Entrepreneurial Assistance: Opportunities Exist to Improve Collaboration and Performance Management for Financial Assistance Programs
Published: 2014-02-06T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Economic development programs that effectively provide assistance to entrepreneurs may help businesses develop and expand. In August 2012, GAO reported information on 52 programs at Commerce, HUD, SBA, and USDA that provided $2.0 billion in support to entrepreneurs in fiscal year 2011 ( GAO-12-819 ). Of these 52 programs, 30 programs distributed across the four agencies can provide financial assistance in the form of grants and loans. Inefficiencies in the administration of these programs could compromise the government's ability to effectively provide services and meet the shared goals of the programs.
This testimony discusses (1) the extent of overlap, fragmentation, and duplication among these programs and the extent to which programs collaborate and (2) the extent to which agencies collect information necessary to track program activities and whether these programs have met their performance goals and have been evaluated. This testimony is based on GAO's August 2012 report and provides information on the agencies' actions to address recommendations GAO made in that report.
section_title: What GAO Found
paragraphs: Federal programs GAO reviewed that offer financial support to entrepreneurs, such as grants and loans, are fragmented and overlap based on the type of support they are authorized to offer and the type of entrepreneur they are authorized to serve. The Departments of Commerce (Commerce), Housing and Urban Development (HUD), and Agriculture (USDA); the Small Business Administration (SBA); and the Office of Management and Budget (OMB) have taken steps to collaborate more in administering these programs in response to a recommendation in GAO's August 2012 report. For example, OMB has established a Cross-Agency Priority goal for entrepreneurship and small business and an associated interagency working group. However, the four agencies have not implemented a number of good collaborative practices GAO has identified, such as establishing compatible policies and procedures to better support rural businesses. The Government Performance and Results Act Modernization Act of 2010 (GPRAMA) crosscutting framework requires that agencies collaborate in order to address issues such as economic development that transcend more than one agency, and GPRAMA directs agencies to describe how they are working with each other to achieve their program goals. Some entrepreneurs struggle to navigate the fragmented programs that provide technical assistance in the form of training and counseling. This difficulty can in turn affect referrals to other programs, including financial assistance programs. For example, some entrepreneurs and technical assistance providers GAO spoke with said the system can be confusing and that some entrepreneurs do not know where to go for technical assistance. Collaboration could reduce some negative effects of overlap and fragmentation, but field staff GAO spoke with did not consistently collaborate to provide training and counseling services to entrepreneurs. Without enhanced collaboration and coordination, agencies may not be able to use limited federal resources in the most effective and efficient manner and entrepreneurs may struggle to navigate these fragmented programs.
While the four agencies collect at least some information on entrepreneurial assistance program activities, they do not track such information for many programs, a practice that is not consistent with government standards for internal controls. They typically do not track detailed information on the characteristics of entrepreneurs that they serve, such as whether they are located in rural or economically distressed areas or the entrepreneurs' type of industry. In addition, GAO found that from 2000 through 2012, the four agencies conducted program evaluations of 13 of the 30 financial assistance programs reviewed. GPRAMA requires agencies to set and measure annual performance goals and recognizes the value of program evaluations because they can help agencies assess programs' effectiveness and improve program performance. Without more robust program information, agencies may not be able to administer programs in the most effective and efficient manner, and scarce resources may be going toward programs that are less effective.
section_title: What GAO Recommends
paragraphs: In August 2012, GAO recommended that the four agencies and OMB explore opportunities to enhance collaboration among programs and that the four agencies track program information and conduct more program evaluations. The agencies neither agreed nor disagreed with the recommendations but did provide information on their plans to address them.

