[Senate Hearing 106-758]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 106-758
 
    GAO'S PERFORMANCE AND ACCOUNTABILITY REVIEW: IS THE SBA ON PAR?

=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 20, 2000

                                     




                                     

              Printed for the Committee on Small Business

                                 ______

                     U.S. GOVERNMENT PRINTING OFFICE
68-000 CC                    WASHINGTON : 2000
_______________________________________________________________________
   For sale by the Superintendent of Documents, Congressional Office
         U.S. Government Printing Office, Washington, DC 20402




                      COMMITTEE ON SMALL BUSINESS

                       ONE HUNDRED SIXTH CONGRESS

                              ----------                              
                CHRISTOPHER S. BOND, Missouri, Chairman
CONRAD BURNS, Montana                JOHN F. KERRY, Massachusetts
ROBERT F. BENNETT, Utah              CARL LEVIN, Michigan
OLYMPIA J. SNOWE, Maine              TOM HARKIN, Iowa
MICHAEL ENZI, Wyoming                JOSEPH I. LIEBERMAN, Connecticut
PETER G. FITZGERALD, Illinois        PAUL D. WELLSTONE, Minnesota
MIKE CRAPO, Idaho                    MAX CLELAND, Georgia
GEORGE V. VOINOVICH, Ohio            MARY LANDRIEU, Louisiana
SPENCER ABRAHAM, Michigan            JOHN EDWARDS, North Carolina
VACANCY
                     Emilia DiSanto, Staff Director
                      Paul Cooksey, Chief Counsel
    Patricia R. Forbes, Democratic Staff Director and Chief Counsel



                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Bond, The Honorable Christopher S., Chairman, Committee on Small 
  Business, and a United States Senator from Missouri............     1
Enzi, The Honorable Michael B., a United States Senator from 
  Wyoming........................................................     6
Kerry, The Honorable John F., Ranking Member, Committee on Small 
  Business, and a United States Senator from Massachusetts.......   255
Snowe, The Honorable Olympia, a United States Senator from Maine.   267

                           Witness Testimony

Walker, The Honorable David M., Comptroller General, United 
  States General Accounting Office, Washington, D.C..............     7
Czerwinski, Stanley J., Associate Director, Housing and Community 
  Development Issues, Resources, Community, and Economic 
  Development Division, United States General Accounting Office, 
  Washington, D.C................................................    30
Willemssen, Joel, C., Director, Civil Agencies Information 
  Systems, Accounting and Information Management Division, United 
  States General Accounting Office, Washington, D.C..............   115
Brostek, Michael, Associate Director, Federal Management and 
  Workforce Issues, General Government Division, United States 
  General Accounting Office, Washington, D.C.....................   230
Alvarez, The Honorable Aida, Administrator, Small Business 
  Administration, Washington, D.C.; accompanied by Peter 
  McClintock, Deputy Inspector General, Small Business 
  Administration, Washington, D.C.; James Ballentine, Associate 
  Deputy Administrator for Government Contracting, Minority 
  Enterprise Development, Small Business Administration, 
  Washington, D.C.; and Kris Marcy, Chief Operating Officer, 
  Small Business Administration, Washington, D.C.................   279

          Alphabetical Listing and Appendix Material Submitted

Alvarez, The Honorable Aida
    Testimony....................................................   279
    Prepared statement and attachment............................   283
    Responses to post-hearing questions posed by Senator Bond....   320
    Responses to post-hearing questions posed by Senator Kerry...   358
Bond, The Honorable Christopher S.
    Opening statement............................................     1
    Prepared statement...........................................     3
    Letter from Senator Bond to Ms. Alvarez......................   266
    Post-hearing questions posed to Ms. Alvarez and subsequent 
      responses..................................................   320
Brostek, Michael
    Testimony....................................................   230
    Prepared statement...........................................   233
    Responses to post-hearing questions posed by Senator Kerry...   354
Czerwinski, Stanley J.
    Testimony....................................................    30
    Prepared statement and attachments...........................    38
    Responses to post-hearing questions posed by Senator Kerry...   349
Enzi, The Honorable Michael B.
    Opening statement............................................     6
    Ledger report titled ``Sorted By Function''..................   271
Kerry, The Honorable John F.
    Opening statement............................................   255
    Letter from Ms. Alvarez to Senator Kerry.....................   257
    Prepared statement...........................................   262
    Post-hearing questions posed to Mr. Walker and subsequent 
      responses..................................................   341
    Post-hearing questions posed to Mr. Czerwinski and subsequent 
      responses..................................................   349
    Post-hearing questions posed to Mr. Willemssen and subsequent 
      responses..................................................   350
    Post-hearing questions posed to Mr. Brostek and subsequent 
      responses..................................................   354
    Post-hearing questions posed to Ms. Alvarez and subsequent 
      responses..................................................   358
Snowe, The Honorable Olympia J.
    Opening statement............................................   267
Walker, David M.
    Testimony....................................................     7
    Prepared statement...........................................    15
    Responses to post-hearing questions posed by Senator Kerry...   341
Willemssen, Joel C.
    Testimony....................................................   115
    Prepared statement and attachments...........................   117
    Responses to post-hearing questions posed by Senator Kerry...   350


    GAO'S PERFORMANCE AND ACCOUNTABILITY REVIEW: IS THE SBA ON PAR?

                              ----------                              


                        THURSDAY, JULY 20, 2000

                              United States Senate,
                               Committee on Small Business,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 9:30 a.m., in 
room 428-A, Russell Senate Office Building, the Honorable 
Christopher S. Bond (Chairman of the Committee) presiding.
    Present: Senators Bond, Enzi, Snowe, and Kerry.

    OPENING STATEMENT OF THE HONORABLE CHRISTOPHER S. BOND, 
  CHAIRMAN, SENATE COMMITTEE ON SMALL BUSINESS, AND A UNITED 
                  STATES SENATOR FROM MISSOURI

    Chairman Bond. Good morning. The Small Business Committee 
will come to order. Senator Kerry will be joining us, but since 
we have a full schedule of witnesses today and the possibility 
of votes beginning sometime right after 9:45, I thought we 
would start and get as much testimony in as we can before we 
have to go off to vote.
    Let me say that as we begin this hearing, it is with a 
heavy heart, particularly on the Small Business Committee, that 
we note the passing of a dear friend, Paul Coverdell. He was a 
great champion of the small business community. He was a 
dedicated leader in the Senate.
    Since I became Chairman of this Committee in 1995, Paul 
Coverdell has been a valued and dedicated Member of the 
Committee. He worked tirelessly for small business on many 
critical issues, including making the SBA a more efficient and 
effective supporter of small business, tax relief and IRS 
reform, ensuring a drug-free workplace, and improving 
educational opportunities for America's children.
    He certainly is going to be missed by all of us. We feel a 
special connection with Paul as Missourians. He was a 
Missourian for a while, lived near Kansas City and attended the 
University of Missouri. But most of all, I think that all in 
the small business community will remember him as one who 
really had the interests of small business at heart and he was 
undoubtedly a valued member of our leadership.
    Our thoughts and prayers are with his wife, his family, his 
staff, and all those who cared greatly for and appreciated the 
work that Paul Coverdell did.
    Today's hearing is the first in a series of hearings by the 
Committee on the management challenges faced by the SBA. This 
hearing also introduces a new methodology that the GAO is using 
to assist Congress with its monitoring and oversight efforts. 
Of course, the GAO's job is to assist Congress by providing 
careful, independent, and objective reviews of agency 
operations and programs. Most of the GAO's reports, however, 
focus on isolated programs, processes and/or concerns, and 
while they provide important information about the various 
specific aspects of an agency, they do not provide Congress or 
the agency administrators with a complete picture of how an 
agency is operating.
    Accordingly, last October, at my request, the Committee and 
the GAO set out to formulate a method for the GAO to conduct an 
examination of agency operations that would provide depth and 
breadth to root out any systemic problems in an agency, not 
just symptoms of such problems that might appear in the way a 
particular operation is undertaken. The result is what GAO has 
dubbed the Performance Accountability Review, or PAR.
    The PAR is a way for the GAO to provide an overall 
assessment of an agency's major performance and management 
challenges. What the PAR entails is a comprehensive review of 
agency operations that are most critical to the achievement of 
an agency's mission. These include an agency's strategic and 
performance planning, information systems management, financial 
management, human capital, client services, and budget 
formulation and execution. The PAR review also calls for a 
review of mission-critical program and ties the shortcomings an 
agency might have with its programs to systemic issues related 
to general agency operations.
    As a former State auditor, I am familiar with 
accountability reviews, performance reviews, and functional 
reviews. I share Mr. Walker's vision that it is of the utmost 
importance that Congress actively exercise its oversight 
authority to ensure that the Federal Government is operating in 
the most effective, efficient, and economical manner possible. 
That is the ultimate goal of PAR.
    Now, after formulating the method by which the GAO could 
perform this type of review, the Committee concluded it was 
important that the GAO perform the Performance and 
Accountability Review at the SBA. There are three primary 
reasons. First, the SBA is an agency in transition. At the 
request of Congress, the SBA has outsourced many of the tasks 
it used to perform in-house. It is transforming itself from a 
programmatic agency to a regulatory agency, and we need to 
monitor how it is carrying that out.
    Second, there have been concerns raised to the Committee 
about how the SBA manages its core programs. The Committee has 
received several reports from the SBA Inspector General and GAO 
demonstrating serious problems with its core programs.
    Finally, the SBA is a small agency compared to behemoths 
like HUD and the IRS, and PAR is intended to be a prototype 
that we expect the GAO can use in all other agencies.
    We will hear more about that from the Comptroller General, 
but PAR is challenging, comprehensive, and resource intensive, 
not only for the GAO and the SBA but for the Committee. We 
believe that there are many important aspects to this 
Performance Accountability Review and before we turn to the 
Comptroller General, I want to call on Senator Enzi for any 
opening comments that he wishes to make.
    [The prepared statement of Chairman Bond follows:]

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 OPENING STATEMENT OF THE HONORABLE MICHAEL B. ENZI, A UNITED 
                  STATES SENATOR FROM WYOMING

    Senator Enzi. Thank you, Mr. Chairman. I appreciate your 
holding this hearing today. I think that the Government 
Performance Accountability Review and the Act that created it 
are extremely important to the Government.
    Before I make formal remarks, I, too, need to say a few 
words about our colleague, Paul Coverdell. Senator Coverdell 
was a great part of this Committee. In fact, he was a great 
part of anything that he served on. He was one of the work 
horses that was not up front taking the publicity but was 
pumping away at all of the internal efforts that were being 
done and usually wound up being a huge part of any solution.
    He pursued legislation that benefited small businesses not 
only in Georgia but throughout the country. He was a hard 
worker. He never understood ``no.'' He never understood when we 
said it cannot be done that way. He always persevered.
    He was a good friend of mine as well as a mentor. I admired 
him greatly. He will be truly missed in the Senate as a whole, 
but more specifically as a Member of this Committee. He has 
done some exciting and diligent work here that cannot be 
matched.
    I am looking forward today to learning more about the 
progress of the GAO's Performance and Accountability Review of 
the Small Business Administration. As you know, the SBA was one 
of the pilot agencies for the Government Performance and Review 
Act and their strategic plan has benefited from past GAO 
reviews. To my knowledge, GAO was generally pleased with the 
SBA's progress and cooperation during the GPRA process. I had 
meetings with them on that process earlier and then I followed 
that up, meeting personally with Administrator Alvarez during 
the GPRA process at the SBA offices to encourage their 
cooperation in getting a better understanding of the process as 
well as their agency. I also have been to a number of other 
agencies following up on this process, such as the Department 
of Labor, OMB, and the IRS.
    I think that GPRA and PAR have the potential for being one 
of the great tools of government, right down to the employees, 
so that the employees can finally get some credit for the work 
that they are doing.
    Therefore, I sincerely hope and am confident that the Small 
Business Administration will work actively with the GAO to find 
solutions to the concerns that the GAO has addressed in its 
three initial reports associated with this new Performance and 
Accountability Review. The Small Business Committee is 
committed to ensuring that the Small Business Administration 
stays on task in an efficient and effective manner when 
assisting small businesses nationwide.
    Again, I want to thank Administrator Alvarez, Comptroller 
Walker, and the other witnesses for being here today. I look 
forward to hearing from each of you.
    Chairman Bond. Thank you very much, Senator Enzi. It is 
always nice to have a real accountant on the Committee. I was 
just elected to the post. Senator Enzi earned the title of CPA. 
There is a real difference.
    With that, let us turn now to our first witness, the 
Honorable David Walker, Comptroller General, U.S. General 
Accounting Office in Washington, D.C. Good morning, Mr. Walker, 
and welcome.

