Performance Audit Report 

The SBA Needs to Improve Its Management of the State Trade and Export
 

Promotion Grant Program
 

For Official Use Only 
 

 

 

 

 

 

 

 

 

U.S. Small Business Administration
 

Office of Inspector General
 

Washington, D.C. 20416
 

REPORT TRANSMITTAL 

REPORT NO. 12-21 

DATE: September 25, 2012 

TO: Dario Gomez 

Associate Administrator for International Trade 

SUBJECT:	 The SBA Needs to Improve Its Management of the State Trade and Export Promotion 

Grant Program 

This report presents the results of our audit, Review of the Small usiness !dministration’s (S!’s) State 

Trade and Export Promotion (STEP) Grant Program. Our objectives were to determine the extent to 

which STEP grant recipients are measuring program performance and the results of those 

measurements, and to determine the overall management and effectiveness of the program. 

We appreciate the courtesies and cooperation of the Office of International Trade and the Grants 

Management Office during this audit. If you have any questions concerning this report, please call me at 

(202) 205-7390 or Riccardo R. Buglisi, Director, Business Development Programs Group, (202) 205-7489. 

*** 

/S/ original signed 

John K. Needham 

Assistant Inspector General for Auditing 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The SBA Needs to Improve Its Management of the State Trade and 

Export Promotion Grant Program 

What OIG Audited 

This report presents the results of the SBA Office of 

Inspector General’s audit, entitled Review of S!’s 

State Trade and Export Promotion (STEP) Grant 

Program. The Small Business Jobs Act of 2010 

required the SBA Office of Inspector General to 

conduct a review of the STEP Grant Program. 

There were two objectives for this audit: 1) to 

determine the extent to which grant recipients were 

measuring program performance and the results of 

those measurements and 2) to review the overall 

management and effectiveness of the program. 

To achieve our objectives, we reviewed the Small 

Business Jobs Act of 2010 and the FY 2011 STEP 

Program Announcement. We also conducted site 

visits and obtained documentation from the recipients 

of the five largest STEP grants: California, 

Pennsylvania, Washington, Michigan, and Illinois. 

In addition, we interviewed SBA personnel from the 

Office of International Trade (OIT) and the Office of 

Grants Management (OGM). We also reviewed 

pertinent Codes of Federal Regulation, Federal Public 

Laws, and Office of Management and Budget (OMB) 

Circular A-123. 

OIG Recommendations 

The OIG recommended a total of nine specific actions, 

all of which were addressed to S!’s !ssociate 

Administrator (AA) for International Trade.
 

We believe that these recommended actions will 

improve the accountability and performance of the
 

STEP grant program.
 

Agency Comments and OIG Response 

On August 14, 2012, we provided a draft of this report 

to the OIT for comment. On September 11 and 

September 14, 2012, the AA for International Trade 

submitted formal comments on the draft of this 

report. We found that the AA for International Trade 

did not state whether management concurred or nonconcurred with seven of the nine recommendations. 

However, management was responsive to seven 

recommendations, partially responsive to one 

recommendation, and unresponsive to the remaining 

recommendation. 

What OIG Found 

Recipients of STEP grants did not implement adequate 

metrics by which to measure program performance. 

In addition, the results of performance measurements 

did not demonstrate whether grant recipients 

achieved milestones and remained on track to meet 

proposed goals. This occurred because OIT personnel 

did not hold STEP grant recipients accountable for 

meeting reporting requirements. As a result, grant 

recipients are behind schedule to achieve FY 2011 

performance goals and have been authorized to 

request no cost extensions in order to accomplish 

FY 2011 goals and expend federal funds. 

Further, SBA personnel did not meet with Congress to 

identify and clarify the FY 2011 STEP program 

measures for success, the first year of the program, 

which is contrary to key practices. This information 

could have allowed OIT personnel to communicate 

intended outcomes to applicants. In addition, OIT 

personnel could have ensured that grant recipients’ 

performance measures included measurable targets, 

established baselines against which to measure 

performance, and directly corresponded to ongress’ 

intentions for the FY 2011 STEP grant program. 

Without this information, grant recipients and OIT 

personnel could not ensure that the STEP program 

would have the effect that Congress intended. 

Additionally, OIT and OGM personnel mismanaged the 

STEP grant program by awarding a grant to an 

ineligible applicant, providing untimely and inaccurate 

responses to inquiries, and failing to enforce grant 

terms and conditions. Personnel from the OIT did not 

have the experience or training required to manage 

and administer such a complex grant program. 

Personnel also relied on inaccurate information, 

did not conduct adequate oversight, and did not 

maintain documentation in the grant award files. 

Due to S!’s mismanagement, more than $1 million in 

funding was misspent, grant recipients and SBA 

personnel were confused about the governance of the 

program, and OIT authorized no cost extensions that 

directly violate grant terms and conditions. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table of Contents 

Introduction .................................................................................................................................................. 1
 

Results........................................................................................................................................................... 3
 

Finding: Grant Recipients’ Performance Measures Did Not Demonstrate Whether STEP Program Goals 

Were Achievable ....................................................................................................................................... 3
 

Grant Recipients Developed Performance Measures That Did Not Meet Federal Standards as 

The Results of Grant Recipients’ Performance Measurements Did Not Demonstrate that the STEP
 

Required................................................................................................................................................ 5
 

Grant Program Would Achieve Desired Outcomes .............................................................................. 6
 

Personnel from the S!’s Offices of International Trade and Grants Management Did Not Hold 

Grant Recipients Accountable for Reporting Requirements ................................................................ 7
 

Meeting with Congress Would Have Been Useful in Determining Specific STEP Program Goals ........ 7
 

Conclusion............................................................................................................................................. 8
 

Recommendations................................................................................................................................ 8
 

Finding: The S!’s Mismanagement of the STEP Grant Program May Result in the Program Not 

Achieving Intended Results and Misspent Funds ..................................................................................... 9
 

The SBA Awarded a STEP Grant to an Ineligible Recipient ................................................................... 9
 

The SBA Did Not Effectively Communicate with Grant Recipients....................................................... 9
 

The SBA Did Not Hold Grant Recipients Accountable for Grant Terms and Conditions.....................11
 

Inexperience and Inadequate Oversight Resulted in S!’s Mismanagement of STEP Grants...........12
 

Conclusion...........................................................................................................................................12
 

Recommendations..............................................................................................................................13
 

Agency Comments and Office of Inspector General Response ..................................................................13
 

Actions Required.........................................................................................................................................16
 

Appendix I: Scope and Methodology.........................................................................................................17
 

Use of Computer Processed Data ...........................................................................................................17
 

Prior Coverage.........................................................................................................................................17
 

Appendix II: FY 2011 State Trade and Export Promotion (STEP) Grants Awarded.....................................18
 

Appendix III: Agency Comments.................................................................................................................19
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

Introduction 

This report presents the results of our audit project, Review of the Small Business 

!dministration’s (S!’s) State Trade and Export Promotion (STEP) Grant Program. The Small 

Business Jobs Act of 20101 required the SBA Office of Inspector General to perform a review of 

the STEP Grant Program. We were required to provide our report to the Committee on Small 

Business and Entrepreneurship of the Senate and the Committee on Small Business of the House 

of Representatives no later than September 30, 2012. 

Objectives 

There were two objectives for this audit: 1) to determine the extent to which STEP grant 

recipients were measuring the performance of the activities being conducted and the results of 

those measurements, and 2) to review the overall management and effectiveness of the STEP 

Grant Program. 

