the SBDC.

(3) Recruitment and salary increases for SBDC Directors, subcenter

Directors and staff members shall conform to the administrative policy

of the recipient organization.

(D) Travel. Transportation costs shall be at coach class; per diem

rates, including lodging, shall not exceed those authorized by the

written travel policies of the Host. All travel must be separately

identified in the proposed budget as planned in-State, planned out-of-

State, unplanned in-State or unplanned out-of-State. In order for any

travel to be approved by the SBA, it must be in accordance with the

written travel policies of the recipient organization or the sponsoring

SBDC organization and directly attributable to specific work of the

SBDC or incurred in the normal course of administration of the program.

All proposed travel by the SBDC Director and the SBDC staff must be

reasonable, justified in writing, and included in the SBDC's proposed

annual budget. Such justification must indicate the estimated cost,

number of persons traveling, and the benefit to be derived by the small

business community from the proposed travel. A specific projected

amount, based on past experience where appropriate, must also be

included in the budget for any unplanned travel. A justification in

greater detail shall be required for unplanned out-of-State travel. Any

proposed unplanned out-of-State travel that exceeds the approved

budgeted amount for travel must be submitted to the Project Officer for

approval on a case-by-case basis. Any such submission must contain a

written budget revision and written narrative explaining the need for

such travel and the relation of such travel to the efficient operation

of the SBDC. Travel outside the United States must have prior approval

by the AA/SBDCs on a case-by-case basis.

(E) Dues. Costs of membership in business, technical, and

professional organizations shall be allowable expenses. The use of

Federal dollars in payment of such dues shall be permitted, provided

that all such payments are anticipated in the budget proposal, approved

by the SBA as reasonable and comply with Sec. 130.460(b)(2)(iii)(B).

Sec. 130.470 Fees.

SBDC clients may be charged a reasonable fee to cover program costs

in connection with training activities sponsored or cosponsored by the

SBDC, or costs associated with approved specialized services. Fees may

not be imposed for counseling, as defined in Sec. 130.110(h).

Sec. 130.480 Program income.

(a) Treatment of program income for recipient organizations or SBDC

service providers based in universities or nonprofit organizations

shall be subject to the provisions of Attachment D of OMB Circular A-

110. Treatment of program income for recipient organizations or SBDC

service providers based in State or local governments shall be subject

to the provisions of Sec. 7.e and Attachment E of OMB Circular A-102

and 13 CFR 143.25.

(b) Program income, including any interest earned on program

income, must be used to accomplish program objectives. It cannot be

used to satisfy the requirements for Matching Funds. Each SBDC must

report in detail, on Financial Reporting Form SF 269, receipts and

expenditures of program income, including any income received through

co-sponsored activities. A narrative description of how program income

was used to accomplish program objectives shall be included or attached

to the SF Form 269.

(c) The phrase ``to accomplish program objectives'' means expanding

the quantity or quality of services, resources or outreach provided by

the SBDC network. The Project Officer is responsible for monitoring

financial expenditures to ensure that program objectives are being met.

Any unused program income will be carried over to be utilized to

further program objectives in a subsequent Budget period.

Sec. 130.500 Funding. [Reserved]

Sec. 130.510 Transfer of funds.

(a) All SBDC Cooperative Agreements will be funded through the SBA

internal ``Letter of Credit Replacement System'' (LORS), formerly

administered under the Department of Treasury's Letter of Credit (LOC)

system. The Standard Forms 1193A and 1194 will be used to establish and

modify letters of credit.

(b) SBDCs shall utilize the Standard Form 5805 in order to draw

down funds. It is critical that recipients ``draw down'' only those

funds required to meet their estimated or actual expenses. The

frequency of drawdowns and the amount of the cash-on-hand balance are

monitored by examining the Standard Form 272 (Federal Cash Transactions

Report), submitted quarterly by the recipient. Repeated drawdowns in

excess of immediate cash needs may result in the cancellation of the

LOC. In the event any interest results from the deposit of any

drawdowns in an interest-bearing account, SBDCs, other than state

government sponsored SBDCs, must report and return such interest

annually to the SBA.

