April 11, 2017

Followup on the Small Business Innovation Research and Small Business Technology Transfer Programs

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs are congressionally-mandated programs that require Federal agencies with large research and development budgets to set aside a certain percentage of their funding for small businesses to develop innovative technologies. The Office of Science (Science) manages these programs for all Department of Energy offices except the Advanced Research Projects Agency-Energy (ARPA-E), which independently manages its own programs. While Science administers its awards through grants, ARPA-E uses cooperative agreements as its primary funding mechanism. With cooperative agreements, substantial Government involvement in the project is expected. In fiscal year (FY) 2015, annual funding for the Department’s SBIR and STTR programs was approximately $198 million for Science and $12.3 million for ARPA-E.

In our previous audit of these programs, The Department of Energy’s Small Business Innovation Research and Small Business Technology Transfer Programs (DOE/IG-0876, November 2012), we identified significant delays in the closeout of grants, substantiated allegations relating to conflicts of interest during the award selection process, and found erroneous and unsupported costs charged by a grant recipient. Due to the issues identified in our prior audit and ARPA-E’s relatively limited experience with these programs, we initiated this audit to determine whether the Department is efficiently and effectively managing its SBIR and STTR programs.

Through our review of eight Science grants and one ARPA-E cooperative agreement (awards), we found:

• Three recipients had not properly accounted for, or maintained adequate supporting documentation for, a portion of their project expenses.

• The Department had not ensured that three recipients met all terms and conditions of their awards.

• Science had not always ensured recipients submitted all final expenditure reports within the required timeframe and had not always adequately documented its rationale for decisions to waive closeout requirements for recipients to submit final project deliverables.

The issues that we identified were primarily due to recipients having a lack of awareness of regulations and specific award terms and conditions and, at times, Department officials providing limited oversight.

To address the issues noted in this report related to Science’s management of SBIR and STTR awards, we made recommendations to the Acting Director for the Office of Science and the Acting Director for the Advanced Research Project Agency- Energy.

Topic: Science and Innovation