section_title: Letter
paragraphs: I am pleased to be here today to discuss our work on programs that  provide financial assistance to entrepreneurs. Entrepreneurs play a vital  role in the U.S. economy, and the federal government provides a variety  of support and assistance to them. In August 2012, we reported  information on 52 programs at the Departments of Commerce  (Commerce), Housing and Urban Development (HUD), and Agriculture  (USDA), and the Small Business Administration (SBA) that support  entrepreneurs. In March 2013, we testified before the House of  Representatives Small Business Committee on our findings from our  August 2012 report and the actions the four agencies had taken since the  report. According to agency officials, these programs, which typically  fund a variety of activities in addition to supporting entrepreneurs, spent  an estimated $2 billion on economic development efforts in fiscal year  2011. Of these 52 programs, 30 programs distributed across the four  agencies can support entrepreneurs through financial assistance in the  form of grants and loans. Economic development programs that  effectively provide assistance to entrepreneurs, in conjunction with state  and local government and private sector economic development  initiatives, may help businesses develop and expand. However, we have  found that the ways that these programs have been administered, and the  lack of data collection and program evaluations, could lead to inefficient  delivery of services. These inefficiencies could compromise the  government’s ability to effectively provide the needed services and meet  the shared goals of the programs.
In January 2011, Congress updated the Government Performance and  Results Act of 1993 (GPRA) with the GPRA Modernization Act of 2010  (GPRAMA). GPRAMA established a new framework aimed at taking a  more crosscutting and integrated approach to focusing on results and  improving government performance. Among other things, GPRAMA  requires the Office of Management and Budget (OMB) to coordinate with  agencies to establish outcome-oriented federal government priority goals  covering a limited number of policy areas, as well as goals to improve  management across the federal government. GPRAMA also highlighted  the importance of program evaluation for federal agencies. Specifically,  GPRAMA requires agencies to describe program evaluations that were  used to establish or revise strategic goals. In addition, the President’s  2013 budget submission established Cross-Agency Priority goals,  including one to increase federal services to entrepreneurs and small  businesses, with an emphasis on start-ups, growing firms, and  underserved markets.
My testimony today is based on information on the 30 financial assistance  programs discussed in our August 2012 report and 2013 testimony.  Specifically, this testimony discusses (1) the extent of overlap,  fragmentation, and duplication among these programs and the extent to  which programs collaborate and (2) the extent to which agencies collect  information necessary to track program activities and whether these  programs, have met their performance goals and have been evaluated.  This testimony also provides information on the agencies’ recent actions  to address recommendations we made in our August 2012 report.
For our August 2012 report, we reviewed statutory and regulatory  authority on the activities and services the agencies can conduct to  administer each of the programs, and we found significant overlap and  fragmentation among programs that provide financial assistance. We  evaluated this information against promising practices of leading  organizations and the requirements of GPRAMA. In addition, we obtained  and reviewed the agencies’ statements on their plans for implementing  the recommendations made in our August 2012 report. The work on  which this statement is based was performed during the June 2011  through February 2014 time period 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.
subsections: section_title: Fragmented Programs Overlap, and Agencies’ Efforts to Collaborate Have Been Limited
paragraphs: Programs providing financial assistance to entrepreneurs are  fragmented—which occurs when more than one agency or program is  involved in the same broad area of national interest. Of the 30 financial  assistance programs we reviewed, 16 can provide or guarantee loans  that can be used for a broad range of purposes by existing businesses  and nascent entrepreneurs in any industry. Examples of programs in this  category include SBA’s 7(a) Loan Program and USDA’s Business and  Industry Loans. Other programs can support loans for a more narrow  range of purposes or industries or can only support other types of  financial assistance, such as grants, equity investments, and surety  guarantees.
In addition, a number of programs overlap based on the characteristics of  the targeted beneficiary. Entrepreneurs may fall into more than one  beneficiary category—for example, an entrepreneur may be in an area  that is both rural and economically distressed. Such entrepreneurs may  be eligible for multiple subsets of financial assistance programs based on  their specific characteristics. For example, a small business in a rural,  economically distressed area, such as Bourbon County, Kansas, could in  terms of authority, receive financial assistance in the form of guaranteed  or direct loans for a broad range of uses through multiple programs at the  four agencies, including
Commerce’s Economic Adjustment Assistance;
HUD’s Community Development Block Grant (CDBG)/States
SBA’s 7(a) Loan Program and Small Business Investment Companies
USDA’s Business and Industry Loans and Rural Business Enterprise  Grants.
