Economic Development:

Efficiency and Effectiveness of Fragmented Programs Are Unclear

GAO-11-651T: Published: May 25, 2011. Publicly Released: May 25, 2011.

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This testimony discusses the potential for duplication and fragmentation in economic development programs. In March 2011 and more recently in May 2011 we reported on potential duplication among federal economic development programs. We are involved in ongoing work focusing on economic development programs because if they 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. Our recent work includes information on 80 economic development programs at four agencies--the Departments of Commerce (Commerce), Housing and Urban Development (HUD), and Agriculture (USDA) and the Small Business Administration (SBA). SBA administers 19 of the 80 programs. 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 such non-economic development activities as rehabilitating housing and building community parks. This testimony today discusses our work on (1) the potential for overlap in the design of these 80 economic development 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.

In summary, based on our work to date, we have found that (1) the design of each of these economic development 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; (2) Commerce, HUD, SBA, and USDA appear to have taken actions to implement some collaborative practices but 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; and (3) the agencies appear to collect only limited information on program outcomes--information that is necessary to determine whether this potential for overlap and fragmentation is resulting in ineffective or inefficient 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.

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