COVID relief: SBA could improve communications and fraud risk monitoring for its arts and entertainment venues grant program

What the GAO found

The Closed Venue Operators Grants program was created to financially assist businesses in the performing arts and entertainment industries impacted by the COVID-19 pandemic. The Small Business Administration (SBA) approved 73 percent of the 17,328 applications it received for the program as of December 31, 2021. Smaller businesses (those with 50 or fewer employees) accounted for more than 90 percent of the award recipients. Of the six eligible business types, movie theaters had the highest average award amount (see figure).

Indoor venue operators Average grant and award recipients, by type of eligible business, as of December 31, 2021

Communications from the SBA’s Shuttered Venue program were viewed negatively by most applicants, according to a GAO survey. The agency changed program guidance frequently, and the survey estimates that 85 percent of applicants found these changes challenging. Customer service was difficult to access and did not provide applicant-specific assistance, most respondents reported. Existing SBA plans for program communication during emergencies focus on regional loan programs that serve all businesses, so they were not appropriate for the Shuttered Venue program, which is a nationwide but targeted grant program. of the industry. A more comprehensive communication strategy would better position the SBA for future emergency assistance programs, particularly those that may differ from its existing programs.

SBA’s checks for the application process (pre-award checks to verify identity and eligibility) reflected some leading practices for managing fraud risk. For example, the SBA designed controls to compare applicant information with third-party databases. The SBA periodically evaluated the program’s risks, including fraud risks. The most recent assessment outlined eight fraud risks, including identity theft. In July 2022, the SBA provided the GAO with draft procedures for monitoring suspected fraud among closed location grant recipients. However, the preliminary procedures do not specifically address all of the risks identified in the SBA’s fraud risk assessments. The GAO Fraud Risk Framework underscores the importance of focusing monitoring resources on identified risks. By ensuring that program monitoring efforts are properly targeted, the SBA would be better positioned to detect and respond to fraud.

Why GAO did this study

Between April 2021 and July 2022, the SBA awarded $14.6 billion in grants to help arts and entertainment businesses negatively impacted by the pandemic. Dealerships can use the awards to pay for operating expenses such as payroll, rent or mortgage, and utilities.

The CARES Act includes a provision for GAO to monitor funds provided for the COVID-19 pandemic. Among its objectives, this report examines the characteristics of grant applicants and recipients as of December 31, 2021; applicants’ views on SBA communications; and the steps SBA took to identify ineligible and fraudulent applications and manage fraud risks and the extent to which these reflect selected leading practices.

GAO reviewed SBA documents and analyzed program data as of December 31, 2021 (the most recent grant-level data available at the time of GAO’s analysis). GAO surveyed a generalizable sample of grant applicants and interviewed SBA staff and six business associations. The GAO also tested the program’s eligibility and fraud controls.

Leave a Comment