Small Business Administration: Preliminary Views on Issues Related to the Women's Business Center Program
Published: 2007-09-20T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Small Business Administration (SBA) provides training and counseling services to women entrepreneurs through the Women's Business Center (WBC) program. With approximately $12 million in fiscal year 2007, SBA funded awards to 99 WBCs. However, Congress and WBCs have expressed concerns about the uncertain nature of the program's funding structure. Concerns have also been raised about the possibility that the WBC and two other SBA programs, the Small Business Development Center (SBDC) and SCORE programs, are duplicating each other's efforts. This testimony discusses preliminary views on (1) uncertainties associated with the funding process for WBCs; (2) SBA's oversight of the WBC program; and (3) actions that SBA and WBCs have taken to avoid duplication among the WBC, SBDC, and SCORE programs. GAO reviewed policies, procedures, examinations, and studies related to the funding, oversight, and services of WBCs and interviewed SBA, WBC, SBDC, and SCORE officials.
section_title: What GAO Found
paragraphs: Until 2007, WBCs were funded on a temporary basis for up to 10 years, at which time it was expected that the centers would become self-sustaining. Beginning in 1997, SBA made annual awards to WBCs for up to 5 years. Because of concerns that WBCs could not sustain their operations without continued SBA funding, in 1999, Congress created a pilot program to extend funding an additional 5 years. Due to continued uncertainty about WBCs' ability to sustain operations without SBA funding, in May 2007, Congress passed legislation authorizing renewable 3-year awards to WBCs that "graduated" from the program after 10 years, as well as to current program participants. Like the current awards, the 3-year awards are competitive, and more centers may be applying for limited dollars. SBA is currently revising its award process to incorporate the new program changes. Though SBA has oversight procedures in place to monitor WBCs' performance and use of federal funds, staff shortages from the agency's downsizing and limited communication may hinder SBA's oversight efforts. SBA relies extensively on district office technical representatives (DOTRs) to oversee WBCs, but these staff members also have other job responsibilities and may not have the needed expertise to conduct some oversight procedures. SBA provides annual training and has taken steps to adjust its oversight procedures to adapt to staffing changes, but concerns remain. Some WBCs also cited communication problems, and one study reported that 54 percent of 52 WBCs responding to the study's survey said that SBA could improve its communication with the centers. For example, some WBCs told us that SBA did not provide sufficient feedback on their performance. Under the terms of the WBC award, the centers are required to coordinate with local SBDCs and SCORE chapters. SBA officials told us that they expected district offices to ensure that the programs did not duplicate each other. However, based on our preliminary review, we found that SBA provided limited guidance on how to successfully carry out coordination efforts. Most of the WBCs that we spoke with explained that in some situations they referred clients to an SBDC or SCORE counselor, and some WBCs also took steps to more actively coordinate with local SBDCs and SCORE chapters to avoid duplication and leverage resources. However, some WBCs told us that coordinating services was difficult, as the programs were each measured by the number of clients served and could end up competing for clients. Such concerns thwart coordination efforts and could increase the risk of duplication in some geographic areas.

section_title: Letter
paragraphs: I am pleased to have the opportunity to be here today to discuss the  Women’s Business Center (WBC) Program. The WBC program, one of  several business assistance programs offered by the Small Business  Administration (SBA), provides long-term training, counseling,  networking, and mentoring to women entrepreneurs, especially those who  are socially and economically disadvantaged. With a budget of  approximately $12 million in fiscal year 2007, SBA funded awards to 99  WBCs in amounts ranging from $90,000 to $150,000. However, Congress  and WBCs under the program have expressed concerns about whether  WBCs can continue operations without SBA funding and about the  uncertain funding structure of the program. The 5-year funding cycle for  regular awards, which many believed did not offer WBCs enough time to  become self-sustaining, was later supplemented by a pilot program that  provided for an additional 5-year funding cycle for sustainability awards.  But this program too raised concerns because of uncertainty about its  reauthorization and funding. In May 2007, to address the uncertainties  about the pilot program, Congress replaced it by allowing WBCs— including those that had graduated from the program—to receive 3-year  renewable awards.
