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CO: Denver’s Paperwork Burden on Women-Owned Businesses

UPDATE: We have been informed that there are four (not one) organizations that administer the federal Small Business Association’s (SBA) Women-Owned Small Business certification process, in addition to an option to self-certify.  Those options are detailed on the SBA website.

Denver’s process for certifying women-owned small businesses not only duplicates the federal paperwork, it includes several provisions that are significantly more intrusive, and puts potentially sensitive information in the hands of government employees.

The federal Women-Owned Small Business certification process is administered by the U.S. Women’s Chamber of Commerce, while the City and County of Denver administers its own process.  Watchdog Wire compared the two sets of questionnaires and required documents for corporations to qualify (Note: The document requirements for LLCs are slightly different from those of corporations.)

Almost all of the documents and questionnaires are the same, however, the few but intrusive differences are enough to keep Denver from accepting the federal certification, requiring the applicant to run through a similar on a completely different site, something that could—even if it were identical—take several hours.

Most of the documentation and questionnaire makes sense; they are, after all, intended to make sure that the business really is in the line of work it’s applying for, that the ownership and decision-making authority really is in women’s or minority hands, and that the company is a real entity, not simply a special-purpose shell corporation, or one that is owned and operated by another company.

For a corporation, Denver requires the minutes of all stockholder and board meetings. As is obvious, a great deal of sensitive and confidential information can be recorded in those minutes, including potential merger & acquisition activity, solicitation of business, attempts to secure business, contractors, vendors, and entry into new lines of business.

Denver requires an extensive personal financial statement for the owners, something not required by the federal process.

Finally, Denver requires that the business reveal the three largest contracts it has worked on recently, and the three largest active jobs it is currently working on.  For certain businesses, the clients may be confidential.

The potential for conflicts of interest, or the temptation to use such information for the benefit of friends or acquaintances is clear.  It’s true that government employees are bound by strict confidentiality, and no doubt the vast majority of them are honorable professionals.  Nevertheless, individual abuses of such information could be very difficult to trace and prosecute, while the damage could be immediate and lasting.

Tammy Trujillo from the Division of Small Business said that the program questionnaires differed because they were the result of two different programs: a federal one funded with federal dollars and a local one funded with City and County dollars.  The Denver program is the result of the 2013 Disparity Study which showed significant underutilization of minority and woman-owned small businesses in city contracting.

She said that they use the contract size information to prove that the company can handle the scope of work, and often verified that information with a site visit by an analyst.  Trujillo also said that the stockholders’ and board minutes were used to verify who actually had control over the company’s decision-making.

Such designations are appealing because of set-asides and targets for business-owners who are members of traditionally-disadvantaged groups, or groups who have in the past found it difficult to break into lines of work where word-of-mouth and connections can be important.  In additions, some large corporations like to advertise that they do business with such owners for public relations purposes, and for the purpose of establishing their own connections in minority communities or with networks of businesswomen.

Opponents have pointed out that the very process of establishing the qualification criteria could be open to manipulation.  Whether or not one philosophically agrees with set-asides for women- and minority-owned businesses, however, one can certainly question why the process of qualifying should require the owner to turn over information that could potentially be used against them.  Especially when they’ve already gone through a similar and thorough vetting process for the federal qualification.

The following is the list of documents required for a corporation to be certified as a Woman-Owned Small Business:

  • Birth certificates, Naturalization papers, or unexpired passports for owners who are women;
  • (i) Articles of incorporation and any amendments; (ii) By-laws and any amendments;(iii) All issued stock certificates, including the front and back copies, signed in accord with the by-laws; (iv) Stock ledger; and (v) Shareholder or voting agreements, if any;
  • The firms most recent Federal 941 Quarterly Payroll Tax Returns;
  • Federal business tax returns and all schedules for the last three years;
  • Current business financial statements.
  • A written financial and management history of your firm including ownership origination and changes, management, cash and equity contributions;
  • Resumes for all owners (more than 10%) to include education, training, employment and current job responsibilities;
  • W-2 or 1099 for every Officer, Director or Owner;
  • Current bank signature card or corporate resolution detailing authorized signers;
  • A copy of the most recent itemized payroll for all employees  (Not required for Denver)
  • Signed leases for primary facilities;
  • A list of all major capital assets, such as property, office/facilities, equipment, vehicles with value, ownership or lease status noted, and (if leased) the name of the entity from which the equipment was leased;
  • Documentation of any transfer of assets to or from the firm or between Officers, Directors or Owners within the last two years;
  • Copies of all licenses and/or certifications required for primary business activities of the firm;

The following information is required on the questionnaire:

  • Business Size Declaration
    • Major Products & Services
    • # of employees
    • Gross sales or receipts, three last years
  • Direct Ownership & Gender
    • Relationship to other owners
    • Initial Investment
    • Other businesses managed?
    • Other businesses employed w/relationship to this firm?
  • Officers & Board
  • Firm Control, including:
    • Financial Decisions/Transactions
    • Estimating/Bidding/Execution
    • Personnel/Operations
    • Major Purchases
    • Marketing/Sales
  • Licenses/Expertise
  • Share with Another Business
    • Equipment/Vehicles
    • Office/Storage Space
    • Employees
  • Financial Control
    • Accounts
    • Loans
    • Contributions/Asset Transfers to/from any owners (2 year look-back)

Joshua Sharf

Joshua is co-editor of Watchdog Wire - Colorado. Contact him at Colorado@WatchdogWire.com to learn how to get involved with citizen journalism in the Boulder State. Follow him on Twitter: @joshuasharf

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