    STATEMENT OF THE HONORABLE DAVID M. WALKER, COMPTROLLER 
   GENERAL, U.S. GENERAL ACCOUNTING OFFICE, WASHINGTON, D.C.

    Mr. Walker. Thank you, Mr. Chairman, Senator Enzi. I 
appreciate the invitation to testify before you here today on 
the important issue of Congressional oversight. But before I 
do, I, too, would like to say a few brief words about Senator 
Paul Coverdell, given his recent and sudden death.
    Senator Coverdell was one of my strongest supporters for 
appointment as Comptroller General of the United States. I knew 
him from my time as a partner and Global Managing Director with 
Arthur Andersen in Atlanta. His wife, Nancy, and mine have 
worked for Delta Airlines for years. My wife actually handled 
his personal travel when he was Director of the Peace Corps, 
and my daughter worked on one of his Senate campaigns.
    Paul Coverdell was a true leader and a total gentleman. He 
made a difference every day and he will be remembered for 
years. We can only take comfort in the fact that he is now with 
his maker and in a better place, and so our thoughts and 
prayers go out to Nancy and Paul's family. We will not forget 
him.
    Chairman Bond. Thank you.
    Mr. Walker. With that, Mr. Chairman, I would like to begin 
my testimony. As you know, you have asked me to focus on the 
importance of the issue of oversight and I am going to provide 
an overview context. I will also provide a bridge to the next 
panel of three GAO professionals who will be talking about 
specific projects that we are doing at the SBA.
    But before I do, let me have a few brief introductory 
remarks. I think it is commendable that you are having this 
oversight hearing. There is a dire need for a renewal and a 
reinvigoration of the oversight process in both houses of 
Congress. This is an important beginning. Our Nation is at an 
important crossroads. The cold war is over and we won, and for 
the first time in decades, we face surpluses projected for a 
number of years in the future. These surpluses provide us with 
an opportunity to look beyond the immediate, to look over the 
horizon and to try to address some of the longer-term 
challenges that we face in the 21st century.
    I have testified before about the demographic tidal wave 
that is going to hit this Nation and put tremendous budget 
pressures on us in the future. It is very important that we 
continue to review what government does, and how government 
does business, to make sure that the taxpayers are getting an 
appropriate return on their investment. While we may have 
plenty of money today, we are going to come under increasing 
budget pressures in the future because of known demographic 
trends. Our simulations show that. It is critically important.
    So we need to continue to focus on oversight, and there are 
several ways in which we need to do so. This is a perfect time 
for the Congress to be looking at what the Government does and 
how the Government does business, and with that framework, I 
would like to turn to the first board that I will use for 
discussion purposes. I assume, Mr. Chairman, that my full 
statement will be entered into the record.
    Chairman Bond. We will make it a part of the record and we 
appreciate your calling that to our attention.
    Mr. Walker. Thank you, Mr. Chairman. First, I think there 
are four key points as an overview theme. This is the opportune 
time for the Congress to be looking at what the Federal 
Government does and how it does business. Many programs were 
created decades ago based upon past wants and needs. They may 
or may not make sense today, and they may need to be 
reengineered or otherwise modified. Elected officials 
ultimately will determine what the Government should do because 
that is your responsibility as an elected official. But the GAO 
can play an important role in getting you the facts, helping 
you understand the options, the pros and cons, to be able to 
make timely and informed judgments.
    Now is the time to also reexamine and redefine 
beneficiaries of Federal programs. The key word here is 
targeting, targeting Federal policy, whether it be spending, 
loans, guarantees, tax incentives, regulatory actions, or 
otherwise, to those most in need in order to get the best 
return on investment. Also, targeting programs that get the 
best results or the best return on investment in similar areas.
    The third area, the constant need to improve the economy, 
efficiency, and effectiveness of Federal Government operations. 
This is an ongoing task and requires the concerted effort of 
OMB, the departments and agencies, the Congress, the GAO, and 
the Inspectors General. We must bring modern management 
principles to government and enhance the use of technology 
while protecting personal privacy.
    And last but certainly not least, we should continue to be 
vigorous in fighting fraud, waste, abuse, and mismanagement. 
But candidly, Mr. Chairman, the U.S. Government is the largest, 
most complex, most diverse entity on the face of the earth and 
it probably always will be. Fraud, waste, abuse, and 
mismanagement will never be zero. We should have zero tolerance 
for it, but it is very important that we focus on changing the 
way that government does business because that is where we are 
going to get a much higher return on our investment.
    [The chart follows:]

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    The next chart will show there are three general areas 
where we think there are opportunities for oversight. One area 
deals with cross-cutting programs and efforts, whether it be 
economic development, health care, food safety, or 
counterterrorism.
    Another area deals with cross-management functions, whether 
it be strategic planning, financial management, information 
technology, human capital management, acquisition management, 
or client and customer service.
    Another area deals with individual agency programs and 
management functions, where it is important that we look at 
major functions within an agency and major programs within an 
agency, and that we consider both for our performance and 
accountability series as well as our high-risk series, which we 
update every 2 years.
    You can see there is a great intersection between these 
three and it is important that we work with the Congress on a 
bicameral and nonpartisan basis on all three of these tracks. 
In fact, I think that now is the time that both the GAO and the 
Congress need to review how we go about conducting studies, how 
we go about working together in order to make sure that the 
major programs and functions are being addressed on a 
reasonable cycle and within reasonable timeframes but yet to 
try to better manage the workloads, the workloads of the 
Congress, the workloads of the agencies, and, yes, the 
workloads of the GAO, because we all have limited resources.
    [The chart follows:]

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    Mr. Walker. The next chart shows that we have an 
opportunity. We have an opportunity to buildupon a management 
reform agenda that the Congress enacted in the 1990s. Whether 
it be financial management, information technology, or other 
areas, you can see that there are a number of major reforms 
that were enacted in the 1990s. The real key missing link to 
maximizing the Government's performance and accountability for 
the benefit of the American people is the area of people, or 
human capital. Much more attention must be focused 
administratively on that issue as well as ultimately 
legislatively when the issue is ripe.
    [The chart follows:]

    [GRAPHIC] [TIFF OMITTED]68000.006
    
    Mr. Walker. We need to build on these reforms. We need to 
capitalize on the information contained herein in order to 
develop an oversight plan that addresses the three key 
oversight tracks and achieves a better workload balance for the 
Congress, the agencies, and the GAO. We stand ready to work 
with the Congress on a bicameral and nonpartisan manner to do 
so.
    As you know, we have been conducting work at the SBA--for 
the last several years. We have issued approximately 20 reports 
on the SBA in a given year and that has occurred for several 
years and I am happy to answer questions with regard to that.
    The SBA is in transition and we have had a number of 
pending requests to do work at the SBA. As you know, Mr. 
Chairman, by law, we are required to do work that is either 
mandated by the Congress or requested by a Congressional 
committee. I would like to note for the record that everything 
that we are doing falls into one of these two categories. I do, 
however, appreciate workload concerns on behalf of the Agency, 
the Committee, as well as the GAO in this regard.
    It is important to note that the panel that follows me will 
provide examples of some of the work that we are doing right 
now at the SBA. There are three areas in particular that are 
going to be discussed. Stan Czerwinski, who has overall 
responsibility for the SBA program work, will discuss our 
findings in two reports that you have requested on the SBA's 
8(a) program. They are being released today. Joel Willemssen, 
who has looked across government at information technology 
issues will discuss our report to you on information technology 
at the SBA and a report that is also being released today. And 
finally, Mike Brostek, who has been handling our human capital 
work, will discuss our recent work in the SBA's human capital 
area.
    It is important to note that the SBA has had an opportunity 
to review these reports. We think that is important. We do not 
want to play ``gotcha.'' That is not what good government is 
all about. We want to be professional, objective, fact-based, 
nonpartisan, non-
ideological, fair, and balanced, and Mr. Chairman, I will 
endeavor and our people will endeavor to do that in everything 
that we do.
    I cannot overstate my support for you and your colleagues 
and others to try to look to renew and reinvigorate the 
challenging task of serious oversight. It is important for the 
country. It is important for the taxpayers.
    That concludes my prepared statement. Mr. Chairman, I would 
be happy to answer any questions that you or Senator Enzi might 
have.
    Chairman Bond. Thank you very much, Mr. Walker.
    [The prepared statement of Mr. Walker follows:]