As you know, Congress created the WBC program in part due to the  finding that existing business assistance programs for small business  owners were not considered adequate to address women’s needs, but  concerns have also been raised about whether SBA’s business assistance  programs are duplicating each other’s efforts. The two other primary  business assistance programs that SBA administers are the Small Business  Development Center (SBDC) and SCORE (formerly called the Service  Corps of Retired Executives) programs. These programs also provide  training and counseling services to aspiring and existing small business  owners but are not expected to target a particular group. Under the terms  of the SBA award, WBCs are required to coordinate with local SBDCs and  SCORE chapters when appropriate.
In my testimony, I will discuss our preliminary views on these and related  issues affecting the WBC program.  My testimony addresses (1) the  uncertainties associated with the funding process for WBCs; (2) SBA’s  oversight of the WBC program, including policies and procedures for  monitoring compliance with program requirements; and (3) the services  that WBCs provide to small businesses and actions that SBA and WBCs  have taken to avoid duplication of the services offered by the WBC, SBDC,  and SCORE programs. My remarks are based on our ongoing work, which  is exploring these issues in more detail.
In conducting this work, we reviewed the legislative history of the WBC  program, GAO’s previous reports, SBA’s policies and procedures for  administering the program, and studies of the program conducted by SBA  and external organizations. For the seven WBCs we visited, we reviewed  documentation SBA uses to oversee WBCs and interviewed WBC officials  about their services, relationship with SBA, and coordination with SBDCs  and SCORE. We also interviewed SBA officials about the WBC, SBDC, and  SCORE programs. In addition, we compared the statutory authority for the  3 programs, interviewed a random sample of 17 WBCs about their  services, relationship with SBA, and coordination with SBDCs and  SCORE, and visited 6 SBDCs and the SCORE national office. We discussed  the contents of this testimony with SBA. We conducted our work between  August 2006 and September 2007 in accordance with generally accepted  government auditing standards.
subsections: section_title: Background
paragraphs: The WBC program is administered through the Office of Women’s  Business Ownership (OWBO) in SBA’s Office of Entrepreneurial  Development (OED). The program was established by the Women’s  Business Ownership Act of 1988 to provide long-term training, counseling,  networking, and mentoring to women who own businesses or are potential  entrepreneurs after Congress found that existing business assistance  programs for small business owners were not addressing women’s needs.  The program’s goal is to add more well-trained women entrepreneurs to  the U.S. business community and to specifically target services to women  who are socially and economically disadvantaged. In fiscal year 2007, SBA  funded 99 WBCs throughout the United States and its territories.
Private nonprofit organizations are eligible to apply for funds to set up  WBCs, and successful applicants are initially awarded cooperative  agreements for a maximum of 5 years. WBCs must raise matching funds  from nonfederal sources such as state and local public funds, private  individuals, corporations and foundations, and program income derived  from WBC services. In the first 2 years of the 5-year award, each WBC is  required to match SBA award funding at one nonfederal dollar for each  two federal dollars. In the last 3 years, the match is one nonfederal dollar  for each federal dollar. WBC award amounts cannot exceed $150,000 each  fiscal year per recipient. Award amounts may vary depending upon a  WBC’s location, staff size, project objectives, performance, and agency  priorities.
WBC funding is performance-based, and each additional 12-month budget  period beyond the initial award may be exercised at SBA’s discretion.
Among the factors involved in deciding whether to exercise an option for  continued funding are the availability of funds, the extent to which past  WBC funds were spent, and satisfactory performance against SBA- established performance measures, including the number of clients served  and the number of jobs created. WBCs are required to provide this  performance data to SBA in quarterly reports.
