    [House Hearing, 113 Congress]
    [From the U.S. Government Publishing Office]

     ENTREPRENEURIAL ASSISTANCE: EXAMINING INEFFICIENCIES AND DUPLICATION
                            ACROSS FEDERAL PROGRAMS

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

                                    HEARING

                                   before the

                          COMMITTEE ON SMALL BUSINESS
                                 UNITED STATES
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  HEARING HELD
                                 MARCH 20, 2013

                                   __________

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                Small Business Committee Document Number 113-007
                  Available via the GPO Website: www.fdsys.gov

                                    _____

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                       HOUSE COMMITTEE ON SMALL BUSINESS

                         SAM GRAVES, Missouri, Chairman
                               STEVE CHABOT, Ohio
                                STEVE KING, Iowa
                             MIKE COFFMAN, Colorado
                           BLAINE LUETKEMER, Missouri
                         MICK MULVANEY, South Carolina
                             SCOTT TIPTON, Colorado
                       JAIME HERRERA BEUTLER, Washington
                            RICHARD HANNA, New York
                             TIM HUELSKAMP, Kansas
                           DAVID SCHWEIKERT, Arizona
                           KERRY BENTIVOLIO, Michigan
                            CHRIS COLLINS, New York
                            TOM RICE, South Carolina
                   NYDIA VELAZQUEZ, New York, Ranking Member
                             KURT SCHRADER, Oregon
                            YVETTE CLARKE, New York
                              JUDY CHU, California
                            JANICE HAHN, California
                         DONALD PAYNE, JR., New Jersey
                              GRACE MENG, New York
                            BRAD SCHNEIDER, Illinois
                              RON BARBER, Arizona
                        ANN McLANE KUSTER, New Hampshire
                            PATRICK MURPHY, Florida

                          Lori Salley, Staff Director
                        Paul Sass, Deputy Staff Director
                          Barry Pineles, Chief Counsel
                      Michael Day, Minority Staff Director

                                C O N T E N T S

                               OPENING STATEMENTS

                                                                       Page
    Hon. Sam Graves..................................................     1
    Hon. Nydia Velazquez.............................................     2

                                   WITNESSES

    William B. Shear, Director, Financial Markets and Community
      Investment, U.S. Government Accountability Office, Washington,
      DC.............................................................     4
    Michael A. Chodos, Associate Administrator for Entrepreneurial
      Development, Office of Entrepreneurial Development, U.S. Small
      Business Administration, Washington, DC........................     5
    Doug O'Brien, Deputy Under Secretary for Rural Development,
      United States Department of Agriculture, Washington, DC........     7

                                    APPENDIX

    Prepared Statements:
        William B. Shear, Director, Financial Markets and Community
          Investment, U.S. Government Accountability Office,
          Washington, DC.............................................    28
        Michael A. Chodos, Associate Administrator for
          Entrepreneurial Development, Office of Entrepreneurial
          Development, U.S. Small Business Administration,
          Washington, DC.............................................   152
        Doug O'Brien, Deputy Under Secretary for Rural Development,
          United States Department of Agriculture, Washington, DC....   157
    Questions and Answers for the Record:
        Mr. William Shear............................................   163
        Mr. Michael Chodos...........................................   167
        Mr. Doug O'Brien.............................................   177
    Additional Material for the Record:
        Memorandum of Understanding between the U.S. Small Business
          Administration and the U.S. Department of Agriculture......   189
        C.E. Rowe, President/CEO, Association of Small Business
          Development Centers........................................   195

     ENTREPRENEURIAL ASSISTANCE: EXAMINING INEFFICIENCIES AND DUPLICATION
                            ACROSS FEDERAL PROGRAMS

                                  ----------

                           WEDNESDAY, MARCH 20, 2013

                      House of Representatives,
                   Committee on Small Business,
                                                        Washington, DC.
        The Committee met, pursuant to call, at 1:02 p.m., in Room
    2360, Rayburn House Office Building, Hon. Sam Graves [Chairman
    of the Committee] presiding.
        Present: Representatives Graves, Chabot, Luetkemeyer,
    Tipton, Hanna, Huelskamp, Schweikert, Collins, Velazquez,
    Schrader, Clarke, Chu, Payne, and Murphy.
        Chairman Graves. Good afternoon, everyone. I call this
    hearing to order, and I want to thank everyone for being with
    us today.
        Today America's national debt has surpassed $16.7 trillion,
    and, according to the Congressional Budget Office, each of the
    past 4 years, Federal spending has been between $3.5 trillion
    and $3.6 trillion. It is Congress' duty to put our fiscal house
    in order, reduce spending, and stabilize our debt to ensure
    prosperity in our Nation for future generations.
        In order to do this, we must ensure that taxpayer dollars
    are being spent wisely and not on overlapping, fragmented,
    wasteful, or duplicative Federal programs. It is this
    Committee's job to examine each Federal program that claims to
    help entrepreneurs, with a specific focus on the Small Business
    Administration, to ensure that necessary programs remain intact
    while advocating for the elimination of those that are
    redundant and ineffective.
        Unfortunately, it has become clear that the numerous
    entrepreneurial assistance programs run by the Federal
    Government are all engaging in similar activities with no true
    metrics to determine which programs are truly beneficial to
    entrepreneurs. Recent reports by the Government Accountability
    Office have identified 52 programs across 4 agencies aimed at
    helping entrepreneurs, but agencies are not adequately
    measuring the effectiveness and collaboration among these
    agencies is lacking. That makes figuring out what is helpful
    and what should be consolidated and what should be cut much
    more difficult.
        On this Committee, we understand the value of encouraging
    entrepreneurs and facilitating the creation of new businesses.
    However, I am very skeptical that all 52 Federal programs aimed
    at entrepreneurs are having a significant enough impact to
    justify their costs. And a further question, how any individual
    seeking to start a small business can look at 52 programs and
    know which is best suited for them or how the different
    programs fit together. I certainly can't imagine having the
    time to focus on establishing a company while navigating a
    disjointed maze of fragmented and overlapping Federal programs.
        And let me be clear about this: There is an immediate need
    to reduce the Federal budget, but even if the United States
    were not facing staggering debt levels, program inefficiencies
    would need to be eradicated to ensure entrepreneurs were
    receiving the best help.
        Today I hope our witnesses can shed light on some of these
    programs and comment on the GAO's findings.
        I thank all of you for taking time out of your busy
    schedules to be here.
        And I now yield to Ranking Member Velazquez for her opening
    statement.
        Ms. Velazquez. Thank you, Mr. Chairman.
        Across the Federal Government, departments, agencies, and
    bureaus of all sizes are working to help small businesses.
    Their efforts run the gamut from providing loans to farmers, to
    helping manufacturers gain access to foreign markets, to grants
    improving infrastructure.
        Many of these programs have become essential to our
    Nation's small businesses. However, others have been proven
    less necessary, duplicative, and even wasteful. Ensuring that
    these programs work better together is important, not just for
    taxpayers but also for small businesses that depend on them.
        In administering these programs, it is critical that
    agencies maximize efficiency and minimize waste. In practice,
    this means ensuring that rules and regulations are clearly
    articulated, that a framework for evaluation is in place, and
    that the initiatives are not simply mirroring other agencies'
    work.
        It is imperative that programs are continually evaluated,
    and it should not take a fiscal crisis to do so. This
    Committee, both Democrats and Republicans, have repeatedly
    pinpointed programs at SBA that are wasteful and duplicative,
    irrespective of budgetary politics. Our views and estimates
    have annually identified ten of millions in wasteful spending
    that could be reinvested in other valuable programs.
        GAO has also been a regular in this room, as their reports
    have shown that waste, fraud, and abuse are all too common
    within the agency. From the HUBZone programs, to disaster
    lending, to coordination between the SBA and Agriculture, the
    GAO has recommended improvements, many of which have been
    enacted into law.
        Today I am looking forward to not only hearing GAO's
    recommendations about government-wide coordination of
    entrepreneurial assistance programs but also the reactions of
    the SBA and USDA. Oversight is not only a responsibility of
    Congress but also for the agencies we oversee. And in this
    case, for this Committee, it means the Small Business
    Administration.
        Unfortunately, in this regard, the agency has not met
    expectations. It has established and authorized pilot programs
    without any performance measures. While these initiatives cost
    taxpayers millions of dollars, the agency has failed to use
    objective metrics to quantify their success or failure.
        In the last 3 years, SBA requested funds for seven pilot
    programs, including the Small Loan Advantage and Community
    Advantage programs, the Impact Investing and Early-Stage
    Innovation Fund, regional clusters, the Distance Learning
    Portal, and the Emerging Leaders programs. The last three of
    these alone cost $50 million. That is more than what we spent
    on the Women's Business Centers, an initiative that is
    authorized, has performance measures, and is regularly overseen
    by Congress. While the original intent may be admirable, once
    launched, these pilot programs often take on a life of their
    own, drawing funds away from proven initiatives.
        Even among programs that we know work, there is a need for
    better harmonization. In its recent report, GAO found that
    agencies do not coordinate their services. If they did, the
    government could lower administrative costs and leverage each
    program's unique strengths.
        Steps must be taken to ensure that agencies are conducting
    meaningful evaluations of their initiatives rather than simply
    checking the box. If a program is not working, it should either
    be fixed or defunded. Doing so will ensure taxpayers get the
    biggest bang for their buck and, equally important, that small
    businesses' needs are met. Today, reducing duplication and
    improving performance are not just nebulous, bureaucratic
    catchphrases. When applied, they mean better services for
    entrepreneurs and greater job creation for the economy.
        Everyone here recognizes the importance of entrepreneurship
    to our economic recovery. As we seek ways to make economic
    development programs more efficient, we cannot afford to
    shortchange small businesses. Instead, our goal should be
    ensuring that these programs work in concert together,
    delivering small businesses the help they need.
        I look forward to today's testimony, and I thank all the
    witnesses for being here.
        Thank you, Mr. Chairman. I yield back.
        Chairman Graves. Thank you very much.
        Our first witness Bill Shear, the Director of Financial
    Markets and Community Investment at the Government
    Accountability Office.
        And, Mr. Shear, I know you testified before our
    Subcommittee on Contracting and the Workforce just yesterday,
    so we appreciate you coming to the Hill twice in 1 week. Thank
    you very much. Look forward to hearing from you.

    STATEMENTS OF WILLIAM B. SHEAR, DIRECTOR, FINANCIAL MARKETS AND
     COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE,
     WASHINGTON, D.C.; MICHAEL A. CHODOS, ASSOCIATE ADMINISTRATOR
      FOR ENTREPRENEURIAL DEVELOPMENT, OFFICE OF ENTREPRENEURIAL
     DEVELOPMENT, U.S. SMALL BUSINESS ADMINISTRATION, WASHINGTON,
         D.C.; DOUG O'BRIEN, DEPUTY UNDER SECRETARY FOR RURAL
     DEVELOPMENT, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.

                     STATEMENT OF WILLIAM B. SHEAR

        Mr. Shear. Okay. And thank you. And so the joke about it
    is, I was in the same chair yesterday, and it is really quite
    comfortable. So, at any rate, thank you very much.
        Chairman Graves, Ranking Member Velazquez, and members of
    the Committee, I am pleased to be here this afternoon to
    discuss our work on economic development programs that provide
    entrepreneurial assistance. This statement is based on our
    report issued in August 2012 and information we have received
    from the four agencies since our report's issuance.
        We reported information on 52 programs at SBA, USDA Rural
    Development, Commerce, and HUD. In summary, we found the
    following.
        First, Federal programs that support entrepreneurs are
    fragmented and overlap based on the type of assistance they are
    authorized to offer, such as financial and technical
    assistance, and the type of entrepreneur they are authorized to
    serve. Much of the overlap among these programs tends to be
    concentrated among programs that provide a broad range of
    technical and financial assistance.
        In addition, while agencies have taken steps to collaborate
    more in administering these programs, they have not implemented
    a number of good collaborative practices we have previously
    identified. And some entrepreneurs struggle to find the support
    they need. The GPRA Modernization Act's crosscutting framework
    requires that agencies collaborate in order to address issues
    such as economic development that transcend more than one
    agency. And it directs agencies to describe how they are
    working with each other to achieve their program goals.
        As my second summary statement, I will offer the following:
    Agencies do not track program information on entrepreneur
    assistance activities for many programs--a practice that is not
    consistent with government standards for internal controls.
        In addition, we found that 33 of the 52 programs had set
    goals for their programs, but 19 of these 33 programs did not
    meet any of their goals or only met some of their goals.
    Further, agencies have conducted evaluations of only 20 of the
    52 active programs since 2000. As a result, information on
    program efficiency and effectiveness is limited, and scarce
    resources may be going toward programs that are less effective.
        The GPRA Modernization Act requires agencies to set and
    measure annual performance goals and recognizes the value of
    program evaluations because they can help agencies assess
    programs' effectiveness and improve program performance. In
    summary, without enhanced collaboration and coordination, as
    well as more robust program information, agencies may not be
    able to administer programs in the most effective and efficient
    manner.
        Based on our findings, we recommended that the four
    agencies and OMB explore opportunities to enhance collaboration
    among programs both within and across agencies and that the
    four agencies track program information and conduct more
    program evaluations. The agencies neither agreed nor disagreed
    with the recommendations but did provide information on their
    plans to address our recommendations.
        Chairman Graves and Ranking Member Velazquez, this
    concludes my prepared statements. I look forward to answering
    questions you may have.
        Chairman Graves. Thank you, Mr. Shear.
        Our next witness is Michael Chodos. He is the Associate
    Administrator for Entrepreneurial Development within the Office
    of Entrepreneurial Development at the SBA. In this capacity,
    Mr. Chodos is responsible for overseeing SBA's counseling and
    training programs for entrepreneurs.
        And I appreciate you being with us today.