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    Chairman Bond. When I ran for the post of State Auditor in 
Missouri, I promised to move State auditing in Missouri from a 
foot and tick operation to a performance review and I found out 
very quickly as we hired a staff of CPAs and brought in people 
with some management expertise that some of the agencies who we 
reviewed looked at us with the same skepticism that the dental 
patient looks at the dentist who promises a root canal is 
ultimately going to make him feel better. There was a great 
deal of skepticism, and so I am used to that. We believe that 
performance reviews can be very helpful.
    Administrator Alvarez will be stating in her testimony, and 
she has mentioned to me in the past, that the GAO has or is 
conducting 41 reviews of SBA programs or processes. Is this 
correct, and what would explain the number of the GAO reviews?
    Mr. Walker. We have about 20 reviews ongoing right now. We 
issue about 20 reports a year on the SBA and we typically have 
about 20 that are in process that typically get issued the next 
year. Of the 24 reviews that we have underway, 10 of them 
relate to governmentwide issues in which we are looking at an 
SBA angle. Fourteen relate specifically to the SBA. All of them 
are either a mandate or a Committee request. We are not doing 
any self-initiated work in this area. I think, clearly, it does 
place a considerable workload on the Committee, on us, and the 
SBA, which is one reason I think we want to look at the review 
process of how we go about oversight and balance that workload 
better. But those are the facts, Mr. Chairman.
    Chairman Bond. You have indicated that the GAO has shared 
this information with the SBA, they have had a full opportunity 
to comment on it, and you will be including their responses in 
your reports. Does the GAO stand behind the reports as fair, 
objective, and independent?
    Mr. Walker. We do, and frankly, I think we have a 
constructive relationship with the SBA. I think Administrator 
Alvarez can testify to that.
    Chairman Bond. Would you elaborate on that for us?
    Mr. Walker. Well, she and I, for example, met within the 
last several months to talk about the many projects that we 
have underway and she expressed the understandable concern that 
we have a lot going on at the SBA. This obviously is a workload 
problem for us, as well. We had a very candid and constructive 
conversation about how we go about our work, what we are doing, 
and how we do it, and we have talked periodically.
    My view is that while we have got a lot going on and there 
are clearly workload implications, we are being true to our 
core values and we have a constructive working relationship 
with the SBA. I think the SBA has been responsive to us. I 
think the SBA has, in most cases, agreed with our 
recommendations, and I think, in most cases, they have also 
moved to implement our recommendations within a reasonable 
period of time. I consider that a win-win, quite frankly.
    Chairman Bond. The Performance and Accountability Review 
does put an extra burden on the SBA. Do you think that the 
long-term benefits of that kind of review will outweigh the 
short-term drain on resources?
    Mr. Walker. Well, I do, but there are timing differences, 
Mr. Chairman. As you know, sometimes you have to make an 
investment in order to get the return, and I appreciate the 
fact that we, the Committee, as well as the SBA, are making 
significant investments in time and other resources now, but I 
have no doubt that they will generate a return that far exceeds 
the cost.
    Chairman Bond. You have mentioned that the GAO is going to 
provide Congress with a broad perspective on a number of 
performance issues through your high-risk and performance and 
accountability series and that you will provide an overall 
report on the SBA as part of your series. What is your approach 
to doing work at other agencies beyond the SBA for the high-
risk and performance and accountability series?
    Mr. Walker. Mr. Chairman, we are currently looking at that 
whole area right now and we will be publishing a proposal for 
comment within the next several weeks that will lay out, for 
example, what we see as the key functions that have to be 
looked at across government. Obviously, there are key programs, 
as well, and we will be laying out proposed criteria for what 
it takes to become high risk and what it takes to get off the 
high-risk list. In the past we have always had to employ our 
professional judgment and we always will have to. However, I 
feel it is important that the GAO have clearly defined, 
consistently applied, transparent, and well-documented criteria 
so that people can understand what the rules are and, 
therefore, be motivated to keep off the list or to get off the 
list.
    We are also planning to focus on functions and programs 
rather than departments or agencies per se because most 
departments and agencies have strong suits and weak points. 
Many departments and agencies are trying to make progress in 
areas because they may have been challenged for years and it 
takes time to be able to effectively address all those 
challenges.
    Chairman Bond. With my other role on the Appropriations 
Committee, I know something about high-risk agencies and high-
risk programs, but we will save that for another day.
    Senator Enzi, do you have questions for Mr. Walker?
    Senator Enzi. Thank you, Mr. Chairman. Just a couple of 
quick ones because those of us, of course, serving on this 
Committee understand that small business is the most important 
function in the whole United States. We are not prejudiced. In 
spite of all the newspaper articles that show all these 
multibillion-dollar mergers of organizations that obviously are 
not small business, most of the businesses in this country and, 
of course, all of the businesses in Wyoming, are small 
business. So I appreciate the effort that the GAO is exerting 
with the Small Business Administration and this oversight. But 
for those who might not be on the Committee who might have an 
interest, can you give us a little background on how they 
became a pilot agency in the PAR process?
    Mr. Walker. We are always trying to develop new tools and 
methodologies to try to help us better serve the Congress, and 
obviously our job is to maximize performance and assure 
accountability. So we were experimenting with some new tools 
and approaches and methodologies. We communicate with our 
clients constantly, committee chairs, ranking members, and 
other leaders, and in doing that, Senator Bond and others 
expressed interest in the potential application of this to the 
SBA.
    The SBA is an agency in transition. It has many different 
programs. In some cases, it has created programs on its own. In 
some cases, Congress has created the programs. In fact, one of 
their challenges is they have a proliferation and some of that 
is Congress' doing rather than the SBA's doing.
    Chairman Bond had thought that it might make sense for us 
to focus on a few areas as a beta, as a prototype. We are also 
doing this at other agencies, and quite frankly, we are going 
to have to do it over a period of time. You cannot do it all at 
once. We do not have the resources and the agencies do not have 
the resources. In addition, the Committee does not have the 
resources to do it all at once.
    Senator Enzi. I appreciated your comment, too, in your 
first chart where you talked about what the Government does and 
how the Government goes about its business. I have changed that 
slightly to what the Agency does and how we can tell when they 
have got it done. That is one of the things that the American 
people are looking for, is some finality, some method of 
measuring, some method of knowing what their agencies are 
really about and that they are achieving things, and I think 
that is really the potential of GPRA, too.
    You mentioned that there needs to be more focus on people, 
more on the human capital. Could you expand on that just a 
little bit?
    Mr. Walker. Ultimately, people are what make things happen. 
People represent the most valuable asset of the U.S. 
Government. Government is a knowledge business. The Federal 
Government faces an emerging crisis in the people area. The 
Federal Government has downsized significantly, but it is how 
it has gone about that downsizing that in many cases has placed 
agencies at risk. Broad-based RIFs, hiring freezes, cutting 
back on training, cutting back on enabling technology, 
contracting out without necessarily having the right kind of 
people with the right skills and knowledge to manage cost, 
quality, and timeliness, has occurred at a number of agencies.
    I think that we face a major challenge in the Government 
where a significant percentage of the Federal workforce is 
going to be eligible to retire over the next 5 years, where we 
have increasing competition for talent, to attract and retain 
top talent, that the skills that are required to meet the 
public's demands, needs, and expectations are changing.
    It is a critically important area that I am speaking out on 
and that we are trying to lead by example with regard to 
administrative actions at the GAO. As you may know, Senator 
Enzi, I had global responsibilities for human capital for one 
of the top consulting firms in the world.
    I might add one other point. I think government as a whole 
needs to undergo a cultural transformation. From my 
perspective, and I have been in both the public and the private 
sectors, government in many cases, and this is a generality, I 
am not talking about a specific agency, tends to be too 
hierarchial, too process-
oriented, too siloed or stovepiped, and too inwardly focused. 
We need to transform over a period of time to be more 
partnerial, which means more empowerment and more 
accountability, more results oriented, focused on outcomes, not 
outputs, more integrated, teaming, crossing boundaries, 
departments, agencies, Federal, State, local, international, to 
address challenges, and more focused externally, including on 
what the taxpayers want, need, and deserve, and a lot of that 
has to do with performance and accountability. That is what we 
are focused on.
    That is a huge cultural transformation. It is going to take 
years, but it will pay major dividends for Federal employees, 
for the Federal Government, and for the taxpayers.
    Senator Enzi. You have just stated the benefits of GPRA 
very well. Thank you.
    Chairman Bond. Thank you very much, Mr. Walker. We 
appreciate your testimony. We will keep the record open and as 
the hearing goes on, there may be questions that we will submit 
to you in writing for your reply. We do very much appreciate 
your being with us and we thank you and dismiss you, if you 
wish, if you have other responsibilities, or you are welcome to 
stay.
    Chairman Bond. Now I would like to call the second panel, 
the members of the GAO who are responsible for the actual audit 
projects.
    Mr. Stanley J. Czerwinski is Associate Director of Housing 
and Community Development Issues, Resources, Community, and 
Economic Development Division of the GAO. Mr. Joel C. 
Willemssen is Director of Civil Agencies Information Systems, 
Accounting and Information Management Division of the GAO. Mr. 
Michael Brostek is Associate Director, Federal Management and 
Workforce Issues, General Government Division of the GAO.
    Welcome, gentlemen, and Mr. Czerwinski, if you would begin, 
please.

   STATEMENTS OF STANLEY J. CZERWINSKI, ASSOCIATE DIRECTOR, 
HOUSING AND COMMUNITY DEVELOPMENT ISSUES, RESOURCES, COMMUNITY, 
  AND ECONOMIC DEVELOPMENT DIVISION, U.S. GENERAL ACCOUNTING 
                    OFFICE, WASHINGTON, D.C.

    Mr. Czerwinski. Thank you, Mr. Chairman, and thank you, 
Senator Enzi. We are here to discuss two reports that you 
requested and released today on the SBA's 8(a) program.
    As you know, the 8(a) program is the Federal Government's 
primary tool for developing small businesses owned by socially- 
and economically-disadvantaged individuals. There are 6,000 
8(a) firms and these firms are eligible for contracts from 
Federal agencies. These agencies set aside about $6 billion a 
year in contracts. The firms are also entitled to technical 
assistance and management training. However, we are unable to 
estimate the extent of that technical assistance and management 
training because the SBA does not have that capability.
    I would like to highlight two points from our reports 
today. The first is that when we did our review, we found that 
the SBA's efforts are not aligned with the needs of the 8(a) 
firms the program is designed to serve. Second, we found that 
the SBA lacks the information it needs to direct its efforts 
and to tell it how well the program is working.
    To elaborate on the first point, as the chart to your right 
shows, many 8(a) firms have received few or no contracts. In 
fact, of firms in the program for at least 2 years, about a 
quarter have never gotten a contract at all and over half have 
obtained no more than one or two contracts their whole time in 
the program.
    Perhaps even more significant is the fact that a very small 
number of 8(a) firms have garnered very large percentages of 
8(a) contract dollars. For example, in fiscal year 1998, about 
3 percent of the 8(a) firms received about 50 percent of the 
8(a) dollars, while approximately 50 percent of the firms got 
nothing at all. This is not a new problem. We reported it as 
early as 1992. The Inspector General has reported on it since 
then as well. And the SBA itself has even listed this issue as 
a material weakness in its Financial Integrity Act reports 
since 1994.
    SBA officials agree the concentration of contracts is a 
problem. However, they added that the program regulations do 
not require or guarantee that all firms get contracts. They 
also noted that the SBA relies on Federal agencies to make the 
contracts.
    In addition, SBA officials told us that there are more ways 
to measure the success of the 8(a) program than just contracts. 
For example, a prominent measure that the SBA uses to gauge the 
success of the program is the technical assistance and the 
management training it provides. However, the SBA has never 
surveyed its customers, the 8(a) firms, to determine their view 
on what makes the 8(a) program successful.
    [The chart follows:]

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    Mr. Czerwinski. We surveyed 1,200 8(a) firms to find out 
their expectations and their needs. As the chart to your right 
shows, over 80 percent of the firms joined the 8(a) program to 
obtain Federal contracts. As you can see, firms cared little 
whether the contracts were explicitly set aside by 8(a) or with 
Federal agencies in general. The bottom line is, the 8(a) firms 
pretty much just want Federal contracts. On the other hand, 
only about 20 percent of the firms told us that they joined the 
8(a) program to get technical assistance and management 
training.
    [The chart follows:]

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    Mr. Czerwinski. Our survey shows one reason this may be 
happening is that 8(a) firms, by and large, have substantial 
business experience. As the chart to your right shows, almost 
three-quarters of the 8(a) firms have owners with over 10 years 
of business experience. For example, one survey respondent told 
us that he had 20 years of business experience. He joined the 
8(a) to get help finding contract opportunities, but instead, 
what the SBA offered him was rudimentary training that he told 
us he did not need.
    [The chart follows:]

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    Mr. Czerwinski. The SBA has agreed with our recommendations 
to periodically survey the 8(a) firms. This will help them 
better understand what their firms need and how to meet those 
expectations. The SBA has also agreed that it should place a 
high priority on helping increase contract opportunities.
    This brings me to the second point: The SBA currently lacks 
information it needs to direct its efforts to help its clients; 
it also lacks the information it needs to measure program 
effectiveness. In addition to lacking data on customers' needs 
and expectations, there are two other areas that I want to 
point out today.
    First, the SBA does not have information systems in place 
to track the assistance it provides to 8(a) firms or the 
results of that assistance. This is not a new problem. We also 
reported back in 1992 that the SBA lacked these systems and the 
SBA agreed to take action. After several stops and starts, the 
SBA piloted such a system last year. However, the pilot has 
shown some problems that really have to be worked out before it 
can go online.
    The other area that lacks vital information is contracts. 
The SBA does not know which firms are getting contracts and 
which are not. This is because when the SBA delegated contract 
authority to agencies, it no longer required those agencies to 
report contract activity directly to the SBA. Because the SBA 
is still working through how it would get needed contract data, 
it currently lacks information essential to managing the 8(a) 
program.
    As you can see, a root cause of some of the issues that I 
have described is that the SBA lacks needed information 
systems. Joel Willemssen, the next GAO witness, directs all of 
the GAO's work on information technology. He will discuss the 
SBA's information systems in more detail.
    However, before I turn it over to Joel, I would like to 
close by saying that throughout the course of our work, we have 
shared our findings with the SBA. In fact, last month, we 
provided drafts of the reports being released today. The SBA 
has agreed with the findings. They have also promised to act on 
our recommendations. We believe that such actions should lead 
to significant improvement in the 8(a) program.
    That concludes my statement, Mr. Chairman. I would be glad 
to respond to any questions you might have.
    Chairman Bond. Thank you very much, Mr. Czerwinski.
    [The prepared statement and attachments of Mr. Czerwinski 
follow:]

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    Chairman Bond. Mr. Willemssen.

   STATEMENT OF JOEL C. WILLEMSSEN, DIRECTOR, CIVIL AGENCIES 
  INFORMATION SYSTEMS, ACCOUNTING AND INFORMATION MANAGEMENT 
   DIVISION, U.S. GENERAL ACCOUNTING OFFICE, WASHINGTON, D.C.

    Mr. Willemssen. Thank you, Mr. Chairman. Senators, thank 
you for inviting us to testify today. As requested, I am going 
to briefly summarize our statement, which will discuss the 
results of our recent review of the SBA's management of 
information technology, and I am going to quickly run through a 
series of slides of which you also have a hard copy in front of 
you.
    In looking at IT at the SBA, we focused on five areas: 
investment management, systems architecture, software 
development and acquisition, computer security, and IT human 
capital. In doing so, we particularly focused on policies, 
procedures, and practices and compared those with industry 
standards, legal requirements, and other generally-accepted 
guidance. Then, portraying where the SBA stood at a particular 
point in time, we gave indications by using either a blank 
circle to show that policies and procedures largely did not 
exist and practices were ad hoc; a half-circle to indicate that 
policies and procedures were predominantly current, although 
not all practices were in place; or a full circle to indicate 
things were being done in a comprehensive fashion.
    Just quickly going through a summary of some of these key 
areas: first, the investment management area for information 
technology, that is, controlling projects from a cost, benefit, 
and risk perspective through their life. The SBA has much 
remaining to be done in this particular area. They are 
committed to doing that. They have an investment review board 
that has been established and is beginning to work. However, 
there is more to be done in terms of getting the necessary data 
out of those processes and also bringing that to bear on 
decisions that are to be made on investment technology 
projects. So there is more to be done, but the SBA does have a 
commitment for doing so.
    The second major area has to do with systems architecture--
a blueprint for an entity to follow to provide seamless, cost-
effective services to its users. The SBA has made progress on 
this, due in large part to their planning efforts on their loan 
monitoring system. Among the areas they still need to work on, 
though, is the change management area, where system changes are 
made. They need to make sure that that is still linked to the 
overriding systems architecture.
    Another critical area is software development and software 
acquisition. If you look at major information technology 
projects, software is often the underlying cause for why 
projects do not come in on time or over cost or do not meet 
performance goals. In this area, the SBA has a lot of work 
remaining. They are committed to doing so. I have noted in 
their statement, in the Administrator's statement this morning, 
that she plans to pursue more of their effort on the 
acquisition side rather than the development side, and we are 
encouraged by that.
    Another important area is computer security. The SBA has 
made good progress on this in terms of making its staff aware 
of the need for security and implementing necessary system 
controls. They still need a bit more effort in making 
assessments of the risk of threats and vulnerabilities to their 
systems and to the integrity of their data.
    And then the last overall functional area we looked at in 
the information technology area was human capital--
understanding clearly what it is you need both with in-house 
staff and contractor staff, making an assessment of your 
current inventory, identifying the gaps, strategizing to fill 
that gap, and periodically reporting on where you are. The SBA 
still has a long way to go. They have done some inventory 
efforts, but work remains to be done there.
    This last slide just gives you an overall summary of the 
five IT functional areas and the 37 data points that we used in 
conducting our review and presenting the results. We have made, 
associated with this area, 18 recommendations to the SBA for 
improvement. The SBA has agreed with those recommendations. And 
I may also say, Mr. Chairman, the SBA has shown with its top 
management a clear commitment to implement these 
recommendations and to improve its management of information 
technology.
    That concludes the summary of my statement and I also would 
be pleased to answer any questions. Thank you.
    Chairman Bond. Thank you very much, Mr. Willemssen.
    [The prepared statement and attachments of Mr. Willemssen 
follow:]

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    Chairman Bond. Mr. Brostek.

