[Senate Hearing 108-452]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-452


                         SBA REAUTHORIZATION: 
                        PROGRAMMING FOR SUCCESS

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          AND ENTREPRENEURSHIP



                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 4, 2003

                               __________

      Printed for the use of the Committee on Small Business and 
                            Entrepreneurship


 Available via the World Wide Web: http://www.access.gpo/gov/congress/
                                 senate



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            COMMITTEE ON SMALL BUSNIESS AND ENTREPRENEURSHIP

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                     OLYMPIA J. SNOWE, Maine, Chair
CHRISTOPHER S. BOND, Missouri        JOHN F. KERRY, Massachusetts
CONRAD BURNS, Montana                CARL LEVIN, Michigan
ROBERT F. BENNETT, Utah              TOM HARKIN, Iowa
MICHAEL ENZI, Wyoming                JOSEPH I. LIEBERMAN, Connecticut
PETER G. FITZGERALD, Illinois        MARY LANDRIEU, Louisiana
MIKE CRAPO, Idaho                    JOHN EDWARDS, North Carolina
GEORGE ALLEN, Virginia               MARIA CANTWELL, Washington
JOHN ENSIGN, Nevada                  EVAN BAYH, Indiana
NORMAN COLEMAN, Minnesota            MARK PRYOR, Arkansas

            Mark E. Warren, Staff Director and Chief Counsel
     Patricia R. Forbes Democratic Staff Director and Chief Counsel


                            C O N T E N T S

                              ----------                              

                                                                   Page

                           Opening Statements

Snowe, The Honorable Olympia J., Chair, Committee on Small 
  Business and Entrepreuneurship and a United States Senator from 
  Maine..........................................................     1

                               Testimony

Barreto, The Honorable Hector V., Administrator, Small Business 
  Administration, Washington, DC.................................     3

          Alphabetical Listing and Appendix Material Submitted

Barreto, The Honorable Hector V.:
    Prepared opening statement...................................     8
    Answers to Committee questions...............................    38
Kerry, The Honorable John F.:
    Prepared opening statement...................................    98
Landrieu, The Honorable Mary:
    Prepared opening statement...................................   108
Levin, The Honorable Carl:
    Prepared opening statement...................................   110

                        Comments for the Record

Wilson, Donald, President, Association of Small Business 
  Development 
  Centers, Washington, DC........................................   113

 
                         SBA REAUTHORIZATION: 
                        PROGRAMMING FOR SUCCESS

                              ----------                              


                        WEDNESDAY, JUNE 4, 2003

                              United States Senate,
          Committee on Small Business and Entrepreneurship,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:05 p.m., in 
Room SR-428A, Russell Senate Office Building, Hon. Olympia 
Snowe, Chair of the Committee, presiding.
    Present: Senator Snowe.

        OPENING STATEMENT OF HON. OLYMPIA SNOWE, CHAIR, 
SENATE COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP, AND A 
                UNITED STATES SENATOR FROM MAINE

    Chair Snowe. The hearing will come to order.
    I want to say how much I welcome the Administrator here 
this afternoon to our hearing on the reauthorization of the 
Small Business Administration and its programs. I welcome you, 
Mr. Barreto, here today to join in the discussion on some of 
the issues as we prepare for the reauthorization process.
    This is the last in a series of hearings, as well as 
roundtables, that the Committee has been holding to examine the 
entire range of SBA programs that are designed to serve the 
needs of America's small businesses and the entrepreneurs of 
tomorrow.
    In March, we began this endeavor by focusing on the SBA's 
contracting programs and the problem of contract bundling. We 
heard testimony about the nearly $235 billion in federal 
contracts awarded in Fiscal Year 2001. While this figure 
overall represents an 11 percent increase over the amount spent 
5 years earlier, there have been a steady decline in the number 
of small businesses receiving new contract awards. Since 1991, 
the pool of small business contractors receiving new contract 
awards has declined by more than 50 percent.
    So the testimony was clear that significant changes needed 
to be made if federal agencies are to meet the goal of ensuring 
that at least 23 percent of the value of federal contracts go 
to small enterprises.
    In April and May, we conducted a thorough review of the 
agency's various programs through a series of roundtables. On 
April 9th we heard about the impressive track record of the 
SBA's Office of Advocacy, which is an invaluable voice for 
small business within the Administration, and has produced an 
estimated $21 billion in regulatory cost savings for small 
businesses in Fiscal Year 2002.
    Our roundtable also examined the individual entrepreneur 
development programs the SBA offers to small businesses, the 
Small Business Development Centers, the Women Business Centers, 
the Service Corps of Retired Executives, and a host of other 
programs that assist small firms and individuals to try to 
create their own small businesses.
    We are also looking carefully at the SBA's Government 
contracting and business development programs which assist 
small businesses in competing for the business of the Nation's 
largest consumer, which of course is the Federal Government.
    The conclusion is while there are some programs that are 
working well at SBA, there are insufficiencies that we can 
address to ensure that small businesses get the assistance that 
they require through start up and operations. Once operating, 
these small businesses should be assured that the SBA can 
deliver solid Government contract assistance through 
experienced SBA personnel.
    Finally, in our two roundtables that were held on April 
30th and May 1st, we focused on the SBA's lending and 
investment capital programs. The 7(A) and 504 loan programs are 
two of the most useful and critical resources the agency has to 
offer small businesses that continue to seek capital to operate 
their businesses as well as to grow and expand.
    I was pleased to learn that the SBA is continuing to 
improve these programs through new initiatives like the 
SBAExpress Program. These loan programs have a solid record of 
helping small businesses create and retain more than 2 million 
jobs, and I plan to build upon the success by working through 
the reauthorization program to make these programs more 
efficient, more user-friendly for small businesses that seek 
capital to strengthen their enterprise.
    Similarly, the SBA's investment capital programs have been 
significant sources of long-term capital for small enterprises. 
The past few years have been a difficult time for businesses 
seeking venture capital. But these programs have kept venture 
capital at far greater levels than would otherwise have been 
the case.
    The SBIC program alone has made more than 16,000 
investments in small businesses since the start of Fiscal Year 
1999 totaling almost $17 billion. Moreover, these investments 
have supported approximately 481,000 jobs in small businesses.
    With a significant record on the SBA's program, their 
strengths and weaknesses already in hand, today we complete our 
fact-finding with a final hearing and a special guest, the SBA 
Administrator. Throughout the past 3 months, our focus has been 
on the agency's success stories, what has been helping small 
businesses the most, why it has worked, and how can that 
success be applied to other programs.
    This afternoon I certainly look forward to listening to the 
Administrator about the SBA's proposals for improving the 
agency's ability to respond to the many challenges facing 
existing small businesses and the increasing number of new 
startups. I know the SBA has offered a package of legislative 
proposals over the next several years and I am eager to hear 
about those proposals and how they will enable SBA to build 
upon its record of success, particularly this year when the SBA 
celebrates its 50th anniversary.
    So Mr. Barreto, we are very pleased to have you here this 
afternoon. This is an important hearing because it will help us 
to work through some of the issues that are important to the 
agency and highlight the leadership that you have provided to 
the agency. I want to commend you for that. We want to work 
with you throughout this reauthorization process to succeed in 
reaching some decisions on those programs that have really 
worked well for small businesses and to see what we can do 
better in the future.
    So I welcome you, Mr. Barreto. You can begin and I will 
submit your full testimony in the record.

