Objective

To determine whether the New York City Department of Small Business Services (SBS) provided available services under programs to small businesses to assist them in obtaining funding for opening, operating, and expanding their businesses. The audit covered the period from July 2019 to November 2023.

About the Program

SBS' mission is to help “unlock economic potential and create economic security for all New Yorkers by connecting New Yorkers to good jobs, creating stronger businesses, and building thriving neighborhoods across the five boroughs.”

SBS contracts with outside entities known as Industrial Business Service Providers (Industrial Providers) and Business Solutions Centers to support these programs and assist businesses with analyzing their finances, identifying the best available financial products, working with lenders to package loans, collecting financial documents and completing forms, structuring loan requests, and submitting final loan applications to lenders, as well as following up to ensure disbursement of funds and providing post-financing advisement. Another service these contracted entities were required to provide was training, consisting of webinars/workshops, to business owners. Under the Industrial Provider Capital Access program, SBS facilitates assistance to businesses in the manufacturing, construction, transportation, wholesale, utility, and film production industries. The New York City Businesses Solutions Capital Access program covers businesses in other industries. During the 4 fiscal years from 2019 to 2022, SBS reported that these programs facilitated about $220 million in financing to businesses.

Key Findings

SBS provides services to small businesses through contractors. These contractors assist small businesses in obtaining access to financial organizations that will provide financing for their business. However, while SBS’ monitoring of these contractors includes reviewing their expenses and outputs, it does not include the development and review of operational data that would enable the agency to determine how its programs are helping small businesses reach their goals.

The 76 businesses we reviewed obtained facilitated loans of $97,363,816; however, SBS did not collect data on the beneficial effects of this financing, such as the creation of new jobs or strengthening of the businesses’ operations.

Additionally, while SBS audits the contractors' use of the contract funds, it does not verify program performance in terms of the number and amount of the facilitated loans. Instead, the program results are self-reported by the vendors.

A review of the files at the Industrial Providers and Business Solutions Centers showed that they did not always obtain the required documentation from businesses. For example:

• Fifteen of the 76 sampled businesses received 24 facilitated loans, valued at $23,113,349, but did not have a proof letter from the lender in Dynamics (SBS’ system of record) verifying that the loan had been made.
• Three sampled businesses had differences between the amount in their lenders’ proof letters and the amounts recorded in Dynamics. For two of the businesses, the amounts stated in the proof letters were higher by $2,175,909, and for one, the amount in Dynamics was higher than the amount in the proof letter by $599,125.

To qualify for services, businesses are required to be located in New York City or have a formal presence if they are based outside New York City. We found that 158 of the 2,129 facilitated loans, valued at $10,242,747, were made to businesses located outside of New York City or there was no documentation to support a presence in New York City.

Additionally, the programs included training courses for businesses in subjects such as preparing financial statements (to be submitted to lenders), business plans, operating a business, and how to do business with government agencies. Data related to these programs is included in performance metrics for contractors, which helps SBS evaluate the programs. We found the controls over enrollment and attendance need to be improved. For example:

• Courses and seminars administered by the Business Solutions Centers were missing Zoom attendance reports in Dynamics to support the attendance of 141 of 1,083 (13%) of the participants. These participants were counted toward reaching the Business Solutions Centers’ annual attendance goal.
• For the remaining 942 (1,083 - 141) attendees who had Zoom reports to corroborate their attendance, we found that 173 attendees (18%) did not stay for at least half of the course/session.

Before 2023, SBS did not conduct post-course surveys to assess whether the courses administered by the Business Solutions Centers benefited the businesses in any measurable way. Although SBS officials advised that surveys were conducted by another New York City entity, they did not provide us with the survey results.

Key Recommendations

• Improve monitoring to ensure the programs align with SBS’ mission. This may include expanding required reporting in future contracts to collect data that would enable the assessment of program outcomes and effectiveness.
• Improve oversight over Industrial Providers and Business Solutions Centers data to ensure completeness and accuracy and that all required fields in Dynamics are complete.
• Ensure that all businesses are located in New York City or have a formal presence if they are based outside New York City.
• Require Business Solutions Centers to improve their records of attendance at training webinars/workshops that are service goals per their contracts.
• Set minimum attendance time for an attendee to be counted as a service that was provided as part of the contract.
• Revisit the process used to conduct post-training surveys to determine whether they should be conducted by SBS.