To achieve these objectives, we judgmentally selected all STEP grants exceeding $1 million for 

review. Six grant recipients met this threshold: the states of California, Illinois, Michigan, 

Pennsylvania, Washington, and the Commonwealth of the Northern Marianas Islands (NMI). 

In addition, we reviewed the Small Business Jobs Act of 2010 and the Small Business 

!dministration’s FY 2011 STEP Program Announcement. We also conducted site visits and 

obtained documentation from grant recipients in the states of Pennsylvania, California, 

Washington, Michigan, and Illinois. Further, we interviewed SBA personnel from the Office of 

International Trade (OIT) and the Office of Grants Management (OGM). We also reviewed 

pertinent Codes of Federal Regulation (CFRs), Public Law 111-240, and OMB Circular A-123. 

We conducted this audit from March 2012 to June 2012 in accordance with generally accepted 

government auditing standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the evidence obtained provides a 

reasonable basis for our findings and conclusions based on our audit objectives. 

Background 

Office of International Trade 

Prior to December 2010, the OIT was a division within S!’s Office of apital !ccess; It was led 

by the Director for International Trade, who reported to the Associate Administrator (AA) for 

Capital Access. The Small Business Jobs Act of 2010 required the SBA Administrator to appoint 

an AA for International Trade no later than December 27, 2010. In conjunction with this new 

position, the OIT’s reporting structure was realigned: the !! for International Trade reported 

directly to the Office of the Administrator. On December 23, 2010, the Administrator approved 

the reorganization that included the formation of the OIT and appointed an AA for International 

Trade in August 2011. 

1 Public Law 111-240, Small Business Jobs Act of 2010, September 27, 2010 

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State Trade and Export Promotion Grant Program 

The Small Business Jobs Act of 2010 authorized the SBA to establish the STEP Grant Program as a 

three-year trade and export pilot program. Congress authorized funding of $30 million per year 

in fiscal years (FY) 2011, 2012, and 2013. To execute the program, the SBA awarded grants to 

states with the goal of assisting eligible small business concerns2 with exporting. The objectives 

of the program were (1) to increase the number of eligible small business concerns in the state 

that export, and (2) to increase the export volume of those eligible small businesses that already 

export. The express purpose of the program was to award grants to states to execute export 

programs that assist eligible small business concerns in: 

participation in a foreign trade mission;
 

a foreign market sales trip;
 

a subscription to services provided by the US Department of Commerce;
 

the payment of website translation fees;
 

the design of international marketing media;
 

a trade show exhibition;
 

participation in training workshops; or
 

any other export initiative determined appropriate by the AA for S!’s Office of 

International Trade.
 

The Small usiness Jobs !ct of 2010 defined the term “state” to include each of the 50 several 

states, the District of Columbia, the Commonwealth of Puerto Rico, the US Virgin Islands, Guam, 

and American Samoa. The AA for International Trade was responsible for establishing the STEP 

grant program and was given the authority to award each of the 55 eligible recipients’ no more 

than one grant per fiscal year on a competitive basis. In addition, the AA for International Trade 

was required to submit an annual report to Congress. This report must include the number and 

value of grants made under the program in the preceding year, a list of states that received a 

STEP grant, and a list of activities performed under each grant. Further, the report must 

describe the effect that each grant has had on exports of eligible small business concerns. 

The OIT has not provided an annual report to Congress because the first year of the program is 

not yet complete. In addition to establishing the STEP program and awarding grants to eligible 

recipients, the OIT is responsible for the management and oversight of each grant. However, 

the Office of Grants Management (OGM) oversees the financial aspects of the STEP program. 

In FY 2011, OIT awarded 52 STEP grants valued at $29,999,875. For a full list of the FY 2011 

STEP grants awarded, see Appendix II. Between September 17, 2011 and September 30, 2011, 

the SBA obligated FY 2011 single year appropriations to fund the STEP program that states 

executed during FY 2012. 

2 Small business concerns that are eligible to participate in STEP activities must be in business for more than one 

year; operate profitably; demonstrate an understanding of costs associated with exporting; possess a strategic 

plan for exporting; and meet small business size requirements as defined in 13 CFR 121. 

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On March 30, 2012, the SBA Office of Inspector General issued an advisory memorandum3, 

in which the audit team determined that STEP grant number SBAHQ-11-IT-0047, awarded to the 

Commonwealth of the Northern Mariana Islands (NMI) and valued at $1,022,781 was 

inappropriate because the NMI did not meet the definition of the term “state” as prescribed by 

the Small Business Jobs Act of 2010. As a result of this memorandum, grant number 

SBAHQ-11-IT-0047 was terminated on March 27, 2012. 

Nature of Limited or Omitted Information 

Our audit included performance results for the first and second quarters of the FY 2011 STEP 

grant program, which was executed throughout FY 2012. Because Congress mandated that we 

provide our report by September 30, 2012, we were unable to include performance results for 

quarters three and four. According to grant recipients, performance results related to export 

sales may not be realized until future years. 

Review of Internal Controls 

The Office of Management and Budget (OMB) Circular A-1234 provides guidance to federal 

managers on improving the accountability and effectiveness of federal programs and operations 

by establishing, assessing, correcting, and reporting on internal controls. It also requires a 

strengthened process for conducting management’s assessment of the effectiveness of internal 

controls over financial reporting based on widely recognized internal control standards.
 

We determined that material internal control weaknesses existed in the award and
 

management of the STEP grant program. Specifically, the SBA did not:
 

maintain documentation to support its rationale for the award of STEP grants ;
 

ensure that STEP grant recipients’ goals aligned with ongress’ intent for the STEP
 

program ;
 

perform adequate reviews of quarterly reports submitted by grant recipients ; and
 

enforce STEP grant terms and conditions.
 

Implementing our recommendations will improve S!’s award process and overall management
 

of the STEP grant program.
 

Results 

Finding: Grant Recipients’ Performance Measures Did Not Demonstrate Whether 

STEP Program Goals Were Achievable 

Recipients of STEP grants did not implement adequate metrics by which to measure program 

performance. The results of performance measurements that we reviewed did not demonstrate 

whether STEP grant recipients achieved milestones to ensure that they remained on track to 

3 SBA OIG Advisory Memorandum Number 12-12, The S!’s Office of International Trade Inappropriately Awarded 

a One Million Dollar State Trade and Export Promotion (STEP) Program Grant to an Ineligible Recipient, 

March 30, 2012. 4 OMB Circular A-123, Management’s Responsibility for Internal ontrol, December 21, 2004 

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meet proposed goals. This occurred because OIT personnel did not hold grant recipients 

accountable for meeting established federal and programmatic reporting requirements. As a 

result, STEP grant recipients may fall short of ongress’ expectations and may force S! to 

return a high amount of unexpended STEP funding. Contrary to key performance accountability 

practices, OIT personnel also did not consult with Congress to ensure that STEP grant program’s 

performance goals5 were specific and results-oriented. This prevented SBA personnel from 

discussing performance measures and goals with grant recipients to ensure that they were in 

line with ongress’ intended outcomes. 

The Small Business Jobs Act of 2010 established the STEP grant program’s strategic goals,6 which 

were to increase the number of small businesses that export and increase the export volume of 

those small businesses that already export. 

The FY 2011 STEP Program Announcement and the STEP Grant Notices of Award state that at 

the end of each federal fiscal quarter, grant recipients must provide quarterly Performance 

Progress Reports to SBA program officials. These reports must include financial reports, 

performance narratives, and quarterly data reflecting project activities and results. 

