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Economic development > 7. Support for Entrepreneurs

Overlap and fragmentation among the economic development programs that support entrepreneurial efforts require the Office of Management and Budget and other agencies to better evaluate the programs and explore opportunities for program restructuring, which may include consolidation, within and across agencies.

Why This Area Is Important

Economic development programs that effectively provide assistance to entrepreneurs may help businesses develop and expand, and thus contribute to the nation’s economic growth. The Departments of Commerce (Commerce), Housing and Urban Development (HUD), and Agriculture (USDA), and the Small Business Administration (SBA) administer 53 such programs that focus on supporting entrepreneurs.[1] These programs, which typically fund a variety of activities in addition to supporting entrepreneurs, spent an estimated $2.6 billion in enacted appropriations on economic development efforts in fiscal year 2010.[2]

As GAO reported in March and May 2011, the majority of the economic development programs had missions related to supporting entrepreneurs. Programs with overlapping missions can result in inefficiencies, such as requiring recipients to fill out applications to multiple agencies with varying program requirements, as well as compromising the government’s ability to effectively provide the desired service and meet the shared goals of the programs. While collaboration is one way to overcome overlap among agencies when providing similar services, opportunities for program restructuring, which include consolidation, may also exist. GAO has ongoing work that will be issued later this year to continue examining issues beyond those identified in the March and May 2011 reports. This document reports GAO’s findings to date.



[1]The number of programs administered by Commerce, HUD, SBA, and USDA that were identified in GAO-11-477R as supporting entrepreneurial efforts decreased from 54 to 53 because Commerce merged its Minority Business Opportunity Center program and Minority Business Enterprise Center program into one program that is now called Minority Business Center. In addition, two of the original Commerce programs identified in GAO’s March and May 2011 reports—Community Trade Adjustment Assistance and Research and Evaluation—have been replaced with two other Commerce programs—Trade Adjustment Assistance for Firms and the Economic Development-Support for Planning Organizations—because one of the original programs had temporary funding and the other original program was misclassified as an economic development program. The two new Commerce programs that have been added should have been included in the March and May 2011 reports, according to Commerce officials. See appendix III for a list of the 53 programs GAO is currently reviewing that support entrepreneurs and their 2010 enacted appropriations.

[2]GAO excluded the portion of the Community Development Block Grant funding that HUD reported is not used to support economic development. The total enacted appropriations for these 53 programs was about $5.6 billion for fiscal year 2010.

What GAO Found

Based on a review of the missions and other related program information for these 53 programs, GAO determined that these programs overlap based not only on their shared purpose of serving entrepreneurs but also on the type of assistance they offer. The programs generally can be grouped according to at least one of three types of assistance that address different entrepreneurial needs: help obtaining (1) technical assistance, (2) financial assistance, and (3) government contracts. Many of the programs can provide more than one type of assistance, and most focus on technical and/or financial assistance:[1]

  • Technical assistance: Thirty-six programs distributed across the four agencies provide technical assistance, including business training and counseling and research and development support.
  • Financial assistance: Thirty-three programs distributed across the four agencies support entrepreneurs through financial assistance in the form of grants and loans.
  • Government contracting assistance: Seven programs distributed between two of the four agencies support entrepreneurs by helping them qualify for federal procurement opportunities.

The table below illustrates overlap among programs that provide entrepreneurial assistance in terms of the type of assistance they provide. For example, 13 programs across 3 of the agencies provide financial assistance only. SBA and USDA both have 5 programs that only provide financial assistance, while HUD has 3.

53 Programs That Support Entrepreneurs, by Type of Assistance, as of
September 30, 2011a

HUD

SBA

USDA

Commerce

Totalb

Technical assistance only

2

6

5

4

17

Financial assistance only

3

5

5

13

Technical and financial assistance only

7

3

4

2

16

Government contracting assistance only

2

2

Technical and government contracting only

1

1

Financial and government contracting only

2

2

Technical, financial, and government contracting assistance

2

2

Total

12

19

14

8

53

Source: GAO analysis of information provided by Commerce, HUD, USDA, and SBA.

aSome of the programs may not have received funding in fiscal year 2011.

bThe 36 technical assistance programs include those in the following categories: technical assistance only; technical and financial assistance only; technical, financial, and government contracting assistance; and technical and government contracting assistance only. The 33 financial assistance programs include those in the following categories: financial assistance only; technical and financial assistance only; technical, financial, and government contracting assistance; and financial and government contracting assistance only. The seven government contracting assistance programs include those in the following categories: government contracting assistance only, technical and government contracting assistance only, financial and government contracting assistance only, and technical, financial, and government contracting assistance.

