Report 15-15: SBA Needs to Improve Its Management of Disaster Technical Assistance Grants

OIG’s Audit Report 15-15, SBA Needs to Improve Its Management of Disaster Technical Assistance Grants, presents the results of our audit of the SBA’s oversight of Hurricane Sandy technical assistance grants.

The Disaster Relief Appropriations Act of 2013 gave the Small Business Administration’s (SBA’s or the Agency) Office of Entrepreneurial Development $19 million to provide technical assistance to small businesses recovering from Hurricane Sandy.  We focused on the two largest recipients, the New York Small Business Development Center (NYSBDC) and the New Jersey Small Business Development Center (NJSBDC), which together received $12.6 million of the $19 million appropriated for Hurricane Sandy technical assistance grants.

For Phase 1, the SBDCs faced challenges in operating under an initial aggressive 6-month timeline, while delivering an increased level of technical assistance services supported by multiple funding sources.  However, both SBDCs were able to achieve some Hurricane Sandy goals: NYSBDC reported meeting nearly 3 of its 4 goals, while NJSBDC reported meeting nearly 2 of its 3 goals to address short-term needs.  For Phase 2, NYSBDC and NJSBDC may not meet their goals for long-term resiliency.  As of March 31, 2015, several of the SBDCs’ goals lagged behind schedule, with $6.6 million remaining to be spent by August 2015.  Both SBDCs faced challenges with attracting technical assistance clients and spending Sandy funds concurrent with funds from other grants, including residual Phase 1 funding.  The SBDCs also had difficulty collaborating with other technical assistance providers.

We also found that SBA did not identify or mitigate the risk of unallowable expenditures during Phase 1.  As a result, sub-centers of the SBDCs used $16,965 on unapproved scholarship costs, $168,082 on unsupported personnel and indirect costs, and $335,217 on unapproved budget revisions—all of which went undetected by SBA.

OIG made ten recommendations to the Associate Administrator of the Office of Entrepreneurial Development intended to improve how SBA manages disaster technical assistance grants.  SBA agreed with our report and nine of our ten recommendations, and partially agreed with one recommendation.