                     STATEMENT OF MICHAEL A. CHODOS

        Mr. Chodos. Thank you.
        Chairman Graves, Ranking Member Velazquez, and
    distinguished members of the Committee, thank you for inviting
    me to testify about the Small Business Administration's work to
    enhance collaboration, avoid duplication, and improve data
    tracking within our entrepreneurial assistance programs. I look
    forward to discussing our extensive collaboration with other
    Federal agencies and our ongoing efforts to evaluate our own
    programs and to make them more streamlined, effective, and
    efficient.
        Entrepreneurs are the foundation of America's economic
    success, and SBA is there with the services and support small
    businesses need to start, grow, and create jobs. In the past
    year alone, SBA and its resource partners counseled and trained
    over 1 million small businesses and helped thousands of new
    businesses start.
        SBA and its network of lenders also supported over $30
    billion in loans to small businesses through its 7(a) and 504
    loan programs, and we helped agencies across the Federal
    Government to put over $90 billion in Federal contracts in the
    hands of small businesses. SBA also leveraged a record $3.3
    billion in capital for small businesses through the SBIC
    program and, since 2009, has supported over $3.3 billion in
    lending in our export loan programs.
        To implement its programs and disaster support services,
    SBA connects directly with small businesses in communities
    across America. It does so directly through its nationwide
    network of SBA district offices, Small Business Development
    Centers, Women's Business Centers, SCORE chapters, and Veterans
    Business Opportunity Centers.
        And because of so many of SBA's programs are delivered in
    partnership with others, we also help small businesses every
    day by collaborating with our very large network of private
    lenders, microlenders, and investment funds in our lending and
    capital programs, with Federal and State partners in our
    procurement, Small Business Innovation Research, and export
    programs, and with university and nonprofit partners in several
    of our innovative programs for supporting veterans
    entrepreneurship.
        We work collaboratively every day to break down silos and
    to work effectively with our Federal, State, and private-sector
    partners. But we know that there are always further
    opportunities to use taxpayer dollars wisely and to make things
    simpler and easier for our small-business constituents. We know
    that navigating the Federal Government and its many programs
    and services can be daunting to a small business.
        For that reason, SBA and our network of partners act as the
    front door to Federal support for small businesses. We help
    them access our own programs and services and also act as a
    community-based and online guide to help small businesses get
    the help they need from whichever Federal, State, or local
    partners can serve that small business best.
        Over the past several years, SBA has focused intensively on
    opportunities for improving collaboration and coordination
    within its own network. We want to make sure that network is
    operating as efficiently and collaboratively as possible.
        SBA has participated in and led efforts to collaborate and
    share resources with USDA, Department of Commerce, and HUD. For
    example, SBA has been working with the Department of Commerce
    and numerous other Federal agencies on developing Business-
    USA.gov, the comprehensive one-stop platform for businesses
    looking to access information, resources, programs, and
    services available through the Federal Government.
        While more work remains to be done, I am very proud of our
    accomplishments and progress in the area of collaboration to
    date. A great deal of the credit should go to our SBA district
    office leadership; national, State, and local leadership in our
    SBDC, WBC, and SCORE networks; and our cluster administrators
    and other partners.
        In addition to our work fostering collaboration within our
    own SBA family and with other agencies, the agency has been
    working intensively on ways to improve the measurement and
    evaluation of our programs. Starting in 2012, OED, which is the
    office which I lead at the agency, undertook a comprehensive
    modernization project for our resource partner data-collection
    system, known as EDMIS, to enhance current data fields, improve
    budget and performance integration capabilities, and expand
    reporting capabilities.
        Additionally, we are also working with all of our resource
    partners to identify and align all of our respective surveying,
    polling, and impact-study methodologies to harmonize the data
    collected through these efforts and to have a coordinated set
    of data sources between the agency and its partners.
        In closing, I want to thank you for the opportunity to
    testify before you today. SBA, its resource partners, and its
    many lending, Federal-sector, and other partners share the
    common goal of collaborating and supporting and strengthening
    America's 28 million small businesses. Through enhanced
    collaboration, improved metrics, and new service delivery
    tools, we are building an entrepreneurial ecosystem for the
    21st century and beyond.
        I look forward to answering any questions you may have.
    Thank you.
        Chairman Graves. Thank you, Mr. Chodos.
        Our final witness is Doug O'Brien, who is the Deputy Under
    Secretary for Rural Department at the U.S. Department of
    Agriculture. Mr. O'Brien was appointed to this position in
    August of 2011 and oversees efforts to promote economic
    development throughout our rural communities.
        Mr. O'Brien, I apologize I wasn't able to meet with you on
    Monday. My flight was delayed. But I appreciate you making the
    effort, and welcome to the Committee.

