SBA Regulatory Compliance & Risk Management 3 — Questions and Answers
Question 1: A small business with federal contracts must comply with which regulation requiring affirmative action plans if it has 50 or more employees and contracts of $50,000 or more?
- Title VII of the Civil Rights Act
- Executive Order 11246 (Correct answer)
- The Davis-Bacon Act
- The Service Contract Act
Correct answer: Executive Order 11246
Executive Order 11246 requires federal contractors meeting the thresholds to develop written affirmative action plans and prohibits employment discrimination.
Question 2: Under the Sarbanes-Oxley Act (SOX), which provision most directly affects small businesses that are publicly traded?
- Mandatory union representation
- Internal controls over financial reporting (Section 404) (Correct answer)
- SBA loan interest rate caps
- OSHA reporting requirements
Correct answer: Internal controls over financial reporting (Section 404)
SOX Section 404 requires management to assess and report on the effectiveness of internal controls over financial reporting for public companies.
Question 3: A business continuity plan (BCP) differs from a disaster recovery plan (DRP) primarily because the BCP:
- Focuses only on IT systems restoration
- Covers the entire organization's operations during disruption, not just IT (Correct answer)
- Is required by federal law for all SBA loan recipients
- Applies only to natural disasters, not cyber incidents
Correct answer: Covers the entire organization's operations during disruption, not just IT
A BCP addresses how the whole business continues operating during any disruption, while a DRP is typically a subset focused on restoring IT and data systems.
Question 4: The Environmental Protection Agency (EPA) requires small businesses that generate hazardous waste to register as which category if they generate between 100 and 1,000 kg per month?
- Very Small Quantity Generator (VSQG)
- Small Quantity Generator (SQG) (Correct answer)
- Large Quantity Generator (LQG)
- Exempt Household Generator
Correct answer: Small Quantity Generator (SQG)
Businesses generating 100–1,000 kg of hazardous waste per month are classified as Small Quantity Generators under RCRA, with specific storage and reporting rules.
Question 5: Which practice best describes a 'compliance audit' in a small business context?
- An IRS examination of past tax returns
- A systematic review of business operations to ensure adherence to applicable laws and regulations (Correct answer)
- A financial review conducted by an SBA loan officer before disbursement
- An internal evaluation of employee performance
Correct answer: A systematic review of business operations to ensure adherence to applicable laws and regulations
A compliance audit systematically examines whether a business's practices, records, and policies conform to relevant legal and regulatory requirements.
Question 6: Under the Family and Medical Leave Act (FMLA), a small business is covered if it employs:
- At least 25 employees within 75 miles
- At least 50 employees within 75 miles (Correct answer)
- At least 50 employees nationwide
- At least 15 employees within 50 miles
Correct answer: At least 50 employees within 75 miles
FMLA applies to employers with 50 or more employees within 75 miles of the worksite, entitling eligible employees to 12 weeks of unpaid leave.
Question 7: A small business implementing a 'whistleblower policy' is primarily aiming to:
- Comply with union organizing requirements
- Encourage employees to report misconduct without fear of retaliation (Correct answer)
- Meet SBA collateral documentation requirements
- Reduce payroll tax liability
Correct answer: Encourage employees to report misconduct without fear of retaliation
Whistleblower policies protect employees who report illegal or unethical activities from retaliation, supporting a culture of compliance.
SBA Regulatory Compliance & Risk Management 3
A small business with federal contracts must comply with which regulation requiring affirmative action plans if it has 50 or more employees and contracts of $50,000 or more?