Much of the overlap and fragmentation among these 53 programs is concentrated among programs that support economically distressed and disadvantaged areas and programs that assist disadvantaged and small businesses. As the figure below shows, of the 36 programs that provide technical assistance (that is, programs that either provide only technical assistance or those that provide technical assistance in addition to financial and government contracting assistance),

  • Commerce’s Economic Development/Technical Assistance program and SBA’s 7(j) Technical Assistance program are among the 33 programs that assist businesses located in economically distressed areas.[2]
  • HUD’s Hispanic Serving Institutions Assisting Communities and USDA’s Rural Business Opportunity Grants programs are among the 23 that can assist businesses operating in areas that are disadvantaged,[3]
  • SBA’s Small Business Development Centers and Commerce’s Minority Business Centers are among the 27 programs that support disadvantaged businesses,[4]and
  • USDA’s Rural Business Enterprise Grant program and SBA’s 8(a) program are among the 32 programs that serve small businesses.

Overlap and fragmentation are also evident among programs that provide more specific forms of assistance. For example, technical assistance programs that provide business training and counseling include SBA’s Small Business Development Centers, Women’s Business Centers, SCORE (formerly, Senior Core of Retired Executives) programs; Commerce’s Minority Business Centers program; and USDA’s Rural Business Enterprise Grants program. In addition, many of these economic development programs also operate in both urban and rural areas.[5]


Programs That Provide Technical and Financial Assistance, by Type of Business and Community Served, as of September 30, 2011

Programs That Provide Technical and Financial Assistance, by Type of Business and Community Served, as of September 30, 2011

Note: Some of the programs may not have received funding in fiscal year 2011.

The number of programs that support entrepreneurs—53—and the overlap among these programs raise questions about whether a fragmented system is the most effective way to support entrepreneurs. By exploring alternatives, agencies may be able to determine whether there are more efficient ways to continue to serve the unique needs of entrepreneurs, including consolidating various programs. In ongoing work, GAO plans to examine the extent of potential duplication among these programs.

In addition, in order to effectively evaluate and oversee the services being provided, Congress and the agencies need meaningful performance information such as evaluation studies and performance measures. This information is needed to help decision makers identify ways to make more informed decisions about allocating increasingly scarce resources among overlapping programs. Specifically, performance measures can provide information on an agency’s progress toward meeting certain program and agencywide strategic goals, expressed as measurable performance standards. For example, while some of the financial assistance programs track measures that include number of businesses assisted and dollar value of loans obtained, they could begin to track measures like defaults, prepayments, and number of loans in good standing to better report how businesses fare after they participate in these programs. In contrast, program evaluations are systematic ways to assess a broader range of information on program performance. As a result, evaluation studies can help identify which programs are effective or not, explain why goals were not met and identify strategies for meeting unmet goals, and estimate what would have occurred in the absence of the program.

Based on preliminary results, GAO found that while most (45) of the 53 economic development programs that support entrepreneurs have reasonable performance measures and tend to meet their annual performance goals, few evaluation studies have been completed and little evaluative information exists to assess programs’ effectiveness. For 39 of the 53 programs, the four agencies have either never conducted a performance evaluation or have conducted only one in the past decade. For example, while SBA has conducted recent periodic reviews of 3 of its 10 programs that provide technical assistance, the agency has not reviewed its other 9 financial assistance and government contracting programs on any regular basis.[6] Moreover, Commerce, HUD, and USDA have not routinely conducted program evaluations for the majority of their economic development programs.