      STATEMENT OF HON. HECTOR V. BARRETO, ADMINISTRATOR, 
               U.S. SMALL BUSINESS ADMINISTRATION

    Administrator Barreto. Thank you very much, Madame Chair.
    Thank you for inviting me here today to discuss the 
President's budget request and reauthorization package for the 
U.S. Small Business Administration for Fiscal Year 2004.
    As you know, President Bush and his Administration are 
dedicated to serving and protecting America's small businesses. 
The President appreciates the enormous contributions that small 
business makes to our country and his domestic policy agenda 
reflects that appreciation. The Jobs and Growth Act was a good 
example of how the President is working to help small business. 
From the rate reductions that will help small business owners 
who file their business income on their personal returns to 
quadrupling the expensing limits for business equipment, small 
business owners are one of the main beneficiaries of the Jobs 
and Growth Act.
    The budget request and reauthorization package for the SBA 
also reflects the President's faith in small business and this 
Administration's desire to serve the small business community. 
To support the President's small business agenda, the SBA is 
focusing on three strategic goals. First, SBA is championing 
small business by minimizing the regulatory burden, providing 
easily accessible information about regulatory compliance and 
ensuring that regulatory process treats small businesses 
fairly.
    Second, SBA is empowering entrepreneurs by increasing 
access to capital and information, technical assistance and 
counseling, as well as increased access to procurement 
opportunities.
    Third, SBA is continuing to play a vital role in helping 
businesses and families recover from disasters.
    When I testified before Congress last year, I testified 
about the challenges facing SBA. Today, I am pleased to report 
that this Administration has met those challenges and has 
significant accomplishments to report to you. For example, our 
new econometric model for the 7(A) Loan Guarantee Program will 
enable SBA to allocate resources more effectively, determine 
program costs more precisely, and increase its ability to 
target loans to aspiring entrepreneurs. The model improves the 
Government's ability to forecast loan performance by accounting 
for a wider range of economic factors, as well as a wider 
variety of loan characteristics.
    We are also changing the way that SBA delivers services to 
its customers. Today, we are implementing our transformation 
efforts with a 3-district pilot program. We have worked hard to 
ensure the success of SBA's transformation efforts and to 
address the concerns raised by our congressional partners in 
formulating this plan.
    SBA has also taken steps towards a more modern oversight 
system for our lending partners. SBA contracted with Dun & 
Bradstreet to develop a new loan monitoring system that meets 
our needs for lender oversight. I believe we have made great 
strides in these areas and others, and I respectfully ask for 
your support of the President's Fiscal Year 2004 budget request 
for the SBA.
    The President's plan proposes a total Fiscal Year 2004 
appropriation of $797.9 million. It maintains the spending 
level proposed for Fiscal Year 2003 and would provide 
substantial levels of credit, capital, procurement, and 
entrepreneurial development assistance to small businesses. 
This fiscally sound budget would provide more than $20.8 
billion in small business loans, loan guarantees, and venture 
capital, and more than $760 million in new disaster loan funds 
for victims of natural disasters. It includes funding for $9.3 
billion in guaranteed loans under the 7(A) program, as well as 
more than $115 million for the agency's technical assistance 
programs.
    This budget proposal demonstrates that SBA, under the 
President's management agenda, is seeking ways to serve the 
Nation's small businesses more efficiently and ensure economic 
security by creating jobs. A prime example of this comes in the 
request for the 7(A) Loan Guarantee Program, SBA's flagship 
program. Earlier in Fiscal Year 2003, to deal with the effects 
of lowered fees on 7(A) loans, SBA instituted a cap of $500,000 
per 7(A) loan. The emphasis on smaller loans enabled us to 
leverage resources and provide an increased number of loans to 
emerging markets. This put SBA ahead of its 7(A) lending goals 
in every category for Fiscal Year 2003, including 35 percent 
ahead to women-owned businesses, 65 percent ahead to African-
American owned businesses, 39 percent to Hispanic-owned 
businesses, and 31 percent to veteran-owned businesses.
    By focusing on smaller average loan size, we are assisting 
more small businesses and creating more jobs. In 2002, we 
estimate that our Capital Access Programs helped create or 
retain 573,000 jobs. Historically, we calculated the job 
creation and retention by estimating one job created or 
retained for every $32,000 lent. Using our portfolio data, we 
found that loans under $50,000 give the greatest return in job 
creation, with $14,700 in loan dollars creating one job, 
whereas loans between $1 million and $2 million require 
$140,000 to create one job. Smaller loans have a true win-win 
track record.
    To date SBAExpress and smaller loans in general tend to 
have lower default rates than larger loans. The growth of 
SBAExpress, a program offering efficiency that is attractive to 
borrowers and lenders alike, is a testament to its value to our 
private sector partners. Lenders want to help budding 
entrepreneurs, and SBA is committed to working with them to 
accomplish that goal.
    We will also promote smaller loans by expanding the lending 
program to allow 1,500 credit unions to join our network of 
lenders, a potential increase of some 30 percent in the number 
of outlets for capital for small businesses.
    The budget request will enable SBA to provide $4.5 billion 
in loans through the 504 Certified Development Company Program 
with no cost to taxpayers. The 504 program, which was 
established to increase long-term fixed asset funding, has 
always had a job creation goal and SBA recognizes the need to 
increase access to 504 loans.
    The budget request includes $8.8 million to continue 
implementation of SBA's transformation efforts. These efforts 
are crucial to the agency's continued relevance in its second 