                       STATEMENT OF DOUG O'BRIEN

        Mr. O'Brien. Chairman Graves, Ranking Member Velazquez and
    members of the Committee, thank you for this opportunity to
    appear before the committee to discuss USDA Rural Development's
    role in supporting economic development of our Nation's rural
    communities.
        Since 2009, President Obama's support for rural America has
    brought about historic investment in rural communities that has
    made rural America stronger and more vibrant. Rural development
    has directly invested or guaranteed more than $131 billion over
    the last 4 years in broadband, businesses, housing, safe water,
    community facilities, and more that have benefitted not only
    the communities our agency serves but the Nation's overall
    economy.
        In fact, we view rural development programs as building
    blocks for a successful rural economy. Quality infrastructure
    encourages business and economic growth, which, in turn,
    encourages housing development to serve the influx of new
    employees and leads to additional necessities such as schools,
    hospitals, and emergency resources. Our programs address all of
    these needs.
        Congress had the forethought to strategically place
    comprehensive programs for rural America in one agency, USDA
    Rural Development. Perhaps most importantly is how Rural
    Development provides these critical programs: with more than
    400 offices in rural communities across the country that
    provide us the ability to work directly with stakeholders that,
    many times, do not have the capacity to otherwise access
    Federal programs.
        To make sure that the community economic development
    mission is met, we have always looked for opportunities to
    collaborate with other agencies to get the best results
    possible in rural communities. Engaging with members and
    stakeholders on the White House Rural Council has opened doors
    to improved cooperation.
        Last summer, I participated in the Regional Innovation in
    Rural America forum to develop strategies for leveraging
    infrastructure investments in rural communities that create
    jobs and boost economic development. Two programs highlighted
    in this forum were the Rural Jobs and Innovation Accelerator
    Challenge and the Stronger Economies Together initiative.
        The Rural Jobs and Innovation Accelerator Challenge
    leverages existing financial and technical assistance resources
    from 13 Federal agencies and bureaus. To date, projects across
    12 States have received Federal funding to help strengthen
    regional industry clusters by identifying and maximizing local
    assets, connecting to regional opportunities, and accelerating
    economic and job growth across rural regions.
        Meanwhile, the Stronger Economies Together, or SET,
    initiative enables rural communities and counties to work
    together to implement multicounty economic blueprints to build
    on a region's current and emerging strengths. Rural Development
    launched this initiative with land-grant university partners
    and Regional Rural Development Centers 2 years ago. SET is now
    active in nearly 40 regions in 19 States.
        Over the past year, we have further strengthened our
    collaborative efforts with the Small Business Administration.
    We held a series of USDA and SBA joint roundtables across the
    country focused on increasing investment in rural communities.
    The meetings have presented opportunities to hear from
    stakeholders at both agencies about the challenges and benefits
    of investing in rural America.
        In response to these discussions, leaders from our rural
    business team have been meeting with SBA to increase
    microlending availability to rural constituents. We determined
    from these roundtables that there are substantial amounts of
    resources and revolving funds created through several of our
    programs that are available for increasing investment in rural
    communities. We are actively pursuing the relending of these
    funds.
        Participants in these discussions include our revolving
    fund partners SBA, SBA Certified Development Companies, Small
    Business Development Centers, commercial lenders, and other
    community and economic development stakeholders. This is
    important in light of the challenges entrepreneurs face getting
    financing in rural areas, where lenders are often small and
    less likely to shoulder the risk alone, particularly during an
    economic downturn.
        Building on these successes, USDA signed an MOU with the
    American Association of Community Colleges to strengthen rural
    economies throughout the Nation. National, State, and local
    staffs around the Nation are diligently working to find ways to
    coordinate with stakeholders and colleagues in other Federal
    agencies to leverage resources and create jobs.
        For example, a USDA Rural Development in California has
    recently joined into a memorandum of understanding with the
    California Community Colleges Chancellor's Office. In
    conjunction with this effort, the two agencies are partnering
    with local community colleges and small-business development
    centers to present capital readiness events throughout the
    State, and these events provide information and resources for
    small businesses seeking financing.
        These are just a few of the examples of USDA's
    collaborative efforts with other agencies across Federal
    Government to support rural communities that are fostering
    economic development. Leveraging Federal resources to more
    effectively support economic development efforts continues to
    be an agency best practice.
        I am proud of our record of collaboration and meeting
    increased demand for our services in the face of declining
    funding levels and significant staffing losses. In spite of
    those challenges, Rural Development has been able to maintain a
    unique connection to rural America, a connection like no other
    Federal agency, by aggressively implementing the Secretary's
    Blueprint for America and Rural Development's economic
    development strategies.
        I appreciate the opportunity to join my colleagues from SBA
    and GAO to testify before members of the Committee today, and I
    welcome the chance to answer your questions. And thank you for
    your support for Rural Development programs.
        Chairman Graves. Thank you very much, Mr. O'Brien.
        We are going to start with Mr. Huelskamp.
        Mr. Huelskamp. Thank you, Mr. Chairman.
        Mr. Shear, I appreciate your returning to the Committee. I
    also appreciate the brevity. You had a minute, 25 left in your
    time--well recognized for that.
        But I have a follow-up question, particularly a tough one.
    And if we are looking at these programs, and, again, many
    different programs across multiple agencies, are we able to
    compare the performance or efficiencies of these programs one
    to another?
        Mr. Shear. It is a very good question, and it is a very
    difficult question. And the general answer to that is no.
        Each program has program metrics looking at the attainment
    of certain goals, which there are some differences among them,
    but the idea is that those metrics provide an opportunity to
    track outputs over time, such as number of businesses assisted,
    things of that nature. So they are more output-oriented, but
    they don't get to the issue of the effectiveness of the
    programs.
        And this is one reason why we say that especially for the
    programs that don't meet their goals, but even those that do,
    evaluation is important, where you are trying to benchmark to
    some degree what would happen without the program and saying,
    how well does the program work at serving its particular
    mission, such as training and counseling, and how well does it
    help the small businesses that participate in training and
    counseling, is one example.
        Mr. Huelskamp. And so, well, how do we then--does that mean
    that we just don't have the data? We are on the other side of
    the table. I mean, we have a multitude of programs here, two
    different agencies represented today. And it is time to pick or
    choose, when we have a $16.7 trillion deficit. You are telling
    me that even if we don't have the data or even if we did have
    the data to collect it, we still couldn't compare it and say,
    hey, this program is something worth keeping compared to
    another program?
        Mr. Shear. There are some indications--there is some
    information that can be available to look at the usefulness,
    some programs better than others. As it happens, there is
    better information on the three counseling and training
    programs at SBA than other programs, but, really, there is
    generally a lack of information.
        To give you an example, when we issued our GAO-wide report
    last year, we thought we would be making a recommendation to
    Congress, what we call a matter for consideration, to tie
    funding more closely to demonstrate effectiveness. But based on
    further evaluation on our part, we decided that was premature
    because the first step in that would be for the agencies, to
    have a requirement and should consider it their responsibility,
    both individually and collectively, to collect and evaluate
    information on how well their programs are serving their
    intended purposes.
        Mr. Huelskamp. You know, appreciate that.
        And so let me ask the agencies represented here--and thank
    you for coming here.
        Mr. O'Brien, later I will follow up separately on RUS. We
    can actually make a key difference if we got a key decision out
    of that agency.
        But if you had to pick one particular program, gentlemen,
    in your purview that you would say, hey, that is the least
    effective program in our department, would you please identify
    that for me?
        Mr. Chodos. Well, from the SBA's perspective, in the
    President's submission in the 2013 budget the SBA proposed that
    the PRIME technical assistance program not be funded further,
    that it was duplicative of programs that are essentially micro-
    assistance counseling and technical assistance already provided
    in our SBDC, Women's Business Center, and SCORE networks and,
    therefore, that it was an opportunity for savings.
        Mr. Huelskamp. Very good.
        USDA, Mr. O'Brien?
        Mr. O'Brien. Thank you for that question, Congressman.
        I think two programs that I might point to are somewhat
    similar programs, one called the Rural Business Opportunity
    Grant and the one called the Rural Business Enterprise Grant.
    They have similar purposes; the way that we deliver them is
    separate. And there has been discussion and we have suggested
    in the past that we actually merge those two programs and
    consolidate the implementation of those two programs.
        Mr. Huelskamp. Are you proposing to save money or simply
    consolidate and maintain the same----
        Mr. O'Brien. Well, there would be some streamlining. Each
    of those programs have their separate competitive process to
    compete for those Federal dollars, and, by consolidating the
    program, that would be one less--NOFA process and the attendant
    staff time that goes on to make sure that we do a good job.
        Mr. Huelskamp. Indeed. Now, is that in the President's
    budget proposal?
        Mr. O'Brien. Well, at this point, of course, with the
    President's budget not being released, that is something I
    can't comment on right now.
        Mr. Huelskamp. Okay. I would have some comments--and I am
    out of time--on the President's budget proposal, but, Mr.
    Chairman, I appreciate the opportunity to ask questions. I
    yield back.
        Chairman Graves. Ms. Velazquez?
        Ms. Velazquez. Thank you, Mr. Chairman.
        Mr. Shear, thank you for coming back.
        I just would like to clarify for the members of the
    Committee, when you were answering the gentleman from Kansas,
    you said that all the programs have metrics and all the
    authorized programs have metrics. What about pilot projects? Do
    they all have metrics, the pilot programs?
        Mr. Shear. My understanding is that they don't.
        But one of the things with the pilot programs, and one
    reason they are not in our universe, we took what was basically
    the executive branch's approach to what is considered a
    program, which is from the Catalog of Federal Domestic
    Assistance. So some of the programs you talk about--it is a
    very good point--some of these pilot programs don't appear on
    that list.
        So there are some programs out there that my understanding
    is don't have metrics, but they have not been included in our
    universe because they are not identified as such.
        Ms. Velazquez. Uh-huh. Okay.
        So, Mr. Shear, in your 2011 testimony before this
    Committee, you stated that SBA had only met 16 of 26
    requirements of the Small Business Disaster Response and Loan
    Improvement Act, which was passed to make improvements in the
    aftermath of Hurricane Katrina.
        Where does the agency stand on implementing these
    requirements?
        Mr. Shear. The agency--there are 26 provisions. Some of
    them create some authority but not a responsibility, and we put
    those down as not applicable. But you take those away, they
    have implemented--let's say, we made a big deal about having
    regional outreach-type plans, and they have implemented that.
        The three remaining provisions from that act that haven't
    been implemented are the private and the expedited and the
    intermediate loan programs, which are programs to operate with
    private lenders. Those have not been implemented.
        In terms of our recommendation around the whole thing, we
    asked, for things not implemented, to give us a timeline. We
    still don't have a timeline on those three.
        Ms. Velazquez. Okay.
        As you know, Hurricane Sandy has produced the largest
    number of disaster loan applications since Hurricane Katrina.
    Unfortunately, processing times have spiked significantly,
    causing many to go without the funds they need to fully
    recover.
        Given these delays, wouldn't the unimplemented provisions,
    particularly those allowing private lenders to assist SBA
    during periods of high volume, help individuals get their loans
    more quickly?
        Mr. Shear. The intent of those programs, as passed, was to
    provide that type of assistance when you had big disasters. So
    I can't say exactly how they would have played out if they were
    available.
        But what I can observe is that, ever since, the act went
    through, SBA said it wanted to conduct pilot programs, which we
    thought were a good idea. But this is a number of years ago.
    And they were focused on having pilot programs in the Gulf
    States, but you can have a disaster anywhere. So they really
    didn't look at it in the proper way.
        Ms. Velazquez. But it was a great opportunity now under
    Sandy, given the magnitude, right?
        Mr. Shear. Absolutely. And if they would have taken steps
    to at least be positioned to introduce pilot programs in
    different parts of the country, they would be in a position now
    to implement pilot programs. And it not only could help serve
    that purpose, but it could also provide information on how
    effective such interventions could be.
        Ms. Velazquez. Okay.
        While there is significant overlap among the populations
    that these programs serve, you know that GAO did not find
    duplication. Can you elaborate on this point and the
    distinction GAO makes between overlap and duplication? Because
    I think it is a critical part of GAO's findings.
        Mr. Shear. Yes. ``Duplication'' we define as providing the
    same or similar services to the same types and the same
    businesses themselves. So it really is serving the same
    audience, the same types of services. We did not find evidence
    of duplication.
        ``Overlap'' tends to be when you have a number of programs
    that are operating in the same space as far as missions and
    goals. So we do observe overlap. And we do observe an awful lot
    of fragmentation.
        Ms. Velazquez. Some of the overlap you talk about has been
    caused by agencies creating their own initiatives without the
    authorization of Congress. For instance, the SBA has created
    programs like Regional Innovation Clusters and Emerging
    Leaders.
        With more than 50 entrepreneurial assistance programs
    across the government, does it make any sense for agencies to
    be creating new programs in this area?
        Mr. Shear. While we didn't look at the pilot programs, we
    say it doesn't make sense and it goes against the grain of
    everything we are recommending here.
        Under the GPRA Modernization Act, agencies are supposed to
    work with each other. There is a priority goal established by
    the administration to serve entrepreneurs and small businesses.
    And no agency by itself, in that framework and under the law as
    passed by Congress that everybody seems to have accepted, it is
    not appropriate for an agency to go off and create its own
    pilot programs on their own. It just is inconsistent with where
    we are going on this.
        Ms. Velazquez. Thank you, Mr. Shear.
        Mr. Chodos, SBA ED programs are funded through a salaries
    and expenses account, which will face a reduction of $22
    million. Is that correct, $22 million, right?
        Mr. Chodos. We are speaking about under sequestration?
        Ms. Velazquez. Yes.
        Mr. Chodos. Approximately, yes.
        Ms. Velazquez. Based on information we have received from
    your agency's CFO, it appears that SBA will reduce some of its
    entrepreneurial development programs by 8 percent, such as
    SBDC, and others by nearly nothing, such as microloans,
    technical assistance, and veterans assistance.
        I just would like to know, how did you arrive at these
    decisions, and why did they not apply 5 percent across the
    board?
        Mr. Chodos. Thank you, Ranking Member Velazquez, for the
    question.
        The whole issue of how best to apply the sequestration,
    application of sequestration cuts--I am sorry.
        Ms. Velazquez. I just--I need for you to answer my
    question. How did the agency arrive at the decision, and why
    did it not apply the 5 percent across the board? You cut some
    programs at 8 percent and other programs at 5. How did you get
    to that decision?
        Mr. Chodos. I will respond by saying this. The overall
    requirement was to cut 5 percent out of each major line item,
    budget item, for the agency. The salaries and expenses account
    includes almost all of the agency's programs and services and
    expenses for salaries.
        The overall cut was required to be 5 percent. The agency
    engaged in a very deep analysis of where best to apply cuts,
    either below or above that level, in order to achieve the 5
    percent cut across that entire bucket.
        Ms. Velazquez. So I hope you could share with the Committee
    what metrics you used to decide which programs to cut at 5 and
    which programs to cut at 8.
        Explain to me, why did you decide to defund the PRIME
    Program that happens to be the only program that provides
    technical assistance to low-income, entrepreneurs for example?
    Or why did you decide to cut 5 percent--let's pick one.
    Emerging Leaders, you know, where you train 300 people at a
    cost of $3 million. Compare that to SBDC. That is only $2,000
    per client, while Emerging Leaders, which is a pilot program
    with no metrics, costs $12,000 per client.
        Mr. Chodos. Actually, the Emerging Leaders Program does not
    cost $12,000 per client, and we do maintain metrics on all of
    our programs, including the two that you have mentioned,
    Regional Innovation Clusters and Emerging Leaders.
        We are highly focused on the need to maintain actual,
    meaningful measurements of not only participation and activity
    but also outcomes in all of those programs. And, indeed, we do.
        Ms. Velazquez. Excuse me 1 second. These are your numbers;
    these are not my numbers. Emerging Leaders, $3.776 million to
    train 300 individuals. The cost per training one individual
    through that program, if I do the arithmetic, is $12,500.
        Mr. Chodos. I look forward to and I am happy to provide a
    detailed summary of all of the budget analysis and expenditures
    in e200. This year's budget for the e200 Program is
    approximately $1.2 million. The number of students who were
    enrolled in the e200 program last year across the country in
    our 27 cities in which we operate the program is approximately
    400 to 500 per----
        Ms. Velazquez. Can you explain to the Committee, why did
    you decide to apply 8 percent to the Women's Business
    Development Centers compared to any of the unauthorized
    programs?
        Mr. Chodos. We applied an 8 percent cut across our three
    primary programs because it is a key principle that we have in
    all of our dealings with our three main technical assistance,
    counseling, and training programs that not only do they
    collaborate and coordinate and provide a complementary suite of
    services, but as our budget goes up or goes down, all of them
    need to absorb those increases or decreases in a proportionate
    way.
        Ms. Velazquez. Mr. Chodos?
        Mr. Chodos. Yes.
        Ms. Velazquez. For the record--and this is my last question
    now--if you cut all the unauthorized pilot programs, that will
    add up to what?
        Mr. Chodos. Well, I am not sure--I don't believe we have
    any unauthorized programs. I think every program that the
    agency has----
        Ms. Velazquez. Those are pilot programs that are
    unauthorized.
        Mr. Chodos. Well----
        Ms. Velazquez. We legislate here. We know which programs
    have been authorized by this Committee.
        Mr. Chodos. Yes.
        Ms. Velazquez. And those are not.
        Mr. Chodos. I would like to say, Ranking Member Velazquez--
    and I am not sure specifically which programs you are referring
    to. The e200 program, as I said, has a $1.2 million budget for
    this year. Now, that is a significant amount in any agency's
    budget, including our budget.
        The Regional Innovation Clusters budget for the agency for
    2012 was $5 million. Under sequestration, it is going to be
    something less than that.
        Ms. Velazquez. Well, since you don't know----
        Mr. Chodos. May I----
        Ms. Velazquez. Excuse me 1 second.
        For the record, Mr. Chairman----
        Mr. Chodos. May I answer?
        Ms. Velazquez. I know what you are going to say. But you
    said that you don't know what programs are unauthorized, and I
    am going to tell you. You have $6 million for BusinessUSA Web
    site; $3.4 million for Clusters; $7 million for national vet
    training program; $2.2 million for Emerging Leaders. And these
    add up to $22 million.
        Mr. Chodos. Yes. Well, if the question that--I believe the
    last question that you asked is, do we maintain metrics in
    those programs? Are we able to measure the effectiveness of
    those programs? And, in fact, have we cut the only program that
    provides training to our micro-entrepreneurs? And the answer, I
    think, to those questions is no.
        The reason that the President proposed in his 2013 budget
    that the PRIME Program be defunded is simply that the
    allocation in that program and the problems addressed by that
    program can be addressed by our Women's Business Centers, which
    are targeted to underserved women and male entrepreneurs all
    across this country, and by our----
        Ms. Velazquez. Reclaiming my time, Mr. Chairman.
        PRIME is the only program where a loan is tied to technical
    assistance. If you want to see low-income entrepreneurs
    succeed, you provide technical assistance, and until they
    graduate, they will not be able to access capital. And it has
    been proven that it has been one of the most successful, at
    least for women--62 percent, 62 percent of borrowers are low-
    income women.
        And, with that, I yield back the balance of my time.
        Chairman Graves. Thank you, Ranking Member.
        Mr. Luetkemeyer?
        Mr. Luetkemeyer. Thank you, Mr. Chairman.
        Mr. Shear, you were talking a while ago about some of the
    programs were not--we did not evaluate them, they were not
    required by law to be evaluated. What is the penalty for not
    evaluating a program?
        Mr. Shear. We would hope that through hearings such as this
    and by initiatives by the administration that there be a
    recognition that the demonstrated effectiveness of programs
    should play some role in allocating resources.
        Mr. Luetkemeyer. Okay. So what you are saying is, at this
    point, there is no penalty?
        Mr. Shear. There is no legal requirement.
        Mr. Luetkemeyer. There is no outcome that we are looking
    for that will show some sort of a penalty for not doing
    evaluation on it; is that right?
        Mr. Shear. The question there is almost like, how would you
    as a Committee, Congress, and the administration respond in
    terms of agencies that run programs----
        Mr. Luetkemeyer. Okay.
        Mr. Shear.--that don't measure effectiveness.
        Mr. Luetkemeyer. If you can't measure the effectiveness,
    why should we continue to fund it?
        Mr. Shear. This is really--it is a great question. It is
    one of the questions we had in mind when we thought we were
    going to make the recommendation of tying funding to
    demonstrated effectiveness. In the absence of such information,
    it is a difficult situation.
        Mr. Luetkemeyer. Well, the gentleman from Kansas asked a
    great question, you know, with regards to--he pointed the
    problem we have with our budget, and we are going to have to
    find some places where we are going to cut. And, you know, Mr.
    Chodos made the comment with regard to some of the things he
    was trying to do.
        But, at the same time, if we have no measurement of any of
    these programs--on half the programs, I was going through here,
    we have them highlighted. I mean, you look at some of this
    stuff. Some of the programs didn't meet goals; other ones met
    some of the goals. Some of them have information on them; some
    don't have information on them.
        I mean, and then when somebody complains, well, we don't
    have any--you know, well, this is a great program and we have
    to cut it, it is a bunch of nonsense. If we are supposed to be
    sitting here setting priorities, you know, I would hope that
    you and your agency would help set priorities so we know which
    ones to fund, which ones not to fund.
        Mr. Shear. This is a very important point, I think, is that
    what we are trying to do is to provide our evaluation of the
    situation that we hope provides information that can lead to
    certain decisions. There are certainly value judgments
    involved, where we are not going to make those value judgments.
    We are not here to pick the winners and losers of what programs
    should stay and which ones should not. But we are trying to do
    our best, based on the information that we could glean from
    these agencies, of how well these programs are working. And,
    there are certain things where we have to look to the agencies
    to collect and analyze information.
        Mr. Luetkemeyer. It was kind of interesting, when I was--I
    served on the Appropriations Committee back in Missouri, and
    when an agency came in and they couldn't explain a program, it
    was automatically cut.
        Mr. Shear. Yes.
        Mr. Luetkemeyer. And you should have seen the gasps from
    the rest of the crowd, who were all full of--the crowd was made
    up of all the people from the agency. That is why we got their
    attention, and that is how we managed our budget. This is
    ridiculous.
        Mr. O'Brien, you know, the title of this hearing today is
    ``Examining Inefficiencies and Duplication Across Federal
    Programs.'' And I fail to see anywhere in your testimony on in
    this hearing you testified today anywhere where you talked
    about streamlining any programs. All you talked about was
    collaboration.
        Is there anyplace in the USDA that you are streamlining?
        Mr. O'Brien. Yes. And I thank you for that question,
    Congressman.
        Mr. Luetkemeyer. Why wasn't it in your testimony?
        Mr. O'Brien. I believe, actually, in some of the written
    testimony there was. Some of it should have been in the oral
    testimony.
        Mr. Luetkemeyer. Okay.
        Mr. O'Brien. One thing I would like to highlight on
    streamlining: In 2009, department-wide and including Rural
    Development, we instituted an effort called Blueprint for
    Stronger Service. That was focused on, streamlining the
    operations and the programs across the Department.
        Since that time, across the Department we have saved $700
    million in things such as reduced travel, and office closures,
    as well as a number of things like coordinating procurement
    contracts, and a list that I would be able to and would be very
    happy to provide you on the record afterward.
        Mr. O'Brien. Within Rural Development itself, in the last
    year and a half we have reduced our workforce by about 18
    percent. We have 47 State offices. We have done things in our
    business programs to create team leads, 10 team leads, in 10
    different regions so that they have a higher expertise and that
    they basically provide the training for our staff in these
    particular programs. And, also, with some of the staffing
    shortages that we have, that they have some backup in those
    places. So it is some streamlining.
        Mr. Luetkemeyer. Okay. With regards to--you talked about
    all your collaboration. Okay, through your collaborative
    efforts, have you found places where you can save?
        Mr. O'Brien. Yes, I----
        Mr. Luetkemeyer. Collaborating with other agencies, have
    you found where you can save some money?
        Mr. O'Brien. I think the--I think yes, sir. And thank you
    for that question.
        Mr. Luetkemeyer. Okay. Since you have found places, have
    you instituted a program to save that money?
        Mr. O'Brien. Well, I think that the money--well, you know,
    instituted a program. I think that with the reduced--I think
    with those savings what we have experienced as opposed to--
    because a number of our programs have been cut, and in
    particular our salaries and expenses have been reduced in the
    last few years----
        Mr. Luetkemeyer. Okay, we got that part. What about
    programs now? You know, you have sequestration cuts coming
    here. Have you found a place where you can cut, other than
    salaries and associated expenses, somewhere in your
    programmatic group?
        Mr. O'Brien. Yes, we have. And----
        Mr. Luetkemeyer. Give me an example.
        Mr. O'Brien. In the fiscal year 2013 budget, we identified
    some programs that we thought would----
        Mr. Luetkemeyer. Give me an example, please.
        Mr. O'Brien. I think the Rural Business Opportunity Grant
    Program in the 2013 budget was one that we recommended that it
    not be funded. There were a number of other programs that we
    did recommend some reduced----
        Mr. Luetkemeyer. With the new sequestration cuts, what are
    some of your latest ones you are going to go after?
        Mr. O'Brien. The latest programs that we will go after?
        Mr. Luetkemeyer. Yes, uh-huh.
        Mr. O'Brien. Well, with the sequestration cuts, the way
    that it works with our budget lines so the way that
    sequestration will affect the programs in the Rural Business
