The purpose of the HUBZone program, established by the HUBZone Act of 1997, is to stimulate economic development in economically distressed communities (HUBZones) by providing federal contracting preferences to eligible small businesses. The types of areas in which HUBZones may be located are defined by law and consist of census tracts, nonmetropolitan counties, Indian reservations, redesignated areas (that is, census tracts or nonmetropolitan counties that no longer meet the criteria but remain eligible until after the release of the first results from the 2010 census or 3 years after they ceased being qualified), and base closure areas. To be certified to participate in the HUBZone program, a firm must meet the following four criteria: must be small by SBA size standards; must be at least 51 percent owned and controlled by U.S. citizens; principal office—the location where the greatest number of employees perform their work—must be located in a HUBZone; and at least 35 percent of the full-time (or full-time equivalent) employees must reside in a HUBZone. The Veterans Benefits Act of 2003, which established the service-disabled veteran-owned small business program, permits contracting officers to award set-aside and sole-source contracts to any small business concern owned and controlled by one or more service-disabled veterans. Veteran means a person who served in the active military services, and who was discharged or released under conditions other than dishonorable. Service- disabled means that the disability was incurred or aggravated in the line of duty in active service. A firm also must qualify as a small business under the North American Industry Classification System (NAICS) industry-size standards. A firm must meet several initial eligibility requirements to qualify for the 8(a) program (a process known as certification), and then meet other requirements to continue participation. A concern meets the basic requirements for admission to the program if it is a small business that is unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and U.S. citizens, and demonstrates the potential for success. Our work involving 80 economic development programs at four agencies—Commerce, HUD, SBA, and USDA—indicates that the design of each of these fragmented programs appears to overlap with that of at least one other program in terms of the economic development activities that they are authorized to fund. For example, as shown in table 1, the four agencies administer a total of 54 programs that can fund “entrepreneurial efforts,” which include helping businesses to develop business plans and identify funding sources. SBA accounts for 19 of these 54 programs, and it administers programs contained in six of the nine economic activities. (The 19 SBA programs are listed in the table in appendix I.) Our prior work going back more than 10 years also identified potential overlap and fragmentation in economic development programs. Among other things, we found that legislative or regulatory restrictions that target funding on the basis of characteristics such as geography, income levels, and population density (rural or urban) differentiated many programs. While some of the 80 programs we assessed fund several of the nine economic development activities, almost 60 percent (46 of 80) fund only one or two activities. These smaller, narrowly scoped programs appear to be the most likely to overlap because many can only fund the same, limited types of activities. For example, narrowly scoped programs comprise 21 of 54 programs that can fund entrepreneurial efforts. Moreover, most of the 21 programs target similar geographic areas. To address issues arising from potential overlap and fragmentation in economic development programs, we previously have identified collaborative practices agencies should consider using to maximize the performance and results of federal programs that share common outcomes. These practices include leveraging physical and administrative resources, establishing compatible policies and procedures, monitoring collaboration, and reinforcing agency accountability for collaborative efforts through strategic or annual performance plans. Preliminary findings from our ongoing work show that Commerce, HUD, SBA, and USDA appear to have taken actions to implement some of the collaborative practices, such as defining and articulating common outcomes, for some of their related programs. However, the four agencies have offered little evidence so far that they have taken steps to develop compatible policies or procedures with other federal agencies or searched for opportunities to leverage physical and administrative resources with their federal partners. Moreover, we found that most of the collaborative efforts performed by program staff on the front line that we have been able to assess to date have occurred only on a case-by-case basis. As a result, the agencies do not appear to be consistently monitoring or evaluating these collaborative efforts in a way that allows them to identify areas for improvement. We reported in September 2008 that the main causes for limited agency collaboration include few incentives to collaborate and lack of a guide on which agencies could rely for consistent and effective collaboration. In that same report, we recommended that SBA and USDA take steps to adopt a formal approach to encourage further collaboration. To date, the two agencies have entered into a memorandum of understanding and USDA has recently