half century. In recent years, SBA's program delivery has 
changed dramatically, but SBA has not adapted to these changes. 
Through transformation, SBA will shift field office efforts 
from administrative functions such as loan purchases and 
liquidation functions to more direct relationships with 
customers and resource partners. This new approach will empower 
SBA to serve more small businesses.
    SBA carefully negotiated the implementation of the pilots 
with its union and they are currently underway. We will 
evaluate the results of these pilot programs and incrementally 
expand the successful practices to more offices until all of 
the SBA has been transformed.
    The transformation plan is linked with SBA's implementation 
of the President's management agenda which emphasizes better 
management of the Federal Government through five key areas: 
human capital, competitive sourcing, E-government, integration 
of budgets and performance, and improved financial management.
    The budget requests $16.5 million, including $8.8 million 
for the transformation plan, to support the agency's execution 
of the President's management agenda.
    SBA requests $2.3 million to streamline business processes 
to reduce costs and to improve customer service and $1.7 
million to support SBA's information technology infrastructure.
    SBA's Fiscal Year 2004 budget request includes level 
funding for entrepreneurial development programs, SCORE and the 
SBDC, the women's business centers, and business information 
center networks. It is often said that access to information is 
the key to small business success.
    The budget request includes continued funding for the 
agency's Disaster Assistance Program. SBA works closely with 
the Federal Emergency Management Agency to assist small 
businesses and individuals directly affected by disasters to 
get them back on their feet in times of trouble.
    At the SBA, we are proud of what we have accomplished over 
the past year and over the past 50 years. While we take pride 
in our achievements, we are not going to rest on our laurels. 
We continue to look ahead, and SBA's Fiscal Year 2004 budget 
request offers an opportunity for us to work together with you 
to ensure that SBA continues to assist small businesses into 
the next half-century.
    I would now like to address the first part of our 
legislative proposal for reauthorization. We are asking 
Congress to extend the reauthorization of SBA's programs to a 
6-year cycle. Over the years, our private sector partners have 
spoken about the problems they face due to crises of confidence 
in the public sector. There is no surer sign of the 
Administration's confidence and support than our proposal.
    This is something our SBIC partners can show the markets 
and allow CDCs time to plan further into the future. It will 
not affect the oversight authority of Congress, which has been 
exercised many times over the years regardless of program 
authorization.
    Specifics of our legislative proposal, explained in greater 
detail in my submitted written testimony, are as follows. We 
propose changes to update SBDC assistance by encouraging new 
technologies, creating a virtual SBDC, analyzing local economic 
development needs, and increasing the capacity of the SBDC and 
Women Business Center clearinghouses. This will significantly 
expand sharing of SBDC information, leverage resources, and 
support the integration of entrepreneurial development 
programs.
    Because of our strong support for women business centers, 
we do not believe the reauthorization of sustainability is the 
best way to serve them. The pilot requires SBA to spend 30.2 
percent of the women's business center budget on sustainability 
grants. After funding existing centers and the sustainability 
requirement, little is left for new centers, ideas, or for 
outreach. Sustainability locks in the status quo.
    With the funding currently dedicated to sustainability, the 
SBA estimates that an additional 24 centers could be opened. 
Currently, there are no centers in Nevada or Delaware or the 
city of Los Angeles. Sustainability is preventing the WBC 
program from reaching women in more than a dozen cities.
    Madame Chair, I appreciate your work on S. 1154. Our staffs 
have been talking and I look forward to working on this program 
with you.
    SBA is also proposing competition for the SBDC program. The 
process would be phased in with strong performing centers 
flourishing and underperforming centers working to improve 
their performance and prove their value to the small business 
community. Women business centers compete, why should SBDCs 
remain a monopoly, under a system that prohibits other 
potential service providers from even offering their services.
    SBA is also proposing changes to the 7(A) program to 
clarify SBA's approach, authority to regulate small business 
lending companies, and carry out the SBA's fiduciary 
responsibilities. Currently, SBLCs have no federal regulator, 
yet carry out approximately 20 percent of all SBA lending.
    We have proposed two changes to the Microloan program, one 
regarding eligibility requirements for participation, and the 
second repealing the current limits on the use of technical 
assistance funds. This will allow additional qualified 
intermediaries into the program, and we propose to give them 
flexibility to best serve microborrowers.
    SBA is also proposing changes to the loan loss reserve for 
the 504 Premier Certified Lending Program. The original formula 
requires loss reserves that financially strain CDCs. SBA's 
proposal is less restrictive to a risk-based system that will 
encourage CDCs to participate in PCLP lending.
    SBA proposes a statutory modification to increase fees for 
the SBIC Participating Securities Program to maintain the 
program's zero subsidy. This change is not due to any failure 
of the program but due to a drop in the Treasury rates 
reflecting in reduced participation agreement returns. If this 
change is not enacted, the program will require an 
appropriation.
    SBA also proposes changes to allow participating security 
SBICs to make increased distributions to the SBA and to allow 
SBICs the flexibility to invest idle funds in securities.
    Madame Chair, this concludes my testimony and I am happy to 
answer any questions you might have at this time. Thank you 
very much.
    [The prepared statement of Mr. Barreto follows:]