Without results from program evaluations and performance measurement data, agencies lack the ability to measure the overall impact of these programs, and decision makers lack information that could help them to identify programs that could be better structured and improve the efficiency with which the government provides these services. Moreover, the federal government has recently required the Office of Management and Budget (OMB) to coordinate with agencies to ensure that they better track the results of their programs. Specifically, the GPRA Modernization Act of 2010 (GPRAMA) requires OMB to work with agencies to, among other things, develop outcome-oriented goals for certain crosscutting policy areas and report annually on how these goals will be achieved.[7] Other GPRAMA requirements could lead to improved coordination and collaboration among agencies. For instance, GPRAMA requires each agency to identify the various organizations and program activities—both within and external to the agency—that contribute to each agency’s goals. In ongoing work, GAO plans to determine reasons why the agencies (1) do not conduct more routine evaluations of these programs and (2) have not established and do not track performance measures for 8 of the 53 programs. In addition, GAO plans to determine the ongoing and planned efforts of OMB and the agencies to address the provisions contained in GPRAMA.



[1]SBA administers the two programs that solely provide entrepreneurs with assistance in obtaining government contracts: the HUBZone program, which supports small businesses located in economically distressed areas, and the Procurement Assistance to Small Businesses program, which serves small businesses located in any area.

[2]GAO characterizes economically distressed areas as those communities with high concentrations of low- and moderate-income families and high rates of unemployment and/or underemployment.

[3]GAO characterizes disadvantaged communities include as those with concentrations of minority populations, among other factors.

[4]GAO characterizes disadvantaged businesses as those owned by women, minority groups and veterans, among other factors.

[5]The definition of rural varies among these programs, but according to USDA—the agency that administers many of the economic development programs that serve rural areas—the term “rural” typically covers areas with population limits ranging from less than 2,500 to 50,000.

[6]SBA administers a total of 19 programs that support entrepreneurs. Six of its programs provide technical assistance only, 5 provide financial assistance only, 2 provide only contracting assistance, 3 can provide both technical and financial assistance, 1 provides technical and government contracting assistance, and 2 provide financial and government contracting assistance.

[7]Pub. L. No. 111-352 (2011).

Actions Needed

GAO expects to recommend that

Congress should

  • consider ways to tie funding more closely to a program’s demonstrated effectiveness. One way to increase accountability and elevate the importance of program evaluation activities is to tie these factors to funding decisions. Therefore, Congress may want to consider requiring agencies to provide greater support for funding requests and requiring information on demonstrated results of program effectiveness.

Agencies should

  • improve program evaluation and performance metrics. In order to identify options to better structure these programs for the Congress to consider, SBA, Commerce, HUD, and USDA should conduct program evaluations and collect data on performance measures.

OMB and the agencies should

  • explore opportunities to restructure programs through means such as consolidation, elimination, and collaborative mechanisms, both within and across agencies. As OMB works with the agencies to identify programmatic areas that should be better coordinated and tracked, the agencies should look for ways to consolidate programs or opportunities for greater collaboration. In addition, to better ensure the most efficient and effective delivery method for federal assistance to entrepreneurs, SBA, Commerce, HUD, and USDA should individually, and collectively, explore options for restructuring programs that target particular types of businesses or communities and report the results of their efforts to the Congress.

How GAO Conducted Its Work

The information contained in this analysis is based on findings from the products listed in the related GAO products section and additional work GAO conducted that will be published as a separate product in 2012. GAO focused its analysis on the 53 economic development programs at Commerce, HUD, USDA, and SBA that fund entrepreneurial assistance because these programs appeared to overlap the most. GAO examined the extent to which the federal government’s efforts to support entrepreneurs overlap among these numerous, fragmented programs by examining their missions, goals, services provided, and targeted beneficiaries and areas. GAO also collected information on performance measures that the agencies collect to track the performance of each of the 53 programs, and any evaluation studies conducted or commissioned by the agencies evaluating the effectiveness of these programs. This process included meeting with agency officials to corroborate the publicly available information. GAO also determined the reasonableness of the performance measures by assessing each measure against agency strategic goals and specific program missions to determine the extent to which they are aligned. GAO plans to issue a report evaluating (1) the support that the programs provide to entrepreneurs, and the types of information available on this support; (2) the extent to which federal agencies collaborate on the provision of counseling, training, and related services to entrepreneurs; and (3) the extent to which programs that support entrepreneurs overlap or are fragmented, the extent to which these programs have met their performance goals, and the information that is available on their effectiveness.