The narrative section of each quarterly performance report must include the following: 

! brief summary of the period’s activities, challenges, and accomplishments and 

success stories;
 

Measurement data and a comparison of actual accomplishments to the goals 

established for the reporting period;
 

Any reasons for goals not being met and a proposed plan of action or steps already
 

taken to overcome the identified difficulties;
 

Information relation to actual financial expenditures of budget cost categories 

versus the quarterly advance or reimbursement received, including an explanation
 

of any cost overrun;
 

Names of key personnel (those individuals expending 50 percent or more time); and
 

Description of project activities for small business regarding trade and exporting.
 

! grant recipient’s performance measures7 should capture the most important aspects of a 

program’s objectives. These measures are the indicators that are used to gauge program
 

performance and should incorporate targets and timeframes to measure performance. 

Targets are the quantifiable or otherwise measurable characteristics that determine how
 

well a program must be executed in order to achieve performance objectives.
 

Appropriate performance measures should include both measurable targets and timeframes.
 

5 Performance goals are the target levels of performance expressed as a measurable objective, against which 

actual achievement can be compared; they can be stated as either outcomes or outputs. 

6 Strategic goals are statements of purpose or mission and should be used to develop specific, operational 

performance goals. 

7 Performance measures are the indicators or metrics that are used to gauge program performance and can be 

either outcome or output measures. 

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Grant Recipients Developed Performance Measures That Did Not Meet Federal Standards as 

Required 

All five grant recipients that we reviewed developed year-end performance goals for the 

FY 2011 STEP grant program. However, none of these STEP grant recipients developed 

performance measures that established monthly or quarterly targets or established baselines by 

which to measure performance. All STEP grant recipients were also required to develop a chart 

of measurable monthly projections for all activities to be performed. These monthly projections 

were intended to demonstrate how each grant recipient planned for its STEP program to 

progress throughout the year. The annual performance goals for each of the states that we 

reviewed were not broken down into monthly or quarterly targets. Therefore, OIT personnel 

were not able to accurately determine whether grant recipients were on track to achieve annual 

performance goals or fully expend federal STEP funding because the recipients did not develop 

targets that could be measured at regular intervals. 

None of the five STEP grant recipients that we reviewed established baselines or timelines 

against which to measure performance. For example, Michigan’s FY 2011 technical proposal did 

not include historical data regarding the number of small businesses involved in exporting or the 

markets in which current exporters were involved. In addition, the state relied on its strategic 

partners to establish a baseline for export sales; the baseline included small and medium 

businesses and could not be verified. However, Michigan developed the following performance 

goals: 1) increase the value and volume of exports by 7 percent; 2) increase the number of small 

business exporters by 15 percent; and 3) increase the number of new markets for small business 

exporters by 25 percent. Without establishing a verifiable baseline for small business export 

sales, the number of current small business exporters, and current export markets, it was not 

possible for OIT personnel to determine Michigan’s success in these areas. For instance, a 

15 percent increase in the number of small business exporters from 100 represents a smaller 

increase than a 15 percent increase from 200 small business exporters. In addition, Michigan 

did not indicate when they expected to realize export sale increases. According to 

representatives from multiple states, export sales may not be realized until future years. 

Without providing timelines to realize export sales, OIT personnel could not determine whether 

Michigan achieved its performance goal to increase export sales by seven percent. 

Establishing baselines and timelines is essential to measuring targets; without them, there is no 

way to verify that recipients achieve their performance measures. 

The state of Illinois developed performance measures that did not promote the goals of the 

STEP grant program. Rather, Illinois’ performance measures focused on increasing the number 

of small businesses that receive export assistance from the state’s Office of Trade and 

Investment. In addition, the state established goals to provide financial and technical assistance 

to small businesses in order to attend trade shows and conduct market research. 

These performance measures do not relate to the overarching STEP program strategic goals to 

increase the number of small business exporters and to increase the volume of exports for those 

small businesses that are already exporting. Providing small businesses with financial and 

technical assistance in order to attend trade shows or conduct market research do not align with 

the strategic goals of the STEP grant program. However, they are included in the list of activities 

a state may conduct in order to meet these strategic goals. In addition, Illinois’ performance 

measures did not contain measurable targets. The state used terms such as “significant 

expansion” and “direct growth in dollar value of export sales.” These are not measurable 

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characteristics and did not allow the grant recipient to measure performance in a way that 

would be meaningful to Congress . 

The Results of Grant Recipients’ Performance Measurements Did Not Demonstrate that the 

STEP Grant Program Would Achieve Desired Outcomes 

The first and second quarter reports submitted by the five grant recipients we reviewed did not 

include effectiveness and efficiency information required by the FY 2011 STEP Program 

Announcement and the Notices of Award. For example, none of the quarterly reports that we 

reviewed for California, Illinois, Michigan, Pennsylvania, and Washington contained a 

comparison between estimated and actual accomplishments for the period, as required by the 

program announcement. These five grant recipients did not develop quarterly or monthly 

targets by which to measure performance and therefore, could not compare estimated 

accomplishments with actual accomplishments for a particular period. Without these types of 

comparisons, SBA personnel were unable to determine accurately whether grant recipients 

were on track to achieve annual performance goals. 

Grant recipients estimated the value of federal STEP funds that would be expended in each 

quarter. None of the five states that we reviewed were able to expend their federal STEP funds 

as estimated. For example, in its FY 2011 STEP budget, Pennsylvania estimated that it would 

expend 25 percent of its federal STEP funds in the first quarter. However, in its quarter one 

Performance Progress Report, Pennsylvania had obligated only 1.65 percent of the total STEP 

grant award. Similarly, in its FY 2011 STEP budget, California estimated that it would expend 

50 percent of its federal funding throughout quarters one and two. ontrary to the state’s 

budget submission, representatives from California stated that the majority of STEP-funded 

activities would take place in the third and fourth quarters. The state submitted a single 

reimbursement request for the first two quarters and received only 4.24 percent of the overall 

STEP budget, despite prior indications that 50 percent of the budget would have been 

expended. We determined that the grant recipients that we reviewed were far behind schedule 

in terms of federal funding expenditures. 

In addition to these omissions, we found that the information contained in the grant recipients’ 

quarterly reports was insufficient to support STEP program goals and objectives. For instance, 

California, Pennsylvania, Washington, and Michigan categorized participating firms as “Small 

and Medium Enterprises (SMEs).”

8

On November 8, 2011, the OIT issued a memorandum 

entitled “larification of STEP Grant Issues.” This memorandum included the definition of the 

term “eligible small business concern” as it applies to the STEP program – see footnote 2 on 

page 6 for further clarification. The definition of a STEP “eligible small business concern” does 

not correlate to the definition of an SME. !dditionally, Pennsylvania’s first quarter performance 

report included both the small and large businesses that were scheduled to attend trade shows 

and missions, rather than reporting on only those business concerns that were STEP program 

eligible. According to Pennsylvania representatives, they could not exclude large businesses 

from attending trade shows sponsored by STEP funds because the trade shows were sponsored 

by the state. As a result, Pennsylvania inaccurately reported the results of qualified small 

businesses participating in STEP activities. California, Washington, and Michigan were also 

8 !ccording to the US Department of ommerce’s International Trade !dministration, small and medium 

enterprises (SMEs) are defined as firms with 500 or less employees. 

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unable to verify that only eligible small business concerns participated in STEP activities and 

received federal STEP funds. 

