September 11: Small Business Assistance Provided in Lower	 
Manhattan in Response to the Terrorist Attacks (01-NOV-02,	 
GAO-03-88).							 
                                                                 
The attacks on the World Trade Center had a substantially	 
negative impact on the New York City economy, severely affecting 
businesses. In the aftermath of the attacks, Congress, among	 
other things, appropriated emergency supplemental funds to	 
several federal agencies to aid and rebuild the affected areas.  
The Chairman of the House Committee on Small Business asked GAO  
to describe the assistance provided to small businesses that is  
funded from emergency supplemental appropriations of federal	 
Community Development Block Grant funds and other sources.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-88						        
    ACCNO:   A05426						        
  TITLE:     September 11: Small Business Assistance Provided in Lower
Manhattan in Response to the Terrorist Attacks			 
     DATE:   11/01/2002 
  SUBJECT:   Disaster relief aid				 
	     Federal aid to localities				 
	     Small business assistance				 
	     National preparedness				 
	     State-administered programs			 
	     Terrorism						 
	     Urban economic development 			 
	     Empire State Development Corporation		 
	     Business Recovery Grant Program			 
                                                                 
	     Empire State Development Corporation		 
	     Business Recovery Loan Program			 
                                                                 
	     Empire State Development Corporation		 
	     Small Firm Attraction and Retention		 
	     Grant Program					 
                                                                 
	     Empire State Development Corporation		 
	     Technical Assistance Program			 
                                                                 
	     HUD Community Development Block Grant		 
	     Program						 
                                                                 
	     New York (NY)					 
	     New York City Lower Manhattan Business		 
	     Retention Grant Program				 
                                                                 
	     September 11th Victim Compensation Fund		 
	     of 2001						 
                                                                 
	     World Trade Center Disaster Recovery		 
	     Bridge Loan Program				 
                                                                 

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GAO-03-88

Report to the Chairman, Committee on Small Business, House of
Representatives

United States General Accounting Office

GAO

November 2002 SEPTEMBER 11 Small Business Assistance Provided in Lower
Manhattan in Response to the Terrorist Attacks

GAO- 03- 88

To assist in New York City's recovery from the September 11, 2001,
terrorist attacks, Congress appropriated $3.5 billion in Community
Development Block Grant funding of which Congress earmarked at least $500
million to be used to compensate small businesses, nonprofit
organizations, and individuals for their economic losses. One year after
the attacks, these funds, administered in part by New York State*s Empire
State Development Corporation (Empire State), have provided $266 million
to about 9,000 small businesses, many with fewer than 10 employees (see
fig. below). Such assistance has included grants to compensate businesses
for part of their economic losses* for both physical and economic
injuries* and payments to attract and retain small businesses in efforts
to revitalize the affected areas. Hundreds of millions of dollars remain
available through these and other programs to assist an estimated 18, 000
affected businesses. Empire State has employed mailings, visits, walk- in
centers, and mass media to inform businesses of assistance programs.

Other efforts by the Small Business Administration, New York City and
State, banks, and nonprofit organizations have provided critical
assistance to address the immediate and additional unmet needs of small
businesses.

Percentage of Small Business Recovery Grant Recipients, as of September
11, 2002, by Number of Employees

Source: GAO analysis of Empire State database. SEPTEMBER 11

Small Business Assistance Provided in Lower Manhattan in Response to the
Terrorist Attacks

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 88

To view the full report, including the scope and methodology, click on the
link above. For more information, contact William O. Jenkins, Jr. (202-
512- 8678) or jenkinswo@ gao. gov. Highlights of GAO- 03- 88, a report to
the

Committee on Small Business, House of Representatives.

November 2002

The attacks on the World Trade Center had a substantially negative impact
on the New York City economy, severely affecting businesses. In the
aftermath of the attacks, Congress, among other things, appropriated
emergency supplemental funds to several federal agencies to aid and
rebuild the affected areas. The Chairman of the House Committee on Small
Business asked GAO to describe the assistance provided to small businesses
that is funded from emergency supplemental appropriations of federal
Community Development Block Grant funds and other sources.

Page i GAO- 03- 88 September 11 Letter 1

Results in Brief 2 Background 3 Empire State Uses CDBG Funding to Provide
Various Types of

Assistance to Small Businesses 6 SBA, New York City and State, Banks, and
Nonprofit Organizations

Have Also Assisted Small Businesses 16 Agency Comments 24

Appendix I Scope and Methodology 26

Appendix II Map of Lower Manhattan with Highlighted Empire State Program
Areas 29

Tables

Table 1: Information on Empire State Small Business Assistance Programs
Using CDBG Funding as of September 11, 2002 7 Table 2: SBA Loans to
Businesses in Lower Manhattan, as of

September 11, 2002 18 Table 3: Major Nongovernmental Business Assistance
Programs, as

of September 11, 2002 24

Figures

Figure 1: Types of Businesses Receiving Business Recovery Grants 8 Figure
2: Percentage of Business Recovery Grant Recipients, by

Number of Employees 10 Figure 3: Annual Gross Revenues of Businesses
Receiving Business

Recovery Grants 11 Contents

Page ii GAO- 03- 88 September 11 Abbreviations

BRG Business Recovery Grant CDBG Community Development Block Grant EIDL
Economic Injury Disaster Loans HUD Department of Housing and Urban
Development LMDC Lower Manhattan Development Corporation SBA Small
Business Administration SBDC Small Business Development Center SFARG Small
Firm Attraction and Retention Grant STAR Supplemental Terrorism Activity
Relief

Page 1 GAO- 03- 88 September 11

November 1, 2002 The Honorable Donald A. Manzullo Chairman, Committee on
Small Business House of Representatives

Dear Mr. Chairman: The September 11, 2001, terrorist attacks on the World
Trade Center had a substantially negative impact on the New York City
economy, strongly affecting businesses, both large and small and as
disparate as financial services firms, travel agencies, and retail stores.
Some businesses were destroyed, some displaced, and still others could not
operate because of street closures and the lack of utilities. Many small
businesses still face a diminished client base and uncertainty about the
future redevelopment of the World Trade Center site.

In the aftermath of the attacks, Congress appropriated emergency
supplemental funds to various agencies to aid and rebuild the affected
areas. In particular, Congress made $3.5 billion in Department of Housing
and Urban Development*s Community Development Block Grant (CDBG) funds
available to the Empire State Development Corporation (Empire State) and
its subsidiary, the Lower Manhattan Development Corporation. Congress
earmarked at least $500 million of that total to compensate small
businesses, nonprofits, and individuals located in lower Manhattan for
their economic losses.

This report responds to your request that we describe the types and
amounts of assistance provided to small businesses from (1) the CDBG
supplemental funding and (2) other sources of funds that have been made
available to rebuild or sustain small businesses in lower Manhattan.

To address these objectives, we met with officials and obtained data from
federal, state, city, and nonprofit organizations on the assistance that
they provided to small businesses in the aftermath of the terrorist
attacks. We also met with lower Manhattan small business advocacy groups,
whose directors were often small business owners, and attended meetings in
which members spoke about the impact of the terrorist attacks on their
businesses. In addition, we visited city and state business recovery
centers and a Small Business Development Center and attended a chamber of
commerce networking event in lower Manhattan. See appendix I for a
detailed description of our scope and methodology.

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 03- 88 September 11

We conducted our work between April and September, 2002, in Washington, D.
C., and New York, New York, in accordance with generally accepted
government auditing standards.