   STATEMENT OF MICHAEL BROSTEK, ASSOCIATE DIRECTOR, FEDERAL 
 MANAGEMENT AND WORKFORCE ISSUES, GENERAL GOVERNMENT DIVISION, 
        U.S. GENERAL ACCOUNTING OFFICE, WASHINGTON, D.C.

    Mr. Brostek. Mr. Chairman and Members of the Committee, I 
am pleased to be here to present our observations on the SBA's 
management of its human capital. Whether one looks at how well 
programs are implemented, as Mr. Czerwinski has done, or at how 
well agencies carry out important managerial support functions, 
as has Mr. Willemssen, ultimately, an agency's most important 
asset is its human capital. It is the people who staff an 
agency whose talent, motivation, and collective effort support 
organizational success.
    I would like to make two points today about the SBA's 
management of its human capital. First, the SBA has developed a 
vision for how it would like to operate in the future. That 
vision, which includes transitioning its workforce from 
approving and servicing loans to primarily reaching out to new 
markets and overseeing private sector partners, has 
implications for the management of its workforce.
    Second, the SBA has begun to take steps to better manage 
its human capital, such as undertaking various workforce 
planning activities. However, more remains to be done, 
including completing its efforts to identify the knowledge, 
skills, and abilities that its employees will need to perform 
successfully in the SBA's new business environment; estimating 
the number of employees with those skills that they will need; 
developing a succession plan for senior leaders and reinstating 
candidate development programs for those leaders; and finally, 
ensuring that employees receive adequate training to perform 
their jobs well.
    Before I proceed further, let me explain the basic steps of 
workforce planning, which will sound quite similar to what Mr. 
Willemssen has just described. A workforce plan begins with a 
strategy for how an organization plans to do its business, 
which will often differ from the way it is presently doing 
business, and that is the case with the SBA. Once a strategy 
for how business will be done is complete, an organization must 
determine how many workers with what knowledge, skills, and 
abilities will be needed to successfully carry out that 
strategy. This, then, can be compared to the organization's 
current workforce to measure whether there is any gap in terms 
of numbers and skills.
    When the extent and nature of any staffing gap is known, 
then a plan can be constructed for addressing that gap. The 
plan might include hiring new staff, retraining current staff 
to acquire new skills, or possibly contracting to obtain 
services.
    In relation to these workforce planning steps, the SBA has 
developed a vision for how it would like to operate in the 
future and it has communicated that in accordance with the 
Government Performance and Results Act. The plan calls for 
sharply increasing the amount of financial business development 
and procurement assistance for new markets, that is, 
minorities, women, veterans, Native Americans, small exporters, 
and businesses in low- and moderate-income urban and rural 
areas. In addition, the SBA intends to continue increasing the 
portion of loans that are approved and issued by third parties 
and to sell assets currently in its portfolio.
    These changes mean that the SBA will, for example, need to 
assign more employees to oversee lenders and to perform those 
outreach services that it anticipates providing to new market 
businesses.
    The SBA has recognized that these changes will require 
different skill sets than employees may now have. Accordingly, 
the SBA has determined that it needs to develop competencies, 
that is, definitions of the knowledge, skills, and abilities 
that staff will need to perform five functions: Marketing and 
outreach, leadership, business development, lender oversight, 
and procurement. While the SBA has developed the competencies 
for two of these functions, the marketing/outreach and the 
leadership function, it has not yet done so for the other 
three.
    The SBA also recognizes that it must assess the skill of 
its current employees in order to measure that gap between 
current skills and those that will be needed in the future. 
This remains to be done.
    In the interim, the SBA has begun training some of its 
staff in the skills that it has identified for the marketing/
outreach and leadership functions. It is relying also on 
employees who already perform such functions as lender 
oversight to train additional employees for those activities.
    Although training has been identified by the SBA as 
critical to transitioning its workforce to the skills needed to 
implement its new business approaches, fewer of its employees 
report that they have received the training that they believe 
they need to perform their jobs than did Federal employees 
governmentwide in surveys conducted in 1998 and 1999. And, 
indeed, the percentage of the SBA employees who reported that 
they felt they were adequately trained decrease between 1998 
and 1999.
    The SBA also believes that leadership is key to its ability 
to successfully transform its workforce and to implement its 
new business practices. Thus, leadership was one of the first 
competencies that the SBA defined. However, the SBA does not 
have a succession plan for developing its future leaders and it 
has not had candidate development programs for senior 
executives and district directors since 1995.
    As I noted earlier, the SBA has undertaken numerous human 
capital initiatives over the past several years. These include, 
for instance, reallocating its current workforce to better 
balance the resources available to provide services to clients 
locally, beginning to identify the skills that staff will need, 
and initiating training for those new skills. In addition, this 
spring, the SBA contracted to develop a workforce transition 
plan that is intended to help it begin addressing the 
additional steps that we believe need to be taken.
    In summary, although the SBA has taken steps to address 
human capital management challenges, these efforts are 
incomplete in several important areas and the efforts that have 
occurred have not been guided by an overall workforce plan. 
While a plan itself cannot ensure success in transitioning the 
SBA's workforce, a well thought out plan increases the odds 
that the Agency will be successful. Implementing that plan, 
once it is developed, will take several years and will require 
sustained attention by the SBA leadership.
    That concludes my oral statement and I would be happy to 
join the others in answering questions.
    Chairman Bond. Thank you very much, Mr. Brostek.
    [The prepared statement of Mr. Brostek follows:]

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    Chairman Bond. We have been joined by our Ranking Member, 
Senator Kerry, so let me turn to Senator Kerry for comments and 
questions. Good morning.

   OPENING STATEMENT OF THE HONORABLE JOHN F. KERRY, RANKING 
   MEMBER, COMMITTEE ON SMALL BUSINESS, AND A UNITED STATES 
                   SENATOR FROM MASSACHUSETTS

    Senator Kerry. Good morning, Mr. Chairman. Thank you very 
much.
    Let me begin, if I may, by expressing what I know others 
have already said today, which is our sense of personal loss 
for our colleague, Paul Coverdell. He was what I would describe 
as a gentle soul and one of the kinds of people here who helps 
to make this place work and function effectively, who reached 
across the lines.
    I particularly enjoyed working with him, not just on this 
Committee, where he was always thoughtful and steady, but on 
the area of education, where he had been charged with 
responsibilities by the Leader. He and I spent a great deal of 
time in the last year and a half trying to find the bridge 
between our two parties and he was always thoughtful and always 
extraordinarily generous as a listener, so we obviously will 
miss him greatly and my condolences go out to his family, to 
all of his staff, and to everybody who feels the sense of loss 
that the Senate feels today.
    I apologize to Mr. Walker, who I know has had to leave, and 
to my colleague, the Chairman, for not being able to be here at 
the beginning of this. I certainly welcome the Administrator 
and I am very grateful to her and I think the Committee should 
be very grateful to her for sitting through the whole hearing 
and then responding at the back end.
    This is an important hearing. It is always important for 
the United States Senate to take the time to conduct oversight. 
I have always been a strong believer in oversight. When I was 
chairman of a number of subcommittees, I took the time to do 
that, and I thank you, Mr. Chairman, because I do think it is 
an important part of our role. In too many committees, they do 
not take the time to do it and then we pay a price somewhere 
down the road because of that. So I think we have passed good 
legislation, and that is always important, but it is important 
for us to know what is happening within the Agency that we fund 
and how effectively it is implementing reforms that are needed.
    I also think, at the same time, there can be a tendency in 
the oversight process not to be positive enough about the good 
things that entities are accomplishing when they are 
accomplishing them. I do not think the record should avoid an 
affirmative understanding of the degree to which the SBA has 
been transformed in recent years from an agency that some 
sought to literally do away with to an agency that is, I think, 
extraordinarily strong, extraordinarily capable and dynamic, 
and I commend Administrator Alvarez for an impressive job, 
particularly under difficult circumstances with respect to the 
budgeting.
    Mr. Chairman, I would like to ask unanimous consent that a 
letter addressed to me as Ranking Member from the Administrator 
regarding the need for the budget, for the full fiscal year 
2001 budget proposed in the President's budget, be made part of 
the record.
    Chairman Bond. Without objection.
    [The letter of Senator Kerry follows:]

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    Senator Kerry. Thank you. I think it is very important for 
us to understand the linkage between certain kinds of resources 
that provide the technical capacity to do some of the things 
that the panel before us has just talked about, and I am 
confident that they will affirm that to us, that there is that 
linkage.
    In addition, I will not take the time now to go through all 
of what the Agency has accomplished. I do think it is important 
to recognize that just one company that it has helped, and 
there are many that it has helped to form, just one company, 
Intel, for instance, pays yearly taxes to the Federal 
Government that completely cover the Agency's annual budget. So 
we need to measure the numbers of people who have received 
help, the amount of commerce and transaction that takes place, 
the numbers of jobs created, the amount of tax base returned to 
the United States by virtue of the SBA, and I think that needs 
to be part, also, of the oversight process.
    I also want to say, Mr. Chairman, I think we need to be a 
little bit cautious about the amount of current oversight 
taking place. This is a good report and I am not suggesting 
this is not a healthy and important process. But in the past 
year, the SBA has been the subject of over 40 GAO audits or 
reviews, and I think 20 to 24 are currently underway. One of 
the things we might want to consider is how much administrative 
time gets chewed up responding to these kinds of requests and 
how it needs to be measured against the overall availability of 
personnel and capacity to do it.
    Now, on the 8(a) program, I know that some of the 
criticisms found are similar to criticisms that have plagued 
the program for many years and we are struggling with them. But 
I do think that it is also important to note that the Agency 
has taken numerous steps over the last years to try to 
guarantee that 8(a) firms in larger numbers will receive 
contracts, and I think that has been a good faith effort.
    I am not going to go through all of my thoughts and 
comments on the report here, but I do think that the 
methodology needs also to be as fair as possible. Let me just 
give an example.
    One of the criticisms was that the SBA needs policies and 
procedures to control key IT processes. That is sort of a 
headline in the report. Well, we all agree that there is room 
for more improvement, but in my judgment, it might be more 
accurate to say that the SBA needs more policies and procedures 
because the headline sort of suggests that there are not any. 
It needs policies and procedures. Well, there are some. It just 
needs more and needs to refine them.
    Another example would be that the rating system set forth 
is kind of all or nothing. You get this empty circle, which 
represents incomplete or obsolete policies, and then you have 
the half-circle, which represents policies and procedures for 
key functions, but there really ought to be some kind of a mark 
or circle to represent that they are drafting policies or have 
hired consultants who are developing policies or procedures are 
currently being put in place. There is a distinction between 
ignorance and complete avoidance of responsibility and simply 
developing policies or procedures, or being behind where you 
would like them to be. There is a distinction between that and 
simply not doing anything.
    So these are the kinds of things that I think are important 
to the fair-mindedness and level-playing field as we try to 
approach this. But again, I think the gist of what has been 
presented is very important to us as a Committee. I think it is 
a good report, a good piece of work by the GAO, and it will be 
helpful, ultimately, in making the SBA even stronger, and I 
think the Committee is grateful for that.
    Mr. Chairman, I thank you for allowing me the time to make 
an opening statement.
    [The prepared statement of Senator Kerry follows:]

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    Chairman Bond. Thank you very much, Senator Kerry.
    I will submit for the record a letter I sent to 
Administrator Alvarez in response to her concerns about the 
budget in which I laid out my views.
    [The letter from Chairman Bond follows:]
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    Chairman Bond. We have been joined by the Senator from 
Maine, Senator Snowe. We call on you for comments, questions, 
or other observations you wish to make.