    Cooperative Service, each of those programs will be cut 5
    percent. And we have looked at flexibilities to try and perhaps
    move some of those dollars around, and----
        Mr. Luetkemeyer. Okay, but you haven't----
        Mr. O'Brien. I am afraid that we do not have that
    flexibility.
        Mr. Luetkemeyer.--given an example. You haven't given me an
    example of a program that you are going to cut or where you are
    going to make a cut.
        Mr. O'Brien. In response to the sequestration?
        Mr. Luetkemeyer. Yes.
        Mr. O'Brien. We do not have the flexibility to pick and
    choose which program to cut----
        Mr. Luetkemeyer. Okay.
        Mr. O'Brien.--and which one not to cut.
        Mr. Luetkemeyer. All right. Very good. Thank you.
        Thank you, Mr. Chairman.
        Chairman Graves. Mr. Murphy?
        Mr. Murphy. Thank you, Mr. Chairman. Thank you all for
    being here today. GAO reported that only half the
    entrepreneurial assistance programs identified attempted to
    measure their success. Is that accurate? That only about half
    the programs are being measured for success?
        Mr. Shear. Yes.
        Mr. Murphy. It is. Okay. Forgive me. I am new here. I am
    just trying to get my head around this. But it is hard for me
    to believe that we are giving all this money and it is not
    being tracked. And I know we all keep talking about it here,
    and I don't want to beat a dead horse, but maybe you could
    start off by maybe telling me what you think should be tracked
    when this money is given out.
        Mr. Shear. We don't raise many issues with what is tracked
    as far as metrics over time, such as how many entrepreneurs are
    being served, things of that nature.
        What we are critical of--evaluations are important but
    don't have to occur on an annual basis. It would be quite
    costly to do such. But what we are looking for is certain
    snapshots in time for evaluations which get at the question as
    to how well these programs are serving their intended purposes.
        Mr. Murphy. Things such as how many jobs are created, ROI?
        Mr. Shear. No, and I really appreciate that question.
        We actually think it can be very problematic to try to
    estimate directly how many jobs are created by a program
    because it is so hard to benchmark what would have happened in
    the absence of the program.
        But let me just give you an example using the three
    counseling and training programs that Mr. Chodos runs for SBA.
    And, in that case, what they look at is, first, for those
    people who get counseling and training from those programs, how
    do they value that counseling and training in terms of how much
    it helps their businesses? But then I think, more importantly,
    it takes those businesses that are served, and it collects
    information on how well those businesses do after they receive
    such assistance.
        So the underlying issue is that counseling and training
    programs are supposed to help businesses succeed. They come up
    with an estimate of how much it helps them succeed. And if they
    are succeeding--there is the general notion that if they are
    succeeding, they are probably providing more jobs in the
    community because they are successful businesses as a result of
    the counseling and training.
        Mr. Murphy. Can you provide an example, maybe, of a program
    you thought was failing and what you did about it?
        Mr. Shear. It is not like we do anything about it. Again,
    we don't want to pick out winners and losers. We report on the
    results of some of these evaluations. It is----
        Mr. Murphy. So you don't want to report on it; you want us
    to do it.
        Mr. Shear. Well, the question is, is there a specific
    program that you might be interested in, or maybe somebody on
    the panel would be? I mean, I can identify one where the
    evaluation does not show a lot of success. Would you like me to
    identify one from our list?
        Mr. Murphy. I think that would be helpful for all of us.
        Mr. Shear. Okay.
        In our list, which is--the table is not in my prepared
    statement. It is in our report that my statement is based on.
    We have a table of evaluations that have been conducted. And in
    that, the SBA program that shows up as not being especially
    effective at its purpose is the HUBZone program. It is supposed
    to facilitate economic development in economically depressed
    areas. And the evaluation conducted on that program suggests
    that, due to kind of the small nature of the dollars involved
    over the very large geographic area, that the program has not
    facilitated economic development, which is the purpose of the
    program.
        So that is one program. I hate picking one program, but
    that is one program which, if you read the table in our report,
    I think it stands out.
        Mr. Murphy. Thank you for that.
        And since we don't have the measures and since it seems
    perhaps more complicated for you to give us employment numbers,
    ROI, that sort of thing, do you provide other areas that we can
    cut, other programs, instead of that one in particular. I mean,
    is there a whole list of them?
        And that goes for all three of you.
        Mr. Shear. We are not picking the winners and losers. And
    part of it, getting back to----
        Mr. Murphy. But you need to give us the information to be
    able to do so, correct?
        Mr. Shear. It is like for us or the agencies to evaluate,
    and we are saying the agencies have a responsibility to collect
    and evaluate certain information. We collected an extensive
    amount of data from the agencies, and it only allows us to go
    so far in terms of what we can say about these programs or how
    the agencies use the information to administer the programs and
    to demonstrate effectiveness.
        And we can't make up data. We are a fact-based agency. So
    we have done what we can with the information made available.
    And among our biggest recommendations is that agencies, both
    individually and collectively, should be collecting information
    and evaluating information that tries to demonstrate how well
    the programs are working.
        Mr. Murphy. Thank you.
        Ms. Velazquez. Mr. Chairman, would you indulge me 1 second
    to make a follow-up question regarding the HUBZone program to
    Mr. Shear?
        Mr. Shear, the HUBZone program is supposed to provide
    economic development opportunities in low-income communities.
    Is that the case?
        Mr. Shear. Yes. It is to foster economic development, yes.
        Ms. Velazquez. And is there any data to back this up?
        Mr. Shear. The one evaluation conducted--and I am just
    going to go through a couple steps.
        One of the things that we recommended when we prepared a
    report on the HUBZone program that was delivered to this
    Committee in 2008, that there should be evaluations of the
    effectiveness of the program. SBA acted like they were going to
    evaluate, but the one evaluation of it by the Office of
    Advocacy does not show that it has the intended impact.
        Ms. Velazquez. Thank you. The short answer is no.
        Mr. Shear. The answer is no, yes.
        Chairman Graves. Mr. Collins?
        Mr. Collins. Thank you, Mr. Chairman.
        I am relatively new here, and, you know, so I have been
    listening and watching. And I guess my take of what I am
    hearing today, Mr. Shear, is that if you are the teacher, you
    are not giving very good grades to Mr. Chodos or Mr. O'Brien.
        So if I look at that as a report card and, you know, I look
    at what we are talking about, a lack of coordination and
    efficiency and so forth, I guess--you know, some people know me
    around the country as the pied piper of Lean Six Sigma,
    bringing efficiency to government. And I have done that. So I
    guess I have a simple question.
        Some of the concerns that I am hearing Mr. Shear bring up
    are just screaming for a master black belt to step in and take
    a project and process-map one or two in the SBA, and in
    process-mapping what those steps are, look for efficiencies
    but, more importantly, define outcomes, define metrics, come up
    with control charts.
        Where we say we don't measure it all the time, well, if the
    process is properly set up, you will get data at every turn
    that will give you your metrics. They are ongoing, hourly,
    daily, monthly snapshots. Snap your fingers, you have the data.
        And what I am hearing is a lack of data, a lack of
    accountability, duplication, overlap. I mean, it is just
    screaming, to me, let's maybe think about something out of the
    private sector. Lean Six Sigma is what comes to mind.
        I mean, do you have a comment to make? Does that make sense
    to you? Is it something you might want to try, Mr. Chodos?
        Mr. Chodos. Thank you, Congressman.
        Let me say--and I just want to make sure that we leave a
    proper impression and set of facts with the Committee here
    today. The SBA's Office of Entrepreneurial Development engages
    in among the most robust tracking and ``metricking'' of outputs
    and outcomes across all of our entrepreneurial development
    programs of just about anywhere in the Federal Government.
        We track in detail demographic data about our clients, who
    they are, how big their business is, what their revenues are.
    Then we track what services we provide. Then we track what
    outcomes they report in terms of changes in revenue, changes in
    number of employees, job starts, business starts, that sort of
    thing.
        And then, in addition to the hard data, which is done on a
    client-by-client basis, we engage in annual evaluation through
    surveying of the clients who have received our services to find
    out attitudinal changes, management changes, and the
    effectiveness of the programs. And then we track cohorts over
    time to see how things have improved over time.
        We are deeply engaged in exactly the kind of process
    management that you are describing. We agree with you
    completely that it is critical.
        We recognize that improvements in performance analysis are
    an ongoing project. You never get it right just once and then
    stop; you do it on an ongoing basis. We are happy to work with
    the Committee on an ongoing basis, as we do and look forward to
    continuing to do, to look at what we measure and how we measure
    it and to find opportunities for making it even better.
        Mr. Collins. Mr. O'Brien, do you have a----
        Mr. O'Brien. Yes, just very quickly. I will also--and sort
    of a two-part answer is that, at USDA Rural Development, we
    also track every one of our programs. We take the
    recommendations on how we improve that tracking and, in
    particular, how we can do a better job at program evaluation
    very seriously. And, in fact, we are in the middle of a
    strategic plan right now on how we can do so.
        On your point about Lean Six Sigma, indeed, Secretary
    Vilsack, when he was the Governor of Iowa, it was something
    that he brought to State government, Lean Six Sigma in
    particular, and that is something he brought to the USDA. We
    have used it across the Department at USDA Rural Development.
    We have used it in a number of places. So, absolutely, we agree
    with that.
        Mr. Collins. Well, I mean, that is encouraging. I will
    just--not to go to the Agriculture, it was just disappointing
    when Secretary Vilsack, the other day, said that Lean Six Sigma
    won't work with food inspectors. It works everywhere.
        But, you know, I guess I am hearing a little bit of a
    disconnect, because it starts with the GAO report of all the
    opportunities, but then taking it to isolated cases, everything
    is fine, but everything is not fine.
        So, Mr. Shear, do you want to comment on those two answers?
        Mr. Shear. One of the reasons why I referred to the
    counseling and training programs, which Mr. Chodos is in charge
    of, is that is one of the better examples where--so if you are
    saying what grade to get, his office gets one of the better
    grades, if not the best grade, among these agencies. And for
    the programs within SBA, compared with other SBA programs in
    other areas, his three programs come out the best. And one of
    the things that makes it attractive for me, when I am asked
    questions about it, I can give an example of something that
    goes down the path that we are looking for. So his programs do
    a little bit better.
        But there is the distinction between, again, metrics, where
    you can track certain processes and outcomes, and measures of
    effectiveness and collecting information on how well programs
    are administered. His programs, among the programs we are
    talking about today, his three programs are the ones that are
    the best evaluated.
        And I will just make reference to, without commenting on
    the numbers, but on page 9 of my written statement we have a
    table which really gets to the internal control issues, what
    types of information are the agencies collecting to administer
    their programs. And I will just refer to it. You can get an
    idea as far as kind of a scorecard, or a grade sheet as such,
    of how well the different agencies are doing.
        Mr. Collins. Thank you. My time is up.
        Chairman Graves. Mr. Payne?
        Mr. Payne. Thank you, Mr. Chairman, and to the ranking
    member of the Committee.
        Let's see. Mr. Shear, in your effort to identify overlap
    and fragmentation of the programs across Federal agencies, did
    the GAO take into account programs that are designed for
    targeted populations, such as under-represented minorities and
    women?
        Mr. Shear. Yes, we did. And we tried to draw on that as far
    as what are the purposes of the program. And this is one reason
    why we refer to overlap and fragmentation.
        So we still represent--again, I will use the example of Mr.
    Chodos' three programs. Women's Business Centers are targeted
    to a lower-income population than Small Business Development
    Centers, for example. So we take that into account in
    describing it. Nonetheless, they are programs that do provide
    similar services.
        So one of the questions here--again, we are not picking the
    winners and losers--is, is there a way to provide services in a
    better way, or is there a restructured program that could be
    done, where those populations, including those that are reached
    by the Women's Business Centers, could be done in a more
    efficient manner?
        Mr. Payne. So, you know, in trying to understand what you
    do, you deal primarily in the facts, and you transfer or make a
    recommendation to the SBA or the agency, correct?
        Mr. Shear. Yes, we have made recommendations to the four
    agencies and to the Office of Management and Budget about
    serving entrepreneurs and small businesses.
        Mr. Payne. And the program that you did mention, HUBZone,
    and your findings and seeing that it is not achieving its goal,
    Mr. Chodos, when you get information like that, what do you do
    with it?
        Mr. Chodos. Well, every time we get information from the
    GAO, we take it extremely seriously, and we evaluate it and try
    to understand what it is that they were looking at and what the
    opportunities are for making decisions going forward.
        I will say that the HUBZone program falls within the Office
    of Government Contracting and Business Development at the
    agency, so it is not primarily under my purview.
        Mr. Payne. Okay.
        Mr. Chodos. So I am happy to go back and to submit further
    information to the Committee about what was done after the 2008
    GAO report in order to provide sort of a historical context of
    what occurred from that point forward.
        But the effectiveness of the programs is a key area of
    focus, and I am happy to provide further information on the
    HUBZone program.
        Mr. Payne. Thank you.
        In an effort to try to remain positive on a very
    frustrating topic, nice tie.
        And I would like to ask you and Mr. O'Brien, in response to
    the GAO report, the Department of Commerce stated that the GAO
    should consider the complementary role many agencies play in
    the field of economic development and need for varied but
    complementary activities to address the complexities of
    entrepreneurs.
        Can you provide examples within your agency where
    complementary services may be confused with duplication or
    overlap?
        Mr. Chodos. I think I can provide at least one example.
    There are examples within our network of the three programs
    virtually every day.
        Our SBDCs, our Women's Business Centers, and our SCORE
    volunteers work with each other on the ground in communities
    across America in order to evaluate entrepreneurs when they
    come in the door, find out are they nascent, just getting
    started, do they already have 30 employees and they are looking
    for the next round of financing, are they developing new
    products and materials. And they find them the help that is
    right for them at that particular stage in the life of the
    business. That is something we do within our own programs every
    day.
        But, more broadly, there are programs across the
    government, many of which were identified in Mr. Shear's
    report, which do powerfully valuable work supporting
    entrepreneurship, either through providing capital, grant-based
    funding, technical assistance, counseling, et cetera.
        And so we have worked in the joint regional cluster
    initiatives, we have worked with Commerce, Labor, Energy, NIST,
    agencies across the Federal Government, and Ag, in order to
    make the real analysis that Mr. Shear has been talking about,
    which is: What are all of the things that we all do? And how
    can we bring them together in a single, focused, combined, and
    coordinated effort so that communities can get the benefit of
    all those programs and services, can understand what they all
    are, can navigate through them and get the benefit of them, and
    have the most bang for the taxpayer buck.
        So, that kind of coordination is something at the heart of
    what all of us are trying to do.
        Mr. Payne. Mr. Chairman, if I could just allow Mr. O'Brien
    a brief answer on that.
        Mr. O'Brien. Thank you, Congressman.
        And I would associate myself with the response from Mr.
    Chodos. And, certainly, there has been, I think, some
    unprecedented collaboration across the Federal agencies in this
    administration here in Washington, D.C. I just want to mention,
    though, some collaboration on the ground.
        As we have mentioned, SBA has a very unique field
    structure, essentially, the way that they work with their
    intermediaries. We at Rural Development, primarily, almost
    exclusively, the folks that we work with are our employees in
    the 400 offices throughout the country. So those Federal
    employees that live in rural America, are part of that
    community, really understand the needs of those. And the unique
    programs that Rural Development has many times can be
    complemented by the programs from SBA and others.
        So we now, partially in response to the GAO report, we send
    out an evaluation to our staff at Rural Development every other
    year asking them, how much you collaborating and coordinating
    with SBA?
        I will just mention two or three data points. This is from
    the 2011 survey. And we asked States--and there were 41 States
    that responded--do you advise borrowers and grantees about
    SBA's program? It was universal; every one of our States has
    now picked up that habit. And to be honest with you, as a
    field-based organization, if what we talk about in Washington,
    D.C., doesn't hit the ground, you know, in rural Missouri, then
    it doesn't matter what we talk about here.
        So we found some real highlights about the collaboration
    that is happening out there, and we found some soft spots. And
    we continue to do some training to make sure that collaboration
    happens.
        Mr. Payne. Thank you very much.
        Mr. O'Brien. Thank you.
        Chairman Graves. Mr. Tipton?
        Mr. Tipton. Thank you, Mr. Chairman.
        And I would like to thank our panel for being here today.
        Mr. Chodos, I just want to make sure that I understood.
    Part of your testimony, you had indicated, you said that you
    are working, USDA, SBA, together to be able to recruit small
    businesses from rural communities into the HUBZone program? Is
    that accurate?
        Mr. Chodos. Yes. Among the initiatives that we have
    undertaken with Ag pursuant to our MOU, in addition to co-
    training and cross-referring through our field networks, is to
    try to spread the world about the availability of the HUBZone
    program in order to make it more available and accessible to
    small businesses in rural communities, because many of our
    HUBZones are in rural communities.
        Mr. Tipton. Great.
        Then I guess I would like to ask you a question on behalf
    of my rural communities. We have in Archuleta County 8.5
    percent unemployment; Delta County, 8.1 percent; Montrose
    County, 9.6 percent unemployment; Montezuma County, 7.9 percent
    unemployment; Ouray County, 8 percent unemployment; Rio Grande
    County, 8.6 percent unemployment; San Miguel County, 10.5
    percent unemployment.
        And they just had their HUBZones pulled. How are you
    reaching out and helping those communities? All rural
    communities. I drive them.
        Mr. Chodos. So, what I imagine you are referring to is that
    there was just a realignment of all of the HUBZone designations
    across the country as a result of the last census. And the
    agency does not dictate or decide what is a HUBZone. It is
    determined by the census tract and the various data in the
    tract.
        I don't know specifically about what happened in the
    HUBZones and the designations in those counties----
        Mr. Tipton. I would truly invite you to take a look at
    that.
        Mr. Chodos. Yes.
        Mr. Tipton. Because I just read your criteria. Every one of
    these countries, perhaps save the census, meet that criteria.
        Mr. Chodos. May I get back to you with a specific county-
    by-county explanation of what occurred?
        Mr. Tipton. I would certainly appreciate that. This is
    important for our areas.
        Mr. Tipton. And I would like to follow up on my colleague
    from New York's comments in regards to seeking out some
    volunteerism. You are familiar with SCORE?
        Mr. Chodos. Extremely. SCORE is one of the networks under
    my supervision.
        Mr. Tipton. Right. You know, I just met with them
    yesterday, and SCORE's independent research of their 2012
    client impact shows that they assisted over 38,000 businesses
    being formed, 82,000 jobs created. So they are obviously able
    to actually do some real measurement.
        So how does SBA use this data to be able to promote and
    advocate for SBA programs like SCORE that are effective and
    efficient?
        Mr. Chodos. So, as we describe the number of clients we
    counsel and train, the number of businesses that we start, the
    number of small businesses that we help counsel in specific
    areas, and the number of trainings that we offer, SCORE's
    figures are included within those. And, if requested, I can
    give you very specific numbers for specific locations within
    SCORE.
        But let me just back up to say, there is no force in the
    world as powerful as that in the heart of a volunteer. We are
    so grateful for what SCORE and its 13,000 volunteers do across
    the country every day. They give of their own time and their
    own experience. We have a collection of over 300,000 years of
    accumulated experience in the SCORE network. And they go out
    into communities across the country every day and help small
    businesses start and grow by offering the benefit and the gift
    of their experience. It is a powerful tool.
        Mr. Tipton. No question, you know, very positive. And I
    think Mr. Collins' point and my point is in tough economic
    times let's take advantage of that and be able to promote it.
    Because these are people that did grow businesses and do know
    how to be able to actually see the results and to be able to
    stick with the mentoring.
        Mr. O'Brien, I did want to ask you about the USDA Rural
    Development loans. I am concerned about those. It is set to
    remove communities from qualification, I think, on March 27th.
    Similar issues that I am talking about in regards to
    unemployment with the HUBZone programs.
        We have two communities, Fruita and Palisade, in my
    district that will lose their eligibility for these Rural
    Development loans based, again, on the latest census formula
    and calculation.
        Mr. O'Brien. Yes.
        Mr. Tipton. The unemployment in these areas is about 8.4
    percent.
        When a community is eligible to utilize a program for 10
    years and then all of a sudden this is just pulled, can you see
    why folks in my district are actually angry about this? This is
    a rural, depressed--we don't have a recession, we have a
    depression going on there.
        Mr. O'Brien. Yes. Thank you for that question, Congressman.
    And we certainly understand. We have heard from many
    communities and stakeholders who are concerned about the
    implementation of the 2010 Decennial.
        The three different laws that provide us the authority at
    Rural Development to implement our housing, business, and
    utilities programs, each of them essentially says that we must
    implement the programs pursuant to the latest census. Because
    of the new 2010 Decennial data, it took us a little bit of time
    to be able to accumulate that data, and, by that time, we were
    in continuing resolutions.
        Our general counsel advised us that, at the end of this
    continuing resolution, the one that we are in right now, we
    have a legal requirement to implement the law, which is to
    implement the 2010 Decennial, unless Congress extends
    eligibility in the continuing resolution--which there is some
    language you probably know about in both of the vehicles that
    are out there right now.
        We understand it is a serious issue, but we look to the law
    for our authority.
        Mr. Tipton. Thank you, Mr. Chairman. My time has expired.
        Chairman Graves. Mr. Hanna?
        Mr. Hanna. There is a premise--hi, Mr. Shear. It is nice of
    you to be here 2 days in a row. Thank you.
        Thank you, Chairman.
        There is a premise, kind of overriding premise here that
    things are measurable, that somehow there is an empirical
    method embodied in what you do and that you how to apply it. I
    don't take that for granted. I doubt if you do either.
        But how much of what you do can draw the kinds of
    conclusions that we need to draw? And how much of what you do
    and all of you do is fundamentally more subjective? And how do
    you decide how to weight all of that when you think? If that
    isn't too obscure a question.
        Mr. Shear. I think it is a very good question, and it is a
    good question to draw the distinction of what we might do as a
    fact-based audit agency that doesn't make the value judgments
    and the role of those of you who are put into the challenging
    position of determining the use of taxpayers' money.
        There is not a magical evaluation that is going to, simply
    put, rank-order programs. But, nonetheless, when you do conduct
    evaluations that get to how well are businesses doing that
    receive certain forms of assistance, what businesses are
    getting that assistance, what does that suggest for what
    benefits are generated from the program, whether it be
    counseling and training or loans or whatever it may be, it
    helps inform those decisions.
        As far as a lot of the discussion, in our report we
    certainly point out certain deficiencies, and, based on that,
    we make recommendations. I mean, one of the things that you
    have heard from this panel, and, I will echo, we certainly have
    gotten responses from the agencies that, whether they agree or
    disagree with us or not, they have taken actions to implement
    our recommendations.
        Mr. Hanna. Uh-huh.
        Mr. Shear. Now, as happens with committees across the
    government, and I will say this Committee, which I have had the
    pleasure of working with for a number of years, is that there
    is a need to follow up and just say, okay, are those actions
    actually being taken, and what are they leading to?
        It is promising to us that there is a cross-cutting goal
    that has been established by the administration to serve small
    businesses and entrepreneurs, but the idea is that we are
    looking for something much further. We are glad that there are
    MOUs between these two agencies and other agencies, but we are
    looking for, well, are you going to specify roles and
    responsibilities in those MOUs? Are you going to specify joint
    strategies for how to achieve things?
        And all that requires some form of evaluation. It doesn't
    necessarily have to be rocket science, but, yet, there just
    seems to be a lack of information used to figure out how to
    best serve America's entrepreneurs.
        Mr. Hanna. Sure. And the interpretation of that has got to
    be an extremely difficult part because it must fraught with
    both empirical/mathematical and subjective outcomes and
    processes.
        I guess my point is that if you make a mistake in this
    business, in your analysis, it doesn't necessarily lead to the
    conclusion that the program is good or bad. Is that fair?
        Mr. Shear. I think that, yes, it is important to basically
    recognize whatever the limitations of your evaluation are and
    to respond to the information based on that. So I would agree
    with that.
        Let me put it that way. There are certain times we have
    taken SBA data on, let's just say, their credit program, their
    7(a) program, and geocoded them so that we can analyze who is
    being served and things of that nature. There have been times
    where we take data that is available and will evaluate and will
    say how well we think a program is working or who it is
    serving.
        But, in this case, there is still a lot of information out
    there that isn't being collected for anybody to evaluate.
        Mr. Hanna. Uh-huh. Thank you.
        I yield back.
        Chairman Graves. Any other questions?
        Well, I want to thank you all for participating today.
        You know, the government has long recognized the need to
    aid entrepreneurs, but with 52 entrepreneur assistance
    programs, I think we have more confusion than clarity. And
    sometimes we can do a whole lot more with less. And I hope
    today's hearing is going to inspire the USDA and the SBA to
    reexamine their collaborative efforts to truly align with the
    GAO's recommendations and benefit entrepreneurs.
        Further, as we seek solutions to our budget crisis, this
    Committee is going to continue to examine these programs and
    discover which serve entrepreneurs most effectively, and we are
    going to look for opportunities to replace the duplicative and
    ineffective programs. That is all there is to it.
        And, with that, I would ask unanimous consent that Members
    have 5 legislative days to submit statements and supporting
    materials for the record.
        And, without objection, that is so ordered.
        Chairman Graves. And, with that, this hearing is adjourned.
    Thank you.
        [Whereupon, at 2:22 p.m., the Committee was adjourned.]