Empire State, a New York State entity, designated by the Governor, has
taken the lead in providing business assistance using CDBG funds,
allocating $506 million for small business assistance. As of September 11,
2002, Empire State had disbursed $266 million in grants to lower Manhattan
businesses through its small business assistance programs. 1 Empire
State*s Business Recovery Grant Program began providing assistance in mid-
February 2002 and has provided grants to 8,783 businesses to help
compensate them for their economic losses. About 75 percent of these
businesses had fewer than 10 employees. In addition, through its Small
Firm Attraction and Retention Grant Program, Empire State has provided
grants to 246 businesses that have demonstrated their commitment to remain
in lower Manhattan by signing long- term leases. Small businesses can
receive assistance from both of these programs, as well as other Empire
State programs, as long as the specific eligibility criteria are met for
each program. Empire State also recently increased the amount of
compensation that is available to eligible businesses* both businesses
that already have received grants and new applicants* from its Business
Recovery Grant Program; the expected additional grants are not yet fully
reflected in Empire State*s disbursements. In addition, Empire State is
starting programs that provide funds to nonprofit organizations and other
entities, which in turn will provide technical assistance and lowinterest
loans to small businesses. Apart from grant administration, Empire State
continues outreach to make more businesses aware of available assistance.
Moreover, the Lower Manhattan Development Corporation plans to provide
$200 million from its CDBG funds to Empire State for small business
assistance programs.

The CDBG assistance is part of a larger network of assistance that other
government, nonprofit, and private organizations are providing to small
businesses in lower Manhattan. New York City and State offered grant
assistance to small businesses within the first few months after the
terrorist attacks, disbursing $24 million to 4,722 businesses, and
continue to subsidize a program offering bridge loans to businesses
through

1 Not- for- profit organizations are also eligible under the programs and
are included in the *business* statistics. Results in Brief

Page 3 GAO- 03- 88 September 11

participating banks and community- based lenders. 2 CDBG funds will be
used to reimburse a portion of these costs; however, neither the city nor
the state has made a claim for reimbursement. In addition, the Small
Business Administration (SBA) began making loans to eligible small
businesses within days of the terrorist attacks. As of September 11, 2002,
SBA had approved 2,486 loans totaling $201 million for businesses in lower
Manhattan, of which it had disbursed $154 million. Several banks also have
offered short- term, low- interest loans to small businesses to tide them
over until other resources became available. Moreover, several nonprofit
organizations, often funded by donations and charitable groups, are
providing assistance. The September 11th Fund has committed $50 million in
business assistance. Although the nonprofits* programs have not reached as
many businesses or provided as much funding as the Empire State programs,
they have filled a need by providing early assistance and have targeted
hard- to- reach groups and businesses. For example, one organization
operates in the Chinese community and targets industry groups, such as
garment businesses and limousine drivers. In addition to financial
assistance, some of the nonprofit organizations offer businesses extensive
technical assistance, including future business planning and help with
completing financial documents.

We provided HUD, SBA, and Empire State with an opportunity to review this
report. They provided comments that were technical in nature, which we
have addressed in the report where appropriate.

Using CDBG funds to respond to disasters is not unprecedented; however,
the dollar amounts allocated for such purposes in the wake of the
terrorist attacks on New York City are the largest ever made through the
program. In the months following September 11, 2001, $3.5 billion in
emergency supplemental CDBG funding was made available for New York City*
more than the total CDBG funds provided nationwide for all major disasters
in the last 10 years. 3 Congress appropriated $40 billion to the President
for emergency expenses (Emergency Response Fund) to respond to the
terrorist attacks of September 11. 4 Emergency response funds available
for

2 A bridge loan is a short- term loan that is intended to provide
financing until a more permanent arrangement is made. 3 These funds were
appropriated on a no- year basis and remain available until expended.

4 The 2001 Emergency Supplemental Appropriations Act for Recovery From and
Response to Terrorist Attacks on the United States, Pub. L. 107- 38, 115
Stat. 220 (2001). Background

Page 4 GAO- 03- 88 September 11

transfer to the Department of Housing and Urban Development (HUD) could be
used for CDBG programs, as authorized by title I of the Housing and
Community Development Act of 1974, as amended. 5 Specifically, on November
1, 2001, the Office of Management and Budget designated $700 million for
CDBG funding for New York City out of the Emergency Response Fund that
Congress had appropriated. On January 10, 2002, Congress appropriated an
additional $2 billion for CDBG funding, earmarking at least $500 million
to compensate small businesses, nonprofit organizations, and individuals
for their economic losses. 6 Finally, on August 2, 2002, Congress
appropriated an additional $783 million for CDBG funding. 7

Although the CDBG program*s primary purpose is community development, not
disaster assistance, supplemental CDBG appropriations have been made to
provide recovery assistance from past natural disasters, usually severe
hurricanes, earthquakes, or floods. As in the aftermath of natural
disasters, HUD waived many requirements* such as assisting persons of low
and moderate income* of the general CDBG program. 8 HUD is one of many
federal agencies that offer disaster

5 Section 434 of the Departments of Veterans Affairs and Housing and Urban
Development, and Independent Agencies Appropriations Act, 2002 (HUD 2002
Appropriations), Pub. L. 107- 73, 115 Stat. 651, (2001).

6 The Department of Defense and Emergency Supplemental Appropriations for
Recovery From and Response to Terrorist Attacks on the United States Act,
2002 (Emergency Supplemental Act, 2002), Pub. L. 107- 117, 115 Stat. 2336
(2002), provided $2 billion for emergency response to the September 11
attacks for CDBG (Community Development Fund). The act also required that
of the total amount made available in the Community Development Fund, no
less than $500 million shall be made available for individuals,
nonprofits, or small businesses located on or south of West 14th Street
(west of its intersection with 5th Avenue) or on or south of East 14th
Street (east of its intersection with 5th Avenue), with a limit of $500,
000 per small business for economic loss.

7 The 2002 Supplemental Appropriations Act for Further Recovery From and
Response to Terrorist Attacks on the United States, Pub. L. 107- 206,
appropriated an additional $783 million for the Community Development Fund
for emergency expenses to respond to the September 11 attacks.

8 Section 434 of HUD 2002 Appropriations authorized the Secretary of HUD
to waive or specify alternative requirements for any provision of any
statute or regulation the Secretary administers in connection with the
obligation by the Secretary or the use by the recipient of these funds or
guarantees (except those related to fair housing, nondiscrimination, labor
standards, and the environment).

Page 5 GAO- 03- 88 September 11

assistance, and HUD requires that its funds not be used to duplicate
benefits provided by other federal agencies, such as SBA. 9

Empire State 10 is the New York State entity designated by the Governor to
administer the first CDBG appropriation of $700 million. Created in 1968,
Empire State is a corporate governmental agency of the state of New York
and is currently engaged in housing and economic development and special
projects throughout the state. To carry out large- scale economic
development activities, Empire State has created various consolidated
subsidiaries. In November 2001, the Empire State board of directors
authorized the creation of the Lower Manhattan Development Corporation
(LMDC) to assist in the economic recovery and revitalization of lower
Manhattan, with special emphasis on the redevelopment of the areas damaged
by the terrorist attacks. LMDC functions as a joint city- state
development corporation with a 16- member board of directors that is
appointed by the Governor and the Mayor. For the amounts appropriated by
Congress in the 2002 Emergency Supplemental and the 2002 Supplemental
previously noted, which totaled $2.8 billion, LMDC was designated in the
legislation as the entity to develop programs and distribute assistance.