 OPENING STATEMENT OF THE HONORABLE OLYMPIA J. SNOWE, A UNITED 
                   STATES SENATOR FROM MAINE

    Senator Snowe. Thank you, Mr. Chairman. I, too, want to 
express my profound sorrow over the loss of our beloved 
colleague who served on this Committee and did so many things 
in the United States Senate that enhanced the institution and 
enhanced this country. I describe him as a legislator's 
legislator because he was always developing thoughtful, 
productive, constructive initiatives to move the process 
forward, always trying to design solutions to the problems. We 
are all going to be diminished by his loss.
    Mr. Chairman, I just want to commend you for holding this 
hearing. It is an appropriate function of this Committee to 
conduct oversight. I congratulate the GAO, who always does an 
outstanding job in evaluating programs and functions of 
agencies and also welcome Administrator Alvarez, who I know is 
taking steps to enhance and strengthen the SBA.
    We all support what the SBA does, and as Senator Kerry 
indicated, it was not too long ago it was targeted for 
elimination. That is why I think it is so important to 
constantly evaluate and reevaluate the responsibilities of the 
SBA's role so that we can ensure that these programs are being 
implemented and also fulfilling the mission to which it was 
designed.
    So I want to thank you, Mr. Chairman, for holding this 
hearing so that we can do everything possible to ensure that we 
are evaluating these programs, because I think it is exactly 
what we need to do. In the private sector, they are constantly 
conducting customer satisfaction surveys and it should be no 
different in these programs that we are designing to help small 
businesses and employees to move forward. I hope that we can 
learn from what has been suggested here today and see what we 
can do to ensure that these suggestions are incorporated within 
the Agency's missions and procedures.
    Thank you, Mr. Chairman.
    Chairman Bond. Thank you very much, Senator Snowe.
    Senator Kerry. Could I just ask unanimous consent that my 
comments be placed in the record?
    Chairman Bond. I would hope you would include them because 
we look forward to reading them, and without objection. We were 
disappointed that you did not have a chance to give them, but 
now that they are made part of the record----
    Senator Kerry. I mean, if you wanted me to, I would be 
happy to----
    Chairman Bond. Well, I do not want to impose on you, 
Senator----
    [Laughter.]
    Chairman Bond [continuing]. But we will be more than happy 
to include them and send them around to all the Members for 
their thorough review.
    Let me turn to Mr. Czerwinski. There have been comments 
made and I know the Administrator in her testimony will talk 
about the accomplishments of the SBA. Let me just ask, in 
overview, do you agree that while the SBA has made strides 
toward serving small business, that there are still some 
shortfalls that need to be addressed? What is your assessment 
of what the SBA is doing generally?
    Mr. Czerwinski. Absolutely, the SBA has made 
accomplishments, and one of the things that has impressed us is 
how receptive the SBA is to the recommendations we make. So 
they are on the right track.
    Chairman Bond. That is very encouraging and I appreciate 
hearing that.
    Let me turn now to a detail. Administrator Alvarez, I 
think, notes about $180,000 was spent by the SBA in providing 
information to the GAO. My understanding is that the SBA 
established a centralized system to manage the GAO report, 
which is not customary in other non-military agencies. Is that 
true, and is this a more expensive way to deal with the GAO?
    Mr. Czerwinski. Yes, that is true. We try to keep our 
requests for information reasonable. Whenever we are doing 
work, it is going to entail an effort for the Agency. In this 
case, we have a point of contact very high up in the Agency, 
the Chief Operating Officer, and when we ask for information, 
the SBA has let us know if there is a problem. We have not been 
told about any specific requests for information that have been 
considered excessive.
    Chairman Bond. But this is a more resource-intensive way of 
handling the operation than other agencies under audit have 
utilized?
    Mr. Czerwinski. Yes. We audit a number of agencies. The SBA 
definitely has a process in which our work has a much higher 
level of attention than within other agencies. That is the plus 
side. The down side is I am sure it costs them and takes them 
time to do that.
    Chairman Bond. Let me turn to the customer satisfaction 
now. In your report on 8(a) specifically, what did you find 
that the customers or the SBA employees, for that matter, 
stated with regard to the satisfaction with the manner in which 
the 8(a) program is being operated?
    Mr. Czerwinski. We surveyed the SBA's customers, the 8(a) 
firms, and we asked them what they wanted from the 8(a) 
program. They told us they want contracts. And we asked them 
what they thought they were getting. A very large number of 
respondents did not feel they were getting the kind of contract 
assistance they needed, so there was a level of dissatisfaction 
that was out there in the SBA's 8(a) customers.
    Chairman Bond. How about among the employees of the Agency 
itself ?
    Mr. Czerwinski. We did not survey the Agency employees. We 
did visit field offices and asked the business opportunity 
specialists what kind of things they did, what kind of things 
they would like to do. There was a disconnect because we saw a 
lot of these specialists doing more in terms of checking, such 
as getting reports, as opposed to the outreach that the 
customers are calling for them to do.
    Chairman Bond. So we have got a mismatch, some mismatch 
between customer needs and the kind of service provided.
    Let me ask the full panel, under the PAR review, do you 
believe that the SBA's shortfalls in the management of human 
capital and information technology have contributed to the 
problems in the 8(a) program, specifically the ability of the 
SBA to maintain a data base to understand how the program is 
operating or whether its business opportunity specialists 
provide useful service?
    Mr. Czerwinski. If I could take the first stab at that----
    Chairman Bond. Please.
    Mr. Czerwinski [continuing]. Because I think it is probably 
easier to start from the programmatic perspective. Your 
question gets to the very heart of what we are trying to do and 
that is to integrate what we are finding in the programs with 
what we are finding in functions. And yes, the 8(a) program 
would be much better off, for example, if its information 
systems were stronger. So that kind of functional link-up with 
programs is essentially what we found.
    Chairman Bond. Mr. Willemssen.
    Mr. Willemssen. I would concur with Mr. Czerwinski's 
comments. To the extent that the SBA already has in place and 
can have in place a standard way of doing business for 
acquiring and operating information systems, it is much less 
likely they will run into the impediments they have in certain 
programs and supporting systems. It will become more routine 
and easier to do business and systems will come on line that 
much more quickly.
    Chairman Bond. Mr. Brostek.
    Mr. Brostek. I do not think the work that we have done 
enables us to say that human capital problems have led to the 
problems that Mr. Czerwinski talked about. I would note that to 
the extent that the SBA would need to refocus the program to 
provide more of the services that the customers are expecting, 
that that could have some human capital implications. It might 
require some retraining of employees to be able to perform 
those functions more in the manner the customers would like.
    Chairman Bond. Thank you. I will turn now to Senator Enzi 
for his questions.
    Senator Enzi. Thank you, Mr. Chairman.
    Mr. Czerwinski, on your first chart, it showed that the SBA 
was not meeting the expectations of the 8(a) minority program 
participants. We want to get the job done. Did the SBA staff 
give you any insight into what obstacles prevent them from 
doing their jobs better?
    Mr. Czerwinski. Yes. The major obstacle that they pointed 
out to us was resources, specifically resources for travel. The 
business opportunity specialists told us that one of the things 
that they wanted to do was to get out there, to see the firms, 
to work with them. The firms told us they also wanted the 
opportunity specialist to be out there working with them to 
help them get contracts. This kind of connection was not 
happening anywhere near as much as both the firms and the 
business opportunity specialists in the field wanted it to 
happen.
    Senator Enzi. If the staff is not able to travel, what are 
they doing?
    Mr. Czerwinski. As I mentioned, we have found that the 
business opportunity specialists have a lot of 
responsibilities. They are very, very busy and we received very 
high marks on their courteousness, their service orientation, 
et cetera. However, what they were doing primarily was checking 
and verifying the reporting requirements, documentation, et 
cetera, for firms' participation in the program.
    Senator Enzi. That seems to show up in the comments by the 
businesses that were interviewed, as well.
    Mr. Czerwinski. Yes, Sir.
    Senator Enzi. You mentioned that the staff did not have 
sufficient travel funds. Didn't the GAO recently report about a 
similar problem involving the procurement center 
representatives?
    Mr. Czerwinski. Yes, Sir. That is exactly the same issue 
that came up in that report.
    Senator Enzi. Are not the SBA's procurement representatives 
supposed to be working aggressively at major Federal 
procurement centers seeking contracts that can be set aside for 
small businesses?
    Mr. Czerwinski. Exactly. The concept is for them to be 
reaching out, being a part of those operations, helping out on 
the ground.
    Senator Enzi. Is it reasonable to believe that they can do 
that job without traveling?
    Mr. Czerwinski. No. You have to be there.
    Senator Enzi. Mr. Chairman, there does seem to be a growing 
problem at the SBA where front-line staff who are supposed to 
be helping small businesses obtain government contracts are 
unable to do their jobs because they do not have sufficient 
travel funds. I know that our colleague, Senator Coverdell, was 
pursuing an investigation into the use of travel funds at the 
SBA. If it is OK with you, I would like to pick up the work 
where Paul left off.
    Chairman Bond. I would appreciate that. I think that is 
very important. Mr. Czerwinski has just raised a major problem 
and I would ask that you work with the GAO and the SBA on this 
question.
    Senator Enzi. Thank you. In particular, I am concerned 
about a report recently provided to the Committee by the SBA 
Inspector General. The report details how the SBA maintains a 
second set of budget books where appropriated funds for SBA 
programs are skimmed off into a separate account to support 
unrelated activities at the SBA and the report suggests that 
some of these appropriated funds were used to support some 
overseas travel.
    Last night, we received some documents--actually, I think 
it was this morning--from the SBA at the Committee's request 
that gives the Agency's ledger, which details transactions from 
this separate account, which I want to get more details on, and 
which the SBA refers to as its reserve account. The SBA 
provided the Committee with two versions of the reserve 
account. One of them is marked ``confidential'' and one does 
not carry the confidentiality label. I believe these documents 
are important as our Committee reviews the Agency's use of this 
offline account, and I would request that the version of the 
ledger that is titled ``Sorted by Function'' and not marked 
``confidential'' be included in the record today.
    Chairman Bond. Without objection.
    [The information of Senator Enzi follows:]

