Small Business Administration:

Export Promotion Grant Program Should Better Ensure Compliance with Law and Help States Make Full Use of Funds

GAO-19-276: Published: Mar 12, 2019. Publicly Released: Mar 12, 2019.

Additional Materials:

Contact:

Kimberly Gianopoulos
(202) 512-8612
gianopoulosk@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

The State Trade Expansion Program seeks to help U.S. small businesses export their products to other countries. The Small Business Administration awards the program's funds to state trade offices, which assist with activities like trade show attendance. It has given about $139 million in grants since FY 2011.

The program requires states to provide matching funds—including a portion in cash—and SBA must follow rules designed to spread funding among states.

We made 4 recommendations, including that SBA:

Develop a process to ensure compliance with matching fund requirements

Evaluate the challenges some states face in using all their grant funds

Total State Trade Expansion Program award amounts by state, fiscal years 2015-2017

Color-coded map showing the states and U.S. territories.

Color-coded map showing the states and U.S. territories.

Additional Materials:

Contact:

Kimberly Gianopoulos
(202) 512-8612
gianopoulosk@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

The Small Business Administration's (SBA) management of the State Trade Expansion Program (STEP) does not provide reasonable assurance of compliance with some legal requirements. Specifically, the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA) requirements for STEP include:

Proportional distribution requirement. SBA's Office of International Trade (OIT) must distribute grant funds so that the total amount awarded to the 10 states with the highest percentage of eligible small businesses does not exceed 40 percent of the program's appropriation that year.

Total match requirement. States must provide a 25 or 35 percent non-federal match to the federal grant amount.

Cash match requirement. A state's match cannot be less than 50 percent cash.

GAO found that, while OIT has a process to meet the distribution requirement, it does not have a process for documenting that states have met the total match requirement before grant closeout, and does not have a process to determine whether states are meeting the cash match requirement. Without such processes, SBA cannot be reasonably assured that states are contributing per the law's requirements.

GAO found that, while OIT has made changes to STEP in response to states' feedback, officials from states with low grant use described ongoing challenges with the program that affect their ability to fully use funds. These challenges include compressed application and award timelines, administrative burden, and poor communication. SBA has not adequately assessed risks to the program, including the risk to achieving program goals posed by some states' low grant fund use rates. Without such an assessment, OIT's ability to support U.S. exporters may be diminished. Further, SBA has not effectively facilitated sharing best practices among states. By doing this, SBA could help states make full use of funds to achieve the program's goals.

Twelve States with Low STEP Grant Fund Use Rates Reported Challenges

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Why GAO Did This Study

Congress established STEP in 2010 to increase small business exports. Through STEP, SBA has awarded about $139 million in grants to state trade offices, which in turn facilitate small business export activities, including participation in trade missions and attendance at trade shows. Congress reauthorized STEP in 2016. GAO was asked to review SBA's management of the program.

This report examines the extent to which (1) SBA's STEP grants management process provides reasonable assurance of compliance with selected requirements of applicable law, and (2) SBA has taken steps to address challenges states report in using grant funds to achieve program goals. GAO reviewed the program's authorizing legislation and federal and agency guidance on grants management, analyzed SBA program data, and interviewed SBA officials. GAO also conducted semi-structured interviews with a non-generalizable sample of 12 of the 40 states that received STEP grants in fiscal year 2015, the most recent year for which complete data were available. GAO selected these states on the basis of their low grant fund use rates.

What GAO Recommends

GAO is recommending that SBA develop processes to ensure compliance with legal grant matching fund requirements, take steps to assess risks to program goals from low grant fund use rates, and enhance the sharing of best practices among states receiving the grant. SBA concurred with all of the recommendations.

For more information, contact Kimberly Gianopoulos at (202) 512-8612 or gianopoulosk@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: SBA generally agreed with GAO's findings and concurred with our recommendations. In response to our draft report, agency officials said SBA will establish a process that ensures documentation of state recipients' compliance with the total match requirement before grant closeout.

    Recommendation: The SBA Administrator should establish a process that ensures documentation of states' compliance with the total match requirement before grant closeout. (Recommendation 1)

    Agency Affected: Small Business Administration

  2. Status: Open

    Comments: SBA generally agreed with our findings and concurred with our recommendations. In response to our draft report, agency officials said they would develop a process to determine state's compliance with the cash match requirement.

    Recommendation: The SBA Administrator should develop a process to determine states' compliance with the cash match requirement. (Recommendation 2)

    Agency Affected: Small Business Administration

  3. Status: Open

    Comments: SBA generally agreed with our findings and concurred with our recommendations. SBA observed that the states we did not interview may have had different experiences with the program than the states in our sample. As we note in the report, our sample is nongeneralizable, and so the experiences these states reported to us may not be common to all states receiving the grant. As we stated in our report, we selected the 12 states that had the lowest grant use rates in fiscal year 2015 in order to understand the challenges they faced. In response to the draft report, agency officials said SBA would assess the risk to achieving the STEP program goals posed by some states' low grant fund use rates. This assessment to risk will include examining the challenges that states reported in this audit related to the STEP program application and award processes, administrative burden, and communication.

    Recommendation: The SBA Administrator should assess the risk to achieving program goals posed by some states' low grant fund use rates. Assessing this risk could include examining the challenges that states reported related to the program's application and award processes, administrative burden, and communication. (Recommendation 3)

    Agency Affected: Small Business Administration

  4. Status: Open

    Comments: SBA generally agreed with our findings and concurred with our recommendations. In response to our draft report, agency officials said the Office of International Trade plans to develop an internal control that will focus on collecting and sharing best practices among states that receive grant funds. This internal control is expected to focus on best practices that help STEP improve program outcomes, help share lessons learned, and spread the adoption of promising practices. The internal control is then expected to lead STEP management to externally communicate the necessary quality information to grant recipients so that grant recipients can achieve their program objectives. Their intent is that best practices will improve program effectiveness and will help lead to 100 percent grant fund use.

    Recommendation: The SBA Administrator should enhance collection and sharing of best practices among states that receive STEP grant funds. (Recommendation 4)

    Agency Affected: Small Business Administration

 

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