See pages 339-340 of the PDF version of this report (appendix III) for a list of the programs GAO identified that may have similar or overlapping objectives, provide similar services or be fragmented across government missions. Overlap and fragmentation may not necessarily lead to actual duplication, and some degree of overlap and duplication may be justified.

Agency Comments & GAO Contact

GAO provided a draft of this report to OMB, Commerce, HUD, SBA, and USDA for review and comment. Commerce and HUD provided written comments. OMB, HUD, SBA, and USDA provided technical comments, which were incorporated where appropriate. All written comments are reprinted in appendix IV of the PDF version of this report.

OMB stated that the Administration has taken a number of steps to increase coordination among economic and entrepreneurial development programs, provide better service to businesses seeking federal services, and improve performance evaluation. For example, OMB stated that a new website will be publicly launched for entrepreneurs and business owners in February 2012 named BusinessUSA; the website is intended to provide a virtual one-stop shop for small businesses and enable them to access the wide array of federal programs and services available to them across the government regardless of where they are located. According to OMB, BusinessUSA, while still in its early stages, will help remedy many of the coordination and fragmentation issues identified in the GAO report. OMB also stated that the President has proposed to consolidate the federal government’s primary business and trade agencies and programs into a new more efficient agency that will promote competitiveness, exports and American business. OMB noted that more than half of the programs identified in GAO’s recent report on duplication in federal economic development programs would be consolidated into the new department under the Administration’s proposal, and the new department would more fundamentally address the issues raised in GAO’s report. As GAO continues work in this area, it plans to further monitor and assess OMB’s efforts to work with Commerce, HUD, USDA, and SBA to increase coordination among economic development programs, provide better service to businesses under the programs, and improve program evaluation.

Commerce stated that prior GAO reports have focused on the types of investments made without considering the goals of each program, and GAO may be incorrectly identifying duplication where none exists as a result. For this report, GAO examined the missions, goals, services provided, and targeted beneficiaries and areas for 53 programs that fund entrepreneurial assistance. GAO’s report states that these programs overlap based not only on their shared purpose of serving entrepreneurs but also on the type of assistance they offer; it does not state that duplication exists among these programs. As GAO continues its work, GAO plans to examine the extent of potential duplication among these overlapping programs. Commerce also stated that GAO’s report presents premature actions needed and that the report does not recognize the significant advances that Commerce’s Economic Development Agency has made to improve program evaluation with the development of a performance management improvement logic model. GAO recognizes the action that the Economic Development Agency has taken to develop its new performance management model. However, because the Economic Development Agency has not completely designed its new model or provided sufficient information to explain how results of program evaluations will be included in the model, this action does not change GAO’s findings. In this report, GAO identified areas of concern related to the extent that Commerce, HUD, SBA, and USDA conduct performance evaluations for their economic development programs. Recent legislation also requires OMB to work with agencies to ensure that they better track the results of their programs. GAO believes that the actions needed presented in this report are consistent with its findings and recent legislation. As GAO continues work in this area, it also plans to further monitor and assess the efforts the four agencies undertake to improve program evaluation and performance metrics.