                                A P P E N D I X

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                         Testimony of Michael A. Chodos

                          Associate Administrator for

                          Entrepreneurial Development

                       U.S. Small Business Administration

                                   Before the

                         U.S. House of Representatives

                          Committee on Small Business

                                 March 20, 2013

        Chairman Graves, Ranking Member Velazquez, and
    distinguished members of the Committee. Thank you for inviting
    me to testify about the Small Business Administration's (SBA)
    work to enhance collaboration, avoid duplication and improve
    data tracking within our entrepreneurial assistance programs. I
    am grateful for the opportunity to discuss the wide range of
    business counseling, capital access and procurement assistance
    programs SBA makes available to America's 28 million small
    businesses to help them start, grow, innovate and create jobs.
    I also look forward to discussing our extensive collaboration
    with other federal agencies and our ongoing efforts to evaluate
    our own programs and to make them more streamlined, effective
    and efficient.

        Entrepreneurs are the foundation of America's economic
    success. Roughly two-thirds of all net new private sector jobs
    are created by small businesses; and over half of America's
    working population either own or work for a small business. For
    60 years SBA has been there to provide assistance and support
    for small business' success; and since 2009, under
    Administrator Mills' leadership, SBA has been there to address
    and meet critical gaps as small businesses struggled through
    the deep economic crises of the last four years.

        In the past year alone, SBA and its resource partners
    counseled and trained over 1 million small businesses and
    helped thousands of new businesses start. SBA and its network
    of lenders also supported over $30 billion in loans to small
    businesses through its 7(a) and 504 loan program, and we helped
    agencies across the federal government to put over $90 billion
    in federal contracts in the hands of small businesses. SBA also
    leveraged a record $3.3 billion in capital for small businesses
    through the SBIC program; and since 2009 has supported over
    $3.3 billion in lending in our export loan programs.

        Alongside the many ways in which SBA helps small businesses
    grow and create jobs, we're also there for individuals and
    small businesses after a disaster. Most recently, within 90
    days after Super Storm Sandy struck, SBA approved more than $1
    billion in direct disaster loans.

        To implement its programs, services and disaster support,
    SBA connects directly with small businesses in communities
    across America. It does so directly through its nationwide
    network of SBA District Offices, Small Business Development
    Centers (SBDCs), Women's Business Centers (WBCs), SCORE
    chapters and Veteran's Business Opportunity Centers (VBOCs).
    And because so many of SBA's programs are delivered in
    partnership with others, we also help small businesses every
    day by collaborating with our very large network of private
    lenders, micro-lenders and investment funds in our lending and
    capital programs; with federal and state partners in our
    procurement, Small Business Innovation Research and export
    programs; and with university and non-profit partners in
    several of our innovative programs for supporting veterans'
    entrepreneurship.

        We work collaboratively every day to break down siloes and
    to work effectively with our federal, state and private-sector
    partners. But we know that there are always further
    opportunities to use taxpayer dollars wisely and to make things
    simpler and easier for our small business constituents. We know
    that navigating the federal government and its many programs
    and services can be daunting to a small business. For that
    reason SBA and our network of partners act as the ``Front
    Door'' to federal support for small businesses. We help them
    access our own programs and services, and also act as
    community-based and online guides to help small businesses get
    the help they need from whichever federal, state or local
    partner can serve that small business best.

        We appreciate the work of Mr. Shear and his team at the
    Government Accountability Office (GAO). Their reports on the
    important issues of fragmentation, overlap and data evaluation
    help SBA in its ongoing efforts to collaborate effectively with
    other federal agencies and to improve delivery of its own
    programs and services.

        Over the past several years, SBA has focused very
    intensively on opportunities for improving collaboration and
    coordination within its own network. Our research shows that
    counseling and business assistance services are vital to long-
    term success, and our network counsels and trains over 1
    million entrepreneurs each year on topics ranging from business
    planning to financial analysis to marketing. We want to make
    sure that network is operating as efficiently and
    collaboratively as possible.

        For that reason, last year SBA's Offices of Entrepreneurial
    Development (OED) and Field Operations (OFO) convened the
    first-ever national meeting of representatives from each
    resource partner network. We identified concrete ways to break
    down barriers and collaborate effectively in local markets
    nationwide, and detailed strategies to improve their clients'
    access to and utilization of SBA programs and services. We
    followed up this historic meeting with a series of regional
    meetings with SBA district Office staff to further refine the
    next actions to improve collaboration. And we modified all
    Resource Partner grant agreements to make effective
    collaboration a core part of each grant going-forward. Today,
    SBA's District Offices, SBDCs, WBCs and SCORE chapters are more
    integrated and coordinated than at any time in SBA's history.

        SBA focuses intensively on opportunities for external
    collaboration and coordination of services, as well. At the
    same time, we recognize the ongoing need to identify and use
    the most promising practices for inter-agency collaboration,
    and we look forward to building on existing initiatives.

        SBA has participated in and led efforts to collaborate and
    share resources with USDA, Department of Commerce and HUD. We
    have also worked to leverage each other's outreach efforts to
    improve local small business access to the full range of
    economic development programs and services. For example, SBA
    participated in the Task Force on Travel & Competitiveness
    chaired by the Secretary of Commerce and the Secretary of the
    Interior, and contributed to the development of the Task
    Force's National Travel & Tourism Strategy released in May
    2012. In addition, in response to the historic drought, SBA,
    USDA, and the Department of Commerce, through its Economic
    Development Administration (EDA), worked collaboratively to
    conduct outreach to drought-impacted communities about
    available federal resources. Also, SBA has been working with
    the Department of Commerce and numerous other federal agencies
    on developing BusinessUSA.gov, the comprehensive, one-stop
    platform for businesses looking to access information,
    resources, programs and services available through the federal
    government.

        In another example, pursuant to their MOU executed in 2010,
    SBA and USDA are working together to promote awareness of each
    other's programs and services and to cross-refer business
    clients through their online websites and form their field
    offices. For example, SBA and USDA are working together to
    recruit small businesses from rural communities into the
    Historically Underutilized Business Zone (HUBZone) program. The
    HUBZone program's focus is to create jobs where they are needed
    most, and many designated HUBZones tend to be in rural
    communities.

        In another example, SBDCs partner with USDA to leverage
    both the USDA access to rural communities and the SBDCs
    business assistance services. SBDCs partner with the
    Cooperative Extension System, Rural Business Enterprise and the
    BioPreferred Program Offices to maximize assistance to small
    businesses in rural areas across the country. Several SBDCs
    across the country participate and receive USDA Rural Business
    Enterprise grants that finance and facilitate the development
    of small and emerging rural businesses through distance
    learning networks. And SBDCs are key to the counseling
    component of the E3 partnership led by DOC, EPA, USDA,
    Department of Energy and Department of Labor which has active
    projects in 20 states to integrate federal agency technical
    assistance tools and resources for more integrated factory and
    facility assessments and improvements.

        HUD and SBA have been collaboratively supporting small
    business development in distressed areas through HUD-financed
    Community Development Block Grant (CDBG) projects. Working
    together, the agencies are piloting ways to increase small and
    minority business utilization of HUD's CDBG, HOME, public
    housing and multifamily programs through access to surety bonds
    for the smallest contractors. HUD and SBA have also worked
    together intensively in recent years to identify ways to
    address and eliminate duplication of benefits in disaster
    response, lending and granting programs.

