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Multiple Agencies Provide Assistance to Service-disabled Veterans or Entrepreneurs, but Specific Needs Are Difficult to Identify and Coordination Is Weak.

GAO-09-11R October 15, 2008

As of July 2008, the Department of Defense (DOD) reported that almost 33,000 servicemembers had been wounded in action as part of Operation Enduring Freedom or Operation Iraqi Freedom. Some of these servicemembers could have injuries that keep them from easily entering or returning to the workplace upon their exit from the military. For some service-disabled veterans, starting a business may be one option for entering or returning to the workforce. In the Veterans Entrepreneurship and Small Business Development Act of 1999 (P.L. 106-50), Congress stated that too little had been done to help veterans, particularly service-disabled veterans, in starting small businesses. This law established the framework for the Small Business Administration (SBA), the Department of Veterans Affairs (VA), the Department of Labor (DOL), DOD, and others to coordinate in providing entrepreneurial assistance to veterans and servicedisabled veterans. To improve coordination and enhance small business assistance to veterans, the law required that these agencies enter into memorandums of understanding (MOU) as specified in the 1999 Act (but not all of the agencies were required to participate in each of the MOUs); established the National Veterans Business Development Corporation (now known as The Veterans Corporation) to assist veterans, including service-disabled veterans, in forming and expanding small businesses; and established a government wide federal procurement goal for the participation of small businesses owned and controlled by service-disabled veterans. The Military Reservist and Veteran Small Business Reauthorization and Opportunity Act of 2008 (P.L. 110-186) amended P.L. 106-50 and contained provisions directing these agencies and their resource partners to improve coordination when providing entrepreneurial assistance. For example, it (1) established the authority for an interagency task force, chaired by the SBA Administrator, to coordinate these efforts; (2) increased the number of Veterans Business Outreach Centers (VBOC) by at least two centers in fiscal years 2008 and in 2009, subject to funding from Congress; (3) directed the SBA Administrator to sponsor an independent study on gaps in the availability of VBOCs across the country; and (4) directed SBA to create written materials on self-employment and veterans' entrepreneurship and provide them to DOL for use in its Transition Assistance Program, which helps servicemembers exiting the military. Furthermore, P.L. 110-186 required that GAO describe the (1) types of assistance that may be needed by service-disabled veterans who want to become entrepreneurs and (2) resources that are available to assist such service-disabled veterans.

Although veteran service organizations (VSOs) and others indicated that service-disabled veterans have needs that are common to many entrepreneurs, they also stated that these veterans may need additional help in gaining access to capital, building a support network, and accommodating individual disabilities as they start a business. In particular, because of their military service away from their home community, some veterans may have poor credit histories and few assets. As GAO noted in a 2005 report, some active-duty servicemembers did not receive correspondence from creditors on time during deployments and fell behind in payments, which could have led to negative information being entered into their credit reports and would have made it more difficult and expensive to obtain credit in the future. These negative outcomes could make access to capital more challenging. The time that servicemembers spend away from home also could adversely affect veterans' support networks, which could be a useful tool when starting a small business. Depending on the type and extent of their disability, service-disabled veteran entrepreneurs may have additional needs, due to physical limitations or psychological challenges, which could require specific types and delivery methods of entrepreneurial assistance. Federal officials and their agencies have difficulty in identifying the needs of service-disabled veteran entrepreneurs as a group, partly because their needs are specific to an individual's circumstances. The agency officials also noted that their data on assisted servicedisabled veterans rely on service-disabled veterans identifying themselves as such, but some of these veterans may be reluctant to do so. Multiple agencies provide federal resources to assist veterans and service-disabled veterans or individuals starting small businesses; but few resources are targeted specifically to providing entrepreneurial assistance for service-disabled veterans. Vocational Rehabilitation and Employment (VR&E's) self-employment track is the only federal program that exclusively targets service-disabled veterans who want to become entrepreneurs. VR&E offers five tracks to rehabilitation that are available to qualified veterans. Any qualified veteran may choose the self-employment track, which also offers additional financial assistance to start a small business to those with the most severe service-connected disabilities and for those for whom self-employment is likely the only way to achieve vocational rehabilitation. SBA, VA's Center for Veterans Enterprise, DOL, and their resource partners provide some assistance to service-disabled veterans with financing, business plan development, and education and training. But these entities primarily focus on providing veteran and service-disabled veteran entrepreneurs with information and referrals to other federal, state, and local resources. In assessing the legal framework to coordinate entrepreneurial assistance and resources across federal agencies, we found that statutory objectives and mandates were not fully satisfied and weak coordination could add to the difficulty that veterans face in navigating federal programs. These unfulfilled statutory requirements include a delay in establishing an interagency task force to coordinate federal efforts to provide small business assistance to veterans and service-disabled veterans; agencies not executing and achieving the objectives of required MOUs, and continuing problems of The Veterans Corporation in attaining financial selfsufficiency.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Implemented" or "Not implemented" based on our follow up work.

Director: Jack E. Edwards Team: Government Accountability Office: Financial Markets and Community Investment Phone: (202) 512-8246

Recommendations for Executive Action

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Recommendation: The SBA Administrator should expedite the agency's efforts to convene the interagency task force required under P.L. 110-186 to coordinate assistance to service-disabled veteran and veteran-owned small businesses. In addition to addressing this mandated responsibility, the interagency task force should: (1) encourage SBA, VA, DOL, and other resource partners to strengthen the coordination of entrepreneurial assistance to veterans and service-disabled veterans, and determine whether more formal agency agreements (such as MOUs of the type required in P.L. 106-50) are needed and (2) encourage VA, SBA, and others to work together, as called for in P.L. 106-50, to establish a clearinghouse of information (including contact information) on the federal and local resources available to service-disabled veterans who are interested in becoming entrepreneurs.

Agency Affected: Small Business Administration

Status: In process

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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Publication:General Accounting Office Reports & Testimony
Date:Nov 1, 2008
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