taken some action to monitor the collaborative efforts of its field office staff. In failing to find ways to collaborate more, agencies may miss opportunities to leverage each other’s unique strengths to more effectively promote economic development and efficiently use taxpayer dollars set aside for that purpose. In addition, a lack of information on program outcomes has been a long- standing concern. This information is needed to determine if potential overlap and fragmentation has resulted in ineffective or inefficient programs. More specifically: Commerce’s Economic Development Administration (EDA), which administers eight of the programs we reviewed, continues to rely on a potentially incomplete set of variables and self-reported data to assess the effectiveness of its grants. This incomplete set of variables may lead to inaccurate claims about program results, such as the number of jobs created. Moreover, in only limited instances have EDA staff requested documentation or conducted site visits to validate the self-reported data provided by grantees. We first reported on this issue in March 1999 and issued a subsequent report in October 2005. In response to a recommendation we made in 2005, EDA issued revised operational guidance in December 2006 that included a new methodology that regional offices were to use to calculate estimated jobs and private-sector investment attributable to EDA projects. However, during our recently- completed review we found that the agency still primarily relies on grantee self-reported data and conducts a limited number of site visits to assess the accuracy of the data. While acknowledging these findings, EDA officials stated that they do employ other verification and validation methods in lieu of site visits. These methods include reviews to ensure the data are consistent with regional trends and statistical tests to identify outliers and anomalies. SBA has not yet developed outcome measures that directly link to the mission of its HUBZone program, or implemented its plans to evaluate the program based on variables tied to program goals. We reported in June 2008 that while SBA tracks a few performance measures, such as the number of small businesses approved to participate in the program, the measures do not directly link to the program’s mission. Therefore, we recommended that the agency further develop measures and implement plans to assess the effectiveness of the program. While SBA continues to agree that evaluating the outcomes of the HUBZone program is important, to date the agency has not yet committed resources for such an evaluation. The USDA’s Office of Rural Development, which administers 31 of the programs we reviewed, has yet to implement the USDA Inspector General’s (IG) 2003 recommendation on ensuring that data exist to measure the accomplishments of one of its largest rural business programs—the Business and Industry loan program, which cost approximately $53 million to administer in fiscal year 2010. USDA officials stated that they have recently taken steps to address the IG’s recommendation, including requiring staff to record actual jobs created rather than estimated jobs created. However, an IG official stated that these actions are too recent to determine whether they will fully address the recommendation. Without quality data on program outcomes, these agencies lack key information that could help them better manage their programs. In addition, such information would enable congressional decision makers and others to make decisions to better realign resources, if necessary, and identify opportunities for consolidating or eliminating some programs. Building on our past work, we are in the planning phase of a new, more in- depth review that will focus on a subset of these 80 programs, including a number of SBA programs. We plan to evaluate how funds are used, identify additional opportunities for collaboration, determine and apply criteria for program consolidation, and assess how program performance is measured. More generally, as the nation rises to meet the current fiscal challenges, we will continue to assist Congress and federal agencies in identifying actions needed to reduce duplication, overlap, and fragmentation; achieve cost savings; and enhance revenues. As part of current planning for our future annual reports, we are continuing to look at additional federal programs and activities to identify further instances of duplication, overlap, and fragmentation as well as other opportunities to reduce the cost of government operations and increase revenues to the government. We will be using an approach to ensure governmentwide coverage through our efforts by the time we issue of our third report in fiscal year 2013. We plan to expand our work to more comprehensively examine areas where a mix of federal approaches is used, such as tax expenditures, direct spending, and federal loan programs. Likewise, we will continue to monitor developments in the areas we have already identified. Issues of duplication, overlap, and fragmentation will also be addressed in our routine audit work during the year as appropriate and summarized in our annual reports. As GAO has reported, three small business programs have had varying degrees of internal control weaknesses that affected program oversight. For example, in a June 2008 report, GAO determined that SBA’s mechanisms for certifying and monitoring firms in the HUBZone program gave limited assurance that only eligible firms participated.