State plan to speed small business grants means reduced scrutiny
The state has now distributed $17 million of the $290 million in small business grants it had hoped to give to struggling small businesses by the end of July.
The state is giving Credit Union 1 more discretion in handing out grants ranging from $5,000 to $100,000. In other words, the state is relaxing the verification procedures and documentation requirements that Credit Union 1 had deemed important. This translates into reduced scrutiny on applications.
That is a danger signal, one that makes full public disclosure of grant recipients and amounts more important, though the Dunleavy administration has given no sign that it plans to release the names and grant amounts. Disclosure is vital to limit waste, fraud and abuse.
The state still plans to open the program to small businesses that received less than $5,000 in other funds from the federal bailout bill, but those changes won’t be in place for a couple of weeks. Here is what I wrote in mid-July on the sloppy planning and mismanagement of the this project by the commerce department, problems that began months ago.
Glenn Hoskinson special assistant to commerce commissioner Julie Anderson, sent the update below to legislators July 24.
Hoskinson says the “high volume of applications, program time frames, types of eligible expenses, and program performance are no longer making a controlled disbursement process prudent or necessary in every instance.” Grants under $25,000 can be given out directly to the applicants.
Credit Union 1 and any other operators brought in to speed the program will have “more latitude to rely on an applicant’s certification when making a determination as to eligibility of expenses.”
Businesses that were deemed ineligible under the old rules will have to wait to apply for grants until the new eligibility rules are enacted.
Here is the July 24 note from Hoskinson, the commerce department aide, to legislators:
I hope you are all well! I’m reaching out on behalf of Commissioner Anderson to provide an update on AK CARES. Setting up a completely new grant program to assist businesses through this unprecedented pandemic, and its economic impacts, with constantly evolving federal guidance, has been challenging to say the least. However, we are working to adapt the program as needed, and as quickly as possible, in response to input from the public and legislators. Identifying and implementing improvements to provide relief funds to Alaska’s small businesses more efficiently, and to help as many businesses as possible, remains the top priority for the Department of Commerce, Community, and Economic Development.
Below is an outline of the improvements or changes to the program that DCCED has requested be implemented via the Alaska Industrial Development and Export Authority (AIDEA) and Credit Union 1.
Improvements to the AK CARES Grant Processing Procedures
In response to concerns regarding the processing timelines, DCCED conducted a thorough review of Credit Union 1’s current forms and processes and identified multiple areas for improvement. After careful discussion on how to ensure responsible but efficient processing, DCCED has provided additional clarification to Credit Union 1, through AIDEA, with revised processing guidelines and directions for the AK CARES Grant program.
The clarified and revised processing guidelines include the following changes:
Program operator(s) have discretion to determine whether a grant application package is complete and the level of documentation needed to accurately calculate the amount of expenses eligible. The program operator has had this discretion since the launch of the program on June 1, but when we looked into their current procedures, it became apparent that further clarification from DCCED was needed.
Program operator(s) have been given more latitude to rely on an applicant’s certification when making a determination as to eligibility of expenses.
Program operator(s) have been provided processing guidelines for determining whether a claimed Business Related Equipment expenses is eligible under the AK CARES program.
Any expense that is determined to be ineligible will be disallowed from the schedule of expenses and calculation of the awarded grant amount. However, disallowed expenses may be separately appealed by the grant applicant without holding up funding of the allowed expenses.
DCCED has determined that the high volume of applications, program time frames, types of eligible expenses, and program performance are no longer making a controlled disbursement process prudent or necessary in every instance. The program operator(s) may now provide grant funds directly to the applicant or the applicant’s account. However, vendor payable expenses over $25,000 must still be funded by controlled disbursement.
Bringing on Additional Program Operators
The RFP to bring on additional program operators was paused due to the preliminary injunction filing. However, due to the court decision on July 10, 2020, and the changes that have been made to the program guidelines (noted above), the RFP was re-initiated with responses to be provided no later than close of business on Monday, July 27. The RFP was also expanded to include the ability for new program operators to provide a centralized portal application, to be adapted to the AK CARES program, as an additional service. We will provide a further update on the RFP and the quest to bring on additional program operators next week.
Upcoming Changes to the Program’s Eligibility Criteria
The following changes to the AK CARES eligibility criteria have been made and will become effective when the new program operator(s) are in place.
Businesses that received and kept $5,000 or less in PPP or EIDL funds are eligible for AK Cares funding.
Businesses that received more than $5,000 in PPP/EIDL funds but returned the excess funds are also eligible (i.e., if a business received $6,000 in PPP funds but returned $1,000, they can apply for AK CARES);
Businesses that received funds through a municipal grant program are eligible to apply for AK CARES, regardless of the amount.
Double-dipping is not allowed, meaning if a business received PPP for their June payroll, they can apply to AK CARES for July and August payroll, but not June.
501(c)(6) nonprofit organizations are eligible.
Commercial fishermen who held and fished a Limited Entry Permit or Interim Use Permit issued by the Commercial Fisheries Entry Commission (CFEC) are eligible.
As soon as the effective date has been determined, DCCED will update the AK CARES Grant website, issue a press release, and notify the Legislature via email.
Businesses that are eligible under the new guidelines will be able to apply once the changes are in effect. New applications are being developed to accommodate the changes. If an applicant applies to Credit Union 1 prior to the effective date, the application will be sent back and the applicant will be requested to reapply using the updated forms.
Creation of a Centralized Database
AIDEA is in the process of designing a centralized database that all program operators can use for the AK CARES program. This will help reduce the number of incomplete applications that are coming in. Further, it will allow Credit Union 1 to work with any additional/potential program operators under a protocol to be established with all program operators. Additionally, this will assist in cross-checking with program operators to ensure multiple applications are not being processed for the same business.
Future Changes to the Eligibility Criteria
The changes to the eligibility criteria that are listed above will be implemented in the next couple of weeks. Once those changes go into effect and we have at least 2 weeks of data to evaluate the effectiveness of the changes, we will proceed with evaluating the feasibility of implementing additional eligibility criteria changes.