In the Women’s Business Centers Sustainability Act of 1999, Congress  established the sustainability pilot program because of concerns that  WBCs could not become self-sustaining in 5 years and needed continued  SBA funding. Under the sustainability pilot program, WBCs that had been  receiving funding for 5 years could receive sustainability awards for an  additional 5 years. Criteria for receiving awards under the pilot program  were similar to those for receiving the initial awards. WBCs were assessed  on their record of performance and had to provide nonfederal matching  funds equal to one dollar for each federal dollar. Unlike the WBC regular  award, WBC sustainability award amounts could not exceed $125,000 each  budget year per recipient. As noted earlier, Congress recently replaced  these sustainability awards with 3-year renewable awards of not more than  $150,000 each year per recipient. SBA has not yet begun making these new  awards.
In addition to the WBC program, SBA’s SBDC and SCORE programs also  provide training and counseling services to small business clients. The  SBDC program was created by Congress in 1980. SBDC services include,  but are not limited to, assisting prospective and existing small businesses  with financial, marketing, production, organization, engineering, and  technical problems and feasibility studies. Each state and U.S. territory  has a lead organization that sponsors and manages the SBDC program.  The lead organization coordinates program services offered to small  businesses through a network of centers and satellite locations in each  state that are located at colleges, universities, community colleges,  vocational schools, chambers of commerce and economic development  corporations. In fiscal year 2007, the SBDC program received $87 million  to make awards to 63 lead SBDCs throughout the United States.
The SCORE program was founded in 1964 as a nonprofit organization.  Under the Small Business Act, as amended, SCORE is sponsored by and  may receive appropriations through SBA. The SCORE program is designed  to provide free expert advice to prospective and existing small businesses  in all aspects of business formation, advancement, and problem solving.  SCORE counselors are volunteers who assist clients through a Web site,  SCORE chapter offices, SBA district offices, and other establishments. In  fiscal year 2007, the SCORE program received $5 million to support its  activities and currently has 389 chapters throughout the United States.
section_title: Recent Legislation Addresses Some Concerns about the WBC Program’s Funding
paragraphs: Recent legislation addresses concerns about long-term funding for WBCs,  but prior to this legislation, the funding structure had been in flux since  the program’s inception in 1988. In establishing the WBC program in 1988,  Congress authorized SBA to help private nonprofit organizations conduct  projects that benefit small business concerns owned and controlled by  women. The 1988 act allowed for demonstration projects that terminated  in 1991. However, in 1991, Congress authorized SBA to make awards for 3- year projects, and in 1997 Congress authorized SBA to make awards to  WBCs for 5-year projects. In its 1999 reauthorization of the WBC program,  as noted earlier, Congress added 5-year sustainability funding for WBCs  that successfully completed 5-year projects to provide additional time for  the centers to become self-sustaining. Because the WBC program is a  competitive discretionary award program, WBCs in the program compete  annually for the maximum award amount but continue to receive SBA  funds as long as their performance is satisfactory.
WBCs that we spoke with identified two related factors that have largely  been responsible for their funding uncertainties. First, because until  recently the WBC program offered limited-term funding—in contrast to  the SBDC and SCORE programs, which receive continuous funding— WBCs “graduated” from SBA support after 5 or 10 years. Several WBCs  that we spoke with expressed concern about the funding term limits and  pointed out that the SBDC and SCORE programs do not have the same  limits, even though SBA also administers those programs. Some WBCs in  both the regular and sustainability programs also said that they were  concerned about their ability to continue operations after losing SBA  support. Second, Congress did not make the additional 5-year term for  sustainability funding permanent. Instead, Congress extended the pilot  program with each SBA reauthorization, creating uncertainty that limited  SBA’s ability to manage the program effectively and causing concern  among the WBCs themselves. Several WBCs said that they were concerned  that sustainability funding was not a permanent aspect of the WBC  program.