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    Chair Snowe. Thank you, Mr. Barreto. I appreciate your 
comments here this afternoon.
    First of all, I want to applaud you for applying the 
econometric model to the 7(a) program, because I think that 
certainly does expand the value of the portfolio and the 
ability to be able to lend more money. Then, in addition to 
that, it ultimately responds in a greater number of jobs 
created.
    Do you have any estimate on how much additional loan 
authority the model will create? Again, we are talking about 
$1.4 billion in additional funding, ability to loan.
    Administrator Barreto. We believe that is going to take our 
lending authority to almost $11 billion.
    Chair Snowe. Do you have any idea how many jobs that 
potentially could create?
    Administrator Barreto. Again, it depends on the size of the 
loans that we end up doing. As I mentioned before, we believe 
that the smaller loans can create jobs with as little as 
$14,700 in loan amount. So obviously, at the track that we are 
currently on with the SBAExpress and some of the percentage 
increases that we are seeing in our loan volume, we believe 
that it could be significant. But we would be glad to put some 
numbers together for you on that.
    Chair Snowe. I appreciate that. And I think it is important 
because certainly it illustrates the value of being able to 
expand some of these loan programs because I believe that there 
is a demand. If we can expand these programs to meet that 
demand, it will create more jobs.
    We depend on small businesses to generate job creation in 
this country. And basically, we are wholly dependent on small 
businesses to create jobs.
    So anything we can do to expand that potential is really 
essential. I think the SBA ought to be advertising that. I 
think that is one of the issues. I do not think that you do 
enough--you, the agency, not you personally--but you, the 
agency, touting those numbers. In each of the programs in 
where--for as little amount of money that can be invested per 
job essentially really does make a profound difference.
    Administrator Barreto. I could not agree with you more. We 
have a great resource in our networks and we have, as you know, 
offices in every State of the union. We have 70 major program 
offices. But we have this other great network, which is our 
resource partners. We have something in excess of 7,500 lending 
partners. More and more are signing up every day, especially 
for the SBAExpress Program. And they are a great vehicle for us 
to get the word out, to do the outreach.
    Of course, we have wonderful outreach partners in our 
technical assistance partners. I also mentioned in my testimony 
that we have also opened our programs up to credit unions which 
oftentimes do those small loans that create those jobs. We have 
opened it up to at least 1,500 potential credit unions that 
could take advantage of our programs. We will continue to do 
that.
    But I agree with you, it is our responsibility to get the 
word out, to do the outreach, and to really talk about how 
these tools can really help small business grow.
    Chair Snowe. I think the outreach is important. It's 
important to make known the availability of these programs, 
through the district offices, out in the various parts of the 
country.
    I had a roundtable recently, during the recess, and I was 
so amazed because I do not think there is enough awareness 
about the SBA's programs and the available resources for 
somebody to expand their business or to start a business.
    I think we are just going to have to do a better job at 
expanding and expounding on these programs, because I really do 
think they are very, very critical to the future success of our 
economy.
    Administrator Barreto. I agree 100 percent. We are doing 
two things in particular that I would like to draw your 
attention to. One of them is that we are continuously enhancing 
the information that we provide on the Internet. We have 
recently relaunched our website and we are currently averaging 
about 1.5 million visitors--not hits, but visitors--to the 
website every single week. And of course, they have access to 
all of the information on all of our programs and we will 
continue to use that as an important tool to reach small 
businesses.
    Also, as you mentioned, this is our 50th anniversary. So we 
are going to take that as an opportunity to not only talk about 
what the SBA has accomplished over those 50 years, but really 
talk about where the SBA is going and what the future 
opportunities are. We will be doing events all across the 
country culminating in a major conference we will do here in 
Washington DC. where we will have businesses and centers of 
influence from all across the country.
    The reason I mention these events is that we want to use 
them as opportunities to continually reinforce all of the 
resources that SBA can bring to bear.
    In fact, as you know, we are doing matchmaking events this 
year. At every matchmaking event we have all of our resource 
providers and representatives from all of our programs there to 
not only help small businesses get access to contracts, but 
also help them to get access to capital and access to technical 
assistance. Thus far, that has been working very well.
    Chair Snowe. You mentioned the transformation initiative 
that is underway at SBA. I would like to explore some of those 
issues with you because I think the Committee would be 
interested in the progress that is being made in implementing 
this transformation initiative. I know there has been a request 
for funding, which is what, $16 million?
    Administrator Barreto. Yes, ma'am. It is a total of $16.5 
million.
    Chair Snowe. $15 million? You had a chart that showed 
$17,400,000.
    Administrator Barreto. There are different elements to it. 
When you break it all down, you can put all of this under the 
transformation category but there is money there for training 
and development, for restructuring our office space, for the 
expansion of our current pilots. We want to study the 
commercial activities that we do, and where we can, centralize 
some of our functions; and where possible, possibly outsource 
some of the functions. So there is a lot of stuff in there.
    Also, the upgrade in our technology and the modernization 
of our systems. All of this kind of goes under the 
transformation banner. But it is approximately $16 million, 
maybe a little bit more than that.
    Of course, you know that we had asked for that money in our 
budget last year, and unfortunately, we were not able to 
receive it. The President has asked for the money again this 
year, and we are very hopeful because we think it is critically 
important to really position the SBA for our next 50 years.
    Chair Snowe. Has the agency spent any money on this 
initiative?
    Administrator Barreto. Very little when you talk about 
these major investments that we need to make.
    Chair Snowe. Have you made any progress on the initiative?
    Administrator Barreto. We have. We have started the 
initiative by beginning with three pilot offices currently 
underway. We are looking at them. We are benchmarking them. We 
are really studying.
    One of the things that we know is that not every SBA office 
is exactly the same with the same kinds of needs. So this 
really gives us an opportunity to really customize our 
approach. But at the end of the day what we want to try to do 
is free employees up. One thing that we are very aware of is 
the workforce of the SBA has declined significantly over the 
last 10 years. We are not planning on losing any more of our 
employees, but we also know that it is not that likely that we 
are going to receive a lot more employees. So what that makes 
us do is to operate as efficiently and as effectively as 
possible.
    As you know, one of the things I did last year was I 
visited almost 40 of my 70 districts. I went to 30 of the 50 
States. They kept telling me the same thing. They kept saying 
``Look, you keep giving us more and more work, but there are 
only so many of us. We can only do so many jobs.'' They said 
``What we want to do is, we want to help small businesses. What 