Upon reviewing first quarter performance reports, SBA personnel determined that the free-form 

narrative report presented several problems. Grant recipients provided inconsistent 

information, did not fulfill requirements as prescribed by the FY 2011 STEP Program 

Announcement and Notices of Award, and none of the states followed a standard reporting 

format. In response to these issues, OIT personnel developed and distributed a simplified 

spreadsheet to use for future quarterly reports. This template was an improvement over the 

narrative reports, in that it provided a consistent method for each grant recipient to identify 

accomplishments throughout the period and what was planned for subsequent quarters. 

However, the template still did not provide comparisons between estimated accomplishments 

and expenditures with actual accomplishments and expenditures. Without monthly or quarterly 

milestones and baseline data, this report template did not provide SBA personnel with an 

accurate representation of grant recipients’ progress in achieving annual goals and STEP 

program objectives. 

Personnel from the S!’s Offices of International Trade and Grants Management Did Not Hold 

Grant Recipients Accountable for Reporting Requirements 

By applying for and accepting a STEP grant award, states agreed to the terms and conditions of 

both the FY 2011 STEP Program Announcement and the Notice of Award that each received. 

However, STEP grant recipients did not meet the reporting requirements established in these 

documents and SBA officials did not hold them accountable for adhering to the reporting 

requirements. According to three of the grant recipients with whom we met, SBA personnel did 

not provide feedback to the states on the first and second quarter narrative reports. 

Therefore, the SBA did not inform states that they failed to meet established standards for 

quarterly reporting. In addition, most of the grant recipient’s first and second quarter reports 

identified numerous setbacks and challenges but did not include proposed steps or a discussion 

of actions taken to address these problems. Small Business Administration personnel should 

have required grant recipients to propose remedial and corrective actions for problems 

identified in each reporting period. According to OIT personnel, they did not spend enough time 

reviewing quarterly reports. States may have been held accountable for meeting reporting 

requirements and submitting mitigation plans if SBA personnel had performed adequate 

reviews of quarterly reports. 

Meeting with Congress Would Have Been Useful in Determining Specific STEP Program Goals 

The Small Business Jobs Act of 2010 established broad parameters by which the success of the 

STEP grant program should be measured. A key practice that agencies should follow is 

consulting with Congress and other stakeholders to establish a basic understanding of specific 

program expectations and to ensure the credibility and usefulness of performance information.9 

According to OIT personnel, no one from the SBA met with Congressional staff members to 

identify and clarify the STEP program’s measures for success for FY 2011, the first year of the 

9 Government Accountability Office (GAO) Report Number GAO-06-1046, Grants Management: Enhancing 

Performance Accountability Provisions Could Lead to Better Results, September 2006 and GAO Report 

Number GAO-12-621SP, Managing for Results: A Guide for Using the GPRA Modernization Act to Help Inform 

Congressional Decision Making, June 2012. 

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program. Had SBA personnel consulted with Congress to develop results-oriented goals, the OIT 

could have communicated the program’s intended outcomes for states that intended to apply 

for FY 2011 STEP grant awards. In turn, this information could have allowed grant applicants to 

develop strong performance measures that included measurable targets, established baselines 

against which to measure performance, and directly corresponded to ongress’ intentions for 

the STEP grant program. 

Conclusion 

Grant recipients were behind schedule for achieving FY 2011 performance goals. To accomplish 

FY 2011 goals and expend federal funds, STEP grant recipients were authorized to request no 

cost extensions to perform STEP activities originally proposed for FY 2011 in FY 2012. It is 

unclear whether grant recipients will achieve their established goals. Through proper 

management, SBA personnel could have prevented the need for no cost extensions of FY 2011 

STEP grants by performing adequate reviews of quarterly reports and holding grant recipients 

accountable for reporting requirements. Further, due to the S!’s lack of communication with 

Congress, STEP program expectations were not well defined. Grant recipients and OIT 

personnel did not receive specific guidance as to the desired outcomes of the program and 

could not ensure that the STEP program would have the effect that Congress intended. 

Recommendations 

We recommend that the Associate Administrator for the Office of International Trade: 

1.	 Meet with Congress to determine STEP program expectations for FY 2012. 

2.	 Ensure that STEP grant recipients’ FY 2012 performance measures align with ongress’ 

expectations. 

3.	 Require STEP grant recipients to establish and provide the SBA with quarterly milestones 

that will measure effectiveness and efficiency on a quarterly basis. 

4.	 In cases where STEP grant recipients do not meet established milestones, require grant 

recipients to provide the SBA with revised work plans and budget estimates to meet 

proposed performance goals. 

5.	 Hold STEP grant recipients accountable for adhering to reporting requirements established 

in the Notices of Award and the FY 2012 STEP Grant Program Announcement. 

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Finding: The SB!’s Mismanagement of the STEP Grant Program May Result in the 

Program Not Achieving Intended Results and Misspent Funds 

Small Business Administration OIT and OGM personnel mismanaged the STEP grant program. 

For example, SBA personnel awarded a grant to an ineligible applicant, did not provide timely 

responses to grant recipient inquiries, and sometimes provided inaccurate information. 

In addition, documentation was not properly maintained in the grant award files. Also, SBA 

personnel did not have the experience or the training required to manage and administer a 

grant program of this magnitude and complexity . Moreover, SBA personnel conducted 

inadequate oversight of grantee activities, leaving the STEP program vulnerable to waste. 

Due to S!’s mismanagement, STEP funding may be misspent and the program may not achieve 

the desired results. 

!ccording to the STEP program announcement, S!’s duties, and responsibilities were to ensure 

that STEP activities adhered to federal regulations and the STEP program announcement. 

To accomplish this task, SBA personnel were required to: 

Ensure federal funds are used effectively and efficiently;
 

Provide written approval of contracts supported by project funds;
 

Review performance reports and financial records for completeness and accuracy; and
 

Conduct mid-year and year-end reviews of programmatic and financial aspects of the 

State STEP projects.
 

The SBA Awarded a STEP Grant to an Ineligible Recipient 

The Commonwealth of the Northern Mariana Islands (NMI) received a $1,022,781 STEP grant, 

despite the fact that the NMI was not an eligible recipient according to the Small Business Jobs 

Act of 2010. Officials from the SBA could not provide any rationale for making the award and 

stated that former personnel made the decision based on an opinion from S!’s Office of 

General Counsel. However, they could not provide any documentation to substantiate 

ounsel’s opinion that NMI was an eligible recipient. In response to Advisory Memorandum 

Number 12-12, The S!’s Office of International Trade Inappropriately !warded a One Million 

Dollar State Trade and Export Promotion (STEP) Program Grant to an Ineligible Recipient 

(see footnote 3, page 7), the S! terminated NMI’s STEP grant prior to disbursing any funds. 

As a result, the SBA misallocated $1,022,781 of STEP funds that could have been put to better 

use by additionally funding the other 51 STEP grant recipients. See Appendix II for a full list of 

FY 2011 STEP grant awards. 

The SBA Did Not Effectively Communicate with Grant Recipients 

The SBA mismanaged the STEP grant program by providing untimely and contradictory 

responses to inquiries, failing to enforce grant terms, and conducting inadequate reviews of 

recipient submissions. In doing so, the SBA did not fulfill its duty to oversee STEP project 

activities and ensure that federal funds were used effectively and efficiently. 