In its January 30, 2002, action plan, Empire State estimated that almost
18,000 businesses in New York City, representing approximately 563,000
employees, were disrupted or forced to relocate as a result of the
terrorist attacks. Empire State estimated that businesses with 200
employees or fewer accounted for 99 percent of all affected businesses and
about 50 percent of all affected employees. 11 As lead agency in
administering federal assistance to New York City businesses, Empire State
is carrying out the action plan, which HUD approved, for providing $700
million in business assistance, with $506 million allocated for small
business programs. Additionally, LMDC has a HUD- approved action plan for

9 SBA officials stated that they are providing disaster loan data to HUD
so they can determine if any of their grants (issued subsequently to SBA
disaster loans) through their grantee were made for duplicative purposes.

10 Empire State Development Corporation has been adopted as the business
name of the New York State Urban Development Corporation. 11 Throughout
this report, we use the term *small business* as defined by the particular
assistance provider and program. For example, Empire State has defined
small businesses as those with fewer than 500 employees for its Business
Recovery Grant Program and 200 or fewer employees for its Small Firm
Attraction and Retention Grant Program. Other agencies and programs have
different eligibility standards.

Page 6 GAO- 03- 88 September 11

spending $306 million, primarily to provide residential retention and
attraction grants to individuals. LMDC also has made a proposed action
plan available for public comment that it will submit to HUD, which would
provide $350 million to Empire State for use in its business assistance
programs*$ 200 million of which would be used for its small business
programs. LMDC currently has issued no formal plans for spending the
remaining, approximately $2 billion in CDBG funding.

In addition to the assistance provided by government and private
organizations, qualifying small businesses can receive federal tax
benefits that have been made available for those affected by the terrorist
attacks. The tax benefits include expanded work opportunity tax credits
and special allowances for certain business property. Businesses also may
benefit from real estate tax abatement, commercial rent tax exemptions or
reductions, and energy discounts. These types of assistance are not
discussed in this report.

From an allocation of $506 million, Empire State developed various
programs to assist small businesses. Empire State*s Business Recovery
Grant (BRG) Program provides grants to businesses to compensate them for
economic loss, and its Small Firm Attraction and Retention Grant (SFARG)
Program provides incentives to remain in or relocate to lower Manhattan.
Empire State is implementing additional programs to provide technical
assistance and loans and also expects to reimburse other city and state
programs for their expenditures. Additionally, Empire State has made and
continues to make many efforts to reach out to affected businesses. Table
1 contains information on the funding provided and disbursed as of
September 11, 2002, for each of the Empire State small business assistance
programs. Empire State Uses

CDBG Funding to Provide Various Types of Assistance to Small Businesses

Page 7 GAO- 03- 88 September 11

Table 1: Information on Empire State Small Business Assistance Programs
Using CDBG Funding as of September 11, 2002

Dollars in millions

Program Total dollars

allocated to program

Total dollars disbursed to

businesses Total number of

businesses assisted

Business Recovery Grant $331 $254 8, 783 Small Firm Attraction and
Retention Grant 105 12 246 Business Recovery Loan Fund 50

a a Technical Assistance 5 0. 2 b Bridge Loan 15 c c a This program has
not yet begun to disburse funds or provide assistance.

b This program does not provide direct financial assistance to businesses,
but provides grants to nonprofit organizations to provide technical
assistance to businesses. c Although no CDBG funds have been disbursed for
this program, $6.3 million in other city and state

funds have been provided in loan loss reserves to private banks and
nonprofit lenders that have provided $31.5 million in loans to 950
businesses. Empire State plans to reimburse city and state disbursements
with CDBG funds in the future.

Sources: Empire State and GAO analysis of the Empire State Disaster
Recovery Database.

In addition to the small business programs, Empire State officials said
that retention assistance for larger businesses is particularly important
to the future of the lower Manhattan economy. To a great extent, larger
businesses and their employees provide small businesses in lower Manhattan
with a client base. Small businesses in turn provide larger businesses and
their employees with services ranging from business consulting,
accounting, and office supplies to personal services, such as dry
cleaning, dining establishments, and newsstands. Empire State has
allocated $5 million for a recovery grant program for larger businesses
with more than 500 employees nationwide, but with fewer than 200 employees
in lower Manhattan, from which it has disbursed $3.1 million to assist 18
businesses. Empire State also has allocated $170 million for a larger firm
business attraction and retention program, and LMDC is seeking approval to
provide Empire State with additional funds, of which $150 million would go
toward this program, bringing the total program allocation to $320
million. As of September 11, 2002, no disbursement of funds had been made
from this program. According to Empire State, it had made offers to 102
businesses of which 50 had accepted offers totaling $140 million* a
process that requires a much longer time frame than does the SFARG
Program.

Page 8 GAO- 03- 88 September 11

The BRG Program for small businesses offers grants to compensate for
economic losses. The BRG Program is Empire State*s most far- reaching
business assistance program. The first BRGs were provided in midFebruary
2002. As of September 11, 2002, 8, 783 businesses had received BRG grants
totaling $254 million. The median grant amount was $9,261. Businesses with
fewer than 50 employees accounted for 95 percent of the businesses
receiving BRGs and received $200 million, or 79 percent of the total
amount of BRGs disbursed. All types of businesses are eligible for BRGs,
and assisted businesses can be categorized into various sectors, as shown
in figure 1. The largest number of businesses assisted falls into three
sectors: professional and technical services; finance, which also includes
insurance; and retail trade.

Figure 1: Types of Businesses Receiving Business Recovery Grants

Source: GAO analysis of Empire State database information on 8,783 BRG
recipients.

To be eligible for a BRG, businesses must have had fewer than 500
employees worldwide; have been located on or south of 14th Street in
Business Recovery Grants

Compensate for Economic Loss

Finance andinsurance Retail trade

Other Accommodation

and food service Wholesale trade

Manufacturing Health care

assistanceand social Information

Real estate Arts, entertainment, and recreation

Admin and support services and technicalservices

Professional BRG recipients

Sector 0

500 1,000

1,500 2,000

2,500 2,115

1,507 1,203

975 711

517 410 358

265 262 255 205

Page 9 GAO- 03- 88 September 11

Manhattan on September 11, 2001; and have suffered uncompensated economic
losses related to the attacks. The program identifies four geographic
areas, or zones, upon which it then bases the number of days of revenue
for which it will compensate. In the BRG computation, the number of days
of revenue increases the closer the zone is to the World Trade Center
site. See appendix II for a map that identifies these geographic areas.
Revenue periods range from 3 to 25 days, and maximum grant amounts range
from $50,000 to $300,000, not to exceed a business* economic loss after
adjusting for insurance and other compensation. 12 In addition to other
eligibility requirements, businesses must still be operating in the city
or agree to resume operations in the city within 1 year of the receipt of
grant funds as well as agree to retain a substantial portion of their
business operations in the city for at least 3 years. The program will
accept applications through December 31, 2002.

The size of businesses assisted varies as measured by the number of
employees and annual revenues. Businesses with fewer than 10 employees
accounted for about 75 percent of the businesses assisted (see fig. 2).
Recipients of BRG assistance who had revenues of less than $1 million
accounted for 5,785 businesses, or about 67 percent of the businesses
assisted (see fig. 3).

12 Prior to August 28, 2002, the number of days of revenue included in the
grant determination was 2 to 10, depending on the zone in which a business
was located. According to Empire State officials, this change was made
when Empire State reassessed the amount of funding available and the needs
of businesses, particularly those that were located in or near the World
Trade Center site.

Page 10 GAO- 03- 88 September 11

Figure 2: Percentage of Business Recovery Grant Recipients, by Number of
Employees

Source: GAO analysis of Empire State database information on 8,783 BRG
recipients.

0.9%

200 or more employees

1.7%

100 to 199 employees 

2.8%

50 to 99 employees

20%  10 to 49 employees

74.6% 

Fewer than 10 employees

Page 11 GAO- 03- 88 September 11

Figure 3: Annual Gross Revenues of Businesses Receiving Business Recovery
Grants

Source: GAO analysis of Empire State database information on 8,662 BRG
recipients.