Sec. 130.600 Cooperative Agreement. [Reserved]

Sec. 130.610 General Terms.

(a) Upon approval of the initial or renewal application, the

recipient organization and the SBA shall enter into a Cooperative

Agreement. The Cooperative Agreement shall set forth the programmatic

and fiscal responsibilities of the recipient organization and the SBA,

and describe the scope of the project to be funded as well as the

budget of the program year covered by the Cooperative Agreement.

(b) Principles for determining applicable administrative

requirements are contained in the following OMB Circulars and are

applicable to the Cooperative Agreement: A-110 (for programs

administered by educational institutions and nonprofit organizations)

and A-102 (for programs administered by State and local governments).

Sec. 130.620 Revisions and amendments to Cooperative Agreement.

(a) Requested revisions. A revision to the Cooperative Agreement

may be requested in writing by the recipient organization at any time

during the Agreement period. These revisions will normally relate to

changes in the scope, work or funding during the specified budget year.

Any request for revision must be submitted on an SF-424 ``Application

for Federal Assistance,'' signed by the recipient organization's

``authorized representative,'' and include a revised budget and budget

narrative, if applicable. Any revision to the Cooperative Agreement

must be mutually agreed upon by the recipient organization and the

responsible SBA district office and be approved by the AA/SBDCs. All

procedures for revisions must conform to the requirements of the

applicable OMB Circular (See Sec. 130.620 (b) and (c)).

(b) Revisions which require amendment to Cooperative Agreement. The

Cooperative Agreement under the section entitled ``Prior Approval''

shall list the proposed actions which require Project Officer

concurrence, approval of the AA/SBDCs and amendment of the Cooperative

Agreement. No application for an amendment submitted after the

Cooperative Agreement has been issued shall be effective until it is

approved and incorporated into the Cooperative Agreement. Revisions

which require amendments shall include:

(1) Any change in project scope or objectives;

(2) The addition or deletion of any subgrants or contracts;

(3) The addition of any new budget line items;

(4) Budget revisions and fund reallocations which exceed the

limitations established by applicable administrative regulations or OMB

Circulars, either individually or in the aggregate with other such

revisions or allocations;

(5) Any proposed sole-source or one-bid contracts exceeding the

limits established by applicable regulations or OMB Circulars; and

(6) The carryover from one Budget period to the next Budget period

of unobligated, unexpended SBA funds allocable under the Cooperative

Agreement to nonrecurring, nonservable bona fide needs of the SBDC

network as provided in the applicable OMB Circular and the Annual

Program announcement.

(c) Revisions which do not require amendments to Cooperative

Agreement--(1) Budget revisions. Revision may be requested by the

recipient organization at any time and requires approval of the SBA

Project Officer in the SBA district office and the AA/SBDCs as

prescribed by OMB Circular A-110, Attachment J, or 13 CFR 143.30.

(2) Reallocation of funds. Reallocation of fund shall be conducted

in accordance with OMB Circular A-110, Attachment J, or 13 CFR 143.30.

Additional guidance on this matter may be included in the annual

Program Announcement.

Sec. 130.630 Dispute Resolution Procedures.

(a) Any recipient organization that wishes to resolve a Dispute

concerning one or more elements of its Cooperative Agreement must

submit a written statement describing the subject of the Dispute,

together with any relevant documents or other evidence bearing on such

Dispute, to the Grants Management Specialist, with a copy of such

statement and accompanying evidence being sent to the Project Officer.

The Grants Management Specialist shall respond in writing to the

recipient organization concerning such Dispute within 30 calendar days

of receipt of the descriptive statement.

