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Small Business Regulatory Fairness Board fails state audit

JEFFERSON CITY, Mo. – The Small Business Regulatory Fairness Board has failed a state audit, drawing the ire of the Missouri Chamber of Commerce and Industry.

In a report released Tuesday, state auditor Nicole Galloway said the board was, “not functional and is not achieving its primary objective of monitoring regulations that impact small businesses.”

The audit rated the board as poor, the lowest rating on the office’s scale.

Mehan
Mehan

“The findings of this audit are very concerning. Our business community relies this board to help protect small businesses from excess regulation,” said Daniel P. Mehan, president and CEO of the Missouri Chamber of Commerce and Industry. “Given that this hasn’t been happening for a number of years, perhaps we shouldn’t be surprised that our Missouri 2030 Gallup survey found that only 16 percent of Missouri business leaders say they are satisfied with how the state regulates businesses.”

The Small Buisness Regulatory Fairness, established in 2004, provides state agencies with input regarding rules that adversely affect small businesses, solicits input and conducts hearings regarding any rules proposed by a state agency and issues an evaluation report to the governor and the General Assembly, making recommendations and evaluating regulatory fairness for Missouri’s small businesses.

“The Small Business Regulatory Fairness Board has not received necessary support to fulfill its role as the voice of small business owners, leaving many citizens in the dark about a regulatory process that directly impacts their livelihoods,” Galloway said. “The board is, by design, led by private citizens who help make the regulatory process less burdensome on business owners, but without resources or state support, the board’s volunteer members are not meeting this critical mission.”

The board’s nine members are appointed on a bipartisan level across multiple branches of government. The governor appoints four members, the leader of both parties in the Senate and the House each gets to appoint a member and the ninth member is the chair of the Minority Business Advocacy Commission.

Galloway
Galloway

The report says that as of March, four positions on the board were vacant.

The audit found deficiencies in internal controls, noncompliance with legal provisions and deficiencies resulting from certain management practices and procedures.

“The [board] did not take sufficient steps to solicit input from small businesses and received no comments from small businesses for a two-year period,” the report said. “Board members had been notified of proposed rule and regulation changes by an online subscription service, but the Department of Economic Development (DED) allowed the contract to expire without informing Board members. Small business owners had been allowed to access the service, and the lack of notification negatively impacted input. The Board also has not prepared regular evaluation reports.”

“I’d like to thank Auditor Galloway for making this a priority and I’d call on the governor and our legislative leaders to urgently address the deficiencies on this board,” Mehan said. “We must do everything we can to make sure small businesses can thrive and create jobs in Missouri.”

Galloway has issued a series of recommendations for fixing the issues at the board and says there will be a follow-up audit next year.

“The board is intended to bring a small business owner perspective to the regulatory process and help eliminate unnecessary red tape,” she said. “My team has made a series of recommendations, and I’m calling on the legislature and the Department of Economic Development to take action to ensure business owners can weigh in on policies that affect them.”

Those recommendations include:

  • Developing a process to document and track proposed regulations provided to the Board, increase efforts to solicit input from small business owners, and ensure evaluation reports are completed on a regular basis.
  • Working with the General Assembly and the Governor’s office to ensure all Board vacancies are filled.
  • Work with the DED and the General Assembly to ensure the Board has funding for staff support to allow the Board to function effectively and comply with state law.

In a response included in the audit, the Small Businesses Fairness Regulatory Board said it welcomed the results of the audit and said it hoped the report would spur outside sources, including the Department of Economic Development, which was implicated in its failure to help the board and to keep functions like the public comment system online, to help it correct the issues.

“Generally, the SBRFB agrees with the audit recommendations. Each of these issues — lost internal processes, Board vacancies, and lack of funding — was raised in our 2015 Annual Report. We are delighted that the State Auditor agreed that these were important issues,” it wrote.

The Department of Economic Development also responded, calling the board redundant with other regulatory mechanisms already in place.

“The Missouri Department of Economic Development agrees with and accepts the findings and recommendations in the audit,” it wrote. “The purposes of the SBRFB are redundant with duties performed by the Joint Committee on Administrative Rules and by the Secretary of State. The professional boards and associations representing small business provide access to information and notification of new rules. The duplicative work is evidenced by the average of only one case per year handled by the SBRFB.”