While many programs overlap in terms of statutory authority,  entrepreneurs may in reality have fewer options to access assistance  from multiple programs. Agencies often rely on intermediaries (that is,  third-party entities such as nonprofit organizations, higher education  institutions, or local governments that use federal grants to provide  eligible assistance directly to entrepreneurs) to provide specific support to  entrepreneurs, and these intermediaries vary in terms of their location  and the types of assistance they provide. Some programs distribute  funding through multiple layers of intermediaries before it reaches  entrepreneurs or may competitively award grants to multiple  intermediaries working jointly in the same community to serve  entrepreneurs. For example, Commerce’s Economic Adjustment  Assistance program can provide grants to intermediaries, such as  consortiums of local governments and nonprofits, which in turn provide  technical or financial assistance to entrepreneurs.
Although we identified a number of examples of statutory overlap, we did  not find evidence of duplication among these programs (that is, instances  when two or more agencies or programs are engaged in the same  activities to provide the same services to the same beneficiaries) based  on available data. However, as discussed later, most agencies were not  able to provide the programmatic information, such as data on users of  the program that is necessary to determine whether or not duplication  actually exists among the programs.
In our 2012 report, we examined entrepreneurs’ experiences with the four  agencies’ technical assistance programs—which provide services such  as helping with development of business plans or a loan package to  obtain financing—and found that some struggle to navigate the  fragmented programs. For example, some entrepreneurs and various  technical assistance providers with whom we spoke—including agency  field offices, intermediaries, and other local service providers—told us that  the system can be confusing and that some entrepreneurs do not know  what services are available or where to go for assistance. Technical  assistance providers sometimes attempt to help entrepreneurs navigate  the system by referring them to other programs, but these efforts are not  consistently successful. In addition, programs’ Internet resources can also  be difficult to navigate. Each agency has its own separate website that  provides information to entrepreneurs, but they often direct entrepreneurs  to other websites for additional information. SBA, Commerce, USDA, and  other agencies have collaborated to develop a joint website, called  BusinessUSA, with the goal of making it easier for businesses to access  services. Some technical assistance providers and entrepreneurs we  spoke with suggested that a single source to help entrepreneurs quickly  find information instead of sorting through different websites would be  helpful.
Given the fragmented nature of the federal programs that provide  financial assistance to entrepreneurs, enhanced collaboration between  agencies could help improve program efficiency. In prior work we  identified practices that can help to enhance and sustain collaboration  among federal agencies, which can help to maximize performance and  results, and we have recommended that the agencies follow them.  These collaborative practices include identifying common outcomes,  establishing joint strategies, leveraging resources, determining roles and  responsibilities, and developing compatible policies and procedures. In  addition, GPRAMA’s crosscutting framework requires that agencies  collaborate in order to address issues, such as economic development,  that transcend more than one agency, and GPRAMA directs agencies to  describe how they are working with each other to achieve their program  goals. While most of the agencies at the headquarters level have agreed  to work together by signing formal agreements to administer some of their  similar programs, they have not implemented a number of other good  collaborative practices we have previously identified. For example, SBA  and USDA entered into a formal agreement in April 2010 to coordinate  their efforts aimed at supporting businesses in rural areas. USDA’s most  recent survey of state directors indicates strong collaboration in several  areas, including field offices advising borrowers of SBA’s programs,  referring borrowers to SBA and its resource partners, and exploring ways  to make USDA and SBA programs more complementary. However, the  agencies have not implemented other good collaborative practices, such  as establishing compatible policies and procedures to better support rural  businesses.