we want to do is, we want to be out in those small communities 
and develop partnerships and refer people.''
    We need to be freed up from a lot of the process and the 
bureaucracy that we are saddled with. So that is one of the 
things that we are really focusing on, unshackling some of 
these offices to do what they really want to, which is to help 
more small businesses.
    Chair Snowe. So there has been very little money that has 
been spent to date in implementing this initiative? So really 
it is contingent upon this request for $15 million?
    Administrator Barreto. Absolutely. In order for us to be 
successful with transformation there is no doubt that we are 
going to need the resources to invest in being able to do this. 
There is no doubt in my mind that we will get significant 
return on investment, especially if our return on investment is 
helping more businesses get started, get access to capital, and 
technical assistance.
    Chair Snowe. The three pilot programs, are they underway at 
this point?
    Administrator Barreto. Yes, they are. We have already begun 
pilots in Miami, Florida; Phoenix, Arizona; and Charlotte, 
North Carolina.
    Chair Snowe. How long will it take to determine the results 
of those pilot programs?
    Administrator Barreto. Well, it is on an ongoing basis.
    Chair Snowe. Do you plan to expand the pilot programs?
    Administrator Barreto. We do. We want to expand this pilot 
program. We have a number of our district offices that are 
begging us to be part of the transformation pilot. So we would 
definitely expect and plan on expanding it. However, we need 
the resources to be able to do that.
    We felt it so important to begin this process, even though 
we did not get an appropriation for it. We were not able to do 
it is aggressively as we would have been able to do it 
otherwise. Again, we think that this is critically important to 
the future of the SBA.
    Chair Snowe. So these offices would ultimately be involved 
in outreach and marketing, for example? So they would be 
involved in promoting SBA's programs?
    Administrator Barreto. Absolutely. All district offices do 
that already. What has happened is that by removing some of the 
liquidation processes, and some of the other loan monitoring 
processes that they currently were tasked with, it has freed 
them up. Maybe they only had a fraction of their folks that 
were able to do that. Now that they have freed up a lot of 
people from doing those activities, now it is like they have a 
whole new workforce.
    When I would go out there, they would say ``We need more 
people to do this marketing and outreach.'' But really what 
they needed is to better utilize the people that they had. That 
is what transformation is allowing us to do.
    I will tell you that we are starting to see some great 
results. Miami is up double digits in their loans, technical 
assistance, and the events that they are doing. Phoenix is 
showing some very strong signs, too. Charlotte is coming 
around, as well.
    So it is working, and we want to fast-forward the progress 
across our whole network.
    Chair Snowe. Would you be able to share with the Committee 
some of the results of those pilot programs anytime soon?
    Administrator Barreto. Absolutely. I would be more than 
happy to document exactly, because, in working with them, we 
have come up with some very aggressive, substantive, specific 
goals on how many loans we want to be doing in those areas, how 
many training sessions that we can do for small businesses, 
partnership agreements, we can and do provide opportunities for 
procurement. We have some very specific benchmarks in all those 
areas and I would be happy to provide you with those for each 
one of those district pilots and the progress we are making in 
achieving those goals.
    Chair Snowe. So in making that shift, do they have funding 
for the additional responsibilities? I know that you said that 
they do some of it, but like for outreach and marketing and 
promotion?
    Administrator Barreto. All district offices receive a 
budget to be able to do that, absolutely. But some of these 
activities do not necessarily require a significant amount of 
resources to do the marketing. In other words, if we had 
somebody that was processing forms for 8 hours a day and now 
they do not have to do that anymore, they can go out in the 
field and they can network with Chambers of Commerce and 
business associations, explore partnership agreements, et 
cetera. That is not going to necessarily cost us a significant 
amount of money to allow them to do that. It just frees up the 
time for existing employees.
    Now, a key thing that we need to do is we need to train 
them and transition them into these new activities. We do not 
expect that one day somebody will be processing forms and the 
next day they will be a master marketer.
    Also, it is not to say that every single person will be 
involved in marketing. There are a lot of activities related to 
directly assisting small businesses and that is really we want 
to do.
    As I said, when I talked to the district offices, many of 
our employees would say ``I never get to talk to a small 
business because I am always stuck behind a desk or have all of 
this paperwork I have to do. So I never get out to reach 
them.''
    Chair Snowe. I know that there are some problems that you 
also inherited with respect to accounting problems. I know the 
SBA auditors, after being informed by the GAO of their findings 
regarding the loan asset sales, withdrew their unqualified 
clean opinions for SBA financial statements. I wanted to 
explore some of these issues with you today because obviously, 
if SBA does not have a clean opinion it is going to be very 
difficult to engage in loan asset sales. It affects the 
disaster loan programs.
    This has occurred for three consecutive Fiscal Years, 2000, 
2001, and 2002. I know that SBA has contracted with a private 
company to examine the SBA's financial accounting systems and 
to recommend improvements. What has occurred as a result of 
this work conducted by the private contractor? How long do you 
think it is going to take before they will finalize and 
complete some examination so the SBA can receive an unqualified 
opinion?
    Because otherwise, that is going to be a continuous 
problem. That impacts the overall agency. I am just wondering 
how long it is going to take to rectify this issue so that it 
does not repeat itself?
    Administrator Barreto. Absolutely. I agree with you. When 
we first came in, the SBA actually--what we had been told is 
that we had received very good opinions on all of our 
financials. It was only last year, I believe, that we found out 
that some of those opinions now had to be changed.
    The good news, if we can say that, is that we were able to 
discover this issue and this problem well before the GAO 
report. In fact, we are working very closely with GAO and 
others in the Administration to make sure that we have the best 
financial statements possible. This really speaks to our 
integrity. I agree with you, it is very, very important for the 
agency to have its integrity and to be an agency that is 
credible in everything that it does.
    One of the things that we did immediately is to make some 
changes in our chief financial officer and some of the folks 
that were responsible for these financial reports. We also are 
working very closely with our auditor.
    We do not have the full answers yet, but we have made 
significant progress in looking at this issue and looking at 
this problem. I can't give you a specific date, I promise to 
follow up on that. But I want to tell you that it is going to 
be very soon, sooner than later. They have had a very 
aggressive timetable in being able to resolve these issues.
    The issue gets somewhat complicated because a lot of what 
it has to do with is how the subsidy rate is applied to some of 
these measurements and whether the subsidy rate currently 
applied to disaster loans is even an accurate subsidy rate. 
That is something that we are going to have to determine. We 
are working very closely with our outside contractor and with 
our new chief financial officer to make sure that this is not 
only clarified, but that safeguards are put in place to prevent 