The BRG Program has provided assistance to thousands of businesses;
however, it has awarded only about one- half of the number of grants it
originally estimated and has not covered a substantial portion of the
uncompensated economic losses reported by businesses. Although Empire
State estimated that it would make 19,600 grant awards, on the basis of
the number of small businesses believed to be located in the eligible
area, as of September 11, 2002, it had provided 9,373 grants. 13 Empire
State is making additional outreach efforts and hopes to increase the
number of businesses assisted. Analysis of the economic losses reported by
businesses shows that at the median of businesses receiving a BRG, the

13 These grants were made to 8, 783 businesses. Some businesses received
multiple grants because of appeal decisions or supplemental grant awards.

Number of recipients 0 500

1,000 1,500

2,000 Gross revenue category Less than$ 100,000

$100,000 -$ 249,999 $250,000 -$ 499,999

$500,000 -$ 999,999 $1,000,000 -$ 1,999,999

$2,000,000 -$ 4,999,999 $5,000,000 -$ 9,999,999

$10,000,000and over 1,349

1,549 1,451 1,436

1,177 967

394 339

Page 12 GAO- 03- 88 September 11

BRG covered about 17 percent of a business* losses that were not covered
by insurance and other city and state grants. 14 Empire State recently
changed the BRG computation, both retroactively and prospectively, to
increase the number of business day revenues considered in determining the
grant amount, particularly for those businesses that were in or near the
World Trade Center. This change will result in increased payments to some
businesses and thereby reduce the amount of their uncompensated economic
losses.

With new criteria for increased payments and additional applications
expected, Empire State is estimating that the total allocation for the BRG
Program will be $481 million. Empire State also is expected to use CDBG
funds to reimburse city and state programs that provided grants to small
businesses soon after the September 11 attacks. The city and state
programs have disbursed $24 million in assistance; however, as of
September 11, 2002, neither had filed for reimbursement. As previously
noted, LMDC is currently seeking approval to provide Empire State with
additional CDBG funds, of which $150 million would go toward the BRG
Program, bringing the total program allocation from $331 million to $481
million. Empire State and LMDC plan to meet the federal legislative
requirement that $500 million in CDBG assistance be used to compensate
small businesses, nonprofits, and individuals located in lower Manhattan
almost exclusively through the BRG Program. The remaining expenditures
will come from part of LMDC assistance to individuals through its housing
assistance program. 15

14 This means that BRGs covered less than 17 percent of uncompensated
losses for businesses below the median, and that BRGs covered more than 17
percent of uncompensated losses for those businesses above the median. An
additional analysis of the extent to which BRGs covered total estimated
losses shows that at the median, BRGs covered an estimated 15 percent of
total estimated losses, without accounting for other compensation.

15 In addition to the housing assistance that LMDC provides to those
persons who make a commitment to remain in lower Manhattan, it offers a
$1,000 grant per household to those persons who have continued to live in
the area since September 11, 2001.

Page 13 GAO- 03- 88 September 11

The SFARG Program offers grants to qualifying businesses (i. e.,
businesses with no more than 200 employees that are located or planning to
locate in the general area south of Canal Street) that sign a new lease or
renew an existing lease for a minimum of 5 years. 16 For existing
businesses to be eligible, their current lease must expire no later than
December 31, 2004, except for businesses located in an area designated as
the *October 23rd Zone.* 17 The program offers grants on the basis of the
number of employees in the business. Grant payments are made in two
installments, the first at the time of application approval and the second
18 months after the application date. Total payments are $3,500 per
employee, except for businesses that were in the *Restricted Zone* and
remained downtown, for whom total payments are $5,000 per employee. 18 The
program will accept applications through December 31, 2004. 19

The first SFARG assistance was provided on June 13, 2002. As of September
11, 2002, Empire State disbursed $12 million to 246 businesses in initial
installment payments. The median grant amount was $27,500. The SFARG
Program initially was limited to businesses with a minimum of 10 and no
more than 200 employees. In response to public reaction, the program was
amended to expand eligibility to all businesses with no more than 200
employees, with no lower limit. The program also has been criticized for
excluding businesses that were located in the eligible area as of
September 11, 2001, but that had long- term leases that did not expire by
December 31, 2004. Business advocates argue that those businesses also had
a demonstrated commitment to the area, which should make them eligible and
not place them at a disadvantage relative to new businesses

16 The exact area description for the eligible area is *that area within
the Borough of Manhattan bounded on the north by the centerline of Canal
Street, from the Hudson River to Rutgers Street, then southeast along the
centerline of Rutgers Street and continuing along the centerline of
Rutgers Slip to the East River.* In addition, businesses that were in an
area defined as the *Restricted Zone* may obtain a grant of $3, 500 per
employee, if they relocate outside of the general eligibility area on or
prior to December 31, 2002, but still remain in the city.

17 An area designated by the Mayor*s Office of Emergency Management
wherein pedestrian and vehicular traffic was restricted during September
27 through October 23, 2001. A company located in this zone must sign a
new lease; renew an existing lease; or reaffirm an existing lease, which
must expire on or after September 11, 2006.

18 An area designated by the Mayor*s Office of Emergency Management,
wherein pedestrian and vehicular traffic was restricted during September
19 through September 26, 2001 (see app. II).

19 Except for those applicants who enter into new leases between September
1, 2004, and December 31, 2004, who will have until April 2005 to submit a
completed application. Small Firm Attraction and

Retention Grants Are Meant to Help Businesses Move to or Remain in Lower
Manhattan

Page 14 GAO- 03- 88 September 11

coming to the area. Empire State officials told us that SFARG was designed
to provide incentives to businesses at risk of leaving, not for those that
already had long- term commitments in the area. Additional criticism has
been made that SFARG took too long to put the program in place and that
relatively few businesses have received any benefits. LMDC is currently
seeking approval to provide Empire State with additional CDBG funds, of
which $50 million would go toward the SFARG Program, bringing the total
program allocation from $105 million to $155 million.

The Business Recovery Loan Program will provide funding to communitybased
lending organizations, which in turn will provide low- cost working
capital loans to businesses that were adversely affected by the terrorist
attacks and to businesses that have subsequently located or will locate
new operations in lower Manhattan. 20 The program is intended to enhance
access to capital to businesses, particularly to those that do not meet
SBA credit or eligibility criteria for disaster loans. Loans are available
to businesses (1) located on or south of 14th Street in Manhattan as of
September 11, 2001; (2) located in the five boroughs of New York City, but
outside of lower Manhattan, that were adversely affected because at least
10 percent of their revenues were derived from sales or services to other
businesses located on or south of 14th Street in Manhattan; or (3) newly
located on or south of 14th Street in Manhattan since September 11, 2001.

As of September 11, 2002, Empire State had selected 10 organizations to
participate in the Business Recovery Loan Program. State officials had not
disbursed any funds from the program and were in the process of
contracting with the lending organizations. Under the program, lending
organizations can make loans up to $250,000 per business. Repayments of
principal by the borrowers of eligible loans may be retained by the
lending organization as capital for making additional small business loans
in the lender*s target area. A business advocacy group has criticized
Empire State for taking too long to put the program in place.