(b) The procedures thereafter shall be as follows:

(1) If the recipient organization receives an unfavorable decision

regarding the Dispute from the Grants Management Specialist, the

recipient organization will have 30 calendar days during which to file

an appeal with the AA/SBDCs. The AA/SBDCs shall respond in writing to

the recipient organization concerning such Dispute within 15 calendar

days of receipt of the appeal.

(2) If the recipient organization receives an unfavorable decision

regarding the appeal from the AA/SBDCs, the recipient organization may

make a final appeal to the SBA Grants and Cooperative Agreements

Appeals Committee (the ``Committee''). The appeal must be received by

the Chairman of the Committee within 30 calendar days of the date of

issuance of the AA/SBDCs' written decision. All appeals shall be sent

to the following address: SBA Grants and Cooperative Agreements Appeals

Committee, 409 3rd Street, S.W., Washington, D.C. 20416. Copies of the

appeal shall also be sent to the Grants Management Specialist and the

Project Officer.

(3) There shall not be any prescribed form for submission of an

appeal. Formal briefs and other technical forms of pleading shall not

be required. However, all appeals must be in writing and should be

concise and logically arranged. Appeals are required to contain at

least the following:

(i) Name and address of the recipient organization;

(ii) Identify of the SBA office/program and the Cooperative

Agreement/Grant;

(iii) A statement of the grounds for appeal, with reasons why the

appeal should be sustained;

(iv) A request for the specific relief desired on appeal; and

(v) A statement as to whether or not a hearing is requested, and if

requested, the reasons why a hearing would materially assist in

resolving the Dispute. Requests for hearing will not usually be granted

unless significant material facts are substantially in dispute.

(4) The AA/SBDCs or the Committee shall have the right to request

from the SBDC or the district office additional information or

documentation not previously furnished to the Grants Management

Specialist.

(5) In connection with an appeal proceeding under this section, the

recipient organization will be afforded an opportunity to explain its

position directly to the Committee, either in person or in writing.

(6) If a request for a hearing is made, the Committee may solicit

additional information or material before reaching its decision to

grant or deny a hearing.

(7) If a request for a hearing is granted, the Committee will issue

appropriate written instructions to the recipient organization

pertaining to the hearing.

(8) The Committee will reach a decision on the merits of the appeal

as soon as practicable. The Committee may solicit additional

information or material before reaching its final decision.

(9) The Chairperson, with advice from the Office of General

Counsel, will prepare a written final decision to be transmitted to the

recipient organization with copies to the Grants Management Specialist

and the Project Officer. This will be the final decision of the Agency

on the Dispute.

(c) Expedited dispute appeal process. When a Dispute which may

affect refunding arises within 120 days of the end of the Budget

period, the Committee, in consultation with the AA/SBDCs, shall meet,

with at least a majority of the members in attendance. By an

affirmative vote constituting a majority of its total membership, the

Committee shall have discretion to shorten all response times as

necessary to attain final resolution of the Dispute before the date on

which a new Cooperative Agreement would be due to be issued. At any

time during the appeal process within 120 days of the end of the Budget

period, the recipient organization may submit a written request to use

an expedited process.

Sec. 130.640 Conflict resolution procedures.

(a) Any Conflict that is not resolved at the SBA district office

level within 15 calendar days shall be referred by the SBA Project

Officer to the next SBA administrative level having authority to review

such Conflict. The SBA Project Officer shall make the referral in

writing and shall include the comments of the SBDC Director.

(b) If such Conflict is not resolved at any intermediate SBA

administrative level within 15 calendar days, it shall be forwarded, in

writing, to the AA/SBDCs for final resolution. All comments of the SBDC

Director must be included in any package forwarded to the AA/SBDCs.

(c) The AA/SBDCs shall transmit a final decision in writing to the

recipient organization, the SBDC Director, the SBA Project Officer and

other appropriate SBA field office personnel within 30 calendar days of

receipt of such documentation, unless an extension of time is mutually

agreed upon by the recipient organization and the AA/SBDCs.