section_title: Agencies Lack Information to Track Program Activities and Have Not Evaluated Programs
paragraphs: While the four agencies collect at least some information on program  activities in either an electronic records system or through paper files,  most were unable to summarize the information in a way that could be  used to help administer the programs. Similarly, the agencies typically do  not track detailed information on the characteristics of entrepreneurs that  they serve, such as whether they are located in rural or economically  distressed areas or the entrepreneurs’ type of industry. According to  OMB, being able to track and measure specific program data can help  agencies diagnose problems, identify drivers of future performance,  evaluate risk, support collaboration, and inform follow-up actions.  Analyses of patterns and anomalies in program information can also help  agencies discover ways to achieve more value for the taxpayers’ money.  In addition, agencies can use this information to assess whether their  specific program activities are contributing as planned to the agency  goals. Promising practices of program administration include a strong  capacity to collect and analyze accurate, useful, and timely data.  Table  1 summarizes the type of information that agencies maintain in a readily  available format that could be tracked to help administer the financial  assistance programs we reviewed. For example, USDA collects detailed  information (19 categories) on how entrepreneurs use proceeds, such as  for working capital, provided through five of its financial assistance  programs. USDA maintains this information in an electronic database,  and officials stated that they can provide this type of detailed information  upon request.
We also found that for fiscal year 2011, a number of programs that  support entrepreneurs failed to meet some or all of their performance  goals. GPRAMA requires agencies to develop annual performance plans  that include performance goals for an agency’s program activities and  accompanying performance measures. According to GPRAMA, these  performance goals should be in a quantifiable and measurable form to  define the level of performance to be achieved for program activities each  year. Leading organizations recognize that performance measures can  create powerful incentives to influence organizational and individual  behavior. Some of their good practices include setting and measuring  performance goals. Measuring performance allows organizations to track  the progress they are making toward their goals and gives managers  crucial information on which to base their organizational and management  decisions.
Further, from 2000 through 2012, the agencies had conducted program  evaluations of 13 of the 30 financial assistance programs that support  entrepreneurs we reviewed. Based on our review, we found that SBA has  conducted program evaluation studies on 5 of its 10 programs. We also  found that USDA has evaluated 1 of its 8 financial assistance programs,  but the study did not address the extent to which the program was  achieving its mission. Although GPRAMA does not require agencies to  conduct formal program evaluations, it does require agencies to describe  program evaluations that were used to establish or revise strategic goals,  as well as program evaluations they plan to conduct in the future.  Additionally, while not required to do so, agencies can use periodic  program evaluations to complement ongoing performance measurement.  Program evaluations that systematically study the benefits of programs  may help identify the extent to which overlapping and fragmented  programs are achieving their objectives. In addition, program evaluations  can help agencies determine reasons why a performance goal was not  met and give an agency direction on how to improve program  performance.
Since our August 2012 report we have also evaluated certain SBA  financial assistance programs. For example, in September 2013 we  reported on a pilot initiative within SBA’s 7(a) loan guarantee program,  the Patriot Express Pilot Loan Program, which provided small businesses  owned and operated by veterans and other eligible members of the  military community access to capital. We found that SBA did not  establish measurable goals for the pilot and did not evaluate the effects of  this pilot, which would have allowed SBA to assess if program operations  have resulted in the desired benefits, and, for pilots, determine whether to  make the programs permanent. In this report, we made two additional  recommendations pertaining to program evaluation. SBA said it would  consider the findings as it reviewed extending the pilot program.  Subsequently, SBA discontinued the Patriot Express Pilot Program as of  December 31, 2013, but announced a temporary program, the SBA  Veterans Advantage Program, to serve veteran-owned small businesses.
To address the issues identified in our August 2012 report and to help  improve the efficiency and effectiveness of federal efforts to support  entrepreneurs, we made the following recommendations:
The Director of the Office and Management and Budget; the  Secretaries of the Departments of Agriculture, Commerce, and  Housing and Urban Development; and the Administrator of the Small  Business Administration should work together to identify opportunities  to enhance collaboration among programs, both within and across  agencies.
