	Background

In the Veterans Entrepreneurship and Small Business Development Act of  1999, as amended, Congress established various programmatic  requirements for The Veterans Corporation to address perceived shortfalls  in federally provided services for veterans. Micro loan program. The Veterans Marketplace is an on-line purchase  program for products and services produced by veteran-owned small  businesses. Business Insurance Program. The Veterans Corporation’s Use of and Controls over Federal Funds Received

In its first 2 years of operations, The Veterans Corporation received $8  million in federal appropriations and spent about $4.7 million of the federal  funds primarily on start-up costs. Financial Self- Sufficiency Plan in Place but Too Early to Determine the Likelihood of Success

To address the requirement to become a self-sustaining entity, The Veterans  Corporation has developed a plan to become self-sufficient based on four  major sources of revenue—an electronic marketplace, a credit card  program, an insurance program, and fund-raising. At the time of our review,  three of its efforts were just beginning to produce revenue. Further, according to the plan, total revenue from these  activities is not expected to exceed expenses until the fourth quarter of  fiscal year 2004. Further, VA officials stated that  arrangements are under way to make this information available on their  Web site. We did not evaluate the quality of the other auditor’s work on the  financial statement or conduct our own tests of the financial statement  balances;    Reviewed The Veterans Corporation’s contract with the external auditor  for the 2002 financial statement audit to understand the nature of the  audit services to be provided and the extent of the auditor’s proposed  work on internal control;  Obtained and reviewed minutes of meetings of the board of directors  and the board’s executive committee to determine the board’s policies  as they related to the disbursement and use of federal funds;  Communicated with The Veterans Corporation’s external auditor to,  among other things, determine the extent of financial management  deficiencies in The Veterans Corporation; and  Interviewed the Chief Financial Officer (CFO) of The Veterans  Corporation. Assist veterans, including service-disabled veterans, with the  formation and expansion of small businesses. The Veterans Corporation’s Revenue and Expenses for Fiscal Years 2001 and 2002

As noted in table 2, The Veterans Corporation received federal  appropriations of $4 million in each of fiscal years 2001 and 2002 and used  approximately $1 million and $3.7 million in fiscal years 2001 and 2002,  respectively.
Why GAO Did This Study

The Veterans Entrepreneurship and Small Business Development Act of 1999 (Act) created the National Veterans Business Development Corporation (The Veterans Corporation) to address perceived gaps in providing small business and entrepreneurship assistance to veterans. The Act requires GAO to review The Veterans Corporation. GAO described The Veterans Corporation's (1) efforts to provide small business assistance to veterans, including service-disabled veterans; (2) use of and controls over federal funds in providing these services; and (3) efforts to become financially self- sufficient.

What GAO Found

The Veterans Corporation is providing veterans with entrepreneurial training, on-line educational resources, micro loans, business insurance, and an on-line marketplace. The Veterans Corporation identified initial challenges that slowed program progress, including getting information on transitioning military personnel; and veteran-owned businesses; and delays in making management appointments. Because the programs are new, it is too early to determine their effectiveness. During its first 2 years of operation, The Veterans Corporation spent about $5 of $8 million in total federal appropriations; about $1 million in fiscal year 2001; and about $4 million in fiscal year 2002, with the largest part of the increase due to salaries and program costs. An external audit for fiscal year 2001 identified internal control issues, such as the lack of adequate supporting documentation for disbursements and untimely reconciliation of bank accounts. According to the external auditor, all but one of the deficiencies was addressed in 2002. The Veterans Corporation has developed a financial self-sufficiency plan based on four major revenue sources--an on-line marketplace, a credit card program, an insurance service program, and fund-raising. At the time of GAO's review, most of these efforts were just beginning to produce revenue. According to the plan, The Veterans Corporation is not expected to achieve self-sufficiency until the fourth quarter of fiscal year 2004. If outcomes do not meet projections, Veterans Corporation officials stated that they would explore alternatives.