• This page, Audit of the Massachusetts Office of International Trade and Investment Overview of Audited Entity, is   offered by
  • Office of the State Auditor

Audit of the Massachusetts Office of International Trade and Investment Overview of Audited Entity

This section describes the makeup and responsibilities of the Massachusetts Office of International Trade and Investment

Table of Contents

Overview

The Massachusetts Office of International Trade and Investment (MOITI), established by Section 13K of Chapter 23A of the Massachusetts General Laws, is an agency overseen by the Executive Office of Housing and Economic Development (EOHED) and is part of EOHED’s Massachusetts Marketing Partnership.1 MOITI is administered by an executive director, who is appointed by the Governor. Its website states,

The Massachusetts Office of International Trade and Investment (MOITI) is the international business development agency charged with promoting trade and investment with global partners in Massachusetts and around the world. . . .

Our Goals

  • Increase foreign investment in Massachusetts
  • Create jobs
  • Strengthen the local economy
  • Focus on important trade partnerships

MOITI has been designated by the Governor as the agency responsible for administering the federal Small Business Administration’s (SBA’s) State Trade Expansion Program (STEP).

STEP - Background

STEP was initially established by the Small Business Jobs Act of 2010 as a three-year pilot program. It was later established as a permanent, federally administered program under the Trade Enforcement Act of 2015. Through STEP, SBA provides grants to state government organizations (such as MOITI), which then give financial assistance awards to small businesses. According to SBA’s website,

STEP helps small businesses overcome obstacles to exporting by providing grants to cover costs associated with entering and expanding into international markets.

STEP’s purpose is to increase the number of small businesses that export and to increase the value of exports from those businesses. The program is managed at the federal level by SBA’s Office of International Trade. MOITI, along with the Massachusetts Export Center (MEC),2 administers STEP in Massachusetts.

During the audit period, SBA granted Massachusetts $500,000 in federal STEP funding. The state contributed $166,667 in matching funds.3 The table below details the federal and state funding amounts from September 30, 2015 through September 29, 2021 and the number of small businesses that have received financial assistance awards as part of Massachusetts’s STEP since 2015.

STEP Funding Amounts

Performance Period*

SBA Grant Amount

Commonwealth Match Amount

Total STEP Funding

Number of Small Businesses Given STEP Awards

September 30, 2018
through
September 29, 2021

$500,000

$166,667

$666,667

48

September 30, 2017
through
September 29, 2019

$500,000

$166,667

$666,667

43

September 30, 2016
through
September 29, 2017

$504,478

$168,159

$672,637

61

September 30, 2015
through
September 29, 2016

$500,000

$166,667

$666,667

50

 

*      A performance period is the total time SBA approves for entities like MOITI to carry out the work authorized under each federal STEP grant received.

STEP - Financial Assistance Awards

To be eligible for a STEP financial assistance award, a business must meet the definition of “eligible small business concern” in Section 503 of the Trade Facilitation and Trade Enforcement Act of 2015 (see Appendix B) and be an export-ready United States business (i.e., a United States business that is able to build and sustain export sales) seeking to export products or services that are either of United States origin or at least 51% United States content.4 An eligible small business can apply for a STEP financial assistance award, which is a reimbursement for costs associated with allowable activities undertaken during the performance period of the award, by submitting a Massachusetts STEP Program Readiness Assessment and Application to MOITI. MEC manages the STEP financial assistance award application process for MOITI, hosts a webinar for small businesses that walks them through the application process, and reviews and scores all STEP Program Readiness Assessment and Application forms.

According to the Massachusetts STEP Program Readiness Assessment and Application, financial assistance awards can be used for the following specific international business development and marketing costs:

  • Overseas trade show or conference exhibition and directly related expenses . . .
  • U.S. Department of Commerce international business development services . . .
  • Cost of compliance testing an existing product for entry into an export market . . .
  • Design of export market-specific marketing media . . .
  • Localization of websites for target export markets . . .
  • Research tool subscription for targeted export market research.

The application collects the following information: basic information about a business (such as contact information, amount earned from sales, number of employees, and description of products or services); information about the business’s existing export activity; the proposed activity to be funded with the financial assistance award; the business’s international marketing plan, including how the proposed STEP-funded activity fits in with the business’s overall international business development strategy; and the projected economic effect of receiving an award.

Small businesses also report one of two current levels of export experience on the application:

  • new to export (NTE), for businesses with little or no export experience
  • market expansion (ME), for businesses currently exporting and seeking to either expand into a new country’s market or introduce a new product within an existing international market.