this from ever happening again.
    Again, this is something that is a top priority for me 
because I understand that once you do lose that credibility, or 
if there is any doubt whatsoever--especially when you are 
dealing with the private sector and the markets--that would be 
something that would be very undermining to our mission. Of 
course, we will do everything that we can to prevent that from 
happening.
    Chair Snowe. Obviously, it is the systems in place that are 
resulting in a persistent problem. That is why I think it is 
important to correct them.
    Administrator Barreto. I agree.
    Chair Snowe. And I know that you have taken steps to do so 
and hopefully it is going to be a permanent correction, because 
I know that money has been spent over the last 6 years--for 
example, the loan monitoring system--that obviously were 
overestimates. And that has created huge problems and 
ultimately it undermines the entire program.
    So I do think it is something that needs to be corrected 
sooner rather than later. And I know you understand that. I 
just hope that it can be done.
    Administrator Barreto. It will be done and I want to commit 
to you that it----
    Chair Snowe. Will it be done in the next few months?
    Administrator Barreto. I will give you an exact date on it. 
I want to tell you that we have, as you know, hired a 
contractor. In the end, I believe that we are going to have not 
only a system that works well and does what it is intended to 
do, but that we will have come a long way from where we 
started. There is no doubt that a lot of money was spent, 
probably unnecessarily and unwisely, in the past to get a 
system that we never got and never worked. We did not make the 
problem, but we are going to fix the problem. I assure you that 
we will get you a specific report on our progress to date on 
the loan monitoring system.
    Chair Snowe. We would appreciate that, because ultimately 
it casts a shadow if these problems do not get corrected. And 
ultimately, it is costing money, let alone eroding the 
integrity of the programs. It is fundamental. I hope that we 
can correct it as soon as possible. So would you give a report 
to this Committee on the progress?
    Administrator Barreto. Yes, ma'am.
    Chair Snowe. The same is true for the loan monitoring 
system, and I know this has been a problem since before 1997. I 
understand the SBA has entered into a contract with Dun & 
Bradstreet, is that correct? Is it to establish a loan 
monitoring system?
    Administrator Barreto. Yes, that is right.
    Chair Snowe. What do you expect to result from that 
contract? When do you think they will set up a loan monitoring 
system? Because again, this also seems to be a persistent 
problem. I understand $12 million has been spent since 1997 
internally. And now I know SBA has had to hire an outside 
contractor to get the job done. That contract is worth more 
than $9 million, with a contractor; is that correct?
    Administrator Barreto. Yes.
    The main thing that we expect is to have a loan monitoring 
system that works and to also make sure that it is as cost-
effective and efficient as possible. I believe that is what we 
are embarking upon.
    We have always had a loan monitoring system at the SBA, but 
we always felt that we needed to have something that was even 
more thorough, more effective than what it is that we had 
before. I think that we will have that once our contractor 
finishes the work.
    And again, this is something that I will include in the 
report in terms of the timetable.
    I also want to state that this has been something that we 
have taken a very hard look at. This is something that we 
realized very early-on was going to be a challenge for the SBA 
if we did not get not only our financial situation resolved and 
corrected, but also have an effective loan monitoring system. 
It is one of our highest priorities.
    I want to commend the work our folks have done since those 
problems have been identified. The new team that is in place 
that has really carried the ball very, very far with regards to 
making progress on this. I will not be satisfied until both of 
those issues are corrected and are beyond reproach.
    Chair Snowe. Were all of the SBA's loan guarantee programs 
included in this contract with Dun & Bradstreet? Or were some 
excluded?
    Administrator Barreto. I do not believe that it includes 
every one of the loan programs, but I will double check on 
that.
    Chair Snowe. Would there be a reason why some would be 
excluded?
    Administrator Barreto. I want to verify that, whether the 
disaster loans and the 7(A) loans might be separate. But I will 
definitely check on that.
    Chair Snowe. I hope that there will be a way in which to 
ensure the accuracy of the whole system and to make sure that 
the information that goes into the system is accurate, because 
I understand that also can be a problem.
    Administrator Barreto. Absolutely.
    Chair Snowe. Because the kind of information that you 
provide to Dun & Bradstreet is going to be critical in 
determining the success of establishing this program. It has to 
be the most up-to-date information, the most accurate 
information.
    Administrator Barreto. The integrity of the information is 
key to being able to get the proper reports and the proper 
opinions, and so we will definitely ensure that that happens.
    Chair Snowe. So that effort is underway as well?
    Administrator Barreto. Yes, it is.
    Chair Snowe. Is that something that is recognized by your 
agency?
    Administrator Barreto. Absolutely.
    Chair Snowe. I would like to turn our attention to some of 
SBA's programs. I have had a chance to review some of the 
budget and legislative proposals, and you mention the 7(A) 
program. I know it is basically the same request, based on 
historic levels, of $9.3 billion, I gather.
    During the course of our roundtables, we have had some 
recommendations, obviously by lenders, to expand the program 
because they estimate that there is an increase in demand and 
that demand will exceed the program's capacity.
    What is your opinion about this? I know that you have 
obviously made your recommendation. But do you also think that 
if we were to expand this loan capacity for the 7(A) program 
that it might result in greater number of requests for and the 
demand may exceed even $11 billion? We heard that consistently 
in these roundtables, that there really is a big demand out 
there for these type of loans.
    Administrator Barreto. There has definitely been a big 
demand for SBA loans this year and we are excited about that. 
Let me just put it a little bit in perspective.
    First of all, we are not concerned about running out of 
money in Fiscal Year 2003, even before we made our announcement 
yesterday about the expansion of our budget authority because 
of the econometric model that we applied.
    Compared to this point last year, SBA has reached 10,000 
more small businesses, yet used fewer dollars. Loan approvals 
right now are averaging $40 million a day. We would need to do 
$54 million a day for the rest of the Fiscal Year to run out of 
lending authority, and we do not believe that is going to 
happen.
    Our projections are based on historical lending and we 
think that is very much in line with the usage manifested over 
our recent history. We feel pretty good about where we are at.
    Now, is it possible that we could get a huge uptick in 
demand? Yes, and we hope that happens. But right now, I think 
we are doing pretty well.
    One of the things I mentioned in a previous hearing is the 
fact that we were actually concerned prior to the SBAExpress 
Program really taking off because we had about 13 percent of 
our borrowers absorbing 50 percent of our budget authority. In 
other words, one of the reasons that we would have run out of 
money is the fact that so many large loans were coming out of 
the 7(A) loan program. It does not mean that we do not want to 
do large loans in the 7(A) program, but we have other programs 
like the 504 program, which are very well situated to do those 
larger real estate loans.
    As of right now, we feel that we are in a pretty good place 
and we monitor the situation daily. So it is not something that 