Four of the five grant recipients with whom we met stated that SBA personnel failed to respond 

to inquiries in a timely manner. For example, the state of Washington submitted its first quarter 

request for reimbursement on January 30, 2012 and did not receive approval for payment until 

April 26, 2012. During this 87-day span, representatives from the state of Washington 

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contacted the SBA multiple times and rarely received a prompt response. One month after 

submitting documents for reimbursement, the SBA responded via e-mail, stating that they “have 

not had the opportunity to review these requests;” Similarly, Pennsylvania, Washington, and 

Michigan personnel felt that the SBA was slow to respond to programmatic issues, such as 

adherence to the Fly !merica !ct and clarification on the definition of the term “eligible small 

business concern;” 

In addition to untimely responses, SBA personnel provided grant recipients with contradictory 

information. For example, the state of Pennsylvania had questions regarding reimbursement for 

pre-award costs. Title 2 of the Code of Federal Regulations (CFR) Section 22510 states that grant 

recipients may be reimbursed for pre-award costs; however, the Grant Officer’s Technical 

Representative (GOTR) advised Pennsylvania that it could not be reimbursed for those costs. 

On November 8, 2011, the program manager issued a memorandum that reversed this decision. 

Pennsylvania and Washington also had concerns about the application of the Fly America Act. 

Initially, the SBA advised grant recipients that the Fly America Act did not apply and that 

subgrantees11 could be reimbursed for travel using non-U.S. carriers. After subgrantees 

reserved their flights, SBA personnel revised their position and determined that the Fly America 

Act applied to STEP grant recipients and subgrantees. 

Officials at the SBA also provided contradictory information regarding subgrants. Each of the 

grant recipients indicated that their state intended to subgrant a portion of its STEP funds. 

However, the Notice of Award provided to each grant recipient stated that federal STEP funds 

could not be subgranted. In the OIT’s November 8, 2011 memorandum, “larification of STEP 

Grant Issues,” the SBA further clarified that subgrants were not permissible under the STEP 

program. The memorandum also stated that express statutory authority was required to award 

subgrants and the Small Business Jobs Act of 2010 did not afford STEP grant recipients the right 

to award subgrants.12 Personnel from OIT instructed grant recipients to remove the word 

“subgrant” from their proposals and work plans and substitute it with words such as “stipend” 

and “voucher,” in effect, disguising the action; With S!’s permission, grant recipients changed 

the names of these activities without altering the intent to award subgrants. In doing this, SBA 

personnel provided information that was contradictory to grant terms and conditions and 

advised grant recipients to violate grant terms. In addition, S!’s guidance placed the grant 

recipients at risk of not being reimbursed for subgrants because grant recipients can only be 

reimbursed for costs in accordance with the approved budget and Notices of Award. If the SBA 

intended for the states to award subgrants, the SBA should have modified the Notices of Award 

to allow subgrants. 

Similarly, the Notices of Award allowed the SBA to issue no cost extensions that comply with 

specific provisions. A no cost extension allows the grant recipient to use grant funds beyond the 

expiration date in order to meet the needs established in the technical proposal. However, the 

provision requires extenuating circumstances, such as delays due to a “natural or man-made 

10 2 CFR 225, Appendix B – Selected Items of Cost 11 13 FR 143;3 defines the term “subgrant” as an award in the form of money made under a grant by a grantee to 

a subgrantee. The term includes financial assistance when provided by contractual legal agreement. 12 We reviewed federal laws and regulations and could not verify S!’s assertion in the “Clarification of STEP Grant 

Issues” memorandum, dated November 8, 2011. However, the grant terms and conditions prohibited the use of 

subgranting. 

10
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

disaster” and states that a grant recipient must not be awarded a follow-on grant to be 

performed during FY 2013; None of the grant recipients met S!’s definition of extenuating 

circumstances and each expects to receive another STEP grant in FY 2012. Contrary to the 

provision, SBA personnel said that they would allow states to use current year funds during the 

following year. In addition, SBA personnel did not take steps to modify grant terms and 

conditions. As a result, OIT personnel are placing grant recipients at risk of losing current 

funding because the grant recipients do not meet the requirements for a no cost extension. 

The SBA Did Not Hold Grant Recipients Accountable for Grant Terms and Conditions 

Grant recipients and SBA personnel signed Notices of Award, agreeing to the terms and 

conditions of the STEP grant. These terms included, but were not limited to: quarterly reporting 

requirements, no cost extensions, contracting and subgranting, and disallowed costs.13 

Personnel at the SBA did not enforce these terms and conditions as stated in the Notices of 

Award. For example, grant recipients were required to provide a written report to the SBA on 

progress made during each of the four quarters of the STEP grant. This report was to include a 

comparison between actual project accomplishments for the quarter and the projected 

accomplishments established for that period. However, none of the quarterly reports that we 

reviewed included this comparison. Personnel at the SBA did not provide feedback to grant 

recipients, nor did they request that quarterly reports be amended to include these required 

comparisons. Further, OIT personnel responsible for program oversight stated they did not 

perform adequate reviews of grant recipients’ quarterly reports. 

Likewise, grant recipients could only be reimbursed for activities conducted in accordance with 

the Notices of Award and approved budgets. Activities conducted outside the parameters of the 

Notices of Award and approved budgets result in disallowed costs and, when paid, are 

considered to be improper payments. Each of the states we reviewed had subgranted a portion 

of the STEP funds received by passing STEP funds to small businesses in order to subsidize trade 

show fees, travel expenses, and translation services. For instance, the SBA reimbursed 

Pennsylvania for trade shows attended by both large and small businesses. During the first 

quarter of performance, Pennsylvania sponsored six large businesses, allowing them to attend 

STEP-funded international trade shows. Rather than requesting a prorated reimbursement 

based on the percentage of small businesses in attendance at each show, Pennsylvania 

requested and received a full-cost reimbursement. Personnel at the SBA approved the 

reimbursement and processed it for payment without questioning these costs. Similarly, Illinois 

held several receptions, during which the state provided small business owners with information 

about the STEP program. However, Illinois’ Notice of Award prohibits the use of STEP funding 

for any entertainment costs, receptions, or other social activities. Again, officials at the SBA 

disregarded the parameters established by the Notice of Award and approved Illinois’ request 

for advance. Each of the states’ reimbursement and advance requests for quarter one were 

paid in full, despite the fact that four of the five included disallowed costs. 

13 2 FR 215;2 defines the term “disallowed costs” as those charges to an award that the federal awarding agency 

determines to be unallowable, in accordance with the applicable federal cost principles or other terms and 

conditions contained in the award. 

11
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inexperience and Inadequate Oversight Resulted in S!’s Mismanagement of STEP Grants 

Inexperience and limited training contributed to the mismanagement of the STEP grant 

program. The OIT was established on December 23, 2010 as an independent office with a direct 

chain of reporting to the SBA Administrator. The OIT had never administered a grant program 

and most personnel were unfamiliar with the laws and regulations that govern grants. 

In addition, OIT personnel assigned to the STEP program did not receive training or obtain GOTR 

certifications. Further, OGM personnel stated that none of the individuals assigned to the STEP 

program had managed this type of grant in the past, including the Grants Management Officers 

(GMOs).14 Because of their inexperience and inadequate training, SBA officials provided 

inconsistent and untimely direction to grant recipients. 

In addition, GOTRs inappropriately recommended payment for costs outside the scope of the 

grant terms and conditions, which may have led to a bottleneck for reimbursement and advance 

request approval. Grant management officers were each responsible for 150-200 grants, which 

did not allow them sufficient time to conduct thorough reviews of recipients’ requests for 

advance or reimbursement. Because GOTRs conducted insufficient reviews of advance and 

reimbursement requests, GMOs were forced to repeat the review process in order to correct 

mistakes. This added considerable time to the payment process, which according to one GMO, 

already included a lag time of six to eight weeks. 