The Technical Assistance Program provides grants to community- based
organizations and other service providers to allow them to provide
additional assistance to businesses affected by the World Trade Center

20 Funds may be used for payroll; rent; utilities; inventory; and, in
certain circumstances, refinancing existing debt. Business Recovery Loan

Program Will Increase Access to Capital

Technical Assistance Program Funds Legal, Planning, and Other Aid

Page 15 GAO- 03- 88 September 11

disaster. The program allocation is $5 million, with a maximum grant of
$250,000 per organization. Technical service providers are to assist small
businesses with strategic planning; finance, insurance, and legal issues;
and basic business management and to help businesses identify and access
disaster funds available from CDBG- funded state programs and other city,
state, and federal government agencies. The service providers may also
assist with marketing, member development, and attraction efforts. To
qualify for technical assistance, businesses must have fewer than 200
employees, have been affected by the disaster, and currently be located
south of 14th Street in lower Manhattan.

As of September 11, 2002, Empire State had selected 23 community- based
and other service providers for the program and had provided a total of
$224, 000 to 4 of the organizations* some of which already offered
technical assistance as part of their ongoing assistance programs.
Although such organizations already have offered services to some
businesses and over a year has elapsed since the attacks, a state official
said that there is still a need for additional services and that more and
better information currently exists to help make business decisions than
in the period immediately after September 11, 2001. Empire State officials
also hope that businesses that obtain technical assistance will apply for
financial assistance, if they have not done so already.

The Empire State action plan allocates $15 million to provide loan loss
reserve subsidies to lenders making bridge loans to affected businesses.
Empire State is a partner in the World Trade Center Disaster Recovery
Bridge Loan Program, a joint city- state program that began in October
2001. Through this program, the city and state provide loan loss reserve
subsidies to participating lenders, which make bridge loans to businesses
awaiting SBA loan approvals.

Eligible businesses are New York City- based, commercial, industrial, and
retail enterprises and not- for- profits that were affected by September
11 and that are applying for SBA disaster loans. Participating banks and
community- based lenders make the bridge loans to provide interim capital
to businesses. If the SBA loan is approved, the business pays off the
bridge loan with the SBA loan proceeds. If the borrower does not qualify
for an SBA loan, the lender may restructure the bridge loans as term
loans. In the original Bridge Loan Program, New York City and State shared
equally in providing participating lenders with a 20 percent loan loss
reserve subsidy for approved bridge loans. Empire State will use CDBG
funds to reimburse the city and state for their loss reserve expenditures
at a later date. Bridge Loan Allocation

Will Contribute to City and State Efforts

Page 16 GAO- 03- 88 September 11

Participating lenders have disbursed $31.5 million in bridge loans to 950
businesses as of September 11, 2002. The total city- state loan loss
reserve payments total $6.3 million. The Bridge Loan Program is open until
January 31, 2003, corresponding to the SBA Disaster Loan Program*s ending
date.

Empire State and LMDC are not alone in their efforts to provide assistance
to small businesses in lower Manhattan. There are many other organizations
from all levels of government and the private and nonprofit sectors that
have come forward to offer loans, grants, and technical assistance to
small businesses affected by the disaster. Often these organizations were
providing assistance within weeks or months of September 11, well before
the Empire State programs became available. SBA disaster assistance is the
other major source of federal assistance to businesses in New York. SBA
began making loans within days after the terrorist attacks and has since
made thousands of loans to businesses throughout the region. New York City
and State offered cash grants to businesses within the first few months
after the terrorist attacks as well as bridge loans to businesses through
participating lenders. Some banks have also provided additional assistance
and short- term loans to affected businesses. Finally, many nonprofit
organizations, often funded by donations and charitable groups, have made
loans and grants and offered other aid to hundreds of small businesses.
Although these programs have not reached as many businesses or provided as
much funding as the Empire State programs, they have filled a need by
providing early assistance and targeting hard- to- reach groups and
businesses. Some of these organizations, as well as business advocacy
groups, also have played an important role in facilitating the flow of
information among businesses and representing the interests of small
businesses recovering from the disaster. SBA, New York City

and State, Banks, and Nonprofit Organizations Have Also Assisted Small
Businesses

Page 17 GAO- 03- 88 September 11

In the aftermath of September 11, SBA declaration number 3364, *New York
City Explosions and Fires,* entitled business owners, nonprofit
organizations, homeowners, and renters in New York City and the
surrounding region to apply for SBA physical disaster loans and economic
injury disaster loans (EIDL). 21 Congress made special appropriations of
$175 million to SBA for disaster assistance to respond to the terrorist
attacks. SBA can use the appropriations to provide approximately $651
million in loans, while allowing $40 million for program administration.
The appropriations are being used to cover the *subsidy rate* of the
loans, which represent the costs to the government for the loans. 22 From
its first loan on September 15, 2001, through September 11, 2002, SBA
provided 4,381 loans totaling $346 million within the broadly defined
disaster area; of this $346 million, businesses in lower Manhattan
received $154 million. 23 SBA*s deadline for filing applications has been
extended several times and is now January 31, 2003.

Physical disaster loans go to eligible business owners (for any size
business), nonprofit organizations, homeowners, and renters. Business loan
terms are for a maximum of 30 years at a 4 percent interest rate when no
credit is available elsewhere. 24 The loans can be used to repair or
replace disaster- damaged property, including real estate, machinery and

21 Under another declaration creating an expanded EIDL, number 9TNY, SBA
made all New York businesses eligible for assistance; however, the
expanded EIDL could not be funded out of supplemental appropriations. In
addition, SBA was authorized $75 million for a new Supplemental Terrorism
Activity Relief (STAR) Program, which provided $4.5 billion in additional
funding for 7( a) loans for businesses anywhere in the United States that
can show direct or indirect adverse impact as a result of September 11.
The 7( a) Loan Guaranty Program operates through private- sector lenders
providing loans that are, in turn, guaranteed by SBA. We have not included
either SBA*s expanded EIDL or the STAR Program in our review, since we are
focusing on lower Manhattan. Also, businesses in lower Manhattan would be
unlikely to use STAR, since its terms are not as favorable as those
offered through the disaster assistance loan under the explosions and
fires declaration.

22 SBA budgeted $6 million for physical loans, which at a subsidy rate of
14.67 percent, allows for $41 million in loans. SBA budgeted $129 million
for EIDLs, which at a subsidy rate of 21.16 percent, allows for $610
million in loans.

23 For this disaster declaration, the eligible area included 15 New York
counties for either physical or economic injury claims. Additional
eligibility areas for economic injury claims include: 6 additional
counties in New York, 6 counties in New Jersey, 2 counties in Connecticut,
2 counties in Pennsylvania, and 1 county in Massachusetts. Nonprofit
organizations are also eligible for loans and are included in our
*business* statistics.

24 When credit is available elsewhere, the maximum business loan term is 3
years at an 8 percent interest rate. SBA Disaster Assistance

Aids Businesses, Nonprofits, Homeowners, and Renters

Page 18 GAO- 03- 88 September 11

equipment, inventory, and supplies. SBA also gives EIDLs to eligible small
businesses and nonprofits. SBA determines what constitutes a *small*
business on the basis of the type of business and its revenue or number of
employees. 25 EIDL loans can be used for working capital, including making
payments on short- or long- term notes or accounts payable. The loans
carry a 4 percent interest rate but are only available to applicants with
no credit available elsewhere. Loan amounts for both physical disaster and
EIDL loans have been raised to $10 million and nonprofits have been made
eligible for this disaster only. Collateral is required for physical loans
over $10,000 and for EIDL loans over $5,000. SBA also requires that
applicants have a reasonable ability to repay the loan and any other
obligations from expected earnings. Table 2 shows SBA assistance to
businesses in lower Manhattan, as of September 11, 2002. 26

Table 2: SBA Loans to Businesses in Lower Manhattan, as of September 11,
2002

Dollars in millions

Program Number of

approved business loans Total amount of

loan approvals Total amount of

loan disbursements

Physical Disaster Loan 503 $32 $16 Economic Injury Disaster Loan 1,983 168
139

Total 2,486 $201 $154

Note: Program amounts may not sum to totals due to rounding. Source: SBA.

