RD150 - Executive Summary of the 2018 Interim Activity of the Virginia Small Business Commission

    Executive Summary:

    Pursuant to the powers and duties authorized under § 30-183 of the Code of Virginia, the Virginia Small Business Commission (the Commission) held one meeting during the 2018 interim.


    September 4, 2018

    The Commission's September meeting covered three topics: (1) an overview of small business development programs administered by the Virginia Small Business Development Center; (2) a discussion of the Office of the State Inspector General's audit of the Small, Women-Owned, and Minority-Owned Business Certification Program; and (3) a presentation on legislation referred to the Commission.

    Jody Keenan of the Virginia Small Business Development Center (the Center) gave an overview of the Center's programs. The Center is made up of a network of 15 local centers, based at public universities. George Mason University has managed the network since 2003, and it has about 60 staff members statewide.

    The Center serves several functions. As described above, one of its most important roles is securing funding, but it also it provides free one-on-one counseling to startups and existing small businesses on a variety of issues, like long-term planning, marketing, attracting capital, and expanding operations. The Center also covers more specialized issues like international expansion or cyber awareness, and it helps connect small businesses with available resources.

    Keenan reported that the Center had helped create new jobs and stimulate investment. Each year, it averages 3,500 jobs created, 200 businesses served, and $60 million in capital investment.

    Next, Inspector General Michael Westfall presented on his office's December 2017 report on its audit of the Department of Small Business and Supplier Diversity's (SBSD) Small, Women-Owned, and Minority-Owned Business (SWaM) Certification Program.

    General Westfall described the most recent audit's conclusions. The report suggested that SBSD improve its reporting system and establish which agencies are required to be reporting on procurement. It recommended that SBSD maintain historical vendor data. It indicated that SBSD should consider charging an application fee for SWaM vendor certification and establish written procedures on certification. Finally, it suggested that SBSD evaluate salary levels for employees in its certification division.

    General Westfall said that SBSD's response to the audit had been "proactive" in implementing the suggested changes. SBSD compiled a list of agencies required to report on SWaM procurement. It began working on enabling its certification portal to track historical data, with estimated completion in 2019. The agency performed a compensation study, updated its Certification Manual and other written procedures, and began working with the Department of Planning and Budget to consider application fees.

    Connor Garstka, the Commission's attorney, reviewed legislation that had been referred to the Commission by the 2018 Regular Session of the General Assembly. HB 1341 would have created a Small Business Emergency Bridge Loan Fund. The Fund would have been administered by the Small Business Financing Authority, which currently provides economic development loans to Virginia businesses. Under HB 1341's parameters, the loans would be interest-free, they would range from $1,000 to $5,000, and they would last from 90 to 180 days.

    Next, Garstka described HB 513, HB 1300, and SB 318, all of which would have changed the Virginia statutory definition of "small business" to conform to the federal definition. Under current state law, a small business must be at least 51 percent independently owned, controlled by individuals who are U.S. citizens or resident aliens, and have either 250 or fewer employees or $10 million or less in gross receipts. In comparison, federal law provides different thresholds on an industry-specific basis. Like state thresholds, federal thresholds are based on number of employees or gross receipts. The main federal industry sectors are agriculture, communications, manufacturing, retail, service, transportation, and wholesale, but there are 1,170 subcategories.

    Under the three bills, the switch to the federal definition would have occurred in July 2019. A business applying for certification would select its "dominant business activity," and SBSD would confirm that the business's selection was correct. Then SBSD would apply the applicable federal threshold to determine whether the business met the federal criteria. Under the bills' terms, a certification would last for three years and could be renewed indefinitely (unlike federal certifications, which may be renewed annually for up to nine years).


    The Commission did not recommend any legislative proposals for the 2019 session.