Several of the WBCs that we spoke with said that funding uncertainties  made it difficult to establish an annual program budget with performance  goals. Each year, SBA requires that WBCs participating in its program  submit project-year proposals with performance goals in anticipation of an  award. WBCs are not guaranteed funding each year because SBA makes  awards each year at its discretion. Also, because the program is  competitive and performance based, WBCs may receive varying award  amounts each year. As noted, WBCs in the regular program can receive  annual awards up to $150,000, and those in the sustainability program can  receive annual awards up to $125,000.
OMB’s 2007 PART report found that frequent changes by Congress in the  WBC program’s funding structure, delays in extending sustainability  funding, and uncertainty about the future had created challenges for the  program. OMB’s report also noted that SBA had taken steps to foster  more consistent management of the WBC program but added that long- term planning was problematic because of the program’s funding  structure. When we spoke with officials at OMB, they emphasized that  SBA appeared to be making a significant effort to assist WBCs, given the  program’s limitations. They also noted that the funding challenges that  WBCs faced after graduating from the sustainability pilot could be related  to the fact that these organizations operate resource-intensive programs  and collect nominal revenues in program fees, largely because of their  focus on economically disadvantaged clients, causing them to rely heavily  on external support.
Our preliminary review indicates that WBCs that perform satisfactorily  continue to receive funds until they complete the program, and SBA  indicates that it will fund WBCs through the project term, subject to  availability of funds. But SBA officials in headquarters and the district  offices were aware of the challenges WBCs faced in planning annual  budgets without knowing how much they would receive or whether  sustainability funds would continue to be available. In discussing the WBC  program’s limited term funding, some SBA district office officials  emphasized that the agency had invested in creating successful WBCs and  should be working to make those that performed well permanent SBA  partners.
Recent legislation for the WBC program replaces the sustainability pilot  program with 3-year renewable awards, providing an opportunity for SBA  to continue funding WBCs. Current program participants and those that  have successfully graduated will be eligible to apply for continuous  funding through these awards. The award process will remain competitive  and the number of organizations competing could increase while SBA’s  annual budget for the WBC program may not increase beyond the  approximate $12 million provided in the last 5 years. However, increased  award competition provides an opportunity for SBA to continue funding  high-performing centers. Prior to the new program changes, SBA officials  emphasized that the WBC program is the agency’s only performance based  program and said that they believed this provided an incentive for WBCs  to continuously improve. SBA officials told us that by the end of fiscal year  2007, 26 WBCs would have graduated since the beginning of the program.  SBA has criteria for ranking new award applicants and performance-based  criteria for placing existing program participants into three funding  categories for annual awards. As a result of the new legislation, which  allows graduated WBCs to re-enter the pool of applicants for continuous  funding and which changes the existing 5-year sustainability project terms  going forward, SBA has begun revising its existing award process. SBA  just completed making WBC awards for fiscal year 2007 to fund activities  in fiscal year 2008, and SBA officials told us that they plan to begin  providing the 3-year renewable awards in fiscal year 2008.
section_title: Imbalances in SBA’s Staff Resources and Ineffective Communication with WBCs Could Reduce the Effectiveness of Oversight Procedures
paragraphs: Our preliminary review found that SBA had developed written procedures  for monitoring the performance and financial management activities of  WBCs and has taken steps to measure the WBC program’s effectiveness.  Since 1997, as a condition of continued funding, SBA has been required to  assess WBCs’ performance at least annually through programmatic and  financial examinations. SBA also requires that WBCs submit performance  and financial reports quarterly to describe their progress in meeting  annual performance goals and to detail program expenses that qualify for  SBA reimbursement. Some of the performance data that SBA collects from  WBCs are reported in the agency’s annual performance reports through  several output and outcome measures that are meant to evaluate the WBC  program’s performance and effectiveness. As part of a broader impact  assessment of its business assistance programs, in 2004, SBA initiated a 3- year longitudinal study of the WBC program, surveying clients served by  WBCs nationwide.
