[Federal Register Volume 59, Number 227 (Monday, November 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28651]


[Federal Register: November 28, 1994]


                                                   VOL. 59, NO. 227

                                          Monday, November 28, 1994

SMALL BUSINESS ADMINISTRATION

13 CFR Part 130


Small Business Development Centers

AGENCY: Small Business Administration.

ACTION: Proposed rule.

-----------------------------------------------------------------------

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