On February 10, 2012, the Small Business Administration (SBA) issued their Annual Year-end Financial Reporting Requirements letter for Small Business Investment Companies (SBICs). MCB has summarized below the most significant information.
SBA Web-Based Reporting Update
The SBA is developing a new Web-based reporting system for SBICs that will replace the current Access-based reporting software. The SBA reports the first phase of the new system, which includes SBA Forms 1031 and 468, has been completed and is being tested. The SBA will be sending out a memo with additional information about this project. MCB expects the new system to be rolled out no later than Q2 2012.
Schedule 8 and 9 Submission Revisions
The SBA has indicated that, based on feedback received from many SBICs and their service providers, SBA has limited the supplemental information that must be provided to selected information from Schedule 8 only (see Attachment section below), with the Schedule 9 reporting requirements deferred until further notice. View an updated list of Schedule 8 and 9 FAQ’s. Note: Since all of the information on the Schedule 8 and 9 is not yet required to be filed, the Economic Data schedule is once again required. The Schedule of Participations and Joint Financings may be omitted.
Filing Requirements–SBA Form 468
Annual SBA Form 468 is due March 31, 2012. A complete filing of the annual SBA Form 468 consists of:
- the SBA From 468 data files created by the electronic reporting software;
- two printed sets of audited SBA Form 468 financial statements and the supplementary schedules including:
i. the notes to financial statements,
ii. the Independent Auditor’s Report,
iii. two copies of the Operating Plan Update narrative;
- the valuation reports you prepare internally to support the valuations shown on Form 468 for each portfolio company;
- Schedule 8, Portfolio Company Information, including capitalization tables and liquidation preferences, in the SBIC’s own format;
- The Economic Data schedule, which may be filed separately, but due no later than May 31, 2012 (this requirement was originally dropped, but reinstated with the changes to the Schedule 8 and 9 reporting requirements);
- If you are a Participating Securities fund, the Participating Securities Distribution Worksheet must also be submitted. Any required distributions calculated on this form must be paid by May 1, 2012.
Send the paper copies of the Form 468 to the following address:
U.S. Small Business Administration
Office of Investment
Attention: Antoinette Shingler
409 3rd Street SW, Suite 6300 Washington, DC 20416
Transmit the SBA Form 468 data files created by the electronic reporting package to the Office of Investment by diskette or by electronic mail to email@example.com. The SBA would appreciate the Form 468 in PDF format as well, but it is not a requirement.
Conduct of the Annual Audit
Confirmations: For Licensees with SBA leverage, the SBA’s independent auditors require that SBA confirm a Licensee’s outstanding balance. To expedite this request, mail your outstanding balance confirmation to the following address:
U.S. Small Business Administration
Attention: Mia McCutcheon
Denver Finance Center, Room 322
Denver, CO 80259
Reporting Valuations on SBA Form 468. SBA does not follow fair value measurement as prescribed by Generally Accepted Accounting Principles (GAAP). The framework for fair value measurements under GAAP is found in Accounting Standards Committee Topic 820, “Fair Value Measurements and Disclosures” (ASC 820), formerly FAS 157, “Fair Value Measurements.” SBA has not adopted ASC 820 for reporting valuations on SBA Form 468, and Licensees are not required to include valuation disclosures as required by ASC 820 in the footnotes to their SBA Form 468 financial statements.
SBICs must report portfolio valuations in accordance with the fund’s valuation policy, which should mirror the SBA valuation guidelines found in SBA Standard Operating Procedure 10 06A, Appendix 15, “Valuation Guidelines for Small Business Investment Companies” and SBIC Technote 12, “Guidelines Concerning Valuation Issues.”
Participating Securities Distribution Worksheet
For Participating Securities funds, submission of the Participating Securities Distribution Worksheet is also an annual filing requirement. If you have ever issued Participating Securities, complete and submit the Participating Securities Distribution Worksheet in addition to your SBA Form 468.
SBA Letter, Schedule 8 Instructions and other SBA Attachments
Please click the Download button in the footer of this posting to view the entire SBA letter with Attachments including Form 468 Schedule 8 Instructions.
MCB has over 50 years of experience serving SBICs with accounting, tax, audit, due diligence and consulting services. Contact Matt Dwyer at 703.218.3600 to start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.