RUS administers electric, telecommunications, and water  programs that help finance the infrastructure necessary to improve the  quality of life and promote economic development in rural areas. SBA and USDA Rural Development Have Used a Variety of Mechanisms to Collaborate with Other Federal Agencies and with Each Other

Generally speaking, collaboration involves any joint activity that is  intended to produce more public value than could be produced when the  agencies act alone. Agencies use a number of different mechanisms to collaborate  with each other, including MOUs, procurement and other contractual  agreements, and various legal authorities. Both SBA and USDA have used the authority provided by the Economy  Act to facilitate collaboration. The Economy Act is a general statutory  provision that permits federal agencies to enter into mutual agreements  with other federal agencies to purchase goods or services and take  advantage of specialized experience or expertise. For example, SBA has an agreement with the Farm  Credit Administration (FCA) to examine SBA’s Small Business Lending  Companies (SBLC). Additionally, using the disaster provisions under its traditional multifamily  and single- family rural housing programs, Rural Development  collaborated with FEMA in providing assistance to hurricane victims. While SBA and Rural Development are not currently involved in a  collaborative working relationship, both agencies have some experience  collaborating with each other on issues involving rural development. The MOU outlined each  agency’s responsibilities to (1) coordinate program delivery services and  (2) cooperate with other private sector and federal, state, and local  agencies to ensure that all available resources worked together to promote  rural development. Finally, in creating the RBIP in 2002, Congress authorized Rural  Development and SBA to enter into an interagency agreement to create  rural business investment companies. Rural Development and SBA conditionally elected to fund three rural  business investment companies. Section 1403  of the Deficit Reduction Act of 2005 rescinded funding for the program at  the end of fiscal year 2006. SBA and Rural Development Both Have a Field Office Network, but Rural Development Appears to Have a More Recognized Presence in Rural Areas

Both SBA and Rural Development have field offices in locations across the  United States. However, Rural Development has more state and local field  offices and is a more recognized presence in rural areas than SBA. SBA currently has 68 district offices, many of which are not located in  rural communities or are not readily accessible to rural small businesses. It appears that Rural Development  has an extensive physical infrastructure in rural areas and expertise in  working with rural lenders and small businesses. Our Ongoing Work Will Study the Potential for Increased Collaboration between SBA and Rural Development

You requested that we conduct a review of the potential for increased  collaboration between SBA and Rural Development, and we have recently  begun this work. In general, the major objectives of our review are to  determine:  1. The kind of cooperation that is already taking place between SBA and  Rural Development offices, and  3. Any opportunities or barriers that may exist to cooperation and  collaboration between SBA and Rural Development. To assess the differences and similarities between SBA loan programs and  Rural Development business programs, we will review relevant SBA and  Rural Development documents describing their loan and business  programs. To determine what cooperation has taken place between SBA and Rural  Development, we will examine previous collaboration efforts and  cooperation between the agencies in providing programs and services.
Why GAO Did This Study

The Small Business Administration (SBA) and Department of Agriculture (USDA) Rural Development offices share a mission of attending to underserved markets, promoting economic development, and improving the quality of life in America through the promotion of entrepreneurship and community development. In the past, these agencies have had cooperative working relationships to help manage their respective rural loan and economic development programs. At this subcommittee's request, GAO has undertaken a review of potential opportunities for SBA to seek increased collaboration and cooperation with USDA Rural Development (Rural Development), particularly given Rural Development's large and recognizable presence in rural communities. In this testimony, GAO provides preliminary views on (1) mechanisms that SBA and USDA have used to facilitate collaboration with other federal agencies and with each other; (2) the organization of SBA and USDA Rural Development field offices; and (3) the planned approach for GAO's recently initiated evaluation on collaboration between SBA and Rural Development. GAO discussed the contents of this testimony with SBA and USDA officials.

What GAO Found

While SBA and Rural Development are not currently involved in a collaborative working relationship, SBA and Rural Development have used a number of different mechanisms, both formal and informal, to collaborate with other agencies and each other. For example, both agencies have used the Economy Act--a general statutory provision that permits federal agencies, under certain circumstances, to enter into mutual agreements with other federal agencies to purchase goods or services and take advantage of specialized experience or expertise. SBA and USDA used the act to enter into an interagency agreement to create rural business investment companies to provide equity investments to rural small businesses. For this initiative, Congress also authorized USDA and SBA to administer the Rural Business Investment Program to create these investment companies. However, funding for this program was rescinded at the end of fiscal year 2006. SBA and Rural Development have also used other mechanisms to collaborate, including memorandums of understanding (MOU), contractual agreements, and other legal authorities. For instance, Rural Development has collaborated with the Federal Emergency Management Agency in providing assistance to the victims of Hurricane Katrina using the disaster provisions under its multifamily and single-family rural housing programs. To collaborate with each other, in the past SBA and Rural Development have established MOUs to ensure coordination of programs and activities between the two agencies and improve effectiveness in promoting rural development. Both SBA and Rural Development have undergone restructuring that has resulted in downsizing and greater centralization of each agency's field operations. Currently, SBA's 68 field offices--many of them in urban centers--are still undergoing the transformation to a more centralized structure. Rural Development has largely completed the transformation and continues to have a large presence in rural areas through a network of hundreds of field offices. The program's recognized presence in rural areas and expertise in the issues and challenges facing rural lenders and small businesses may make these offices appropriate partners to help deliver SBA services. GAO has recently begun a review of the potential for increased collaboration between SBA and Rural Development. In general, the major objectives are to examine the differences and similarities between SBA loan programs and Rural Development business programs, any cooperation that is already taking place between SBA and Rural Development, and any opportunities for or barriers to collaboration.