        SBA also partners with the Departments of Commerce, Labor
    and Education to coordinate federal efforts and leadership in
    supporting regional innovation through the Taskforce for the
    Advancement of Regional Innovation Clusters (TARIC). Through
    TARIC, SBA and 15 other federal agencies coordinate and
    collaborate to make their respective programs and services
    available to small business innovators through joint regional
    innovation cluster initiatives, including the Advanced
    Manufacturing Accelerator Initiative and the Rural Accelerator
    Challenge. By way of example, the Rural Accelerator Challenge
    made available a combination of $9 million in funding from EDA,
    Department of Agriculture, the Delta Regional Authority, and
    the Appalachian Regional Commission, along with technical and
    program support from nine additional agencies including SBA.

        SBA has also increased its collaboration with the DOC in
    the administration of its International Trade programs. As
    directed by the Jobs Act, SBA increased its nationwide network
    of Trade Finance Specialists co-located with the Department of
    Commerce staff at U.S. Export Assistance Centers, and has built
    Exporting expertise across the SBDC network with the training
    of over 200 new export counselors. The two agencies also
    participate actively in the inter-agency small business working
    group, chaired by SBA.

        While work remains to be done, I am very proud of our
    accomplishments and progress in the area of collaboration to
    date. A great deal of the credit should also go to our SBA
    District Office leadership; nation, state and local leadership
    in our SBDC, WBC, and SCORE networks; and our Cluster
    administrators and other partners.

        In addition to our work fostering collaboration within our
    own SBA family and with other agencies, the Agency has been
    working intensively on ways to improve the measurement and
    evaluation of our programs. SBA believes that measuring and
    evaluating effectiveness and outcomes is essential to
    maximizing performance. We teach this principle to small
    businesses every day; and we work hard to apply the same
    principles to our own management of the precious taxpayer
    resources entrusted to us.

        Internally, SBA already engages in extensive measurement of
    the activity and outcomes generated within our Resource Partner
    network. But we continually look for opportunities to improve
    that process.

        Starting in FY12, OED undertook a comprehensive
    modernization project for our Resource Partner data collection
    system, known as EDMIS (Entrepreneurial Development Management
    Information System) to enhance current data fields, improve
    budget and performance integration capabilities, and expand
    reporting capabilities. Additionally, we are also working with
    all our Resource Partners to identify and align all our
    respective surveying, polling and impact study methodologies to
    harmonize the data collected through these efforts and have a
    coordinated set of data sources between the Agency and its
    partners.

        Externally, in collaboration with DOC and other agencies,
    SBA is working with TARIC to implement rigorous data collection
    and evaluation for our cluster initiatives and to propagate
    best practices. In addition, our Office of International Trade
    is implementing joint outcome-based performance measures in
    collaboration with the Trade Promotion Coordinating Committee
    and its 18 member agencies.

        SBA is also participating in a series of inter-agency
    meetings in collaboration with the Performance Improvement
    Council to discuss data collection, program evaluation, and
    performance measures to create consistent and relevant
    standards across the agencies which support entrepreneurship.
    SBA is working with OMB and the Council of Economic Advisers on
    an interagency pilot with Commerce and USDA to pursue a cross-
    program study of business technical assistance programs. One
    goal of the pilot is to determine whether SBA program data can
    be matched with Census data to accomplish the broader objective
    of measuring the impact these programs are having related to
    their stated mission. SBA and the Department of Commerce also
    jointly sponsor a ``Smarter Data, Smarter Policy'' initiative,
    the goal of which is to develop a consistent data set that is
    widely accessible to government statistical and business
    agencies.

        In closing, I want to thank you for the opportunity to
    testify before you today. As you know, the SBA, its Resource
    Partners and its many lending, federal sector and other
    partners have a critical mission to fulfill as our economy
    continues its recovery. Our goal is to support and strengthen
    America's 28 million small businesses. Through enhanced
    collaboration, improved performance metrics, and new service
    delivery tools, we are building an entrepreneurial ecosystem
    for the 21st Century and beyond.

        I look forward to answering any questions you may have.
    Thank You.
          Statement of Doug O'Brien, Deputy Under Secretary for Rural
              Development, United States Department of Agriculture

                  Before the House Committee on Small Business

                                 March 20, 2013

        Chairman Graves, Ranking Member Velazquez, and members of
    the committee, I am pleased to have this opportunity to discuss
    USDA Rural Development's role in supporting and encouraging
    economic development of our Nation's rural communities.

        Since 2009, President Obama's plan for rural America has
    brought about historic investment in rural communities that has
    made them stronger and more vibrant. USDA Rural Development
    alone, has directly invested or guaranteed more than $131
    billion over the last four years in broadband, businesses,
    housing, safe water, community facilities and more that have
    benefited not only the communities our agency serves, but also
    the overall economy.

        We view our programs as building blocks for a successful
    rural community. Quality infrastructure encourages business and
    economic growth which in turn encourages housing development to
    serve the influx of new employees, and leads to additional
    necessities such as schools, hospitals, and emergency
    resources. USDA Rural Development programs address all of these
    community needs through grants, direct loans or guaranteed
    loans.

        In the Consolidated Farm and Rural Development Act (Con
    Act), Congress charged USDA with leading the Federal
    Government's efforts to ensure a prosperous rural America and
    declared this task ``so essential to the peace, prosperity, and
    welfare of all our citizens that the highest priority must be
    given to the revitalization and development of rural areas.''
    Four decades later, the agency that I represent today, is
    responsible for implementing a suite of programs with the sole
    mission to increase economic opportunity and improve the
    quality of life for all rural Americans.

        Building on this history, President Obama in June of 2010
    created the White House Rural Council to improve coordination
    among Federal agencies and create more economic opportunity in
    rural America. Coordination between the Department of
    Agriculture and other government agencies to facilitate program
    delivery continues to strengthen. The comprehensive rural
    strategy is encouraging rural economic growth that is outpacing
    urban areas. President Obama and Secretary Vilsack have long
    believed that ``strong rural communities are key to a stronger
    America.''

        The economic literature confirms the importance of vibrant
    rural economies to the Nation's economy. For example, the
    Organization for Economic Cooperation and Development (OECD)
    recently released a report, Promoting Growth in All Regions,
    which says investments in rural places are vital for aggregate
    national economic growth and in many cases such investments
    have found that rural regions have, on average, enjoyed faster
    growth than urban regions.

        We believe, particularly at such a tenuous point for our
    Nation's economy, that we cannot leave significant growth
    opportunities in rural regions untapped. This study provides
    vigorous research and an explanation for why regional rural
    economies are so important to a Nation's overall economic
    health. This isn't the first report to make such a conclusion,
    nor is it news to those of us who work and live or represent
    rural America, but it is notable for its comprehensive analysis
    and recommendations that are important for rural economies.
    They include: investing in less-developed regions makes good
    economic sense; a pro-growth strategy on the assets of the
    region is the most beneficial and sustainable approach;
    policies that support education and training for low-skilled
    workers are critical; infrastructure development has the
    greatest impact when coordinated with other development
    policies; and formal and informal institutions that facilitate
    communication and collaboration in the region are vital. USDA
    and its partner agencies were already working on a number of
    these strategies.

        As you know, rural America has unique challenges and
    assets. Rural communities are characterized by their isolation
    from population centers and product markets and benefit most
    from initiatives that integrate local institutions and
    businesses with State and Federal agencies that have intimate
    knowledge of local needs. To address these unique challenges,
    Congress has provided USDA with a variety of programs that
    comprehensively attend to the rural dynamic.

        As the only Federal Department with the primary
    responsibility of serving rural areas, the presence of USDA
    field offices in every state helps us to serve the specific
    needs of local communities. USDA Rural Development employees
    are able to identify a wide range of community and economic
    development resources for locally elected officials, business
    owners, families, farmers and ranchers, schools, nonprofits,
    cooperatives and tribes. USDA Rural Development staffs are
    located throughout the nation and are members of the
    communities they serve and possess expert knowledge of the
    economic challenges and opportunities that exist in their
    particular region.

        Through USDA Rural Development's infrastructure development
    programs, we make investments in rural utility systems that
    helped improve and expand the rural electrical grid, provide
    clean drinking water to rural communities, and deliver faster
    Internet service to rural families and to businesses, allowing
    them to compete in the global economy. In 2012, we provided
    nearly 64,000 rural households, businesses and community
    institutions with new or better access to broadband Internet
    service, provided more than 8 million consumers with new or
    improved electric service, and provided 2.5 million of our
    borrower's customers with new or improved water or wastewater
    service.

        Through USDA Rural Development's business and cooperative
    loan, grant, and technical assistance programs, the agency
    helped over 9,500 rural small business owners and agricultural
    producers improve their enterprises, including those related to
    renewable energy. Beyond direct assistance to these business
    owners and producers, financial support from USDA also creates
    lasting economic development opportunities in the rural
    communities where the projects are located. Business and
    cooperative funding created or saved an estimated 52,000 rural
    jobs in 2012.

        Not only have we supported small businesses, but we also
    support the social infrastructure that makes rural communities
    attractive to small business owners and their employees. USDA
    Rural Development's Community Facilities loan and grant program
    provided assistance to construct or improve 215 educational
    facilities, and supported 168 health care projects--part of
    more than 1,400 Community Facilities projects nationwide in
    2012. Other key projects included support for local, rural
    emergency responders.

        The USDA Rural Development housing program ensures that
    rural families have access to safe well-built, affordable
    homes. In 2012, more than 153,000 families with limited to
    moderate incomes purchased homes utilizing our housing
    programs. We also helped about 7,000 rural individuals or
    families repair their existing homes under our home repair loan
    and grant program. More than 400,000 low and very-low income
    people were able to live in USDA-financed multi-family housing
    thanks to rental assistance.

        While USDA Rural Development's programs provide the
    critical tools for rural America's success, perhaps the most
    important element is how we use those tools: by having over 400
    offices in rural communities across the country that provide us
    the ability to deal directly with the businesses, individuals
    and communities that many times do not have the capacity to
    otherwise access Federal programs.

        Congress had the forethought to strategically place
    comprehensive programs for rural America in one agency: Rural
    Development. To make sure that the community economic
    development mission is met, we always look for opportunities to
    collaborate with other agencies to get the best results in
    rural communities. We appreciate the ongoing efforts of the
    U.S. Government Accountability Office (GAO) to look at ways
    that the Federal government can collaborate more effectively.

        In the August 2012 report, Entrepreneurial Assistance:
    Opportunities Exist to Improve Programs' Collaboration, Data-
    Tracking, and Performance Management, GAO recommended that the
    Secretaries of Agriculture, Commerce, and Housing and Urban
    Development and the Administrator of the Small Business
    Administration (SBA) conduct more program evaluations to better
    understand why programs have not met performance goals and
    their overall effectiveness. In response, USDA Rural
    Development's Rural Business-Cooperative Service is developing
    a strategic plan that includes an initiative to improve the
    quality of performance measurement within the next two years.
    GAO also recommended that the Secretaries of Agriculture,
    Commerce, and Housing and Urban Development, and the
    Administrator of SBA work together to identify opportunities to
    enhance collaboration among programs, both within and across
    agencies. The Obama Administration has initiated steps that
    provide agencies with a mechanism to work together to identify
    opportunities to enhance collaboration among programs. For
    example, in the Administration's fiscal year 2013 budget
    submission, a cross-agency priority goal was introduced to
    increase services to entrepreneurs and small businesses. One of
    the objectives under this goal is to utilize programs and
    resources across the federal government to improve and expand
    the reach of training, counseling, and mentoring services to
    entrepreneurs and small business owners. Furthermore, the
    Administration established an interagency group--including
    Commerce, SBA and USDA--that aims to streamline existing
    programs, improve cooperation among and within agencies, ease
    entrepreneurs' access to the programs that are right for them,
    and increase data-based evaluation of program performance.

        In 2012 USDA Rural Development provided five webinar
    training sessions for Rural Business employees in the field and
    national offices who track performance data in the agency's
    Guaranteed Loan System (GLS) to improve the collection and
    maintenance of data related to program performance measures and
    to improve data quality. We restructured the field office GLS
    support team by designating a lead and backup for each region.
    These individuals received additional GLS training, including
    recording and tracking performance measures. We also conducted
    bi-annual surveys to assess the level of collaboration between
    SBA and USDA Rural Development and to identify best practices
    for increased collaboration. These actions, in conjunction with
    customer service scores, are helping us evaluate customer
    satisfaction.

        The memorandum of understanding (MOU) USDA signed with the
    SBA in 2010 helped lay the foundation for enhanced inter-agency
    collaboration on economic development and improve service
    delivery to small businesses in underserved rural areas. Over
    the course of the past year, USDA and SBA held a series of
    joint roundtables across the country focused on increasing
    investment in rural communities. I attended several of these
    roundtables and found the discussions to be terrifically
    valuable. The meetings have presented opportunities to hear
    from stakeholders of both agencies about the challenges--and
    benefits--of investing in rural America.

        In response to the roundtable discussions, USDA Rural
    Development leaders from our Rural Business team have been
    meeting with SBA to explore possibilities to increase micro
    lending availability to rural constituents.

        We determined that there are substantial amounts of
    resources in revolving funds created through several of our
    programs that are available for increasing investment in rural
    communities. We are actively pursuing the relending of these
    funds by meeting with our partners during the first quarter of
    this calendar year. Participants in these roundtables include
    our revolving loan fund partners, SBA, SBA Certified
    Development Companies, Small Business Development Centers,
    commercial lenders and other community and economic development
    stakeholders.

        Indeed, one suggestion we received was the need to create
    consistent and streamlined application processes. We are
    researching options with SBA to make improvements and
    standardize the process so it is less burdensome on applicants
    while also ensuring proper due diligence to protect the
    taxpayer from unnecessary defaults.

        Building on these successes, in 2012, USDA signed a MOU
    with the American Association of Community Colleges to
    strengthen rural economies throughout the Nation. National,
    State and local staffs around the Nation are diligently and
    creatively working to find ways to coordinate with stakeholders
    and colleagues in other Federal agencies to leverage resources
    and create jobs by supporting businesses. For example, USDA
    Rural Development in California has recently joined into a MOU
    with the California Community Colleges Chancellor's Office. In
    conjunction with this effort, the two agencies are partnering
    with local community colleges and Small Business Development
    Centers--financed through SBA--to present capital readiness
    events throughout the State. The events provide information and
    resources for small businesses seeking financing.

        USDA Rural Development obviously takes pride in our
    uniquely rural focus and our local program delivery model which
    differentiates us from other Federal agencies. The direct
    personal contact between our agency personnel and lenders,
    borrowers, communities, families and individuals is invaluable
    and provides in-person technical assistance that would
    otherwise be unavailable. This intimate relationship encourages
    agency personnel to work collectively and creatively to make
    our programs more complementary to those of other agencies. By
    doing so, we are able to extend our reach and assist more
    communities.

        Engaging with members and stakeholders on the White House
    Rural Council has also opened doors to improved collaboration
    and coordination. Last summer, I participated in the Regional
    Innovation in Rural America forum to develop strategies for
    leveraging infrastructure investments in rural communities that
    help create jobs and boost economic development. Two programs
    highlighted at this forum were the Rural Jobs and Innovation
    Accelerator challenge and the Stronger Economies Together (SET)
    initiative.

