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B-197439 1 (1981-06-03)

handle is hein.gao/gaobabjbx0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 OFFIC OF GENCRAL,COUNSM June 3, 1981 B-197439 The Honorable Charles B. Rangel House of Representatives Dear Mr. Rangel: This responds to your letter of December 15, 1980, regarding the effect of our decision of July 29, 1980, on existing minority enterprise small business invest- ment companies (MESBICs). We apologize for the delayed response, but it was not until very recently that we received information from the Small Business Administra- tion that we needed before responding. Our decision of July 29, 1980, held that, with some exceptions, SBA did not have authority to leverage Federal money invested in MESBICS. You raised the issue of how to deal with existing MESBICs that might be threatened with financial ruin as a result of that decision. You presented, as an example, the spending commitments made by one MESBIC in reliance on SBA's past practice of leveraging Federal money. And you suggested that we allow funds to be leveraged for existing MESBICs. We appreciate your concern about the effect of our decision on existing MESBICs. However, we cannot authorize SBA to leverage Federal money except where it is permitted by statute. In two situations we think it would be inequi- table to require strict adherence to our decision of July 29, 1980. One is where funds were provided to MESBICs as leverage against Federal funds prior to our decision. As to those MESBICs, we do not suggest that SBA take action to recover refunds. Further, we would not object to SBA honoring any formal commitments it made prior to our decision--i.e., where SBA approved an application for leveraging that included leveraging of Federal funds, and so notified the applicant. According to information SBA furnished us, there was only one such unfulfilled commitment

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