SBA relies heavily on District Office Technical Representatives (DOTRs)  to carry out oversight responsibilities, but our preliminary review suggests  that the downsizing of SBA’s staffing may have created challenges for  DOTRs in fulfilling their assigned responsibilities. District directors  currently assign the role of DOTR as a collateral duty to district office  staff. In 2001, we reported that DOTRs had been given an increased role in  assessing WBCs’ performance to ensure that the programs were fiscally  sound and functioning smoothly. To this end, we reported that DOTRs  were receiving intensive training each year at the postaward conference at  SBA headquarters on how to monitor the WBCs’ programmatic and  financial activities. DOTRs are expected to conduct the WBC’s  programmatic and financial examinations semiannually, but also have  other program duties and full-time agency responsibilities. SBA has a list  of 23 responsibilities for DOTRs, some of which involve oversight,  including (1) reviewing the WBC’s requests for project revisions, (2)  determining the extent to which the WBC is meeting the match  requirement, (3) reviewing the scope and quality of services provided to  clients, (4) reviewing all WBC signage and media, and (5) helping to  resolve problems. DOTRs are also expected to act as advocates for the  WBCs within their district. Some of the DOTRs’ responsibilities related to  this role include (1) ensuring that the district office displays and  distributes WBC brochures; (2) collecting success stories from WBCs to be  used for publicizing the program; and (3) including WBCs in district office  conferences, workshops, and other events for women business owners.
The DOTRs’ total responsibilities for the WBC program appear to be  substantial, particularly since this oversight is a collateral role. Given  SBA’s downsizing in recent years, some DOTRs may have more  responsibilities than they had in the past to perform their WBC program  duties effectively, and others new to the role may lack the necessary  experience and training. Although most WBCs we interviewed spoke  positively of their relationship with their DOTR, several told us that the  reduction in district office staffing had led to changes, including assigning  DOTR responsibilities to a different district office staff member. DOTRs  still attend required training for the WBC program annually at SBA  headquarters, and SBA provides them with a handbook to assist them in  performing their duties. However, district office staff at one location felt  that DOTRs were not adequately trained to conduct the financial  component of WBC programmatic and financial examinations and told us  that SBA headquarters had previously coordinated financial examinations  for WBCs. When we followed up with OWBO officials, they said that in  2004 a requirement was added that WBCs’ financial records be certified  annually by a certified public accountant (CPA), both because the agency  recognized that some DOTRs lacked this expertise and because of isolated  incidents of mismanagement of WBC award funds. OWBO officials also  said that they were coordinating with SBA’s Office of SBDCs, which is also  under OED, to use SBDC financial examiners for these onsite financial  reviews of WBCs but added that recently there had not been enough staff  to do all of the reviews. The officials also said that OED was reviewing  how future financial audits for all of SBA’s business assistance programs  would be conducted.
Our preliminary review found that SBA had taken some steps to adapt  program oversight procedures to staffing changes in district offices. For  example, before January 2007 DOTRs conducted programmatic and  financial examinations four times a year, and SBA switched to semiannual  examinations to conserve its staff resources. In March 2007, SBA also  revised its reporting procedures for WBCs to streamline communication  and reduce review and processing times. For example, WBCs had  previously submitted quarterly financial reports with reimbursement  requests through the district office but now submit them directly to OWBO  and copy the district office. These and other revisions that SBA has made  to date appear to have been made on an as-needed basis and were not part  of a strategic process or plan to revise its oversight activities.
WBCs also cited concerns about communication with SBA.  One study that  we reviewed reported that 54 percent of 52 WBCs surveyed said that SBA  could improve its communication with them. OWBO, which administers  the program, conducts monthly conference calls with the WBCs and  DOTRs, but some WBCs said that the calls were not a good forum for  asking questions though the topics covered in the call may raise questions.  OWBO also uses email to communicate policy changes and make interim  information requests, but several WBCs said these communications often  came without sufficient explanation and mentioned areas in which policy  changes or program requirements were unclear. The study specifically  noted that better communication should include an effort to seek  information from WBCs on how SBA’s frequent information requests and  policy changes impacted WBC operations. Some WBCs also told us that  they were not sure how well they were performing because they did not  receive feedback on semi-annual examinations or the reports they  submitted quarterly to SBA. SBA officials told us that they are aware of  this concern and are taking steps to make the performance-based funding  process more transparent.