HUD’s Deputy Assistant Secretary for Grant Programs stated that GAO should reduce the number of economic development programs identified as being administered by HUD. First, she recommended that five of the Community Development Block Grant (CDBG) programs be identified as one CDBG program. She noted that the five programs may have separate Catalog of Federal Domestic Assistance numbers, but the programs are funded from a single source within HUD’s annual appropriation, the economic development activities CDBG grantees carry out under the five programs are all subject to the same statutory and regulatory requirements, and CDBG grantees generally cannot obtain assistance under more than one of the five programs. Because GAO relies on the executive branch’s definition of these programs, which separates them into five distinct programs, we disagree that the five programs should be identified as one CDBG program. The Catalog of Federal Domestic Assistance defines federal programs based on legal authority, administering office, funding, purpose, benefits, and beneficiaries; also, the catalog may define a program separately regardless of whether it is identified as a separate program by statute or regulation. While GAO would be receptive to actions the executive branch may take to better define programs, using the Catalog of Federal Domestic Assistance GAO initially identified 80 federal programs administered by Commerce, SBA, USDA, and HUD that can fund economic development activities. For this report, GAO focused its analysis on 53 of these programs across the four agencies that support entrepreneurial efforts, including the five programs HUD noted. Second, the Deputy Assistant Secretary recommended that GAO delete the Brownfields Economic Development Initiative (BEDI) as one of HUD’s active programs that can fund economic development activities. She noted that HUD did not request funding nor did Congress appropriate funding for the BEDI program in fiscal years 2011 and 2012.[1] She further noted that HUD will continue to administer existing BEDI grants, but the department is unlikely to request program funding for fiscal year 2013. She added that the activities authorized under the BEDI program can be funded under other CDBG programs. GAO disagrees that the BEDI program should be removed from the list of HUD programs because the department is actively administering grants under the program.

USDA stated that GAO’s report does not emphasize the significant difference in agencies and programs. For example, USDA stated its Rural Business Service administers programs that are unique and not duplicative because of the agency’s mission to provide assistance to businesses in rural communities. USDA acknowledged that other agencies’ programs may provide assistance to businesses in rural areas, but the Rural Business Service’s programs are focused in these areas. USDA also stated that the Rural Business Service delivers its programs through an expansive field structure of state and local offices. According to USDA, federal agencies such as SBA do not utilize a similar field structure to deliver programs. As previously noted, GAO’s report does not state that duplication exists among the 53 economic development programs that support entrepreneurial efforts; it states that overlap and fragmentation are evident based on GAO’s review of the missions and other related program information for these programs. For example, GAO’s report states that USDA administers many of the economic development programs that serve rural areas. However, GAO also determined that there was overlap because other agencies’ economic development programs can provide assistance to entrepreneurs in rural areas. GAO plans to examine the extent of potential duplication in GAO’s ongoing work.

For additional information about this area, contact William B. Shear at (202) 512-4325 or shearw@gao.gov.

Comments from the Department of Commerce

Comments from the Department of Commerce

Comments from the Department of Housing and Urban Development

Comments from Departmet of Housing and Urban Development (Page 1)

Comments from the Department of Housing and Urban Development (Page 2)

Comments from Department of Housing and Urban Development (Page 3)


[1]The BEDI program received $17.5 million in enacted appropriations for fiscal year 2010, which is the fiscal year funding data that GAO is currently reporting for the 53 programs that support entrepreneurs. In addition, while a number of programs that GAO is reviewing received $0 during fiscal year 2010, they are still considered to be active programs by the executive branch. In addition, these active programs could receive funding in the future (see appendix III).

Related Products

Economic Development:

Efficiency and Effectiveness of Fragmented Economic Development Programs Are Unclear
GAO-11-477R:
Published: May 19, 2011. Publicly Released: May 19, 2011.

Government Operations:

Government Operations:

Small Business Administration:

Additional Guidance on Documenting Credit Elsewhere Decisions Could Improve 7(a) Program Oversight
GAO-09-228:
Published: Feb 12, 2009. Publicly Released: Mar 16, 2009.

Small Business Administration:

Additional Actions Are Needed to Certify and Monitor HUBZone Businesses and Assess Program Results
GAO-08-643:
Published: Jun 17, 2008. Publicly Released: Jul 16, 2008.

Small Business Administration:

Additional Measures Needed to Assess 7(a) Loan Program's Performance
GAO-07-769:
Published: Jul 13, 2007. Publicly Released: Aug 13, 2007.

Rural Economic Development:

More Assurance Is Needed That Grant Funding Information Is Accurately Reported
GAO-06-294:
Published: Feb 24, 2006. Publicly Released: Mar 27, 2006.

Economic Development Administration:

Remediation Activities Account for a Small Percentage of Total Brownfield Grant Funding
GAO-06-7:
Published: Oct 27, 2005. Publicly Released: Oct 27, 2005.

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