Another contributing factor in the mismanagement of the STEP program was S!’s inadequate 

oversight. State representatives indicated that SBA personnel have not conducted any site visits 

or reviews related to the STEP grant program. According to an OIT official, GOTRs did not 

perform a detailed review of quarterly reports and requests for advance and reimbursement. 

This same official indicated that oversight was conducted based on trust between the GOTR and 

the grant recipient. Had SBA conducted adequate oversight, SBA officials might have 

determined that grant recipients were being reimbursed for disallowed costs and were behind 

schedule. In addition, SBA personnel could have directed grant recipients to take appropriate 

action to expend STEP funds in accordance with grant terms and conditions and accelerate the 

schedule. 

Conclusion 

The SBA misallocated $1,022,781 in STEP funds by awarding a grant to the NMI, which was not 

an eligible recipient. These funds could have been put to better use by additionally funding 

eligible grant recipients’ programs. Instead, the SBA will likely return the funds to the US 

Department of the Treasury because the funds expire on September 30, 2012. This would 

defeat ongress’ intent to award $30 million to eligible STEP grant recipients. Had S!’s Office 

of International Trade been more experienced with grant program management, they may have 

recognized many of the program’s shortcomings. Experienced grant personnel also could have 

been more responsive and consistent in their communications with STEP grant recipients, 

leading to a more effective and efficient program. However, inconsistent interpretations of the 

Notices of Award, the FY 2011 STEP Program Announcement, and the Code of Federal 

14 The Grants Management Officer (GMO) is the SBA official with delegated authority to obligate federal funds by 

signing the Notice of Award. According to the STEP grant program GMOs, they are responsible for monitoring 

and administrating all financial aspects of the STEP grants, including payment of advance and reimbursement 

requests. 

12
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulation (CFR) appear to have created confusion for grant recipients and SBA personnel. 

Further, S!’s mismanagement has caused OIT to authorize grant recipients to request no cost 

extensions contrary to the grant terms and conditions. 

Recommendations 

We recommend that the Associate Administrator for International Trade: 

6.	 Document and maintain all analyses, evaluations, and rationale used to award STEP grants. 

7.	 Provide Grant Officers Technical Representative (GOTR) training to OIT personnel acting in 

that capacity. 

8.	 Establish and implement a policy requiring GOTRs to conduct in-depth reviews of STEP grant 

recipients’ quarterly submissions and provide feedback to grant recipients; 

9.	 Consult with the Office of Grants Management (OGM) to modify STEP grant terms and 

conditions to align with S!’s management of the program. 

Agency Comments and Office of Inspector General Response 

On August 14, 2012, we provided a draft of this report to the S!’s Office International Trade 

(OIT) for comment. On September 11 and September 14, 2012, the Associate Administrator 

(AA) for International Trade submitted formal comments, which are included in their entirety in 

Appendix III. The AA for International Trade acknowledged the cooperative relationship 

established between the OIG and the OIT. In addition, the AA for International Trade stated that 

the OIG’s recommendations will improve program administration, increase grant recipients’ 

financial accountability, increase the number of small businesses that export, and increase the 

value of exports for small businesses that are currently exporting. In many cases, the OIT had 

already taken action to mitigate issues and improve S!’s management of the STEP grant 

program; however, the AA for International Trade did not state whether management 

concurred or non-concurred with seven of our nine recommendations. We consider 

management comments to be responsive to seven recommendations, partially responsive to 

one recommendation, and unresponsive to the remaining recommendation. A summary of 

management’s comments and our response follows. 

Recommendation 1 – Meet with Congress to determine STEP program expectations for 

FY 2012. 

Agency Comments 

According to the AA for International Trade, OIT personnel have met with House and Senate 

staff members to discuss FY 2012 STEP program expectations. Specifically, the AA for 

International Trade met with staff members from the House and Senate Small Business 

Committees in the fall of 2011 and the summer of 2012. In addition, the SBA hosted a 

congressional panel, which included staff members from the House and Senate Small Business 

Committees, during the STEP Best Practices Conference in February 2012. During these 

meetings, House and Senate staff provided feedback on the FY 2011 STEP program, its 

legislative history, and FY 2012 performance expectations. Further, OIT staff solicited ideas on 

specific performance metrics that the STEP program should be measuring. These dialogues have 

informed the implementation of the program. 

13
 
 

 

 

 

 

 

 

 

 

 

 

 

OIG Response 

We consider management comments to be responsive to our recommendation. 

Recommendation 2 – Ensure that STEP grant recipients’ FY 2012 performance measures align 

with ongress’ expectations. 

Agency Comments 

The AA for International Trade stated that the OIT intends to modify the STEP program reporting 

requirements during the first quarter of FY 2013 in order to ensure that they align with 

ongress’ expectations. 

OIG Response 

We consider management comments to be responsive to our recommendation. 

Recommendation 3 – Require STEP grant recipients to establish and provide the SBA with 

quarterly milestones that will measure effectiveness and efficiency on a quarterly basis. 

Agency Comments 

The AA for International Trade stated that when the OIT became aware of our concerns, the 

reporting process was modified to reflect accomplishments against milestones. In addition, the 

OIT plans to aggressively enforce the new process in the upcoming year. 

OIG Response 

We consider management comments to be responsive to our recommendation. 

Recommendation 4 – In cases where STEP grant recipients do not meet established 

milestones, require grant recipients to provide the SBA with revised work plans and budget 

estimates to meet proposed performance goals. 

Agency Comments 

In cases where STEP grant recipients do not meet established milestones, OIT staff members 

plan to require grant recipients to provide the SBA with revised work plans to meet new 

performance goals. In the future, the OIT will also require grant recipients to provide new 

budget estimates, as necessary. 

OIG Response 

We consider management comments to be responsive to our recommendation. 

14
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recommendation 5 – Hold STEP grant recipients accountable for adhering to reporting 

requirements established in the Notices of Award and the FY 2012 STEP Grant Program 

Announcement. 

Agency Comments 

According to the AA for International Trade, OIT staff members will research the grant 

regulations at 13 CFR 143 and 2 CFR 225 in order to ensure compliance. 

OIG Response 

We consider management comments partially responsive to our recommendation. 

While ensuring compliance with grant regulations is both important and necessary to the 

success of the STEP grant program, the grant Notices of Award and the STEP Grant Program 

Announcement may be more restrictive. Therefore, STEP grant recipients must be held to the 

terms established in those documents. 

Recommendation 6 – Document and maintain all analyses, evaluations, and rationale used to 

award STEP grants. 

Agency Comments 

According to OIT staff, all analyses, evaluations, and rationale used to award STEP grants for 

FY 2011 and FY 2012 have been documented. However, the OIT plans to make these documents 

more readily available. 

OIG Response 

We consider management comments to be non-responsive to our recommendation. The audit 

team requested that OIT staff provide documentation related to the analyses, evaluations, and 

rationale used to award FY 2011 STEP grants on several occasions. However, the OIT did not 

respond to our requests and we concluded that the documentation had not been properly 

maintained. Therefore, there is no evidence to support OIT’s assertion that it maintained 

adequate documentation and this remains a potential area of weakness. 

Recommendation 7 – Provide Grant Officers Technical Representative (GOTR) training to OIT 

personnel acting in that capacity. 

