Special audit rakes state’s targeted small business program; state agency points to updates

After a special review, State Auditor Rob Sand blasted a state program designed to help businesses owned and operated by women and minorities as hard to use and confusing.

Sand called for a range of changes.

The Iowa Economic Development Authority, which runs the program, responded by noting steady improvement after a major overhaul of the program the past five years. Officials said the number of certifications doubled in 2020. 

While Sand noted some improvements, IEDA officials said auditors didn’t do enough to learn of changes in the program. 

The state certifies businesses that are owned and operated by women or minorities, service-disabled veterans and others with disabilities. Those business get preference on state bidding procedures.

Sand’s review found a range of complaints from businesses, ranging from a cumbersome program website to confusing and overly bureaucratic application processes. He noted many businesses knew little about what the state offers.

Sand called on IEDA to simplify the program and do a better job of informing the businesses of state assistance.

In a report released Monday, Sand noted that IEDA already has improved the Targeted Small Business Program website. 

Of the nearly 30 of the 838 certified businesses that responded to auditors’ request for information last August, many said they didn’t know about the program and its benefits until another business owner told them. 

“Both experienced and inexperienced business owners attested to a general lack of awareness about the (Targeted Small Business) program,” auditors wrote. 

“While some respondents attested the certification process to be simple and clear, most certified small business owners indicated a great sense of frustration with the complexity of the process,” auditors wrote. The frustration involved a related website, applications for loans or relief grants, and difficulty in actually securing bids to provide goods to the state, they added.

Some business owners spoke of “great difficulties” navigating the state’s procurement process, the report noted.

“The most common shared frustration among respondents included difficulty navigating the digital interfaces,” auditors noted. 

Staci Hupp Ballard, IEDA chief strategic communications officer, said IEDA has made significant improvements to the program, including to related websites and procedures. In 2020, the number of certifications doubled to 900, the largest number in a decade, she added. 

While state auditors talked to an accounting employee at IEDA about the special review, they did not talk to Jill Lippincott, director of the program, or to IEDA Director Debi Durham, Hupp Ballard said. Both were caught by surprise by the report, she added.

The program “went from an underused state program to a resource that truly opens doors for diverse small business owners in the five years since the Iowa Economic Development Authority set out to improve it,” Hupp Ballard said. “Through a new online portal and quicker response times, we’ve simplified the process to achieve Targeted Small Business certification, which raises the profile of businesses and provides better access to state bidding opportunities. We host regular networking events as well as monthly webinars to educate Targeted Small Businesses about bid opportunities.”

“While there is more work to do to elevate this important state program and our diverse small business owners, we are very proud of the improvements we have made so far,” Hupp Ballard said. She added that because of the pandemic, IEDA has increased its outreach to small businesses through this program and others, including a $600,000 emergency relief grant program.

Sand suggested IEDA produce one-page information sheets on the program, using “layman’s terms.” He also called for added outreach and networking, and the offering of program information when a business registers with the secretary of state’s office. 

The state needs to simply the certification process, auditors found. Sand acknowledged IEDA already has moved to simplify applications and the website, which is “much more user-friendly and easier to navigate.”

Auditors also called for IEDA to more frequently remind the targeted businesses of bid opportunities with the state, and to reduce the number of steps in the process to get contracts. They said the state should give businesses more time to respond, and should measure the success of the program.