Sec. 130.650 Non-renewal procedure for non-performance.

(a) In situations where the SBS District Director believes there is

sufficient evidence of an SBDC's nonperformance or poor performance

under the terms of the Cooperative Agreement or these regulations, and

subject to the provisions of Sec. 130.700(a), the SBA District Director

shall notify the SBDC Director any other appropriate official of the

recipient organization of an intention not to renew the SBDC.

(b) This notification can be forwarded to the recipient

organization at any time during the budget year, but normally should be

sent no later than 3 months prior to the deadline for receipt of an

application by the SBA Project Officer. When there is sufficient

evidence of an SBDC's violation of these regulations, or of any other

causes which may lead to the initiation of suspension or termination

procedures as set forth in Sec. 130.700 of this part, the SBA District

Director may waive the notification period with the concurrence of the

AA/SBDCs.

(c) This notification shall specifically cite the reasons for the

intention not to renew the SBDC. It shall allow the recipient

organization a 60-day period within which to change and adjust its

operations in order to correct any problems cited in the notice, and to

report to the SBA district office, in writing on the results of such

changes or adjustments.

(d) If the recipient organization is unwilling or unable to resolve

the specific problem areas to the satisfaction of the SBA district

office within the 60-day period, the SBA Project Officer shall have ten

(10) calendar days after expiration of such period to submit to the AA/

SBDCs, through appropriate SBA channels, a written description of any

unresolved issues, a summary of the positions of the District office on

the issues, and any supportive documentation.

(e) The AA/SBDCs shall transmit a final decision in writing to the

recipient organization, the SBDC Director, the SBA Project Officer and

other appropriate SBA field office personnel within 30 calendar days of

receipt of such documentation, unless an extension of time is mutually

agreed upon by the recipient organization and the AA/SBDCs.

(f) To reach a final decision, the AA/SBDCs shall consider written

documentation of the issues to be resolved, including all relevant

correspondence between the Project Officer, District Director and any

other SBS personnel and the affected recipient organization. At a

minimum, such documentation shall commence with the first written

notice of issues resulting in the invocation of the non-renewal

procedure. In addition to the written documentation, the AA/SBDCs shall

also communicate in person, in writing or by E-Mail with both the

recipient organization and appropriate SBA personnel.

(g) If the AA/SBDCs determines that the evidence submitted

establishes nonperformance, ineffective performance or an unwillingness

to implement suggested changes to improve performance, the AA/SBDCs

shall have full discretion to order termination of the SBDC. The SBA

district officer shall then pursue proposals from other organizations

interested in applying for SBDC designation. The incumbent SBDC shall

have 60 days to conclude operations and to submit close-out documents

to the appropriate SBA district office. Close-out procedures shall be

in conformance with OMB Circular A-133.

(h) The Agency may employ an abbreviated process for refusing to

provide continued funding to an SBDC for actions other than an SBDC's

poor performance. If a District Director has reason to believe an SBDC

or its key personnel is engaged in any of the conduct referred to in

Sec. 130.700(b) (1) through (9) or any other serious and flagrant

violation of these regulations or the terms and conditions of a prior

agreement, the AA/SBDCs, upon approval from the General Counsel, may

shorten response times in the best interests of the Agency and the

public.

(i) Effect of action on subcenter. If competing applications are

being accepted, nothing shall preclude a subcenter of the previously

funded recipient organization from applying for designation as the

recipient organization, as long as the subcenter is not involved in the

conduct leading to non-renewal of the former recipient organization.

Sec. 130.700 Suspension and Termination Causes and Procedures.