Business advocacy groups have criticized SBA for requiring collateral,
particularly personal residences, for business loans and for denying too
many loans. According to SBA data, denials and withdrawals have accounted
for 54 percent of all business application dispositions. 27 The primary
reasons for denial were *no repayment ability* and *unsatisfactory

25 Although many exceptions exist, SBA has established two widely used
size standards* 500 employees for most manufacturing and mining industries
and $6 million in average annual receipts for most nonmanufacturing
industries.

26 This area was defined using zip codes, encompasses an area identified
by the U. S. Department of Labor*s Bureau of Labor Statistics as being
lower Manhattan, and is roughly similar to the eligibility area used in
the state*s Business Recovery Grant Program.

27 Without including application withdrawals, of those applications
processed to a decision to either approve or deny, 44 percent of business
applications were denied.

Page 19 GAO- 03- 88 September 11

credit.* The primary reasons identified for withdrawals were *no IRS
record found* and *failure to furnish additional information.* SBA has
also received criticism for not providing loans in a timely manner.
According to SBA data, the average elapsed time from the receipt of a
completed business loan application to disbursement issued is 38 days. 28
Although additional funding remains available for disaster loans, the
number of applications has dwindled in recent months. SBA officials said
that some recent applications are for businesses that already have
received loans but are seeking additional loans.

SBA*s outreach efforts have included opening multiple locations to
distribute and explain applications and door- to- door outreach to
affected businesses. At one time, SBA worked from 20 different locations
throughout Manhattan at which business owners could get SBA disaster
applications and information, including 1 location in Chinatown with
multilingual personnel. SBA currently makes loan applications and
information available at 2 locations and over the telephone and Internet.
SBA*s Service Corps of Retired Executives Program also has provided
business counseling to affected owners.

Funded in part by SBA and the state of New York, the New York Small
Business Development Centers (SBDC) have seen increased demand at regional
locations in their roles of providing business counseling and management
assistance to small businesses since September 11, 2001. 29 SBA has
trained SBDC personnel to help business owners complete disaster loan
applications; in turn, SBDC personnel have helped more than 500 business
owners apply for SBA disaster loans. The SBDC program has also established
its own loan fund through private donations and provided $5,000, 3- year
loans at a 3 percent interest rate to 170 businesses, for a total
disbursement of $850,000. Although the loan program is now closed, having
expended all of its funds, SBDC officials are looking to obtain additional
funding to reopen the program in the near future. SBDC

28 SBA business loan processing time averaged 12 days from acceptance of
an application to a determination to approve or deny a loan request.
Business loans averaged 18 days from application to SBA*s issuance of
closing documents, after which time the applicant is responsible for
contacting SBA to set up a closing date.

29 A national program sponsored and administered by SBA, SBDC participants
are generally universities and community colleges and networks of service
delivery centers that are established to provide management and technical
assistance to small businesses. Small Business

Development Centers Provide Technical Assistance and Financial Planning
Advice

Page 20 GAO- 03- 88 September 11

officials also anticipate obtaining state funding to establish another
loan program to provide additional assistance to affected small
businesses.

Both the city and state of New York established assistance programs within
months of the World Trade Center attacks. 30 Specifically, the city
established the New York City Lower Manhattan Business Retention Grant
Program to provide cash grants to nonretail businesses. This program began
on November 14, 2001, and provided cash grants totaling $10 million to
1,674 nonretail businesses, including manufacturers and professional
service firms. The program stopped accepting applications on March 31,
2002. To qualify, businesses had to be located south of Houston Street and
employ 50 or fewer workers; they also had to apply for a loan from SBA or
an approved lender. A business could receive up to $2,500 upon completing
a loan application and up to a $7,500 cash grant (for a maximum of
$10,000) upon approval of the loan, depending on the size of the requested
loan. Moreover, businesses that were located in the World Trade Center
were eligible for the full $10,000 without having to apply to SBA.

The state established the World Trade Center Retail Recovery Grant Program
to provide cash grants to retail businesses. This program began on
November 5, 2001, and provided 3, 048 retail businesses in lower Manhattan
with cash grants totaling $13.7 million. Eligible businesses included
retail and personal service firms, with fewer than 500 employees, located
south of Houston Street. The program offered businesses compensation equal
to 3 days of lost revenue, capped at $10,000, and required that businesses
continue to operate in New York City. The state closed the program to new
applications on December 31, 2001, after which Empire State began offering
grants through the CDBG- funded Business Recovery Grant Program. Under the
Empire State BRG Program, if a business had previously received a Retail
Recovery Grant, the BRG grant amount was reduced by that amount.

While the city and state grant programs are now closed to new
applications, a joint city- state bridge loan program* the World Trade
Center Disaster Recovery Bridge Loan Program* that works in

30 The Empire State action plan identifies each of these programs as
providing assistance that may be reimbursed with CDBG funds; however, as
of September 11, 2002, neither the city nor the state had requested
reimbursement for this assistance. City and State Programs

Also Give Grants to Small Businesses

Page 21 GAO- 03- 88 September 11

cooperation with banks is still available, as previously described in this
report. This program has participating banks and community- based lenders
provide low- cost bridge loans to small businesses and nonprofits. The
city and state each provided banks with 10 percent of the approved loan
amount as a loan loss reserve. The first program loans were made on
October 5, 2001. Subsequently, Empire State allocated $15 million from its
CDBG funds to provide loan loss reserve subsidies and expects to reimburse
the city and state for their prior and continuing expenditures.

In addition to the grant programs, within days of the September 11
attacks, both the city and state established emergency walk- in centers
that assisted small businesses. A toll- free hotline also was established
to direct callers to emergency services. Business location services were
provided as well as comprehensive on- line and hard- copy directories of
emergency and business services available from governmental and
nongovernmental sources. Outreach has included radio and print
advertisements, direct mail, direct telephone calls, informational
workshops, and an *Adopt a Company* Program.

In addition to their participation in the Bridge Loan Program, some banks
in New York offered additional assistance to small businesses, although
there are no comprehensive data on the amount of total assistance they
provided. Some banks offered short- term loan programs for businesses
affected by the disaster. Loan terms were usually short, extending up to 5
years, with an interest rate at or below prime. However, banks did
maintain existing credit standards; consequently, some banks had a high
denial rate. For example, one bank denied over 80 percent of the
applications that it received.

After the September 11 terrorist attacks, several nonprofit organizations
that traditionally assisted small businesses and had an interest in the
business environment of lower Manhattan saw an immediate need that they
could fill. Many nonprofits created programs for affected small businesses
within weeks of the disaster and raised funds from banks, foundations, and
other private contributors. As more disaster- related funding has become
available, the nonprofits have been able or are seeking to supplement
their original funds to expand or continue programs. The September 11th
Fund, an organization dedicated to providing emergency and long- term
assistance to the victims of September 11, became a major funding source
for the nonprofits. The fund set aside $50 million to help small
businesses and provided significant funding to Banks Aided Small

Businesses Nonprofit Organizations Stepped in Quickly after September 11
and Continue Offering Services to Small Businesses

Page 22 GAO- 03- 88 September 11

many of the organizations mentioned below. Additionally, some of the
nonprofits discussed below and others have participated in the city and
state*s Bridge Loan Program, have been selected to receive funding from
Empire State to provide technical assistance, and/ or have been selected
to receive some of the $50 million of loan capital that Empire State will
be awarding.