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    Senator Enzi. Mr. Chairman, the accountant in me says that 
we need to look further into the report. I am particularly 
interested in how this comes about and how it shows up on the 
Federal Financial System. It would seem to me that the 
Inspector General at the SBA would be the appropriate office to 
turn to for help. Seeing the people from the SBA, I assume that 
somebody from the Inspector General's office is here.
    Chairman Bond. Is there somebody from the Inspector 
General's office here?
    Mr. McClintock. Yes, Sir.
    Chairman Bond. And your name is, Sir?
    Mr. McClintock. I am Peter McClintock, Deputy Inspector 
General.
    Chairman Bond. Mr. McClintock, thank you.
    Senator Enzi. According to the advisory memorandum, your 
audit of the Administrator's reserve account covered a period 
ending April 1999. I believe that is even on your website. 
Would it be possible for you to audit the activities of that 
reserve account since the last report and covering the 
remainder of the fiscal year 1999 and 2000, bringing it up to 
date, and would it be possible for that to be done by August 7 
so we can be reviewing it during the recess?
    Mr. McClintock. We would be glad to do whatever we can and 
I could meet with the staff in order to work out the details.
    Senator Enzi. I would appreciate it. Thank you.
    Thank you, Mr. Chairman.
    Chairman Bond. Thank you, Senator Enzi. Thank you, Mr. 
McClintock.
    Senator Kerry.
    Senator Kerry. I am puzzled by that foreign travel thing 
here. Is there something out of the ordinary about some foreign 
travel?
    Mr. Czerwinski. We have not looked at foreign travel in any 
parts of our reviews.
    Senator Kerry. I remember I was down in Buenos Aires for 
the climate control meetings and while I was there I happened 
to meet with the ministers of trade and others and they were 
very excited about a visit from our Treasury officials and, I 
think, our small business officials. They wanted to know how to 
do small business the way we do it in our country and they were 
particularly looking forward to sort of learning how we do our 
SBIC, SBIR, where to start, what is the relationship and so 
forth.
    It seems to me, and I wear the hat on both the Foreign 
Relations Committee and Intelligence Committees, that that is 
precisely what we are trying to do in terms of encouraging 
other countries to become capitalist and democratic, and the 
more we can encourage them to be able to embrace our business 
practices and learn from us, the stronger it is for us.
    So I am puzzled by it. I will certainly wait to see what 
the interest is or what the ramifications are, but do you not 
have anything to share with us at this point in time about 
that?
    Mr. Czerwinski. No. We have never looked at that issue at 
all.
    Senator Kerry. Let me ask you another question. I assume 
that the capacity of people to be able to get out and get 
around the country and do the things they need to do is clearly 
a function of the overall budget of the Agency.
    Mr. Czerwinski. Absolutely.
    Senator Kerry. Now, is it your judgment that the overall 
budget of the Agency is adequate?
    Mr. Czerwinski. I am not going to pass judgment on their 
overall budget.
    Senator Kerry. I mean, can they do the tasks you are 
criticizing them for without resources?
    Mr. Czerwinski. We are talking about targeting the 
resources the SBA already has. Let us just take the 8(a) 
program as an example of how to use the Agency's budget and 
resources most effectively, and we think they could do things 
more effectively. If the 8(a) program had a better sense of 
what its customers' needs and expectations were, if the SBA had 
better ways of tracking the service it provided and then 
measuring the results, that would then lead to a more efficient 
use of the resources and greater accomplishments in terms of 
meeting customers' needs.
    Senator Kerry. Have you made a specific recommendation of 
how to go about that?
    Mr. Czerwinski. Yes, we have. We have a series of 
recommendations.
    Senator Kerry. Could you share with me quickly what you 
think should be done?
    Mr. Czerwinski. Sure. The very first step is for the SBA to 
periodically do what we did: survey its customers. What they 
need to do is to find out exactly what the profile of the 8(a) 
firms is and what the firm's needs are. That just gives them a 
starting point. That gives the SBA essentially a mission, a 
strategy for meeting the firms needs: essentially outreach, 
focusing assistance in certain areas, in this case contracting.
    Then what is very important is to have in place information 
systems that capture the amount of assistance provided in terms 
of contracts, training, technical assistance. That then feeds 
back into measurements that the SBA needs to establish for 
accomplishing each of those things, which then cycles back to 
what the customers are needing. So it should be a customer-
driven system. That is what our recommendations essentially 
state.
    Senator Kerry. Just based on my experience, that sounds 
like a relatively labor-intensive effort.
    Mr. Czerwinski. I think especially in the information 
systems, you are talking about a fair amount of work. Mr. 
Willemssen can give more details.
    Senator Kerry. It seems to me that what you are talking 
about is a combination of labor-intensive and capital, I mean, 
equipment-intensive. Information technology requires the 
software, it requires the computers and so forth. Is there some 
kind of conflict here between what you recommend and the 
drastic cuts that have taken place to the 7(j) funds? Did you 
measure that?
    Mr. Czerwinski. We did not look at what impact the cuts in 
7(j) funds had, but we would suggest that the SBA should take 
the model that we provide, and use that model to come up with a 
budget. I suspect that when all is said and done, yes, it will 
take more resources, but we think the SBA could then have a 
compelling case for asking for resources.
    Senator Kerry. Good. Well, I will be interested to hear 
their point of view on that, but that sounds like a fair 
observation in the abstract, if you are acknowledging that it 
may take some additional resources.
    Mr. Czerwinski. Absolutely.
    Senator Kerry. Thank you, Mr. Chairman.
    Chairman Bond. Thank you, Senator Kerry.
    I have asked Senator Enzi to go participate in the vote and 
come back so that we will have minimal disruption, and then you 
and Senator Enzi can carry on, but I will ask a few more 
questions before I have to go to vote.
    Mr. Czerwinski, I had a number of questions about the 8(a) 
program. I believe you have addressed those in your testimony. 
Since 1992, the GAO reported that only a small number of firms 
participating in the 8(a) program received most of the 8(a) 
awards. Now the SBA reports that it has reduced the 
concentration of 8(a) awards among the top 10 firms by 40 
percent between fiscal years 1997 and 1998. Has the 
concentration of contracts among a small number of firms really 
improved?
    Mr. Czerwinski. Concentration was a problem and still is a 
problem. There are two points that I would like to make on the 
measure that the SBA uses.
    For one, the SBA talked about the top 10 firms. If you will 
recall, there are 6,000 firms in the program. I think the SBA 
needs to have a deeper measure than 10 of 6,000 firms. That is 
why, when we talked about concentration, we talked about 50 
percent of the firms and what kind of coverage they have. In 
addition to that, the SBA's number talks about 1997 to 1998. 
Preliminary numbers for 1999 indicate that the trend has 
reversed and that concentration is pretty much where it was.
    Chairman Bond. So a small number of firms are really 
winning. Can you give us an idea of what would be a cutoff? How 
many contracts are going to a small number of firms?
    Mr. Czerwinski. We found there are $6 billion contract 
dollars. But the key is dollars.
    Chairman Bond. Dollars, yes.
    Mr. Czerwinski. That is what drives these folks. Dollars, 
not numbers of contracts. There are $6 billion being made in 
contracts annually. There are 6,000 firms out there competing 
for those. We found that approximately 200 firms got $3 
billion.
    Chairman Bond. Wow.
    Mr. Czerwinski. So the other 5,800 got the balance. Of 
those 5,800 that got the balance, we found that 3,000 got none 
at all.
    Chairman Bond. So 200 shared in $3 billion.
    Mr. Czerwinski. That is correct.
    Chairman Bond. The SBA, I believe, would state that the 
Agency could have access to better data under the 8(a) program 
if Congress were to permit it to move forward quickly on 
systems modernization. Let me ask about the systems. Has the 
SBA made sufficient progress in its information technology 
planning so that we can be assured that such funds will be used 
effectively and efficiently, or do you believe it is time to 
move ahead?
    Mr. Willemssen. We still have 13 outstanding 
recommendations related to SBA's planned loan monitoring 
system. Eight of those focus particularly on the system, five 
on more cross-cutting areas. The SBA is committed to 
implementing the majority of those recommendations. Just within 
the last week, they have again supplied us with a great deal of 
information that we are currently analyzing to make judgments 
as part of our ongoing review as to whether they are ready or 
not.
    Chairman Bond. You examined, Mr. Willemssen, several 
projects on information technology. Is there a problem with a 
lack of documented practices and procedures and does that have 
any impact on cost increases, schedule delays, or unacceptable 
performance?
    Mr. Willemssen. When these generally accepted procedures 
and practices are not in place, it can have an impact. We have 
identified a couple of examples. For example, there was an 
effort known as Smart Stream within the CFO's office where 
about $2.4 million was spent on a commercial off-the-shelf 
package for personnel actions, financial management, and 
procurement. That encountered a lot of software problems. The 
personnel component was abandoned after 18 months and the other 
two components were never implemented. So that is just one 
example of why it is important to have routine procedures in 
place so that there is a way of doing business to avoid 
situations such as that.
    Chairman Bond. To give me a better understanding, what kind 
of procedures would you have proscribed that would likely have 
avoided essentially wasting $2.4 million?
    Mr. Willemssen. Yes, Sir.
    Chairman Bond. What kind of procedures were not in place 
that should have dealt with that?
    Mr. Willemssen. Before major information technologies are 
embarked upon, there is a process where top leadership buys in 
and says, ``Yes, we want this particular project. It is clearly 
worth the cost. It links to the mission we want to achieve. The 
risks are manageable. Let us go ahead with it.'' Once that 
project is initiated, there needs to be continued monitoring of 
that project. To the extent that it gets off the rails, gets 
off track, there needs to be corrective action. And then once 
the project is implemented, you need to do a post-mortem 
assessment to see if it is indeed fulfilling the goals that 
were intended.
    Without that kind of process, every project can get started 
without the kinds of controls that are necessary. Additionally, 
software-intensive projects need those kinds of controls to 
reduce the risk that they also will be over cost and not come 
in on budget.
    Chairman Bond. Obviously, we are at the post-mortem state 
on that software package. That fell off the rails. Did the SBA 
fail by not having the top level people implementing the system 
buy into the process or where was it that it went wrong?
    Mr. Willemssen. Yes, not looking at it from an investment 
management perspective, not having software acquisition 
practices in place, and then making sure that it could operate 
in an integrated fashion with the other systems that the SBA 
had.
    Chairman Bond. Given the concerns you outlined and the 
reports that you gave us that are documented on this chart, I 
am concerned that some of the deficiencies could adversely 
affect the SBA's ongoing development of its loan monitoring 
system. Is this a reasonable concern?
    Mr. Willemssen. It is a reasonable concern and it is the 
primary reason why planning for the loan monitoring system has 
been stretched out to some degree. The SBA, I believe, has been 
very responsive to issues that we have raised. We, along with 
the SBA, do not want to see a failure as it pertains to the 
loan monitoring system. We want it to be done right, and 
clearly, the SBA does, too. So they have taken the extra step. 
They have not bitten off too much at one time. They are taking 
a piecemeal approach to try to do it right. By not having those 
instituted processes in place, it therefore has stretched out a 
little bit longer than probably the SBA would have liked.
    Chairman Bond. In response to the GAO report, the SBA 
states that it has been recommended that the SBA adopt 
practices not utilized by other Federal agencies, and, 
therefore, comparing the SBA with other agencies, there is not 
a problem with SBA current practices.
    Let me ask you a three-part question. First, what are the 
standards against which SBA performance is judged and are these 
reasonable for a Federal agency to follow? Second, is the SBA's 
claim true that the GAO conducted its study based on standards 
that are ideal rather than practical? Third, should we in 
Congress be satisfied if it is true that the SBA performs as 
well as other Federal agencies with respect to IT?
    Mr. Willemssen. Taking your first question, we used a range 
of criteria in assessing the SBA. Generally speaking, what we 
considered is standard industry practice, in addition to legal 
and regulatory requirements. The Clinger-Cohen Act, passed in 
1996, was a major piece of criteria that we used, the intent of 
the Act is to try to end the cycle of failures of information 
technology projects. We also used guidance from the Software 
Engineering Institute associated with Carnegie-Mellon 
University, specifically in the software development and 
acquisition area. We also used guidance from the IEEE, also the 
National Institute for Standards and Technology, and OMB 
guidance.
    So there is a range of guidance out there. We have used 
this guidance for some time. The part of our report today that 
is a little different is the display of the circles. That was a 
prototyping effort as part of this project we did at the SBA.
    But I think the criteria are generally accepted. It 
provides the SBA with a road map for where they need to go to 
better manage information technology. I think these are the 
appropriate criteria to use. I would be the last person to say 
that the criteria should be the standards other Federal 
agencies are adhering to because having done this for the 
better part of the last 20 years, I can tell you, we repeatedly 
see problems across government. Therefore, I would not hold 
Federal agencies out as the standard. We need to strive beyond 
that and go to generally accepted practices and what the 
industry sees that should be done.
    Chairman Bond. One quick anecdote. When I came to the 
Senate in 1987, the young people that came with me who had been 
using information technology with me previously during the 
campaign had to forget their skills and move backward several 
generations to deal with the equipment that we had in the 
Senate.
    With that, let me turn the gavel over to Senator Enzi. I 
will return but meanwhile, we will keep the hearing going. 
Thank you very much.
    Senator Enzi [presiding]. I always enjoy hearing those 
words ``generally accepted.'' Of course, I like ``accounting 
practices'' to be thrown in there.
    I do not have any more questions for this panel. If anyone 
does, everyone has the opportunity to submit some additional 
post-hearing questions. So we thank you for your testimony and 
your answers to the questions.
    Senator Enzi. At this point, we will go to the 
Administrator of the Small Business Administration, Aida 
Alvarez. We appreciate her attendance this morning and her 
participation.
    But first, we will have a short recess.
    [Recess.]
    Senator Enzi. I call the hearing back to order and turn it 
over to Administrator Alvarez for her testimony.

 STATEMENT OF THE HONORABLE AIDA ALVAREZ, ADMINISTRATOR, SMALL 
BUSINESS ADMINISTRATION, WASHINGTON, D.C.; ACCOMPANIED BY PETER 
     McCLINTOCK, DEPUTY INSPECTOR GENERAL, SMALL BUSINESS 
 ADMINISTRATION, WASHINGTON, D.C.; JAMES BALLENTINE, ASSOCIATE 
   DEPUTY ADMINISTRATOR FOR GOVERNMENT CONTRACTING, MINORITY 
    ENTERPRISE DEVELOPMENT, SMALL BUSINESS ADMINISTRATION, 
  WASHINGTON, D.C.; AND KRIS MARCY, CHIEF OPERATING OFFICER, 
        SMALL BUSINESS ADMINISTRATION, WASHINGTON, D.C.