Agency Comments 

According to the AA for International Trade, several OIT staff members have received GOTR 

training. However, the OIT plans to provide training to all staff members that act as STEP grant 

program GOTRs. 

OIG Response 

We consider management comments to be responsive to our recommendation. 

15
 
 

 

 

 

 

 

 

 

 

 

Recommendation 8 – Establish and implement a policy requiring GOTRs to conduct in-depth 

reviews of STEP grant recipients’ quarterly submissions and provide feedback to grant 

recipients. 

Agency Comments 

The OIT concurred with our recommendation and stated that OIT staff will establish and 

implement a policy requiring GOTRs to conduct in-depth reviews of STEP grant recipients’ 

quarterly submissions and provide feedback to grant recipients, beginning in the first quarter of 

FY 2013. 

OIG Response 

We consider management comments to be responsive to our recommendation. However, we
 

believe that these in-depth reviews should begin with the fourth quarter of FY 2012.
 

Grant recipients’ fourth quarter reports are due 90 days from the end of the quarter.
 

This timeframe coincides with the first quarter of FY 2013 and therefore, reviews should be 

conducted and feedback should be provided for both quarters.
 

Recommendation 9 – Consult with the Office of Grants Management (OGM) to modify STEP 

grant terms and conditions to align with S!’s management of the program. 

Agency Comments 

The OIT concurred with our recommendation and stated that staff members have worked and 

coordinated with OGM staff to address management issues. In addition, OIT and OGM have 

established a weekly problem resolution meeting to ensure S!’s management of the program 

is aligned with STEP grant terms and conditions. 

OIG Response 

We consider management comments to be responsive to our recommendation. 

Actions Required 

Please provide your management decision for each recommendation on the attached SBA
 

Forms 1824, Recommendation Action Sheet, within 30 days from the date of this report.
 

Your decision should identify the specific action(s) taken or planned for each recommendation
 

and the target date(s) for completion.
 

We appreciate the courtesies and cooperation of the Small Business Administration during this 

audit. If you have any questions concerning this report, please call me at (202) 205-7390 or 

Riccardo R. Buglisi, Director, Business Development Programs Group at (202)205-7489.
 

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Appendix I: Scope and Methodology 

We conducted this audit from March 2012 to June 2012 in accordance with generally accepted 

government auditing standards. Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on 

our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives. 

Congress directed the Small Business Administration (SBA) Office of Inspector General to review 

the S!’s State Trade and Export Promotion (STEP) Grant Program, which was established by the 

Small Business Jobs Act of 2010. One of our audit objectives was to determine the extent to which grant 

recipients were measuring the performance of activities being conducted and the results of those 

measurements. In addition, we reviewed the overall management and effectiveness of the STEP grant 

program. To meet these objectives, we judgmentally selected all STEP grants exceeding $1 million to 

review. Six grant recipients met this threshold, including the states of California, Illinois, Michigan, 

Pennsylvania, Washington, and the Commonwealth of the Northern Mariana Islands (NMI). We limited 

our scope because the Small Business Jobs Act of 2010 required the Office of Inspector General to 

provide a report to the Senate Committee on Small Business and Entrepreneurship and the House 

Committee on Small Business no later than September 30, 2012. Due to time constraints, we were 

unable to review grant recipients’ FY 2011 STEP grant performance results for quarters three and four. 

To achieve our audit objectives, we reviewed the Small Business Jobs Act of 2010 and the Small Business 

Administration’s FY 2011 STEP Program Announcement. We also conducted site visits and obtained 

documentation from grant recipients in the states of Pennsylvania, California, Washington, Michigan, 

and Illinois. In addition, we interviewed SBA personnel from the Office of International Trade (OIT) and 

the Office of Grants Management (OGM). We also reviewed pertinent Codes of Federal Regulation, 

Public Law 111-240, and OMB Circular A-123. 

Use of Computer Processed Data 

We relied on the S!’s financial management system, Joint !dministrative !ccounting Management 

System (JAAMS), to obtain accounts payable transactions associated with California, Illinois, Michigan, 

Pennsylvania, and Washington. We reviewed these transactions in order to identify first quarter 

advance or reimbursement payments made to each state. 

Prior Coverage 

The Office of Inspector General issued Advisory Memorandum Number 12-12, The S!’s Office of 

International Trade Inappropriately Awarded a One Million Dollar State Trade and Export Promotion 

(STEP) Program Grant to an Ineligible Recipient, on March 30, 2012. We reported that the NMI 

inappropriately received a STEP grant valued at $1,022,781. ased on the definition of the term “state” 

found in the Small Business Jobs Act of 2010, the audit team determined that the NMI was ineligible to 

receive a STEP grant. As a result of our report, SBA personnel terminated grant number 

SBAHQ-11-IT-0047 on March 27, 2012. 

17
 
Appendix II: FY 2011 State Trade and Export Promotion (STEP) Grants Awarded 

Grant Recipient Federal STEP Funds Awarded Recipient Eligibility 

California $2,540,924 Eligible 

Pennsylvania $1,710,904 Eligible 

Washington $1,591,919 Eligible 

Michigan $1,466,978 Eligible 

Illinois $1,265,477 Eligible 

Commonwealth of the Northern Mariana Islands $1,022,781 Ineligible 

Ohio $983,399 Eligible 

Missouri $977,742 Eligible 

Georgia $973,429 Eligible 

New York $898,646 Eligible 

Louisiana $850,000 Eligible 

Oklahoma $825,733 Eligible 

Florida $780,786 Eligible 

Mississippi $752,914 Eligible 

Arizona $656,000 Eligible 

Massachusetts $614,025 Eligible 

North Carolina $603,442 Eligible 

Utah $584,982 Eligible 

Maryland $584,897 Eligible 

Arkansas $576,404 Eligible 

District of Columbia $548,116 Eligible 

Connecticut $546,822 Eligible 

Kansas $505,326 Eligible 

Rhode Island $496,066 Eligible 

US Virgin Islands $489,646 Eligible 

Hawaii $485,719 Eligible 

Minnesota $454,130 Eligible 

Virginia $432,099 Eligible 

Kentucky $427,843 Eligible 

Oregon $375,000 Eligible 

Tennessee $375,000 Eligible 

Iowa $370,258 Eligible 

Vermont $363,768 Eligible 

Alaska $330,000 Eligible 

Colorado $312,182 Eligible 

Nebraska $310,860 Eligible 

Montana $307,849 Eligible 

New Hampshire $299,493 Eligible 

Idaho $292,000 Eligible 

Delaware $246,917 Eligible 

Commonwealth of Puerto Rico $240,630 Eligible 

Nevada $239,318 Eligible 

South Carolina $202,669 Eligible 

Wisconsin $162,176 Eligible 

Texas $161,711 Eligible 

Maine $146,000 Eligible 

Alabama $140,600 Eligible 

Guam $135,927 Eligible 

South Dakota $116,393 Eligible 

Indiana $100,289 Eligible 

New Mexico $81,000 Eligible 

Wyoming $42,686 Eligible 

18
 
 

 

 

 

 

 

Appendix III: Agency Comments
 

U.S. SMALL BUSINESS ADMINISTRATION 

WASHINGTON, D.C. 

OFFICE O F
 

I NT ERN ATION AL
 

TRA D E
 

TO: John K. Needham, OIG 

FROM: Dario Gomez, AA/OIT 

DATE: September 11, 2012 

SUBJECT: OIT Performance Audit Report on STEP Grant Program 

This memorandum responds to the August 14, 2012, Performance Audit Report titled “The SBA 

Needs to Improve Its Management of the State Trade and Export Promotion Grant Program” 

(STEP). The report asks for written or oral comments within 30 days from August 14. This 

memo responds to that request. 