        The Rural Jobs and Innovation Accelerator Challenge (RJIA)
    leverages existing financial and technical assistance resources
    from 13 Federal agencies and bureaus. Grant winners were
    announced on August 1, 2012. To date, projects across 12 States
    have received Federal funding to help strengthen regional
    industry clusters by identifying and maximizing local assets,
    connecting to regional opportunities, and accelerating economic
    and job growth across rural regions.

        Meanwhile the Stronger Economies Together (SET) initiative
    enables rural communities and counties to work together to
    implement multi-county economic blueprints to build on a
    region's current and emerging strengths. USDA Rural Development
    launched SET with land-grant university partners and Regional
    Rural Development Centers two years ago. SET is now active in
    nearly 40 regions in 19 States.

        These are but two examples of USDA's collaborative efforts
    with other agencies across Federal government to support rural
    communities that are building durable, multi-county coalitions
    that foster economic development on a regional scale. In
    addition to providing direct economic benefits, regional
    collaboration allows rural communities to capitalize on
    economies of scale in infrastructure and public services, to
    encourage the development of specialization in industrial
    sectors that would make them more competitive, and to locate
    facilities and services where they provide the greatest benefit
    at the lowest cost. Leveraging Federal resources to more
    effectively support regional economic development efforts
    continues to be an agency best practice.

        USDA Rural Development has a long standing record of
    consistently implementing new collaborative procedures and
    meeting increased demand for our services in the face of
    declining funding levels and enormous staff loses. We've done
    so through hard work and determination and my implementing
    Secretary Vilsack's ``Blueprint for Stronger Service.'' Under
    the blueprint, the Department identified 379 recommendations
    for improving USDA's office support and operations. To realize
    further efficiencies, USDA Rural Development consolidated
    offices that were, in most cases, within 20 miles of other USDA
    offices. In other cases, technology improvements, advanced
    service centers, and broadband service have reduced the need
    for significant numbers of brick and mortar facilities.

        Since the beginning of fiscal year 2012, USDA Rural
    Development has reduced nearly 18 percent of its workforce or
    1,053 people. In spite of those reductions, USDA Rural
    Development has been able to maintain a unique connection to
    rural America--a connection like no other Federal agency--by
    aggressively implementing the Secretary's Blueprint and Rural
    Development's Seven Strategies for Economic Development. We are
    known as an agency that can build a community from the ground
    up. Today, we are helping rural America prepare for the global
    challenges of the 21st century by looking not only within a
    community for defining strengths and opportunities, but to
    regions and strategic partners, where one community or program
    can compliment and draw upon the resources of another to create
    jobs and strengthen economies.

        We remain committed to increasing economic opportunity and
    improving life for rural Americans. USDA Rural Development is
    helping rural America resolutely move forward. Our presence in
    the rural communities we serve, combined with our local
    knowledge and uniquely rural focus, continues to set us apart
    from other Federal programs. We know our investments will pay
    dividends for years to come.

        I appreciate the opportunity to testify before members of
    the Committee also appear on this panel with my distinguished
    colleagues at SBA and GAO. As you can see from the testimony
    above, we work well together and I anticipate that we will
    continue to do so in the future. I welcome the chance to engage
    in a dialog on even more ways we can further support American
    competiveness and growth. Thank you for your support of USDA
    Rural Development programs. And at this time, I am happy to
    answer your questions.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Enclosure

                          Committee on Small Business

      Hearing: ``Entrepreneurial Assistance: Examining Inefficiencies and
                                  Duplication

                   Across Federal Programs,'' March 20, 2013

                     Responses to Questions for the Record

                           William B. Shear, Director

                  Financial Markets and Community Investment,

                        Government Accountability Office

        Based on GAO's analysis, how extensive is collaboration
    between SBA and USDA across rural America?

        In August 2012, we reported that agencies' efforts to
    collaborate among programs that support entrepreneurs have been
    limited. The agencies have agreed to work together by signing
    formal agreements to administer some of their similar programs.
    For example, SBA and USDA entered into a memorandum of
    understanding (MOU) in April 2010 to coordinate their efforts
    aimed at supporting businesses in rural areas. Under the MOU,
    USDA and SBA agreed that their field offices would advise
    potential borrowers of the other agency's programs that may
    meet their small business financing needs and coordinate the
    referral of small business applicants to one another where
    appropriate, work to make each agency's programs more
    complementary by minimizing differences in program fees and
    processing and closing procedures, and develop joint training
    seminars on each agency's programs. USDA's April 2011 survey of
    state directors indicates progress under the MOU in several
    areas, including field offices advising borrowers of SBA's
    programs, referring borrowers to SBA and its resource partners,
    and exploring ways to make USDA and SBA programs more
    complementary. However, the agencies have not yet implemented
    other good collaborative practices, such as establishing
    compatible policies and procedures to better support rural
    businesses.

        2. For the March 20, 2013 hearing USDA's written testimony
    discussed potentially standardizing certain funding
    applications with SBA. How does this relate to GAO's
    recommendations?

        In August 2012, we recommended that the Director of the
    Office of Management and Budget; the Secretaries of the
    Departments of Agriculture, Commerce, and Housing and Urban
    Development; and the Administrator of the Small Business
    Administration should work together to identify opportunities
    to enhance collaboration among programs, both within and across
    agencies. In prior work, we identified practices that can help
    to enhance and sustain collaboration among federal agencies,
    which can help to maximize performance and results, and have
    recommended that the agencies follow them.\3\ These
    collaborative practices include identifying common outcomes,
    establishing joint strategies, leveraging resources,
    determining roles and responsibilities, and developing
    compatible policies and procedures. USDA's discussion of
    potentially standardizing certain funding applications with SBA
    is consistent with the collaborative practice of establishing
    compatible policies, procedures, and other means to operate
    across agency boundaries.
    ---------------------------------------------------------------------------
        \3\ GAO, Results-Oriented Government: Practices That Can Help
    Enhance and Sustain Collaboration among Federal Agencies, GAO-06-15
    (Washington, D.C.: Oct. 21, 2005).

        3. In February 2012, GAO's annual duplication report notes
    an intention to recommend that Congress tie funding to program
    efficiency. However, GAO's comprehensive August 2012 report did
    not make this recommendation. Please explain what changed as
    GAO put together the August 2012 report that led away from this
    ---------------------------------------------------------------------------
    recommendation?

        In February 2012, we reported that we expected to recommend
    in a subsequent report that Congress tie funding more closely
    to a program's demonstrated effectiveness. However, based on
    additional analysis, we concluded that decisions about funding
    and restructuring would be difficult for Congress without
    better performance and evaluation information about the various
    fragmented programs. Thus, we concluded that making this
    recommendation would be premature and that the agencies must
    first collect the necessary information and conduct program
    evaluations needed to inform funding decisions by Congress.

        Specifically, in August 2012, we concluded that agency
    performance and evaluation information had a number of
    deficiencies. Agencies typically do not collect information
    that would enable them to track the services they provide and
    to whom they provide those services. As a result, we
    recommended in August 2012 that the Secretaries of Commerce,
    Housing and Urban Development, and Agriculture and the
    Administrator of the Small Business Administration consistently
    collect information that would enable them to track the
    specific type of assistance programs provide and the
    entrepreneurs they serve and use this information to help
    administer their programs. Without such information, the
    agencies may not be able to administer the programs in a way
    that will result in the most efficient and effective federal
    support to entrepreneurs.

        4. Please provide a list with date and type of all agencies
    responses to the August 2012 report including 60-day letters,
    formal, and technical comments.

        Technical Comments Received on Draft Report

        HUD (August 1, 2012)

        SBA (August 3, 2012)

        Formal Comment Letters Received on Draft Report

        Commerce (dated August 6, 2012)

        HUD (dated August 10, 2012)

        USDA (dated August 1, 2012)

        60-day Letters Received on Final Report

        Commerce (dated October 22, 2012)

        HUD (dated December 5, 2012)

        SBA (dated February 13, 2013)

        USDA (dated November 12, 2012)

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Committee on Small Business

        Hearing: ``Entrepreneurial Assistance: Examining
    Inefficiencies and Duplication across Federal Program''

        March 20, 2013

        Questions for Mr. Doug O'Brien, United States Department of
    Agriculture (USDA):

        1. Please provide a list of all programs and operations,
    specifically those mentioned in responding to Rep. Luetkemeyer
    during the March 20, 2013 hearing, related to a Blueprint for
    Stronger Service, which delineates programs and savings
    occurred through streamlining and cuts.

        RESPONSE: USDA Rural Development made contributions to the
    $700 million saved under the Secretary's Blueprint for Stronger
    Service by consolidating and reorganizing its field office
    structure, providing projected savings of $758,000 annually.
    These efforts are continuing and are expected to result in
    additional savings over the next few years. Rural Development
    achieved additional savings of $1.3 million with reductions in
    printing, supplies and promotional items. Furthermore, the
    Agency anticipates savings from data center consolidation at
    our National Information Technology Center and changes to the
    Working Capital Fund and Greenbook charges. Those savings are
    cumulative and have not been broken down by individual
    agencies.

        Blueprint for Stronger Service (Departmental Chart)

    ------------------------------------------------------------------------
      Savings/Efficiency Breakdown Initiative    Savings/Efficiency Realized
    ------------------------------------------------------------------------
    Office Closures                                              $37 million
    ------------------------------------------------------------------------
    Real Property                                             $259.2 million
    ------------------------------------------------------------------------
    Disposals/Terminated Projects (not
     including Office Closures)
    ------------------------------------------------------------------------
    Sustainability - Energy Savings                             $6.5 million
    ------------------------------------------------------------------------
    Improved Space Management                                  $13.2 million
    ------------------------------------------------------------------------
    Strategic Sourcing                                           $62 million
    ------------------------------------------------------------------------
    IT Service and Hosting Efficiencies                          $20 million
    ------------------------------------------------------------------------
    Streamlined IT Purchases                                     $31 million
    ------------------------------------------------------------------------
    Travel Efficiencies                                         $129 million
    ------------------------------------------------------------------------
    Reduced publications/printing                                 $8 million
    ------------------------------------------------------------------------
    Improved oversight - Advisory Contracts                      $56 million
    ------------------------------------------------------------------------
    Centralized Supply Purchases                                 $27 million
    ------------------------------------------------------------------------
    Promotional Item Reductions                                     $300,000
    ------------------------------------------------------------------------
    Agency-specific initiatives (e.g., process                   $55 million
     improvements and organizational changes)
    ------------------------------------------------------------------------
    Total                                                     $704.2 million
    ------------------------------------------------------------------------

        In addition to the Blueprint for Stronger Service, since
    the beginning of fiscal year 2012, USDA Rural Development has
    reduced nearly 18 percent of its workforce or 1,053 people.
    Those reductions will save the Agency an estimated $95,359,680
    per year in staff costs in future years.

        2. Please provide examples within the Rural Development
    branch of the USDA, other than salaries and expenses, where the
    Agency has instituted cuts to programs to generate savings.

        RESPONSE: Rural Development (RD) programs are financial
    assistance programs; that is, they provide grants, loans, and/
    or loan guarantees. Thus, cuts in budget authority, such as
    those experienced by the sequester, decreases the amount of
    financial assistance to rural constituents.

        Nevertheless, RD continues to improve the efficiency in the
    overall delivery of our programs, which results in savings. For
    example:

         Regional Field Structure. Rural Business Service
    (RBS) improved program efficiency by developing a regional
    field structure across ten regions. This regional structure
    allows the National Office to (1) provide direction and
    oversight for all RBS programs nationally, with reliance on two
    Regional Coordinators and ten RBS Team Leaders who provide
    guidance to the State RBS Program Directors in their regions
    and (2) reduce the amount of travel and training expenses by
    reducing the number of staff that attend training. Typically,
    Regional Coordinators work with National Office staff to train
    Team Leaders who then provide guidance and direction to the
    Program Directors in their region. This approach also improves
    communication across the agency, resulting in greater
    consistency in program delivery.

         Intermediary on-line reporting system. Implemented
    in 2011, RBS now requires all Intermediary Relending Program
    (IRP) and Rural Microentrepreneur Assistance Program (RMAP)
    intermediary lenders, and strongly encourages Rural Economic
    Development Grant and Rural Business Enterprise Grant revolving
    loan fund intermediaries, to provide their quarterly and
    semiannual reports through an on-line system, Lender Interface
    Network Connection (LINC). Previously, 450 IRP and nearly 100
    RMAP lenders used spreadsheets and other software to develop
    their quarterly and semiannual reports, submitted the reports
    to the Agency in paper copy, and the Agency staff inputted the
    appropriate data into the Agency's data system. With the new
    system lenders access the Agency data base through LINC and
    input their data directly into the Agency's data system. In
    addition to benefiting efficiency, the LINC system also
    improves on the completeness and integrity of the lenders data.

         Centralizing Guaranteed Housing Process. The Rural
    Housing Service (RHS) directed each State Office to centralize
    the loan guarantee process for the Single Family Housing
    Guaranteed program. The purpose of the initiative is to
    maximize efficiencies that enable a reduction in staff time
    while still meeting audit requirements and providing states
    flexibility. Each state was instructed to centralize the
    guarantee process into one entry point, and then electronically
    distribute workflow to the appropriate workstation where the
    designated employee was located. The purpose was not to
    reassign employees to a central office location, but to deploy
    technology for a process improvement as a remedy for staff
    reductions. The result of the centralization initiative has
    been a great success. All states have centralized their
    guarantee workflow process or are in the process of
    implementing it. Some states have implemented this process
    improvement to other Rural Development programs.

         Rural Alaska Village Grant Program. The Rural
    Utilities Service has also undertaken streamlining initiatives
    to improve performance and accountability measures. In FY 2010,
    we launched a process improvement project to address issues
    related to the Rural Alaska Village Grant Program. A Steering
    Committee composed of senior officials from both the national
    and state offices of USDA Rural Development, Alaska Department
    of Environmental Conservation, Alaska Native Tribal Health
    Consortium, Indian Health Service, Environmental Protection
    Agency and the Denali Commission was formed and convened in
    Anchorage. In June of 2011, the partners, signed an MOU
    outlining a streamlined application process, new grant
    agreements, improved accountability measures and other critical
    documents. Today, we are seeing the results of those efforts
    with projects being built serving Alaskan villages, many for
    the first time. Based on these successes, we are in the process
    of codifying the streamlining of this program through a
    regulation that we plan to announce later this year.

        3. As the Government Accountability Office (GAO) August
    2012 report entitled, ``Entrepreneurial Assistance:
    Opportunities Exist to Improve Programs' Collaboration, Data-
    Tracking, and Performance Management,'' found that USDA did not
    track program information on entrepreneurial assistance
    activities for various programs, please explain how USDA is
    ensuring compliance with government standards for internal
    controls.

        RESPONSE: USDA is continually seeking ways to better
    achieve agency missions and program results while working to
    address and implement program changes and improve operational
    processes.

        The GAO report indicated that for all its programs, USDA
    collects detailed information on the industry of each of the
    entrepreneurs it supports as well as on how entrepreneurs use
    program proceeds. USDA seeks to build on this foundation and
    continuously improve the ability to track and measure
    performance information. For example, Rural Business-
    Cooperative Service (RBS) has reviewed and updated its policies
    regarding collecting data relating to program performance
    measures. Objectives include building consistency with policies
    and procedures of other Federal agencies administering similar
    programs (e.g., SBA and EDA), building consistency across all
    RBS programs, and improving the integrity of data. The draft of
    updated policies was completed in October 2012. RBS provided
    training to National Office and field office staff through a
    series of webinars and published the updated policies and
    procedures in an Unnumbered Letter dated January 18, 2013. The
    text of the Unnumbered Letter is located on the USDA Rural
    Development website.

