Economic Development:

Efficiency and Effectiveness of Fragmented Economic Development Programs Are Unclear

GAO-11-477R: Published: May 19, 2011. Publicly Released: May 19, 2011.

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One of the areas included in our recent report on potential duplication among federal programs was economic development. If economic development programs are administered efficiently and effectively, they can contribute to the well-being of our nation's economy at the least cost to taxpayers. Absent a common definition for economic development, we had previously developed a list of nine activities most often associated with economic development. These activities include planning and developing strategies for job creation and retention, developing new markets for existing products, building infrastructure by constructing roads and sewer systems to attract industry to undeveloped areas, and establishing business incubators to provide facilities for new businesses' operations, among others. Our recent work included information on 80 economic development programs at four agencies--the Departments of Commerce (Commerce), Housing and Urban Development (HUD), Agriculture (USDA), and the Small Business Administration (SBA). This work examined (1) the potential for overlap in the design of the programs, (2) the extent to which the four agencies collaborate to achieve common goals, and (3) the extent to which the agencies have developed measures to determine the programs' effectiveness. According to the agencies, funding provided for these 80 programs in fiscal year 2010 amounted to $6.2 billion, of which about $2.9 billion was for economic development efforts, largely in the form of grants, loan guarantees, and direct loans. Some of these 80 programs can fund a variety of activities, including those focused on noneconomic development activities, such as rehabilitating housing and building community parks. In February 2011 we briefed staff of the House and Senate Small Business Committees on the results of this work to date. We will perform additional analysis of some of these programs and will report on them at a later date.

Our work to date suggests that the design of each of these 80 economic development programs appears to overlap with that of at least one other program in terms of the economic development activity that they are authorized to fund. For example, the four agencies administer a total of 54 programs that can fund "entrepreneurial efforts," which includes helping businesses to develop business plans and identify funding resources. We have also identified the ways each agency is able to distribute economic development funding, as well as the geographic regions based on population density that the agencies target. To address issues arising from potential overlap and fragmentation in economic development programs, we previously identified collaborative practices agencies should consider implementing in order to maximize performance and results of federal programs that share common outcomes. Results from our work to date 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 to search for opportunities to leverage physical and administrative resources with their federal partners. In addition, a lack of information on program outcomes is both a current and longstanding concern. We identified such weaknesses at the four agencies we reviewed. Better information on program outcomes is needed to determine whether this potential overlap and fragmentation are resulting in ineffective or inefficient programs. See our March 2011 report for more information on our preliminary results related to the extent to which these four agencies collaborate and how they determine the effectiveness of some of their programs. In previous reports we identified areas of concern related to the extent to which agencies collaborate and assess the effectiveness of their programs. These areas can benefit from continued attention. (1) Agencies need to further utilize promising practices for enhanced collaboration. We first made this recommendation to SBA and USDA in September 2008, but these agencies have taken only limited steps to fully address our concerns. The actions that the four agencies should consider include seeking more opportunities for resource sharing across economic development programs with shared outcomes and identifying ways to leverage each program's strengths to improve existing collaborative efforts. Continuing to explore the extent to which these agencies collaborate could help identify promising practices that may result in more effective and efficient delivery of economic development programs to economically distressed areas. (2) Agencies need to collect accurate and complete data on program outcomes and use the information to assess each program's effectiveness. In June 2008 we made a similar recommendation to SBA about its HUBZone program, but the agency has taken limited action thus far.

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