The Office of International Trade’s (OIT) objective for the STEP pilot Grant Program is to 

increase the number of small businesses that are exporting and to increase the value of exports 

for those small businesses that are currently exporting. We fully recognize that eligible 

organizations may apply to SBA for awards of financial assistance to carry out exporting 

programs that assist “eligible small business concerns.” And, we take very seriously the fact that 

we have full responsibility for programmatic execution of the program. 

We further acknowledge the full, courteous, and cooperative relationship between our office and 

the Office of Inspector General (OIG) during the audit process. We believe this relationship has 

led to meaningful and insightful recommendations that will improve program administration, 

increase grant recipients’ financial accountability, and ultimately increase the number of small 

businesses that export and increase the value of exports for businesses that are currently 

exporting. 

This is a list of the nine recommendations, followed by OIT’s response. 

OIG Recommendation OIT Response 

1. Meet with Congress to 

determine STEP 

program expectations 

Over the past year, OIT staff has met with House 

and Senate staff both in person and via 

teleconference to discuss STEP program 

19
 
 

for FY 2012 expectations for FY 2012. During these meetings, 

Hill staff has provided feedback on the STEP 

program, its legislative history, and performance 

expectations. Additionally, OIT staff has solicited 

ideas on specific performance metrics the STEP 

program should be measuring. These dialogues 

with Hill staff on STEP program expectations have 

informed the implementation of the program. 

2. Ensure that STEP grant OIT staff intends to modify the reporting 

recipients’ FY 2012 requirements, as necessary, during the 1st quarter 

performance measures of FY 2013 to align the performance measures 

align with Congress’ with Congress’ expectations. 

expectations. 

3. Require STEP grant 

recipients to establish 

and provide the SBA 

with quarterly 

milestones that will 

measure effectiveness 

and efficiency on a 

quarterly basis. 

When OIT staff became award of OIG’s concerns, 

OIT modified the reporting process to reflect 

accomplishments against milestones and will 

aggressively enforce it in the coming year. 

4. In cases where STEP 

grant recipients do not 

meet established 

milestones, require grant 

recipients to provide the 

SBA with revised work 

plans and budget 

estimates to meet 

proposed performance 

goals. 

In cases where STEP grant recipients do not meet 

established milestones, OIT staff plans to require 

grant recipients to provide the SBA with revised 

work plans to meet new performance goals. In the 

future, we will also require grant recipients to 

provide new budget estimates, as necessary. 

5. Hold STEP grant OIT staff plans to research the grant regulations at 

recipients accountable 13 CFR 143 and 2 CFR 225 to comply with the 

for adhering to reporting regulations. 

requirements established 

in the Notices of Award 

and the FY 2012 STEP 

Grant Program 

Announcement. 

6. Document and maintain 

all analyses, evaluations, 

and rationale used to 

OIT staff has already documented all analyses, 

evaluations and rationale used to award STEP 

grants for FY 2011 and 2012. However, OIT plans 

20
 
 

 

 

 

award STEP grants. to make these documents more readily available. 

7. Provide Grant Officers OIT has already provided training to several OIT 

Technical staff. However, OIT plans to provide GOTR 

Representative (GOTR) training to all OIT staff who are acting in that 

training to OIT capacity. 

personnel acting in that 

capacity. 

8. Establish and implement 

a policy requiring 

GOTRs to conduct indepth reviews of STEP 

grant recipients’ 

quarterly submissions 

and provide feedback to 

grant recipients. 

OIT staff concurs, and beginning with the 1st 

quarter of 2013, OIT staff plan to establish and 

implement a policy requiring GOTRs to conduct 

in-depth reviews of STEP grant recipients’ 

quarterly submissions and provide feedback to 

grant recipients. 

9. Consult with the Office 

of Grants Management 

(OGM) to modify STEP 

grant terms and 

conditions to align with 

SBA’s management of 

the program. 

OIT staff concurs. OIT staff has worked and 

coordinated with the OGM staff on management 

problems. Also, OIT and OGM have established a 

weekly problem resolution meeting to ensure 

SBA’s management of the program is aligned with 

STEP grant terms and conditions. 

In summary, our office greatly appreciates the opportunity to work with the Office of the 

Inspector General to improve program management so that we can increase the number of small 

businesses that export and to increase the exports of those small businesses that already export. 

If you have any questions, please do not hesitate to contact Arthur Collins of my staff at 205-

6285. 

21
 
WASHINGTON, D.C.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OFFICE O F 

I NT ERN ATION AL 

TRA D E 

U.S. SMALL BUSINESS ADMINISTRATION 

TO: John K. Needham 

Assistant Inspector General for Auditing 

FROM:	 Dario J. Gomez 

Associate Administrator, Office of International Trade 

DATE:	 September 14, 2012 

SUBJECT:	 Supplemental Response to the OIT Performance Audit Report on STEP Grant 

Program 

This memorandum is intended to supplement the Office of International Trade’s (OIT) 

September 11, 2012, response to the August 14, 2012, Performance Audit Report titled “The 

SBA Needs to Improve Its Management of the State Trade and Export Promotion Grant 

Program” (STEP). 

This supplemental response addresses the Office of Inspector General’s (OIG) first 

recommendation as listed below: 

1. Meet with Congress to determine STEP program expectations for FY 2012. 

On September 11, 2012, OIT responded to this recommendation with the following statement: 

Over the past year, OIT staff has met with House and Senate staff both in person 

and via teleconference to discuss STEP program expectations for FY 2012. 

During these meetings, Hill staff has provided feedback on the STEP program, its 

legislative history, and performance expectations. Additionally, OIT staff has 

solicited ideas on specific performance metrics the STEP program should be 

measuring. These dialogues with Hill staff on STEP program expectations have 

informed the implementation of the program. 

OIT now supplements this response with the following information. Beginning in 

September 2011, SBA has made numerous efforts to communicate with Hill staffers regarding 

the FY 2012 STEP program. On September 30, 2011, I met with the House Small Business 

Committee regarding the STEP program. On October 27, 2011, I met with a Senate Small 

Business Committee staffer where we discussed the STEP program in depth. During this meeting 

the Policy Director for the Senate Small Business Committee discussed the STEP program’s 

legislative history. On November 30, 2011, I met with a member of the Senate Small Business 

Committee’s staff where we again discussed the STEP program in depth and the Senate staffer 

suggested a Congressional panel be present at the STEP Best Practices conference to be held in 

February 2012. In addition to the frequent meetings and conversations with congressional staff 

22
 
 

 

 

 

 

 

 

 

 

during the fall of 2011 regarding the FY 2012 STEP program, SBA hosted a congressional panel 

on STEP at the STEP Best Practices conference in February 2012. Staff members from both the 

House and Senate Small Business Committees participated on a panel at that conference. On 

July 20, 2012, I met with Senate and House Small Business Committee staffers to again discuss 

the STEP program. On August 28, 2012, I participated in a conference call with a Senate Small 

Business Committee staffer regarding the STEP program. The record of communication 

between SBA and the Hill staff demonstrates SBA’s commitment to maintaining a dialogue 

between the Agency and the Small Business Committees regarding the STEP program. 

Based on your recommendations, I will continue to have an open dialogue with Congress 

to determine STEP program expectations for FY 2012. If you have any questions, please do not 

hesitate to contact Arthur Collins of my staff at (202) 205-6285. 

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