(a) General. After the SBA has entered into a Cooperative Agreement

with a recipient organization, it shall not suspend, terminate or fail

to renew any such agreement unless the SBA provides the recipient

organization with written notification setting forth the reasons

therefor and affording the recipient organization an opportunity for a

hearing, appeal or other administrative proceeding under the provisions

of the Administrative Procedure Act, 5 U.S.C. 553 et seq. Subject to

this requirement, and except as provided in this paragraph and the

provisions of Secs. 130.630, 130.640 and 130.650 regarding Dispute

resolution, Conflict resolution and non-renewal procedures, the

applicable general procedures for suspension and termination are

contained in 13 CFR 143.43 and 143.44, Enforcement and Termination for

Convenience, Uniform Administrative Requirements for Grants and

Cooperative Agreements to State and Local Governments and in OMB

Circular A-110, Attachment L, Suspension and Termination Procedures for

Grants and Agreements with Institutions of Higher Education, Hospitals,

and other Nonprofit Organizations, Uniform Administrative Requirements.

(b) Causes. Causes which may lead to the initiation of suspension,

termination, or failure to renew procedures include disregard or

material violation of these regulations, or any of the following

reasons:

(1) A willful or material failure to perform under the Cooperative

Agreement or under this part;

(2) Conduct reflecting a lack of business integrity or honesty;

(3) A conflict of interest causing real or apparent detriment to

any small business concern, any contractor, the SBDC or the SBA;

(4) Improper use of Federal funds;

(5) Failure of a Lead Center or its subcenters to consent to audits

or investigation or to maintain required documents or records;

(6) Failure of the SBDC Director to work at the SBDC Lead Center on

a full-time basis;

(7) Failure to promptly suspend or terminate the employment of an

SBDC Director, subcenter Director or key SBDC employee upon notice that

such individual has a criminal conviction for a felony; a criminal

conviction for a misdemeanor involving fraud, bribery, embezzlement,

false claims, false statements, falsification or destruction of

records, forgery, obstruction of justice, receiving stolen property, or

theft; or a civil judgment resulting from any conduct which reflects

adversely upon his or her business integrity.

(8) Violation of the SBDC's standards of conduct as specified in

these rules and as established by the SBDC pursuant to this part; or

(9) Any other cause not otherwise specified which seriously and

adversely affects the operation or integrity of an SBDC or the SBDC

program.

Sec. 130.800 Oversight of the SBDC Program. [Reserved]

Sec. 130.810 SBA review authority.

(a) The SBA shall monitor and oversee the Cooperative Agreement and

ongoing operations of the SBDC network to ensure the effective and

efficient use of SBA funds for the benefit of the small business

community.

(b) Required on-site reviews. A periodic on-site evaluation of the

SBDC network shall be conducted by the SBA with SBDC participation, as

required by law. This evaluation will include a thorough analysis of

the records, procedures, organizational structure, management, and

services of the SBDC. The evaluation shall be both qualitative and

quantitative, shall measure the effectiveness of the program and shall

include an assessment of the benefits accruing to the areas served. The

resulting on-site report by the SBA will review the strengths and

weaknesses of the SBDC network and contain recommendations for

improving the management and operation of the SBDC. SBDC Directors

shall work with their SBA Project Officer and other appropriate SBA

personnel to develop responses in writing within 30 working days to the

recommendations contained in the On-site Review Report, with timeliness

for any remedial action to be taken.

(c) Site visits. The AA/SBDCs, or a representative, is authorized

to make programmatic and financial review visits to Lead Centers and

SBDC service providers to inspect SBDC records and client files, and to

analyze and assess training, counseling and any other SBDC related

activities. These visits shall be coordinated, in advance, with the

SBDC Director.

(d) SBA examiners reviews. (1) From time to time, SBA examiners

shall perform limited scope reviews of SBDC operations. Reviews may be

financially related, programmatically related or a combination of both,

and shall consider ways to improve the efficiency of the program as

well as to monitor compliance with laws, regulations and other general

guidance, and shall be conducted according to published guidelines.