Nonprofits have been able to offer different and sometimes more personal
services than those provided through the larger federal programs. For
instance, Accion New York (Accion), a small business mircrolender, offers
a package of loans, small grants, and personal technical assistance
through its newly created *American Dream Fund.* These services include
help in completing forms and creating needed financial documents. The New
York City Partnership provides businesses with recoverable grants and
intensive technical assistance, such as a mentor to help with future
business planning. The partnership also created a goods and services
clearinghouse for businesses affected by the disaster. Another nonprofit,
Seedco, offers not only loans and grants, but also wage subsidies to
enable small businesses to meet payroll and retain workers who might
otherwise be laid off. For each business, Seedco will subsidize 50 percent
of the salary of up to 10 employees who make $12 an hour or less.

Often, nonprofit programs will specifically target types of businesses
that are either overlooked or ineligible for federal programs or other
nonprofit assistance. Renaissance Development Corporation (Renaissance),
which has been working in Chinatown since 1973, markets its programs to
affected businesses, such as the garment industry and limousine drivers.
Accion targets businesses that have been turned down for SBA loans;
specifically, Accion established a working relationship with SBA in which
SBA refers these businesses to Accion. Accion also was located at a
business recovery center, where clients had access not only to Accion but
also to Empire State and SBA programs. The partnership*s program
specifically chose to target retail businesses with 50 or more employees,
in part, because Seedco*s program covers those with fewer than 50
employees. Many of the nonprofits have far more flexible lending criteria
than either SBA or the banks, thereby allowing them to make loans the
others have eschewed. Unlike SBA, Renaissance does not require collateral
or tax receipts, instead it relies on store receipts, site visits, lottery
sales, and personal knowledge of a business to determine business
viability. Table 3 shows major nongovernmental assistance as of September
11, 2002.

Page 23 GAO- 03- 88 September 11

The nonprofits noted above and other groups also have played an important
role in advocating for the interests of small businesses. For example,
newly founded business advocacy groups, such as From the Ground Up and the
World Trade Center Tenants Association, have lobbied Empire State, city
and federal officials, and others to change programs to benefit small
businesses. Some of these groups also have helped facilitate the flow of
information among businesses and organizations, either formally or
informally. The Manhattan Chamber of Commerce, for instance, has held
networking events in lower Manhattan to bring various resources to one
place. Seedco has published a widely used directory of resources available
to help small businesses.

Page 24 GAO- 03- 88 September 11

Table 3: Major Nongovernmental Business Assistance Programs, as of
September 11, 2002 Nongovernmental business assistance programs, as of
September 11, 2002 Organization/ Type of assistance Date began

offering assistance Targeted businesses Number of Programs Total amount

provided Terms/ Miscellaneous Accion/ World Vision

Loan October 10, 2001 Affected small business south of 14th Street (or has
50 percent of its business there); especially those not eligible for SBA
programs.

227 $2,765,423 Up to $30,000; 5 percent, 5- year term. World Vision
provides a grant for 10 to 30 percent of the value of the loan. Grant
October 10, 2001 Same as above. 227 480,000 Same as above.

Downtown Alliance/ Seedco

Loan October 23, 2001 Retail and manufacturing businesses with fewer than
50 employees south of Canal Street.

195 6,400,000 Up to $100,000 for loans and $25,000 for grants; 2 percent,
3- year term; 50 percent wage subsidy for businesses with up to 10
employees that earn less than $12 an hour. Grant October 23, 2001 Same as
above. 488 4,600,000 Same as above. Wage subsidy October 23, 2001 Same as
above. 238 1,300,000 Same as above.

New York City Partnership

Recoverable grant November 15, 2001 Businesses south of Chambers Street
with 4 to 99 employees; retail with 50 to 100 employees.

51 7,670,000 $25,000 to $250,000; 0 percent interest.

Renaissance

Loan October 4, 2001 Chinatown businesses with fewer than 25 employees;
garment factories with fewer than 50 employees.

134 1,998,000 Up to $35,000; 2 percent, 3- year term.

Grant October 4, 2001 Same as above. 60 123,458 Same as above. Wage
subsidy October 4, 2001 Same as above. 34 456,500 Same as above.

Note: The nonprofits received loan loss reserve subsidies from the city
and state*s Bridge Loan Program for some of the reported loans.

Sources: Accion, Seedco, New York City Partnership, and Renaissance.

We provided HUD, SBA, and Empire State with an opportunity to review this
report. They provided comments that were technical in nature, which we
have addressed in this report where appropriate. Agency Comments

Page 25 GAO- 03- 88 September 11

We are sending copies of this report to the Ranking Minority Member of the
House Committee on Small Business, the Chairman and Ranking Minority
Member of the Senate Committee on Small Business, other appropriate
congressional committees, the Secretary of Housing and Urban Development,
and the Administrator of the Small Business Administration. We will also
make copies available to others on request. In addition, this report will
be available at no charge on the GAO Web site at http:// www. gao. gov.

If you have any questions about this report, please contact Nancy Simmons
or me at (202) 512- 8678. Key contributors to this report were Catherine
Hurley, Mark McArdle, Dan Meyer, and Barbara Roesmann.

Sincerely yours, William O. Jenkins, Jr. Director, Financial Markets and

Community Investment

Appendix I: Scope and Methodology Page 26 GAO- 03- 88 September 11

To obtain information on the assistance provided to small businesses from
Community Development Block Grant (CDBG) supplemental funding, we
interviewed officials from the Department of Housing and Urban Development
(HUD), New York State*s Empire State Development Corporation (Empire
State), and the Lower Manhattan Development Corporation (LMDC). For our
analysis, we obtained detailed program information and data on the various
programs that HUD, Empire State, and LMDC have created to assist
businesses after September 11, including an Empire State database of grant
recipients. This database is the same one used by the HUD Office of
Inspector General to monitor expenditures in New York. We ascertained how
information for this database was collected and maintained to determine
its reliability, and we found the information to be reliable for our
purposes.

To obtain information on other sources of funds available to rebuild and
sustain business in lower Manhattan, we interviewed officials from the
following: the Small Business Administration (SBA), the New York City
Economic Development Corporation, the New York Small Business Development
Center (SBDC), FleetBoston and the Bank of New York, and nonprofit
organizations that provided financial assistance. We selected the
nonprofit organizations by reviewing various media and Internet sources on
the rebuilding effort in New York as well as through referrals from other
organizations concerned with economic renewal in lower Manhattan. We met
with officials from the following nonprofit and other organizations that
offer financial assistance toward the rebuilding and economic renewal
efforts:

 Accion New York,  Downtown Alliance,  New York City Partnership, 
Renaissance Development Corporation,  SeedCo, and  the September 11th
Fund.

We also met with business advocacy groups, whose directors are often small
business owners, to obtain their views on the assistance that Empire
State, SBA, and others provided. These groups included the following:

 From the Ground Up,  Manhattan Chamber of Commerce,  Tribeca
Organization, Appendix I: Scope and Methodology

Appendix I: Scope and Methodology Page 27 GAO- 03- 88 September 11

 Wall Street Rising, and  the World Trade Center Tenants Association.

We obtained the Empire State disaster recovery database, which captured
data on program activity through September 11, 2002. We used these data to
calculate descriptive statistics on the numbers of businesses, dollar
amounts, and other characteristics of the Business Recovery Grant (BRG)
Program, the Small Firm Attraction and Retention Grant (SFARG) Program,
and the large business recovery grant program. We used median instead of
mean values because the median values were more representative of the
*typical* grant. 1 In addition, we analyzed the database to determine
other characteristics of BRG recipients, including annual gross revenues,
number of employees, type of business on the basis of the North American
Industry Classification System code given, and the extent to which BRGs
covered businesses* reported losses. We limited our analysis to disbursed
grants. When multiple grants went to the same business as the result of an
appeal or from an award for a supplemental grant, we summarized the data
by business, not by grant. Since the BRG Program includes nonprofits in
addition to small businesses, we included nonprofits in our analysis,
although entities that identify themselves as nonprofits accounted for
less than 3 percent of the total receiving grants. Other conditions or
limitations are described in the explanations of specific analyses that
follow.