would sneak up on us.
    Chair Snowe. So you do not believe that a higher program 
level would lead to different behavior or greater demand?
    Administrator Barreto. It just has not, again, over the 
last few years. We are having a banner year this year, but we 
just do not see it. I think that historically we have been 
running in that $9 billion to $10 billion level. That is where 
we will be at this year. I think it is pretty safe to say that 
we will probably be there next year, as well.
    Chair Snowe. What I have also noticed is that there is a 
difference between the assessments made by the industry and 
those made by SBA. Is there reason? What accounts for that 
discrepancy? It just seems to be a major difference in 
assessments about what will result.
    Administrator Barreto. One of the things that we were very 
excited about was that when we talked about making these 
changes to the SBAExpress Program and making it easier for 
lenders to participate in this program, many people said to us 
``Well, it is not going to happen, the lenders are not going to 
be interested, they will not do the smaller loans, et cetera.''
    The exact opposite has happened. We are getting tremendous 
response from the lenders saying that they really like the 
SBAExpress Program. They like being able to do these smaller 
loans. They do not mind--in fact, they like the changes that we 
made in the SBAExpress Program.
    By the way, these changes did not come out of SBA's great 
ideas office. We do not have a great ideas office. It came from 
doing lender roundtables. It came from talking to the lenders 
and asking them what they wanted. What they told us that they 
wanted was what we provided them. And you know the old saying 
``the proof is in the pudding.'' They are really responding to 
it.
    Chair Snowe. How do you assess the growth in demand? What 
tools do you use to make that estimate, especially now? I was 
just thinking that given the state of our economy and the fact 
that small business really is responsible for 75 percent of the 
job growth in America, and continues to really be the engine 
that drives the economy.
    So would it not be wise and prudent to invest more in 
expanding the loan capabilities of SBA programs because 
ultimately they will lead to greater job creation?
    Administrator Barreto. I agree with that, but I also agree 
with the advice you give us about doing more outreach because 
that is what will create the demand. We do not have that level 
of demand right now, but we want to get that level of demand. 
One of the things that we think will be vitally important, is 
to enlarge our network--in other words, if we have more people 
that are offering SBA loans, I think that is going to generate 
more demand.
    That is why we made the changes to SBAExpress--to attract 
more lenders--lenders that we did not have before, especially 
small lenders, community lenders, rural lenders. We thought 
that was very important. We thought the change we made to our 
regulations to allow 1,500 potential new distributors of SBA 
products, credit unions, was important. That is a new change 
and we are working with the credit unions to get more and more 
of them involved.
    But I think it is also going to be necessary to create the 
awareness. That will create the demand for our products and 
services.
    A lot of times, I like to say small businesses do not know 
what they do not know. It is not their fault, they are busy. So 
we need to get out there and make sure that they are aware of 
that.
    Once we make them aware of what the SBA does and how it can 
help them, they also need to have confidence in us. A lot of 
times when we have talked to small businesses they have a 
perception that it is going to take a long time, it is going to 
cost a lot of money, it is going to be very complicated. ``I 
can take a `yes,' I can take a `no,' but the `maybe' kills 
me.''
    We are trying to change that perception. I think the 
experience we are seeing right now at the SBA with our loan 
activity, percentage increases in every major demographic, 
especially the fastest growing segments of small business, 
reflects on our future and our ability to be successful in all 
of our loan programs.
    Chair Snowe. What if you are so effective in the outreach 
and you do not have the loan capacity to meet that demand?
    Administrator Barreto. That has not happened to us yet.
    Chair Snowe. You do not think it is going to happen? I know 
it is the chicken and the egg, you do not know if having money 
there is going to make the difference in being able to attract 
more lenders and participants in the program. Or the fact that 
you do not have the moneys creates a deterrent.
    Administrator Barreto. We have a program called the 504 CDC 
Program. It is a great program. We have budget authority for 
$4.5 billion. We believe that many, many small businesses could 
take advantage of that program as well.
    But every year we leave a couple of billion dollars in 
budget authority for the 504 Program on the table. What that 
tells us is we have got to restructure the way that we 
distribute 504s. We have to change the way that we communicate 
about that program. We have to make it easier for people to 
take advantage of that program. We need to make it a win-win 
situation for our partners. It is a perfect example.
    One of the things that I am very confident of is that the 
SBA has never run out of money to make these loans, and I do 
not believe that we will. We will work very closely with you 
and monitor the situation so if it does become a situation 
where we do need to expand the budget authority, we can.
    Chair Snowe. I agree with you on the SBAExpress Program. I 
have heard a lot of positive feedback on that program. I think 
again, it goes back to being innovative and streamlining the 
program and making it easier.
    One of the things that we did hear in the roundtables was 
the burden of paperwork under the 504 Program. And people just, 
in fact, demonstrated this burden by bringing in the amount of 
paperwork necessary to fill out. I agree, it does become a huge 
handicap to participate in some of these programs. So where we 
can enhance and expand efficiencies, we ought to. So I applaud 
you for doing that.
    Is there any improvements we can make in the 7(A) loan 
processing program, drawing on lessons from the SBAExpress 
Program?
    Administrator Barreto. We are definitely looking at 
different things that we can do there. Again, anytime that we 
can minimize the process we will try to do so--by the way, this 
is one of the things the lenders told us. They said ``Look, we 
would be willing to take less of a guarantee if you could allow 
us to do these loans quicker because time is money for us.'' So 
we did that with the SBAExpress Program.
    But we are looking at all of our loan programs to see if we 
have the ability to be able to do that, to make them much more 
streamlined and easier. It needs to be a win-win situation for 
our partners. We depend on our partners to be able to 
distribute these products. We cannot do it without them.
    So, on all of our programs we will continue to take a very 
hard look at what we can do to get better. We are not satisfied 
we are even close to being done with improvements that can be 
made to our programs.
    Chair Snowe. I am going to ask you several more questions. 
We have a vote and since I am the only one here, I will finish 
up.
    But there are several more questions here. The women-owned 
business program is one of my interests in trying to create 
very coordinated, cohesive programs. And my legislation is 
seeking to address that as well.
    And also, to put it on the same model as the Small Business 
Development Centers Program. I have introduced legislation that 
will ensure that we can have some continuity, especially with 
the expiration of the sustainability grants.
    I hope that you would look at that approach. I want to work 
with you because I do think we should be making sure that all 
of these programs are cohesive and they work well together.
    Administrator Barreto. We would definitely look forward to 
not only working with you, but really coming up with some very 