    Ms. Alvarez. Thank you so much, Senator. I appreciate the 
opportunity to speak on behalf of the SBA. I have lengthy 
testimony which hopefully will be entered into the record.
    Senator Enzi. Your entire statement will be included in the 
record, without objection.
    Ms. Alvarez. I would rather make more informal remarks. 
First of all, I want to begin by joining with the others in 
expressing my heartfelt sense of loss at the passing away of 
Senator Coverdell, who was a good man and a very important 
Member of the Committee. He will be missed. I want to extend 
the condolences of the SBA family to the Coverdell family.
    Senator Enzi. Thank you.
    Ms. Alvarez. I also, Senator, want to thank you for the 
time that you have taken on GPRA and the really very good 
meeting that we had at the SBA. I appreciated your coming to 
the SBA and just taking the time. I know how busy you are, but 
I think it really is just a mark of the priority that you give 
to this sort of thoughtful process, and I look forward to 
working with you and moving forward. We do take GPRA and these 
planning processes very seriously.
    I also want to comment that I shared David Walker's feeling 
that the relationship between the SBA and the GAO has been a 
very constructive one. I would say it has been a win-win 
relationship. We take their expertise and their dedication very 
seriously and I believe that they have felt that we are eager 
to be responsive. So it has been a win-win situation for us.
    Many of the findings in the audits were the outcome of a 
joint effort between the SBA and the GAO. They obviously 
arrived at those conclusions as a result of the collaboration, 
so there really were no surprises, and I would say in most 
cases, we shared their conclusions and are looking to implement 
their recommendations. In some cases, we have been implementing 
them all along. So that is where we are with respect to this 
process.
    I thought that it was significant in appreciating the 
importance of these audits to put them in the context of the 
bigger picture, because in the end, as has been said here 
before and as Mr. Walker said, we are here to serve the public. 
Ultimately, it is about outcomes and how effectively we serve 
the public and so for all the imperfections of trying to run an 
agency with many employees and particularly in a time of 
transformation, I think that this hearing offers us the 
opportunity to reflect on some very significant accomplishments 
that have occurred on behalf of small business.
    I think the best way to gauge performance is by looking at 
the results, and so I also brought some charts so that we could 
look at the results of the SBA's activities over the past 
decade.
    To begin, I think it is important to note the kind of loan 
activity that has occurred over this decade. This first chart 
shows the dramatic increase in SBA loan activity over the 
decade. Since 1993, the SBA has helped about 375,000 small 
businesses get more than $80 billion in loans. Important to 
note, that is more dollars than in the previous 39 years 
combined, and so many of those loans are going to those in 
greatest need.
    I want to thank Senator Kerry for his sponsorship of the 
New Markets legislation. I am very pleased that there is action 
planned in the Senate on New Markets legislation and that the 
Chairman has scheduled a Senate Small Business Committee markup 
on the New Markets venture capital and BusinessLinc legislation 
for next Wednesday. I really am hopeful that the Congress will 
enact this bipartisan proposal this session. It is very 
important to Americans around the country.
    The second chart points out the ways in which we have 
helped those borrowers who in the past were underserved. Loans 
to women, for example, between 1973 and 1989, we made 57,000 
loans worth $5.7 billion. In just the past 7 years, more than 
80,000 loans to women worth over $12.2 billion. That is more 
than double the previous 19 years combined. I think that again 
is a mark of effectiveness and success.
    Loans to minorities, this chart shows that in just the past 
7 years, we have made nearly 80,000 loans to minorities, more 
than $18 billion, again, more than doubling the previous 39 
years.
    In the area of venture capital, the next chart shows the 
outstanding growth of our Small Business Investment Company 
program. Since its beginning in 1958, the SBIC program has put 
almost $30 billion in venture capital financing in the hands of 
small business owners. About two-thirds of the $30 billion has 
been invested since 1993.
    The following chart shows that this program, the SBIC 
program, is remarkable in many ways. For example, since 1995, 
it has returned $224 million in profits to the taxpayers 
through the participating securities program. These are dollars 
that have gone back into the Treasury. And if you think of the 
cost of this program, $224 million actually would cover 9 
years' worth of costs of the SBIC program. So this is a program 
that more than pays for itself.
    In the area of 8(a) contract awards, and I know we will be 
talking more about that, we can judge performance by results. 
The 8(a) program has delivered. As you can see, during this 
time the total Federal contracting picture has remained stable, 
there really has been very little growth in Federal 
contracting, there has been governmentwide downsizing of 
contracting personnel. There has been acquisition reform. There 
has been contract bundling. All of that notwithstanding, the 
8(a) contract awards increased 81.5 percent, from $3.4 billion 
to $6.2 billion.
    Doing more with less, I think that is a good way to 
describe what the SBA is doing. The next chart demonstrates 
that over the past decade we have reduced our staff level by 
approximately 24 percent, from just over 4,100 employees to 
around 3,100 employees in 1999. Again, bear in mind that at the 
same time, the SBA loan portfolio has doubled from $25 billion 
in 1993 to nearly $50 billion in the year 2000.
    Providing more loans at less cost to the taxpayer. I think 
this chart is really illustrative of the terrific bargain that 
the SBA represents to the public. Not only are we doing so much 
more, doubling our portfolio, but since Federal credit reform 
was enacted, the cost to taxpayers of SBA loans has gone down 
from almost $5 per $100 loaned in 1992 to a little over $1 
today. Today, a $1.16 is the cost of lending $100 in the SBA 
program.
    Everybody likes report cards and everybody likes to see 
``A''s on their report cards and we have been talking about the 
use of technology as a very important part of the future of all 
businesses and government. The SBA has a terrific report card 
on our website. You can see that ours is an outstanding award-
winning website. Forbes rated it as one of the best of the web 
in the year 2000. Lycos listed it in its top 5 percent. The 
comments are outstanding, and so it should be no surprise that 
the SBA website has crossed a new threshold and we are now 
receiving an amazing 9.5 million hits per week on our website.
    Of course, we are very proud of our four clean, or 
unqualified financial audit opinions, because throughout this 
period of growth, when things can sometimes get very demanding 
and slip through the cracks, we have maintained a strong 
commitment to the safety and soundness of our portfolio. 
Additionally the SBA was the first Federal Credit agency to 
receive an unqualified opinion on its financial statements and 
it is the only Federal credit agency to receive unqualified 
opinions 4 years in a row.
    So I think you can see that we have been taking care of 
business. We have been keeping our eye on the important mission 
of the SBA, helping small businesses succeed. There is 
certainly room for improvement and that is why we welcome this 
hearing, we welcome the insights of the GAO, and we are looking 
forward to getting better all the time.
    Thank you, Mr. Chairman. Thank you.
    Chairman Bond [presiding]. Thank you very much, Madam 
Administrator, and thank you very much for joining us today and 
for staying with us as we went through the recommendations. I 
congratulate you on the ``A'' report on the website and the 
clean audits and I think that you should be gratified, as I 
was, to hear from the General Accounting Office. They felt that 
there was a constructive working relationship, and while there 
are problems, they indicated that the SBA is working with them 
and we hope that after the root canal is completed that this 
will enable you to improve the performance of the Agency.
    I apologize to my colleagues. We did not get the testimony 
until last night, so we will make your full testimony a part of 
the record and we will keep the record open for any questions 
that other Committee Members may have.
    [The prepared statement of Ms. Alvarez follows:]