section_title: WBCs Make Some Efforts to Coordinate with SBDCs and SCORE but Appear to Lack the Guidance Needed to Improve These Efforts
paragraphs: Based on our preliminary review, we found that the WBCs we spoke with  focused on a different type of client than the SBDCs and SCORE chapters  in their areas, and several WBCs actively coordinated with the other  programs to avoid duplicating services. But based on our review to date,  the centers appear to lack guidance and information from SBA on how to  successfully coordinate. Consistent with the WBC program’s statutory  authority and SBA requirements, WBCs tailor services to meet the needs of  economically and socially disadvantaged women. According to one  academic study and WBCs we reviewed, WBCs offered services  emphasizing financial literacy and more intensive long-term business plan  training. Through our work, we also found that WBCs tended to serve  smaller businesses with fewer employees and lower revenues than SBDCs  and SCORE. According to an SBA study of WBCs, WBC clients had  businesses with an average of 2.5 employees that produced average annual  revenues of $63,694, while other SBA business assistance programs served  businesses with an average of 4.5 employees and $175,076 in annual  revenue.
Most WBCs told us that they referred clients to the SBDCs and SCORE  when appropriate, and several coordinated services with the other  programs to leverage resources and avoid duplication. SBA officials told  us that they expected district offices to ensure that the programs did not  duplicate each other, and the program requirement suggests that WBCs  can promote coordination through co-sponsorship arrangements or  memorandums of understanding. However, SBA has not provided detailed  guidance explaining how WBCs could effectively coordinate with SBDC  and SCORE. Lacking such guidance, WBCs used a variety of approaches to  facilitate coordination. Some coordination efforts were initiated by local  business assistance providers, including WBCs, and involved a  memorandum of understanding or regularly scheduled meetings. For  example, a WBC in Wisconsin coordinated with SBDC, SCORE, and other  small business service providers in the area to develop a detailed triage  system for small business clients in their area. In order to better  coordinate services, the WBC and other Wisconsin business assistance  providers developed a flow chart to help service providers divide  resources and determine where to refer customers. In some cases, we  found that the SBA district office was active in the coordination effort and  participated in regular meetings or organized events that included all of  the programs. Several WBCs were co-located with an SBDC, allowing the  two programs to benefit from shared office space and other resources.
However, our preliminary review also found that some WBCs experienced  challenges in their attempts to coordinate services with SBDC and SCORE.  Some WBCs told us that coordinating services could be difficult. Several  WBCs told us that they had considered co-locating or sharing space with  an SBDC or SCORE chapter in order to reduce costs but feared that co- location would inhibit the WBC’s ability to maintain its identity and reach  its target client group of low-income women. WBCs and SBDCs are both  measured on the number of clients that participate in small business  training and counseling services, and one WBC told us that co-location  would cause WBCs to compete for clients. Also, in some instances SBA  encouraged WBCs to provide services similar to those that SBDCs were  already providing to small businesses. For example, one WBC told us that  staff were encouraged to develop a government procurement curriculum  although an SBDC in their area was already providing this service to small  business clients. These concerns and uncertainties thwart coordination  efforts and could increase the risk of service duplication in some  geographic areas.
Mr. Chairman, this concludes my prepared statement. I would be pleased  to respond to any questions that you or other members of the Committee  may have.
section_title: GAO Contact and Acknowledgements
paragraphs: For additional information about this testimony, please contact William B.  Shear at (202) 512-8678 or Shearw@gao.gov. Contact points for our Offices  of Congressional Affairs and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this testimony  include Kay Kuhlman, Assistant Director; Bernice Benta, Michelle Bracy,  Tania Calhoun, and Emily Chalmers.
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