Objectives

To determine whether the New York City Department of Small Business Services provided available services under the Energy Cost Savings Program and the Business Preparedness and Resiliency Program, and whether Small Business Advocates and Compliance Advisors provided services to assist businesses in opening, operating, and expanding their businesses. We also sought to determine whether the services were provided in accordance with the applicable requirements of each program, including eligibility and the value of rebates granted. The audit covered the period from July 2018 through May 2022.

About the Program

The New York City Department of Small Business Services’ (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.” Previously known as the Department of Business Services, SBS is tasked with helping businesses throughout New York City start, operate, and expand. Through its programs, SBS provides direct assistance as well as facilitates services from other entities, such as financial institutions, to aid businesses. In our prior audit, Selected Aspects of Supporting Small Businesses (2020-N-10), we reviewed the Employee Retention Grant program and SBS’ actions to implement the Small Business First initiative. In light of the importance of helping local businesses, we are auditing additional SBS business assistance programs. This audit covers three programs under the Division of Business Services: the Energy Cost Savings Program (ECSP), the Business Preparedness and Resiliency Program (BPREP), and a program to assist small businesses by providing the services of Compliance Advisors (CAs) and Small Business Advocates (SBAs). The three programs were selected because each addresses a different service to provide small businesses the support across the business life cycle from startup to growth that will help them to remain in business. ECSP helps businesses obtain a rebate to reduce energy costs. It was initiated before the Department of Business Services’ name changed to SBS, and subsequently refocused on small businesses. As a result, ECSP continues to assist businesses of various sizes. BPREP assists businesses affected by Superstorm Sandy and educates businesses on how to prepare for potential future disasters. CAs and SBAs provide regulatory advice, helping businesses understand key City rules and requirements and how to avoid and respond to violations. The three programs we examined are briefly described below:

• ECSP allows businesses to qualify for reduced costs for energy provided to them by regulated utilities. During fiscal year 2020, the 418 businesses participating in this program had savings of $11.3 million, with $138.5 million in cumulative savings. CAs and SBAs are SBS professionals who specialize in helping small business owners comply with City regulations. From July 2018 through October 2020:
  • CAs, who provide on-site compliance consultations, reported 2,255 contacts with businesses.
  • SBAs, who provide in-person support to help businesses understand key City rules and requirements, reported 7,507 contacts with businesses.
  • An additional 2,568 services were provided by both CAs and SBAs.
• BPREP provided grants of up to $3,000 to businesses in the Superstorm Sandy flood zone to prepare for emergencies. During the period August 2017 to August 2020, 334 businesses received benefits under this program totaling $942,942.

Key Findings

SBS provides services to help businesses start and comply with City regulatory requirements. While providing valuable services, our audit showed that the agency needs to improve in other areas, such as monitoring businesses’ continued eligibility for program benefits. For example, to maintain their 12-year eligibility for the rebates, ECSP businesses were required to submit an annual report to document the current status of the recipient’s eligibility under ECSP such as the type of business conducted at the eligible premises and change in the occupancy or ownership. We found that none of the 60 businesses sampled submitted the required annual reports for the entire contract period, yet they received rebates totaling $2,870,464. The average rebate was $47,841 – ranging from $145 to $461,191, based on the utility bill, which could be electricity and/or gas.

For CAs and SBAs, SBS did not keep complete records of the visits and the documentation to support the information provided to the businesses. The files SBS provided were missing required documents, such as checklists documenting the items covered during the visit and the recommendations made to the business, and, in some cases, did not contain the name of the business receiving the service. Compliance checklists are an essential part of the documentation generated during on-site visits. We sampled a total of 50 businesses that were reported as receiving a combined total of 74 services from SBS and found that 26 unique businesses did not have sufficient documentation to support that 33 services were provided.

Similarly, for BPREP, SBS did not keep accurate records of webinars and attendees from businesses accessing disaster recovery tools.

Key Recommendations

• Develop a process to ensure that all correspondence between SBS and the businesses receiving the rebate under ECSP are documented, including landlord acknowledgments, property tax bills, and renovation and construction costs, as well as annual reports for continuing eligibility determinations.
• Remind ECSP businesses that they are required to file an annual report and other documents.
• Ensure that the checklists created during SBA and CA visits are complete, are issued to the business owners, provide clear recommended actions to be taken by the business owners, and are retained.