(2) The reviews by the SBA examiners shall not substitute for

audits required of Federal grantees under the Single Audit Act of 1984

or Office of Management and Budget (OMB) Circular A-110, A-128 or A-

133. Nor shall such internal review substitute for audits to be

conducted by the SBA Office of Inspector General under authority of the

Inspector General Act of 1978, as amended.

Sec. 130.820 Recordkeeping requirements.

(a) In order to comply with OMB circulars which require

recordkeeping, as well as to monitor the SBDC Program properly, the

SBDC network shall keep records, as set forth in paragraph (c) of this

section, and shall submit quarterly, semiannual and annual performance

and financial reports as outlined in this section. Those reports and

the clients' evaluations of services provided shall be reviewed by SBA

to:

(1) Determine the quality of services provided by the SBDC network;

(2) Determine the completeness and accuracy of SBDC records; and

(3) Compare the actual SBDC network accomplishments with the SBDC

network performance objectives, such as the Planned Milestone

Accomplishment Chart submitted with the proposal for initial or

subsequent funding which is listed in the Cooperative Agreement.

(b) Client control records. The recipient organization shall

maintain control records, as necessary, for a thorough Lead Center

audit and shall provide required SBA reports. SBDC service providers

and Lead Centers which provide services to small business shall

maintain detailed, complete and accurate client activity files,

specifying counseling, training and other assistance provided.

(c) Performance reports. For those recipient organizations in the

SBDC program for more than three years, interim reports shall be due 30

days after completion of six months of operation; for those recipient

organizations in the program three years or less, reports shall be due

30 days after completion of each of the first three quarters. The

annual report shall include the second semiannual or the fourth quarter

report and shall be due 90 days after the applicable period (December

30 for Fiscal Year and March 30 for Calendar Year SBDCs). These reports

shall reflect accurately the activities, accomplishments and

deficiencies of the SBDC network.

(d) Financial reports. The recipient organization shall provide

three quarterly and one annual financial report to the appropriate SBA

Project Officer. The required financial reports will be set forth in

the Program Announcement and the Cooperative Agreement, in compliance

with the OMB Circulars governing such reports.

(e) Availability of records. As required by OMB Circular A-133, all

Lead Center and subcenter records shall be made available to the SBA

for review upon request.

Sec. 130.830 Audits and Investigations.

(a) Access to records. OMB Circulars A-128 and A-133 set forth the

requirements concerning record access and retention.

(b) Audits--(1) Pre-award audit. All applicant organizations that

propose to enter the SBDC Program for the first time may be subject to

a pre-award audit. The purpose of a pre-award audit is to verify the

adequacy of the accounting system, the suitability of proposed costs

and the nature and source of proposed Matching Funds.

(2) Audits of the SBDC network may be conducted by the recipient

organization or by the SBA. All audits will be conducted in accordance

with Government Auditing Standards (Yellow Book), promulgated by the

Comptroller General of the United States.

(3) Audits by the recipient organization will be conducted as a

single audit of a recipient organization pursuant to OMB Circular A-

102, A-110, A-128, and A-133, as applicable.

(4) Audits by the SBA will be conducted, supervised, or coordinated

by the SBA Office of Inspector General or its agents. At SBA's

discretion, audits of the SBDC network may have been performed even

though single audits may have been performed. In such instances, the

Agency will conduct such audits in compliance with Government Auditing

Standards and all applicable OMB Circulars.

(c) Investigations. The SBA may conduct such investigations as it

deems necessary to determine whether any person has engaged in any acts

or practices which may constitute a violation of the Small Business

Act, as amended (15 U.S.C. 631, et seq.) any rule or regulation under

that Act, any order issued under that Act, or any other applicable

Federal law. If any such violation is about to occur, the SBA may

conduct such investigation as it deems necessary.

Dated: November 15, 1994.

Cassandra M. Pulley,

Acting Administrator.

[FR Doc. 94-28651 Filed 11-25-94; 8:45 am]

BILLING CODE 8025-01-M