Audit Report on the Department of Small Business Services’ Administration of the New York City Employee Retention Grant Program

Audit Findings and Conclusion

The objectives of the audit were to determine whether SBS had adequate controls over the award process for the NYC Small Business Continuity Loan Fund Program and complied with relevant rules and regulations.

While we acknowledge the urgent context in which the Loan Program was established at the very onset of the COVID-19 crisis, and we recognize SBS’ achievements in standing up a complex program with a very short turnaround time, significant shortcomings were found in the implementation of the program, and areas for improvement have been identified.

The audit determined that SBS’ review processes did not sufficiently ensure the accuracy of the eligibility determinations, that notification of applicants was not sufficient to ensure applicants became aware of changes in eligibility requirements and in application deficiencies and denials. The audit also found that Loan Program funding was not equitably distributed across the five boroughs. The Bronx was particularly underserved, with the lowest absolute and relative number of loan recipients and awarded funds.

The audit recommends that for future financial assistance programs, SBS implement multi-level reviews to ensure that staff follow procedures and determine eligibility correctly; require applicants to submit federal, State, and City tax returns and accounting records; independently obtain federal and State tax records; search  public records or use third-party research tools to determine whether businesses have outstanding judgements or liens; communicate changes to documentation requirements to applicants; increase outreach to underserved areas; and distribute funds equitably.

Agency Response

Although SBS generally did not agree with the report’s findings, SBS stated that it implemented six of the report’s seven recommendations, and will take steps to address the remaining recommendation.