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    Chairman Bond. Let me turn to the question of 
appropriations. Looking at the chart, you mentioned that 
additional funds are needed in a number of areas. As I look at 
a chart of the SBA's budget requests and the actual 
appropriation for 1997, 1998, and 1999, the appropriation was 
significantly larger in all 3 of those years. For the current 
year, there was a $250 million, or a 33 percent increase, in 
the request. The actual appropriation was about $100 million 
more than the previous year.
    What we are concerned about is the SBA's priorities for 
spending the money. Why has the SBA not made effective program 
operation a priority? Part of the question the GAO raised was 
the allocation of resources. Are you allocating the resources 
that you get to these priority areas?
    Ms. Alvarez. Absolutely. I think our budget and the budget 
request fully reflect the priorities of the Agency. We 
carefully monitor our fiscal resources to ensure that these 
funds are going to those priorities.
    There are some key areas that have been looked at by the 
GAO where we have made budget requests. We are fearful that, 
based on history, when funding was not forthcoming, that going 
forward, the funding will not be forthcoming as well. For 
example, we requested money for, it is a technical term, seat 
management in the information technology area. We have outdated 
computers and we have requested $7 million to purchase 
replacement computers and the necessary infrastructure. We 
cannot go forward and implement plans without the appropriate 
computers, but so far, we have zero coming from the 
deliberations about our budget.
    In the area of workforce transformation, last year, we 
requested $5 million to allow us to support transformation 
requiring training. It is expensive, and we requested $5 
million. We got zero. This year, we requested $4 million. It 
looks like we will receive zero.
    In the 7(j) program, which is very important to the 
development of 8(a) companies, we have consistently asked for 
funding and have gotten a fraction of what we requested. We are 
hopeful, since I see that we requested $5 million and it looks 
like the Senate is being responsive and we really appreciate 
it. We need the money if we are going to provide the kind of 
technical assistance and training that these 8(a) companies 
need. We cannot do what we need to do in 7(j) without the 
funding.
    In the area of asset sales, I see that we have a funding 
request. We are very proud of our asset sales. There is going 
to be a $1 billion asset sale taking place next week and this 
will be our second sale. Then there will be a third sale for 
approximately $1 billion. We need money to make these things 
happen. We requested $1.5 million. So far, zero is forthcoming.
    So there are some key strategic areas that are tied to 
these GAO recommendations that require funding.
    Chairman Bond. Let me just focus on one. The GAO talked 
about the concern by 8(a) firms on getting access to contracts. 
In light of the SBA argument that it quit tracking business 
development activities because of funding cuts, why does the 
SBA use the available 7(j) funds for executive training 
programs, which apparently are a much lower priority and 
benefit only a few select firms? Why doesn't the SBA use the 
funds for wider-ranging business development tools that would 
help more 8(a) firms, especially those with limited management 
experience, in getting the contracts? It seems to me that this 
is one area where the GAO says, change the allocation of the 
funds you have.
    Ms. Alvarez. Senator, there are lots of issues implicit in 
that question. First of all, the statute specifies that getting 
8(a) certification does not guarantee contracts, and that is an 
up-front advisory.
    Chairman Bond. No question about that.
    Ms. Alvarez. We are aware that there is concentration in 
terms of 8(a) contracts for a variety of reasons. By the way, 
we delegated the decisionmaking on awarding of contracts to 
agencies. We do not make those awards. We did it because we 
wanted to speed up the process and get out of the way. So that 
decisionmaking rests with the individual agencies. We also 
issued regulations a few years ago that limited both the size 
and the number of contracts that could be awarded sole source, 
trying to address the concentration issue.
    With respect to 7(j) funding, unfortunately, or 
fortunately, before we even start out, with the funding we do 
get, quite a bit of it already has been targeted for specific 
programs that various Members of Congress feel are important 
for their constituents. So we actually end up having about, I 
think it is, James, is it $800,000? James, you may want to join 
me if we are going to talk about 8(a). About $800,000 to serve 
the entire nation. The rest of it has been designated for 
programs in different parts of the country. So we really are 
very underfunded in that area.
    Chairman Bond. Thank you, Ms. Alvarez.
    Senator Kerry.
    Senator Kerry. I think it is important to note that when we 
measure the budget and we talk about the request, the request 
is what the administration sends up.
    Ms. Alvarez. Right.
    Senator Kerry. But that is a request that has been pared 
and vetted and fundamentally decided upon by OMB in 
conjunction, obviously, with the White House. It almost never 
reflects what you have asked for from them, correct?
    Ms. Alvarez. Yes, Sir.
    Senator Kerry. So as you sit there and say, here is what I 
need to do my job, we are really living in this artificial 
world in Washington now. I mean, to a degree it is artificial. 
It is real because the numbers are real, the budget law is 
real, but Mr. Chairman, you and I were talking about this just 
coming back from the vote. You have got a budget allocation for 
VA-HUD that is literally impossible to live with and you are 
not going to report out a bill until you get more money.
    She does not have that luxury. She is told by OMB, here is 
your budget. Operate. And that is the request that comes up 
here. Regrettably, it rarely reflects what is needed to do the 
job. Then we sit up here and we start beating away and saying, 
``Well, why can you not do this? Why do you not have that 
money?''
    There is a total disconnect, frankly, and it is not just 
true of this. I find this in the Commerce Committee with the 
Transportation Department, with budgets for the Coast Guard. 
And the admirals all come up here and they are given marching 
orders over at the Pentagon and they all have to look nice and 
feel nice and tell us wonderful things about the budget when 
they know damn well they cannot do the job with the budget. 
That is how it is working here in this city nowadays.
    So it is terrific for the politicians who want to sit up 
here and say, ``Well, you know, you are not living up to what 
the budget requires, but the fact is that we are all the 
victims of this system that nobody wants to break out of or 
challenge.''
    I have a simple question. It seems to me that there are 
some legitimate complaints, if you want to call them 
complaints, or legitimate observations by the GAO, but the 
question is, what does it take to respond to them? Do you have 
adequate capacity for information technology? Do you have 
enough people? I mean, you have just told me. It has gone down 
from what to what?
    Ms. Alvarez. From 4,100 to 3,100.
    Senator Kerry. From 4,100 to 3,100, so one-fourth 
reduction. So you have had a 25-percent reduction, and what is 
the increase in the amount of lending?
    Ms. Alvarez. It is double the loan portfolio.
    Senator Kerry. And what is the increase in the 8(a) 
program?
    Ms. Alvarez. Eighty-one percent increase in the 8(a) 
program.
    Senator Kerry. And yet we are supposed to go out and do all 
this measuring of all these people and take a survey. Can you 
take a survey today? Can you do that kind of work?
    Mr. Ballentine. Yes, Sir.
    Senator Kerry. You could do that? So you have enough people 
there to be able to do the kinds of analyses that have been 
recommended?
    Mr. Ballentine. I will identify myself, Sir. My name is 
James Ballentine. I am Associate Deputy Administrator for 
Government Contracting, Minority Enterprise Development. We 
would be able to do a survey. It would be another 
responsibility of our business opportunity specialists, which 
GAO pointed out are already very much overworked. They would 
have to take a great deal of the work to carry out such a 
survey, but we could do it.
    Senator Kerry. What suffers as a result, anything?
    Mr. Ballentine. Well, obviously, they are very much 
overworked now. They do not have the resources to travel as we 
would like for them to. They obviously would not be able to do 
that. If they were provided those resources, they obviously 
could do it. But they also have regular annual reviews that 
they must do on their portfolio within a given area. For 
example, in the Washington, D.C. area, the portfolio is very 
large. If they were charged with another task, those annual 
reviews may suffer as a result.
    Senator Kerry. So what you are saying is, physically, 
conceptually, you can do it, but it is going to be a hardship 
and something else is going to suffer as a result.
    Mr. Ballentine. Exactly. Priorities must be put in place.
    Senator Kerry. Given the current personnel levels.
    Mr. Ballentine. That is correct.
    Senator Kerry. Have you tried to do it? I mean, what steps 
have you taken? Would you perhaps state for the record what 
steps you have taken to strengthen the 8(a) program at this 
point?
    Mr. Ballentine. We were actually in the process of doing a 
survey when the GAO came to the Agency, and we actually 
assisted the GAO in putting together their survey because we 
had begun the process to do one on our own. We have also, and 
the Administrator asked us to do this some months ago, to begin 
to look at really anything we could do to improve the 8(a) 
program. You must keep in mind that this program is 31 years 
old, and as Senator Bond has mentioned and as the GAO 
mentioned, as SBA is in transition, this program is in 
transition, as well.
    Senator Kerry. It is my understanding that in 1995, you 
issued regulations to eliminate a loophole that allowed firms 
to circumvent the competitive threshold, right?
    Mr. Ballentine. That is correct.
    Senator Kerry. And in 1998, you delegated contracting 
authority to acquisition agencies to streamline the program.
    Mr. Ballentine. That is correct.
    Senator Kerry. And you revised the regulations to allow for 
better enforcement of companies' competitive business mix.
    Mr. Ballentine. That is correct.
    Senator Kerry. And you provided means for 8(a) firms to 
joint venture more easily.
    Mr. Ballentine. Yes, Sir.
    Senator Kerry. So you have actually been undertaking a 
series of steps.
    Mr. Ballentine. We have been attempting to, and they have 
been very effective.
    Senator Kerry. Are there more that you want to do?
    Mr. Ballentine. We would love to do more, and we currently 
have a working group in-house and we are also working with 
several agencies to see how we can make the program work even 
better.
    Senator Kerry. What is the restraint on your achieving--and 
I will make this the last question, the light is on--what is 
the restraint on achieving the legitimate observation of the 
GAO regarding the more contracting that they would like to do 
versus the management component? How do you respond to that?
    Mr. Ballentine. The restraint is resources. It would also 
be a culture change, so to speak, for our business opportunity 
specialists. They currently provide annual reviews, as I said. 
They would need to be trained a little more on providing the 
type of procurement assistance that is needed.
    Senator Kerry. Is there any reason not to do that?
    Mr. Ballentine. No. I think it is a very good idea and we 
have agreed with GAO that this would be a better way to focus 
the 8(a) program. So we are in agreement on that, but we would 
need some training dollars for our business opportunity 
specialists who work hand-in-hand with the 8(a) companies.
    Senator Kerry. Thank you, Mr. Chairman.
    Chairman Bond. Thank you, Senator Kerry.
    I believe that we heard from the GAO that there needs to be 
more emphasis put on business development for 8(a) and there 
ought to be travel funds, and that an allocation can be made 
within the budget for these areas.
    We are going to be shutting down because there has been an 
objection to conducting hearings 2 hours after the Senate has 
come into session, so I am going to turn to Senator Enzi for 
the last series of questions.
    Senator Enzi. We usually do not have enough time anyway, 
but I thank you for the opportunity to ask some questions. With 
the limited amount of time, I cannot dwell on the positive 
things, and I appreciate you having all of those in the report. 
I have to say that your charts that you presented are very 
impressive.
    One of the things that GPRA concentrated on was outcomes 
instead of outputs, and I notice that most of the charts deal 
with outputs. Is there additional data that would show more 
closely how the outcomes fit with the PAR?
    Ms. Alvarez. I am asking Kris Marcy, who is my Chief 
Operating Officer, to join me.
    Senator Enzi. Sure.
    Ms. Marcy. Actually, I think the charts do reflect some of 
the outcomes and really get at the heart of the Agency's 
mission. We are creating new businesses and supporting those 
new businesses, providing capital to those new businesses. We 
are providing technical assistance that allows those businesses 
to be created and developed and sustained. The Administrator 
spoke about the return to the taxpayer in terms of the SBIC 
program. So we have struggled very hard to show what we have 
been able to accomplish in GPRA terminology.
    Ms. Alvarez. If I might be so bold, there have been studies 
that have shown we have 22-million new jobs in this country and 
there are studies that have shown that the majority of new jobs 
have been created by small business. I think that is a 
significant outcome that is the result of all of those, call 
them outputs if you will, but all of that in the aggregate is a 
reflection of the success that we are experiencing in this 
country. It contributes to the success that has led to a 
booming economy.
    Senator Enzi. I would have to agree that those results are 
the outcomes, but the charts reflect the outputs, the number of 
loans, which does not translate directly on the charts to the 
number of jobs that are done.
    Ms. Alvarez. Yes. I agree. We need another set of charts, 
but it would cut into our hearing time.
    Senator Enzi. That is the part that I would really be 
interested in----
    Ms. Alvarez. I agree.
    Senator Enzi [continuing]. You know, the results that are 
out there, because we heard earlier today that these people 
expect to have more contract consultation, more help with 
getting that.
    Ms. Alvarez. Yes.
    Senator Enzi. The number of reports that are filed by those 
businesses do not demonstrate that----
    Ms. Alvarez. I totally agree with you, Sir.
    Senator Enzi [continuing]. And so it is probably selling 
your employees short, and that is why I wanted to make a point 
out of that.
    Ms. Alvarez. I agree.
    Senator Enzi. On your website, you are to be congratulated 
for that.
    Ms. Alvarez. Thank you.
    Senator Enzi. There have been a lot of plaudits for it. I 
did not notice anything on there about security, though, and as 
one of the computer buffs around here----
    Ms. Alvarez. Oh, yes. That is a key issue----
    Senator Enzi [continuing]. I noted that you had been hacked 
and wondered if there was something being done on that.
    Ms. Alvarez. Yes, absolutely, and I would be happy to 
address that, if you are interested. Larry Barrett, who is our 
Chief Information Officer, could add to my comments. 
Information security is a top priority for us. We have actually 
not only hired about 11 people--Larry, would you like to come 
up here? I am sorry, six people, as well as invested $800,000 
in a contract with top specialists who are looking at five key 
systems, and we are close to completion of the review of those 
systems. Larry, would you want to comment?
    Senator Enzi. I do not have much time here. I did notice 
that you are given some credit in those charts, and I have to 
agree with you that the pie chart could have some additional 
things done with it that would be more definitive on what has 
been done. But it was the management side that I looked at in 
the information technology and noticed that all the circles 
were blank.
    Ms. Alvarez. We hope to have them all filled in soon.
    Senator Enzi. We appreciate that. I would appreciate more 
information on----
    Ms. Alvarez. There is a lot in progress there.
    Senator Enzi [continuing]. On how that will be done.
    Ms. Alvarez. Yes.
    Senator Enzi. Just a final comment. Something else that I 
have been interested in that did not show up in any of these 
reports, of course, is the SBIR rural outreach program. I 
noticed that it was not funded in the 2001 budget and this is 
something that is very important to the rural places, 
particularly where I am from----
    Ms. Alvarez. Absolutely.
    Senator Enzi [continuing]. And I am hoping that something 
can be done to reinstate that so that the good work that was 
started that has a lot of outcomes can continue to happen.
    Ms. Alvarez. I would be pleased to have Art Collins brief 
your staff, and I would be pleased to do it myself, to tell you 
what we have been doing in the area of rural initiatives, 
because we have spent a lot of time in this area. We are very 
acutely aware of the needs. And we consider the Rural 
Initiatives part of the New Markets initiative.
    Senator Enzi. I would appreciate the briefing of my staff 
and myself.
    Ms. Alvarez. We would be happy to do that. We would like to 
do that.
    Senator Enzi. We want to be sure that rural is rural, and 
we have a little different sense of rural in Wyoming than most 
places have.
    Ms. Alvarez. Exactly.
    Senator Enzi. I thank you for being here today and taking 
our questions.
    Ms. Alvarez. Thank you, Sir.
    Senator Enzi. Thank you, Mr. Chairman.
    Chairman Bond. Thank you very much, Mr. Enzi. When it comes 
to rural, Missouri probably qualifies as rural in SBIR program, 
as well, and certainly supporting and sustaining the SBIR 
program is not something that depends upon additional 
legislation. We expect that the SBA will put the emphasis on it 
and we are working on a good SBIR reauthorization bill that we 
think will provide additional tools, but there is no reason to 
wait for that legislation to get the job done and we look 
forward to working with you to do that.
    Ms. Alvarez. Yes, Sir.
    Chairman Bond. My thanks, Madam Administrator, to you and 
your people for being with us today. This has been a long 
process, but I trust it has been a productive process. We have 
heard encouraging words from GAO and certainly from the SBA on 
your accomplishments. I want to thank General Walker for his 
leadership, Stan Czerwinski, Michael Brostek, Joel Willemssen, 
and Susan Campbell for their good work from the GAO.
    There are problems, no question about it. I am glad to say 
that the GAO reports that SBA is working with them to utilize 
the information available. This information is helpful to us in 
the oversight sense, but we are not driving the bus. You are 
driving the bus and this information should be very helpful to 
you.
    We had many of these same discussions at our hearing on the 
SBA budget proposal last February. We stressed then the 
importance of SBA placing priority on ensuring that core 
programs are running efficiently and effectively, and again, we 
heard from the GAO that it is a question of assigning 
priorities and making sure that instead of creating new 
programs or embellishing in low-
priority areas, that the Agency focus the resources it has, 
whether bountiful or scarce, on the programs that are 
important.
    We trust that with the benefit of the PAR review, SBA can 
move toward the goal of being a model executive agency, and I 
think if you are able to implement the recommendations, it will 
be an important step toward the goal. We are going to be 
following with you the progress that you make carrying out the 
PAR and working with GAO, and as Senator Enzi has asked, we 
will look for the Inspector General to answer the questions 
regarding the reserve account by the week of August 7.
    We thank all of you.
    Ms. Alvarez. Mr. Chairman, if I may----
    Chairman Bond. Yes, Ma'am.
    Ms. Alvarez. I just want to thank you and your colleagues 
for your help in improving the SBA, both through legislative 
changes and oversight. I do believe that when I tout the record 
of the SBA over the past decade, that it is a record of shared 
success and I think that the work that has been done under your 
leadership has meant a great deal to our continuing to improve 
what we have to offer the American people. So I just want to 
thank you.
    Chairman Bond. We appreciate your testimony. We are always 
delighted to hear the head of an agency be able to tout the 
successes. I will have to say that your predecessors were some 
of the greatest touters I have ever seen.
    [Laughter.]
    Ms. Alvarez. I will tell them you said that.
    Chairman Bond. You tell the Ambassador I said that.
    Ms. Alvarez. I will tell the Ambassador.
    [Laughter.]
    Chairman Bond. I am from Missouri and I need to be shown.
    So with that, the hearing is adjourned.
    Ms. Alvarez. Thank you.
    Chairman Bond. Thank you very much.
    [Whereupon, at 11:43 a.m., the Committee was adjourned.]

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