The Secretaries of the Departments of Agriculture, Commerce, and  Housing and Urban Development and the Administrator of the Small  Business Administration should consistently collect information that  would enable them to track the specific type of assistance programs  provide and the entrepreneurs they serve and use this information to  help administer their programs.
The Secretaries of the Departments of Agriculture, Commerce, and  Housing and Urban Development and the Administrator of the Small  Business Administration should conduct more program evaluations to  better understand why programs have not met performance goals and  the programs’ overall effectiveness.
The agencies, together with the administration, have taken some steps to  address our recommendations. For example, the administration has  initiated steps that provide the agencies with a mechanism to work  together to identify opportunities to enhance collaboration among  programs. In particular, it introduced a Cross-Agency Priority goal to  increase services to entrepreneurs and small businesses in the  President’s fiscal year 2013 budget submission. One of the objectives  under this goal is to use programs and resources across the federal  government to improve and expand the reach of training, counseling, and  mentoring services to entrepreneurs and small business owners. In 2012,  the administration established an interagency group (including  Commerce, SBA, USDA, and others) that aims to streamline existing  programs, improve cooperation among and within agencies, ease  entrepreneurs’ access to the programs, and increase data-based  evaluation of program performance. According to the third quarter fiscal  year 2013 status update on the administration’s Cross-Agency Priority  goal for small business and entrepreneurship, the working group was to  create an interagency evaluation framework in the fourth quarter of fiscal  year 2013 to measure the impacts of coordinating funding streams  through cluster initiatives. It will be important for the interagency group to  follow through on developing an evaluation framework, including metrics,  to ensure that the programs are delivering assistance to entrepreneurs  efficiently and effectively. In addition, in November 2013, OMB noted that  an interagency group meets monthly to discuss individual agency efforts  and identify key areas for improved interagency coordination for the  BusinessUSA website. It will be important for the interagency group to  follow through on any key areas identified to improve coordination among  agencies.
In addition, the four agencies have completed actions or have actions  underway that are intended to improve data collected on program  performance.
In November 2013, USDA noted that the department’s Rural Business  Services completed three initiatives in fiscal year 2013 to improve the  quality of performance measurement, including a project to improve  the integrity of data the agency uses to compile program performance  measures.   In November 2013, HUD noted that the department had undertaken a  series of actions to improve the quality of data on the department’s  Community Development Block Grant (CDBG) funded activities,  including economic development activities. HUD’s efforts include an  extensive clean-up of CDBG data, which the department expects to  complete by the end of the second quarter of fiscal year 2014.   In February 2013, SBA noted that the agency had undertaken a  modernization project for its resource partner data collection system  to enhance current data fields, improve budget and performance  integration capabilities, and expand reporting capabilities.   In October 2012, Commerce’s Economic Development Administration  (EDA) noted that it had recently partnered with two universities to  develop a comprehensive set of performance measures that can be  used to evaluate the effectiveness of its programs.
Going forward, we will continue to obtain updates on the agencies’  progress. We will report on the actions taken by the agencies as we do  for other areas included in our mandated work addressing federal  programs with fragmentation, overlap, and duplication. We look forward  to continuing to work with the agencies as well as this and other  congressional committees in addressing ways to assist entrepreneurs in  the most effective and efficient manner.
Chairman Tipton and Ranking Member Murphy, this concludes my  prepared statement. I would be happy to answer any questions at this  time.
section_title: GAO Contacts and Staff Acknowledgements
paragraphs: For further information on this testimony, please contact me at (202) 512- 8678 or shearw@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Key contributors to this testimony include Marshall  Hamlett, Assistant Director; Catherine Gelb; John McGrail; and Jennifer  Schwartz.
section_title: Appendix I: List of Programs That Provide Financial Assistance to Entrepreneurs
subsections: section_title: Department of Agriculture
section_title: Department of Commerce
section_title: Department of Housing and Urban Development
section_title: Small Business Administration (SBA)
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