[Code of Federal Regulations]
[Title 13, Volume 1]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 13CFR115.21]

[Page 188-189]
 
                TITLE 13--BUSINESS CREDIT AND ASSISTANCE
 
                CHAPTER I--SMALL BUSINESS ADMINISTRATION
 
PART 115_SURETY BOND GUARANTEE--Table of Contents
 
           Subpart A_Provisions for All Surety Bond Guarantees
 
Sec.  115.21  Audits and investigations.

    (a) Audits--(1) Scope of audit. SBA may audit in the office of a 
Prior Approval or PSB Surety, the Surety's attorneys or consultants, or 
the Principal or its subcontractors, all documents, files, books, 
records, tapes, disks and other material relevant to SBA's guarantee, 
commitments to guarantee a surety bond, or agreements to indemnify the 
Prior Approval or PSB Surety. See Sec.  115.18(a)(3) for consequences of 
failure to comply with this section.
    (2) Frequency of PSB audits. Each PSB Surety is subject to audit at 
least once each year by examiners selected and approved by SBA.
    (b) Records. The Surety must maintain the records listed in this 
paragraph (b) for the term of each bond, plus any additional time 
required to settle any claims of the Surety for reimbursement from SBA 
and to attempt salvage or other recovery, plus an additional 3 years. If 
there are any unresolved audit findings in relation to a particular 
bond, the Surety must maintain the related records until the findings 
are resolved. The records to be maintained include the following:
    (1) A copy of the bond;
    (2) A copy of the bonded Contract;
    (3) All documentation submitted by the Principal in applying for the 
bond;
    (4) All information gathered by the Surety in reviewing the 
Principal's application;
    (5) All documentation of any of the events set forth in Sec.  
115.35(a) or Sec.  115.65(c)(2);
    (6) All records of any transaction for which the Surety makes 
payment under or in connection with the bond, including but not limited 
to claims, bills (including lawyers' and consultants' bills), judgments, 
settlement agreements and court or arbitration decisions, consultants' 
reports, Contracts and receipts;

[[Page 189]]

    (7) All documentation relating to efforts to mitigate Losses, 
including documentation required by Sec.  115.34(a) or Sec.  115.69 
concerning Imminent Breach;
    (8) All records of any accounts into which fees and funds obtained 
in mitigation of Losses were paid and from which payments were made 
under the bond, and any other trust accounts, and any reconciliations of 
such accounts;
    (9) Job status reports received from Obligees and documentation of 
each unanswered request for a job status report; and
    (10) All documentation relating to any collateral held by or 
available to the Surety.
    (c) Purpose of audit. SBA's audit will determine, but not be limited 
to:
    (1) The adequacy and sufficiency of the Surety's underwriting and 
credit analysis, its documentation of claims and claims settlement 
procedures and activities, and its recovery procedures and practices;
    (2) The Surety's minimization of Loss, including the exercise of 
bond options upon Contract default; and
    (3) The Surety's loss ratio in comparison with other Sureties 
participating in the same SBA Surety Bond Guarantee Program to a 
comparable degree.
    (d) Investigations. SBA may conduct investigations to inquire into 
the possible violation by any Person of the Small Business Act or the 
Investment Act, or of any rule or regulation under those Acts, or of any 
order issued under those Acts, or of any Federal law relating to 
programs and operations of SBA.