good solutions on behalf of women business owners. This is 
something that is very important to us.
    Women business owners are the fastest growing segment of 
small business. They are already 40 percent of all businesses 
and they are doing some incredible things. So we want to make 
sure that we are doing everything that we can to surround them 
with all the tools that they need to succeed.
    I know that our staffs are working closely together on 
this. I believe there are some meetings coming up tomorrow and 
the next day. And you have our commitment that we will work 
closely with you to come up with the best solutions for women 
business owners.
    Chair Snowe. I appreciate that and am looking forward to 
working with you on it because I want to ensure that they are a 
permanent part of the landscape for small business. They truly 
do work well in providing counseling and the resources and 
support and it is something we ought to encourage since they 
are the fastest growing segment of our economy, women-owned 
businesses. So it truly is important to the future of our 
economy.
    On contract bundling, and on the issues of contracting in 
general--and there are a lot of issues there, however, I will 
not get into all of them today.
    Suffice it to say that there are some issues that we need 
to explore on that front. But I know one of the issues that 
came up during the course of the March 2003 hearing was the 
issue that some of these large companies that received 
contracts having been certified as small businesses, and during 
the course of the contract ended up becoming a large company 
and they still happen to be on the federal database as small 
businesses.
    In fact, the same companies that were reviewed by GAO 
continue to be listed on PRONet in the central contractor 
registration database.
    Why is it that they continue to be on that list when they 
no longer qualify as a small business?
    Administrator Barreto. This is also a very important issue, 
because I think it has become a perception problem and we are 
very concerned about this perception, that big businesses are 
taking contracts away from small businesses--we want the exact 
opposite to be happening. We want small businesses to get more 
access to the $230 billion procurement pie. And we are working 
very hard to ensure that with a number of our initiatives.
    What happens is I think it gets a little complicated in the 
sense that sometimes folks may misperceive what the PRONet 
system is intended to be. It is a directory, not a 
certification program.
    Having said that, one of the other things that we 
experienced is that when the PRONet and CCR got merged together 
late last year, there were some glitches. There were some large 
companies that ended up appearing in there.
    I will tell you that we have removed 600 of those 
companies. Now there are approximately anywhere from 180,000 to 
200,000 firms that are listed on the PRONet directory. We are 
constantly looking at it and scrubbing it.
    But this issue is very important. In fact, we sent a letter 
very recently to all of the procurement departments of each 
federal agency, letting them know of this issue.
    This is also something that we have now put on our website 
as a warning to those large businesses that put themselves on 
there, explaining what the ramifications and applications will 
be.
    Another one of the reasons it gets complicated is sometimes 
a small business will be registered on the PRONet and they will 
qualify as a small business for certain types of procurements. 
However, there are other types of procurements where these 
businesses are no longer considered small business.
    Also, sometimes a small business will go on PRONet, get a 
contract, and the next day will not be a small business based 
on our standards.
    We are putting a number of different measures in place, not 
only to police it, but to make sure that the information that 
is on PRONet is accurate and responsible.
    Chair Snowe. Are there any penalties involved, at this 
point? Because I think there is something to be said about 
creating incentives so this does not occur.
    Administrator Barreto. There are a number of different 
penalties, again depending on what the actual infraction is. If 
it is a large business that has purposely and willfully 
misrepresented themselves, there could be criminal penalties. 
But oftentimes what will happen to a small business, if they 
are doing it on a regular basis, they may be delisted and never 
be allowed on the register, and prohibited from doing any kind 
of procurement.
    When I was in business, one of the best policing methods is 
other business owners banning together. If you are going up 
against a contract with a big business and you lose out to that 
big business, believe me, the small business will protest and 
make it known that they lost this contract to a big business.
    Again, the purpose of PRONet is not to certify that these 
are small businesses. It is to list them. There are auto-
certifications, self-certifications that are going on there.
    Having said that, we are being very vigilant about removing 
any large businesses that should not be there, and we have 
already removed 600.
    Chair Snowe. Is it true that federal regulations generally 
permit a company to remain as a small business, I mean to be 
certified as a small business, through the life of the contract 
even though they now have become a larger business?
    Administrator Barreto. One of the things that we have done 
is we have submitted a proposed regulation to mitigate that. It 
is true for some small businesses, especially with what has 
happened in procurement reform over the last 10 years. In the 
old days, I guess, it was not so common to see these 10- and 
20-year contracts. However, our own regulation has not kept 
pace with the changes that have occurred in procurement.
    One of the things we find is a small business has been 
awarded a contract, and maybe they were small before and now 
they are large, that agency will not be able to get credit for 
small business goals if that business is no longer a small 
business.
    Chair Snowe. I appreciate it, Mr. Barreto, for your 
willingness to be here today and I am looking forward to 
working with you during this reauthorization process, with you 
and your staff, and doing all that we can to ensure that we can 
improve upon the programs and making sure that they continue to 
serve small businesses for the year to come.
    I know that you have also expressed a desire to expand the 
authorization from 3 to 6 years. Obviously, I have some 
concerns about that because of our responsibilities with 
respect to conducting oversight on these programs. So it is 
something we will weigh.
    But generally, the 3 years seems to be a reasonable period 
of time in which to be able to examine some of these programs. 
Whereas you get 6 years, and it becomes far more difficult to 
make the kind of changes that may be necessary during such a 
longer period of time, doing the authorization. But that is 
something we can continue to discuss.
    I am looking forward to working with you and all the 
stakeholders involved in developing these programs and the 
reauthorization. We hope to move forward with this legislation.
    The record will remain open for an additional week, to June 
11th, for anybody who has additional questions or comments. We 
certainly invite them to be submitted within the record.
    I appreciate all of your cooperation, Mr. Barreto, and I am 
looking forward to working with you and to make sure that we 
can be very efficient and expeditious throughout this 
reauthorization process and be hopefully concluded in a timely 
basis. That is certainly my intention and I am going to do 
everything that I can to make sure that that process works.
    Administrator Barreto. Thank you very much, Madam Chair.
    Chair Snowe. I thank you very much for your cooperation.
    Administrator Barreto. I appreciate your leadership and 
your support of small businesses. Thank you very much.
    Chair Snowe. Thank you. This hearing is adjourned.
    [Whereupon, at 3:06 p.m., the hearing was adjourned.]

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