For our analysis of business employee size, we used the total number of
employees of the business; when the business had other business
affiliations, we used the total number of employees worldwide. The BRG
Program uses the total number of employees worldwide to determine if a
business qualifies as a small business. In our analysis of revenues of BRG
recipients, we used the gross revenue amount reported at the business
location. This gross revenue amount is the figure used in computing the
grant amount. The database did not have total business gross revenues that
included affiliated businesses. We included both businesses that received
one grant and businesses that received multiple grants, when the database
included the same gross revenue figure for each of the multiple grants.
Also, Empire State informed us that the gross revenue entries include
projected annual revenues for some new businesses that did not have a year
of revenue data, as well as annual expenses, in lieu of revenue,

1 A median value is a measure of central tendency and does not over
represent the influence of a small number of cases with very large values,
as does a mean.

Appendix I: Scope and Methodology Page 28 GAO- 03- 88 September 11

for some businesses that do not generate revenues and for nonprofits. For
our analysis of type of business, we used the business classification code
from the database and grouped the results by the first two letters of the
code, which designate the general industry type. Where the groups
represented less than 3 percent of all businesses, we grouped them in the
*other* category.

We made two calculations of the extent to which BRGs compensated for
business losses. The business loss data are self- reported and unaudited
by Empire State. In the first calculation, we determined to what extent
BRGs covered the uncompensated loss incurred by each business. The
uncompensated loss was determined by using the business *net loss*
database entry, which reflected remaining losses after adjusting for
insurance proceeds and the city*s Lower Manhattan Business Retention
Grants; we further reduced this amount by the amount of the state Retail
Recovery Grant. The BRG amount was then divided by the uncompensated loss
figure to obtain the percentage of uncompensated loss covered by BRGs for
each business. Where businesses had received multiple grants and the net
loss figures were the same for each grant, we totaled the disbursed grant
amounts and divided the total by the uncompensated loss amount. In the
second calculation, we determined to what extent BRGs covered the total
loss incurred by each business. We divided the BRG amount by the total
business loss to obtain the percentage of the total loss covered by BRGs
for each business. Where businesses had received multiple grants and the
total loss figures were the same for each grant, we totaled the disbursed
grant amounts and divided it by the total loss amount. To more accurately
characterize the loss and compensation experience of small businesses in
lower Manhattan for this report, we considered the entire distribution of
the above statistics over all businesses to identify any uneven
distribution around the median, or 50 percentile, which was the most
common single summary measure we chose to report.

We conducted our review between April and September, 2002 in Washington,
D. C., and New York, New York, in accordance with generally accepted
government auditing standards.

Appendix II: Map of Lower Manhattan with Highlighted Empire State Program
Areas

Page 29 GAO- 03- 88 September 11

Source: Empire State.

Appendix II: Map of Lower Manhattan with Highlighted Empire State Program
Areas

(250080)

Fdr Dr West St

1st Ave Broadway

2nd Ave Grand St

3rd Ave Hudson St

5th Ave Canal St

E 10th St E 14th St

Ave C E 12th St

Bowery E 4th St

I 78 Mott St

E 6th St Madison St Lafayette St

E 13th St 8

7th Ave E 7th St

Ave B Spring St

Henry St Washington St

W 21st St E 3rd St

Ave D Ave A W 18th St

E 11th St W 16th St

Bleecker St E 23rd St

W 15th St Mercer St W Broadway

W 14th St Church St

St Varick St W 12th St

Allen St W 11th St

Broome St W 10th St

E 25th St Clinton St Mulberry St

Worth St Centre St

Delancey St E 20th St

W 4th St E 18th St

E 19th St E 17th St

E 26th St Forsyth St

E Broadway E 22nd St

Pr ince St

Manhattan Bridge Pa

Pitt St E 1st St

St Essex St

Ludlow St Perry S

t York St Elizabeth St

E 24th St Eldridge St

Gold St Fulton St

Park Row Bank St

Chrystie St Orchard St W Houston St

Sullivan St Crosby St 7th Ave S

Warren St Pine St Murray St

Brooklyn Bridge Jane St

Wall St Watts St

Pearl St Chambers St

Thompson St Reade St Liberty St

John St Vesey St

Char les St

William St W 13th St

E 2nd St Greene St

W 3rd St Ridge St Barrow St

Plymouth St King St

White St Leonard St

Walker St Wooster St

Nassau St Christopher St

Suffolk St Norfolk St

Maiden Ln Broad St

Morton St Duane St Laight St

Hor atio St

4th Ave Division St

Delancey St S E 5th St

E 2 1st St

Adams St E 8th St

E 9th St Ann St

Irving Pl Bedford St

Baxter St Beach St

Pa rk Pl

Trinity Pl Hester St

Ba rclay St

Vestry St University Pl

Prosp ect St Pike St

Saint Marks Pl N Moore St

New St Beaver St

s St Front St

River Ter Baruch Dr Grove St

Gansevoort St an St Charlton St

Mac Dougal St Market St Cadman Plz W Catherine St

South St Water St Vandam St

Bond St Greenwich A

ve E Houston St Clarkson St

Brooklyn Battery Tunnel Attorney St

Columbia St Rutgers St W 8th St

W 9th St E 15th St

Willett St Battery Pl

Hudson Ave Jackson St

State St Astor Pl

Hubert St Franklin St

Bayard St South End Ave

Bethune St William

sburg Bridge Park Pl W

olumbia Hts Cooper Sq

Harrison St St How

ard St Peter Cooper Rd

Cherry St Bridge St

Vine St Spruce St

Platt St Lispenard St

Lewis St Beekma

n St Dominick St

Marshall St Frankfort St

Whitehall St Dover St

Main St Leroy St

Albany St Pell S

t Peck Slip

E 16th St Cortlandt Aly Desbrosses St

W Washington Pl Szold Pl Union Sq W

Dey St Washington Sq S

Washington Sq N Jones St

James St Baruch Pl

Ramp Oliver St Cedar St

Ave Of The Finest St

one St Washington Pl

Cornelia St Mangin St Stuyvesant St

Rector Pl Union Sq E

Old Slip Carlisle St

E 4th Walk Cardinal Hayes Pl

Shinbone Aly Sheriff St

Asser Levy Pl Stuyvesant Loop N Stuyvesant Loop S

Stanton St Greenwich St

Stuyvesant Oval Park St

Pike Slip Minetta St

E 5th Walk Saint Johns Ln

Cortlandt St Wanamaker Pl

Hamill Pl Stuyvesant Walk

Abraham Pl Market Slip Washington Mews

Little St Rivington St

Gramercy Park S Patchin Pl

Morris St Waverly Pl

Anchorage Pl E 20th St

E 5th St E 9th St

Beekman St E 11th St

Water St Pike St

Front St West St

Rivington St 9th Ave

E 13 th St

Hester St E 16th St

St Broadw

Cedar St Franklin St

Jay St E 8th St

E 9th St E 15th St

E 28th St E 16th St

New St W 13th St

Water St Bridge St

E 5th St Stanton St

Washington St E 16th St

W 4th St Attorney St Canal St

E 21st St Front St

Fdr Dr Water St Ramp West St

South St Cherry St Houston St. - Canal St.

14th St. - Houston St. South of Canal St. Restricted Zone

Houston St. - Canal St. 14th St. - Houston St. South of Canal St.

Restricted Zone

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