Two international trade experts from MEC review and score all applications that small businesses submit by the designated deadline, using an MEC-designed scorecard. Each application is scored as follows:

  • 25% of the score is based on whether the STEP-funded activity is likely to lead to new or increased export sales
  • 25% is based on whether the STEP-funded activity is likely to lead to job creation and economic impact
  • 20% is based on the business’s financial strength and ability to sustain export sales beyond the performance period
  • 15% is based on the business’s demonstrated commitment to increasing export sales
  • 15% is based on whether the STEP-funded activity is likely to meet the applicant’s needs and provide for long-term growth.

In an effort to prioritize applicants that are new to STEP, MEC deducts a standardized number of points from the final scores for businesses that have already received three or more STEP financial assistance awards. MEC sends a list of all applicants ranked by their application scores to MOITI, which issues awards to the highest-scoring applicants until available funding is exhausted.

During the audit period, financial assistance awards ranged from $6,000 to $12,000 per small business. Before reimbursement, small businesses must submit proof of payment (such as a paid invoice) for the related activity. Each small business that receives an award is also required to provide a match to cover a portion of the total cost of any activity. NTE small businesses have a minimum 25% match requirement, and ME small businesses have a 40% match requirement. For instance, to receive a $6,000 reimbursement, an NTE small business would need to submit at least $7,500 in paid invoices, showing that it had paid an amount that totaled 25% of the financial assistance award.

STEP - Small Business Communities

SBA encourages entities like MOITI to promote STEP to small businesses in certain underserved small business communities (USBCs). In its STEP Funding Opportunity Announcement5
OIT-STEP-2018-01 (see Appendix A), SBA identifies the following four USBCs:

  • socially and economically disadvantaged individuals . . .
  • small business concerns owned or controlled by women . . .
  • rural small business concerns . . .
  • veterans and/or service-connected disabled veterans [i.e., those with disabilities related to military service].

During the audit period, SBA required entities like MOITI to track how many small businesses that applied to STEP were in one or more of these USBCs. MOITI was required to collect this information as part of the STEP application process and report it to SBA during the audit period.

MOITI used an SBA form called the Request for Counseling6 (RFC) to collect this information from small businesses that had been given financial assistance awards. Businesses could report on their RFCs that they were part of one or more USBCs. MOITI recorded this information in the quarterly Performance Progress Reports that it submitted to SBA throughout the performance period.

Graduating Companies from STEP

 

According to STEP Funding Opportunity Announcement OIT-STEP-2018-01, entities like MOITI are strongly encouraged to develop requirements for graduating businesses from STEP after a reasonable duration and amount of funding so that they do not become dependent on STEP funding. SBA does not define what a reasonable duration or amount of funding is, so entities like MOITI can develop these definitions

1.    In 2010, the state Legislature created the Massachusetts Marketing Partnership to coordinate marketing initiatives related to travel and tourism, international trade, and economic development on behalf of the Commonwealth. The partnership is an 11-member board within EOHED. It provides administrative support for MOITI, the Massachusetts Office of Travel and Tourism, the Commonwealth Marketing Office, and the Massachusetts Film Office.

2.    MEC is part of the Massachusetts Small Business Development Center Network. This network is a technical assistance program, supported by both federal and state funding, that provides direct support to Massachusetts small and midsized businesses. MEC helps MOITI with conducting outreach and marketing STEP to Massachusetts small businesses.

3.    As a STEP grant recipient, the Commonwealth is required to provide a $0.333333 cash match for every $1 of federal funds received.

4.    SBA follows the United States Commercial Service’s definitions of United States content. For products, SBA’s “STEP U.S. Content Definition/Formula” defines United States content as “the ex-factory price of a good minus the aggregate value contributed by non-U.S. or foreign sources (e.g., costs or payments to foreign suppliers/providers/employees not resident in the United States).” For services, United States content is defined as “the contract value of the service (whether delivered in the U.S. or overseas), minus the aggregate value contributed by non-U.S. or foreign sources (e.g., costs or payments to foreign suppliers/providers/employees not resident in the United States).”

5.    A funding opportunity announcement is a publicly available document used by a federal agency to communicate its intent to award grants, usually as a result of a competitive application process.

6.    SBA developed this form to collect information from organizations that provide assistance (such as financing, training, and counseling) to small business owners through SBA-funded agreements. The form captures contact information and other background information about businesses seeking assistance.

Date published: June 30, 2022

Help Us Improve Mass.gov  with your feedback

Please do not include personal or contact information.
Feedback