The Small Business Administration (SBA) can’t be reasonably assured that states are contributing their required share of funds in conjunction with the federal State Trade Expansion Program (STEP) grants they receive, according to the findings of a Government Accountability Office (GAO) report released Wednesday.
SBA’s Office of International Trade (OIT) doesn’t have a process for documenting states that have met the total match requirement before grant closeout and doesn’t have a process to determine whether states are meeting the cash match requirement, the report says.
The Trade Facilitation and Trade Enforcement Act requires states to provide a 25 percent or 35 percent non-federal match to the federal grant amount and requires that states’ matches must be at least 50 percent cash.
But OIT has a process to meet a third requirement that the total amount of funds awarded to the 10 states with the highest percentage of eligible small businesses not exceed 40 percent of STEP’s yearly appropriation.
The GAO also found that almost 20 percent of grant funds go unused by states each year, despite SBA officials stating they seek 100 percent use of the funds, GAO International Affairs and Trade Director Kimberly Gianopoulos said during a hearing Tuesday of the House Small Business Subcommittee on Rural Development, Agriculture, Trade and Entrepreneurship.
In 41 of 43 STEP recipient states in 2016, combined grant use was 82 percent, as nearly $3.2 million was left unused, Gianopoulos said. One state left nearly 95 percent of its funds unused, she said.
“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,” the report says. “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.”
Officials from states with low grant use described ongoing challenges affecting their ability to fully use funds, GAO found. Challenges included tight application and award timelines, administrative burden and poor communication, the report says.
GAO recommended 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 grants.
SBA agreed with the recommendations.
Subcommittee Chairwoman Abby Finkenauer, D-Iowa, noted Congress will look at the need for reauthorization of the STEP program in 2020.