        RBS will continue to conduct training to improve data
    collection and maintenance of data related to program
    performance measures and to improve data quality. We now
    conduct bi-annual surveys to assess the level of collaboration
    between SBA and USDA Rural Development and to identify best
    practices for increased collaboration. These actions, in
    conjunction with Customer Service Scores, are helping us to
    continually evaluate program effectiveness and satisfaction.

        Currently, RBS gathers data on all its programs and
    projects, which is analyzed to assess program effectiveness.
    RBS conducts regular evaluations of programs on both national
    and state levels. These reviews rely on data maintained in an
    electronic database as well as project files. Management
    Control Reviews (MCRs) are a process that Rural Development
    uses to assess program effectiveness. The MCR process examines
    a particular program and how it is administered across the
    country. The Business and Cooperative Program Assessment Review
    is an RBS process that examines how individual states
    administer all of Business and Cooperative Programs. Both tools
    identify recommendations to enhance the effectiveness of RBS
    programs.

        USDA continuously evaluates opportunities to keep up with
    advances in information technology and implement changes when
    possible to address management and performance challenges in
    areas at the greatest risk of waste, fraud, abuse, and
    mismanagement.

        4. Both the Small Business Administration's (SBA's) and
    USDA's written testimony references an interagency group which
    was created to develop an action plan for improved
    collaboration as well as a strategy for data collection. Please
    provide the Committee with a list of all meetings held thus far
    including the number of agency representatives and locations.
    Further please provide any action or strategic plans developed
    by this interagency group. If none have been made at this time,
    please provide a timeline for when these are expected.

        RESPONSE: The Evaluation of Business Technical Assistance
    Programs working group has increased the collaboration of
    agencies that operate business related technical assistance
    programs. The primary goal of the group is to assess the
    effectiveness of technical assistance programs for small
    businesses and to facilitate the sharing of best practices in
    this area across the working group agencies.

        The numbers of attendees have varied at each meeting,
    ranging from between 10 and 25 attendees per meeting. Attendees
    include representatives from the Office of Management and
    Budget, the Council of Economic Advisers, and the Department of
    Agriculture, the Department of Commerce, and the Small Business
    Administration. The meeting dates and locations are shown in
    the table below:

    ------------------------------------------------------------------------
                   Meeting Date                           Location
    ------------------------------------------------------------------------
    11/20/12                                            New Executive Office
                                                                    Building
    ------------------------------------------------------------------------
    12/18/12                                          White House Conference
                                                                      Center
    ------------------------------------------------------------------------
    1/15/13                                             New Executive Office
                                                                    Building
    ------------------------------------------------------------------------
    1/30/13                                           White House Conference
                                                                      Center
    ------------------------------------------------------------------------
    2/8/13 (Sub-group on SBA)                         White House Conference
                                                                      Center
    ------------------------------------------------------------------------
    2/19/13                                                  Conference Call
    ------------------------------------------------------------------------
    4/2/13                                            White House Conference
                                                                      Center
    ------------------------------------------------------------------------

        The Evaluation of Business Technical Assistance Programs
    working group is in the process of determining what information
    is currently available on involved agencies' business technical
    assistance programs, as well as what information could be
    obtained that could then be used to measure the impact and
    assess the effectiveness of the programs. Involved agencies are
    currently taking steps to assess the feasibility of doing a
    pilot evaluation. Once the pilot is complete, the group will
    assess the results and determine whether an evaluation model
    can be established for use across the Federal Government.
    Because of the early stages of these efforts, a more exact
    timeframe for this work is not available.

        5. USDA's written testimony indicated that USDA's Rural
    Business-Cooperative Service is developing a strategic plan
    that includes an initiative to improve the quality of its
    performance within the next two years. Please delineate the
    milestones within this plan and explain the benefits and goals
    of this strategic plan.

        RESPONSE: In 2012, Rural Business-Cooperative Service (RBS)
    began an agency-wide effort to develop a strategic plan aimed
    at enhancing effectiveness and efficiency. The plan included a
    focus specifically on program performance and evaluation. The
    goals were to:

              1. Maintain and promote justifiable performance
            measures with a continued emphasis on job creation;

              2. Maximize capabilities of current data collection
            system and process to better position the agency to
            conduct broader program analysis; and

              3. Evaluate potential for additional performance
            measures, which more thoroughly reflect outcomes of
            specific programs.

        The benefits to be obtained through the implementation of a
    strategic plan are primarily the ability of RBS to deliver its
    programs more effectively and efficiently to adjust to changes
    in its budget and staffing levels, and to help RBS plan a more
    orderly succession of leadership as personnel changes take
    place.

        The strategic plan referenced in the written testimony is
    in draft form pending final budget numbers as the Agency
    continues to seek opportunities to improve program performance.
    With this caveat in mind, the current draft identifies
    initiatives in six primary areas:

         Budget and staffing

         Outreach

         Performance Measurement

         Program Review Process

         Leadership Development and Succession Planning

         IT Needs and Technology

        As RBS was drafting the strategic plan in FY2012, we began
    to identifying general timeframes for implementing each of the
    six initiatives. These timeframes ranged from about 9 months
    (outreach) to about 30 months (IT Needs and Technology). The
    ability to meet and complete any of these initiatives will
    depend, in part, on the availability of funds.

        6. In terms of roundtables held with SBA as a form of
    collaboration, please provide the Committee with a list of each
    roundtable held, its location, number of attendants (please
    separate for number of USDA officials, number of SBA officials,
    and number of small firms/entrepreneurs), and a summary of
    responses.

        RESPONSE: There were six roundtable held. Their dates,
    location, and breakdown of participants are shown in the
    following table:

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                          USDA         SBA          Other
                        Date                             Location                     Venue                 Total      officials    officials   Participants
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    9/27/2011..................................              Raleigh, NC  North Carolina State                    32            3            3            26
                                                                           University Park Alumni
                                                                           Center.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    10/26/2011.................................           Saint Paul, MN  Agri Bank Conference Room....           19            3            2            14
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    12/15/2011.................................             Syracuse, NY  Dairylea Cooperative Building           40            3            2            35
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    4/12/2012..................................             Columbus, OH  Columbus Dispatch Kitch Event           27            2            2            23
                                                                           Room.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    2/14/2012..................................               Fresno, CA  Fresno Council of Government            27            3            2            22
                                                                           Conference Room.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    6/20/2012..................................               Denver, CO  Rural Development State                 16            3            2            11
                                                                           Office.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        Summary of Discussions--Challenges and Opportunities: Note:
    The following represent the views of the community
    participants, not the USDA or SBA.

         Need to take advantage of existing programs and
    funding because it appears unlikely that new programs will be
    developed any time soon. At the same time, there is concern
    that we may be driving up demand for programs when we are
    experiencing a decrease in program funding. This has the
    potential to create ill will among current/future participants.

         The SBIC platform could spur investment in low and
    moderate income areas of the country, especially rural areas.
    Research shows that funds that proactively invest in low and
    moderate income areas slightly outperform their peers. There
    are opportunities in these areas, and SBA wants to develop
    partnerships to take advantage of those opportunities.

         The possibly of creating a rural SBIC was brought
    up. SBICs are asking how sustainable the agricultural economy
    is. While an SBIC with strictly a rural focus could be a
    challenge, a fund with rural incentives and rural targets would
    be a real possibility. USDA and SBA need to do a better job of
    education and connecting rural lenders with SBICs.

                SBICs need to be educated about how they can best
            work with rural lenders.

                The main challenge for having SBICs invest in rural
            is connecting dots, mitigating risks, and educating
            rural lenders about how SBICs could help.

                A similar challenge is the uncertainty and a lack
            of knowledge from rural lenders about how SBICs could
            help. An organization such as Agribank or Agstar would
            be a good resource to educate SBICs about rural
            investment opportunities, or offer general insight on
            the agriculture and rural economy. This would all be
            part of the education process.

         SBICs are looking to invest in proven companies
    with about $2-4 million in operating funds. Anything under $2
    million typically goes to angel investors. SBICs are able to
    partner among each other for larger projects. Government
    programs that are available to leverage these investments
    should be promoted more than they are.

         Angel investor attendees also stressed the
    importance of concentrating some resources and investment on
    companies with $2 million or less in operating funds. How can
    angel networks access funding in a timely manner for vetted
    businesses? Access to capital for business with under $2
    million in operating funds is concerning. These businesses need
    access to capital now and sometimes waiting for the government
    review process takes too long. A system where vetted businesses
    could qualify for immediate funding, which would be paired with
    angel investment, would be beneficial.

         One challenge is finding a way to bring all of
    these different resources together and make them available to
    businesses and entrepreneurs in and easy-to-understand method.

         USDA and SBA need to focus not just on jobs, but
    also on smaller self-employers and entrepreneurs that are not
    looking to constantly grow into something bigger. Most
    entrepreneurs just want to make enough to take care of their
    family. Partnering with ``big businesses'' is very important,
    but USDA and SBA cannot forget about smaller firms.

         One challenge frequently mentioned was the need
    for greater technical assistance to build capacity for small
    and micro businesses.

         The current workforce does not align with
    education, especially technical education. Rural businesses,
    especially manufacturers, cannot find employees with the skills
    required due to a shortage of people with the necessary
    technical degrees.

         One of the ways that USDA and SBA will be able to
    continue sustained contributions to rural communities and
    residents will be through meetings like these.

                Rural investor roundtables like these should occur
            throughout the year.

                Rural investor roundtables should include other
            colleagues and partners from various regions throughout
            the state.

                Investor roundtables should also include a greater
            number of banks and lenders

         More foundations should be participating with USDA
    to:

                Conduct infrastructure and transfer of wealth
            studies/discussions with community leaders;

                Identify philanthropic partnership opportunities

                Further discuss ways to stop transfer of wealth/
            talent (brain drain) out of rural communities; and

                Address challenges involved with access to capital
            in rural areas, such as upstate New York.

         USDA and SBA should explore buying down risk
    through bank guarantees and investigate whether or not
    endowment dollars (from universities for example) could be used
    to make strategic investments (similar to loan guarantees) in
    rural communities. It was also pointed out that State pension
    funds are an ``untapped resource'' for investment in small
    businesses.

         More lenders should move beyond reluctance to
    participate with USDA and loan guarantee programs. The process
    is easier than some would think.

         There is interest from funders making local
    investments with endowments and they could be investment
    partners with some of the participants at the roundtable.

         USDA and SBA should continue to reach out to
    existing stakeholders and to new lenders through periodic
    newsletters and emails detailing new programs, funding
    opportunities, and other roundtable functions. Share program
    funding opportunities and experience with government partners
    on past projects.

        7. USDA's written testimony stated that bi-annual surveys
    are conducted to assess collaboration between USDA and SBA.
    Please provide the Committee with copies of the two most recent
    surveys, number of respondents, and a summarized list of the
    results to the survey questions.

        RESPONSE: In 2011, RBS conducted two surveys of state
    offices to assess the level of collaboration between USDA and
    SBA and identify best practices for increasing collaboration.
    The surveys conducted in April and October of 2011, had 40 and
    41 respondents respectively. Each survey asked the same 17
    questions, which mirrored the expectations outlined in the MOU.
    Results from both surveys were similar.

        General conclusions from the survey:

              1. Areas of strong collaboration include referrals,
            outreach, and interagency communication. For example,
            in both surveys all respondents said that they do
            encourage their resource partners to make referrals to
            SBA and its resource partners.

              2. Areas where collaboration could be improved
            include linking to websites and special projects. USDA
            is part of the interagency team that helped to develop
            content for BusinessUSA.gov, the website that will
            serve as a one-stop shop for entrepreneurs by linking
            all applicable federal assistance and resources.
            Additionally, since the survey was conducted, RBS and
            SBA co-hosted several roundtables across the country,
            as described in the response to the previous question.

        Below are the questions and responses from the two surveys.

        RBS - SBA Collaboration Survey: Summary of Results

        Highlights:

         17 questions

         40 states responded in April and 41 in October

         Areas of strong collaboration include referrals,
    outreach, and interagency communication

         Areas with weaker collaboration include linking to
    SBA website and identifying one special joint project.

         Most commonly cited barriers to collaboration
    paperwork and that most lenders do not want to deal with two
    government agencies.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        8. For the Memorandum of Understanding (MOU) between SBA
    and USDA regarding rural development, set to expire in April
    2013, please address:

              a. Whether the current MOU is being extended,
            altered, or voided?

        RESPONSE: USDA is currently drafting proposed amendments to
    the MOU. These amendments will extend the MOU nationwide,
    strengthen collaboration within the Agency's intermediaries and
    networks of resource partners, and broaden participation in the
    MOU by adding the USDA Farm Service Agency as a partner.

              i. If it is being altered please provide the
            Committee with a copy of the new MOU as soon as it is
            available.

        RESPONSE: The Agency will provide the Committee with an
    executed copy of the MOU as requested once it is available.

              b. Whether the MOU, which was originally only in 10
            states, was ever rolled out nationally? If not, will a
            future MOU between USDA and SBA are nationwide?

        RESPONSE: Yes, USDA rolled out the MOU nationally. On April
    11, 2011, RBS sent a letter to Rural Development State
    Directors to encourage all states to implement the MOU. The
    letter specifically stated that ``. . . RBS is grateful to the
    17 states that initially implemented the MOU; the MOU applies
    to all USDA National and State Offices.''

        Furthermore, RBS used the 2011 collaboration surveys to
    assess whether the MOU was being implemented in all states and
    further encourage national implementation. The survey results
    showed that the MOU was being implemented nationally. Forty-one
    out of 47 State Offices responded to the survey. The
    respondents demonstrated that they collaborate with SBA in a
    variety of ways, usually by providing referrals and conducting
    joint training and outreach.

        As noted in the response to the previous question, USDA is
    currently drafting proposed amendments to the MOU that extends
    the MOU nationwide.

              c. The MOU states SBA and USDA will meet ``every 3
            months to measure progress under this MOU.'' Please
            provide the Committee with a list of all the locations
            and dates of all meetings between USDA and SBA as
            required by this portion of the MOU.

        RESPONSE: SBA and USDA have met on numerous occasions to
    implement and discuss our collaboration under this MOU.
    Meetings specific to ``measuring progress'' include, but are
    not necessarily limited to, those shown in the following table:

    ------------------------------------------------------------------------
                     Location                               Date
    ------------------------------------------------------------------------
    USDA National Headquarters, Washington DC                August 29, 2010
    ------------------------------------------------------------------------
    USDA National Headquarters, Washington DC              September 9, 2010
    ------------------------------------------------------------------------
    USDA National Headquarters, Washington DC                 April 25, 2012
    ------------------------------------------------------------------------
    Small Business Administration,                          January 23, 2013
     Headquarters, Washington, DC
    ------------------------------------------------------------------------
    Small Business Administration,                            March 12, 2013
     Headquarters Washington, DC
    ------------------------------------------------------------------------

        In addition to the meetings shown above, the MOU has
    fostered an additional number of collaboration opportunities
    between USDA and SBA. For example, the two agencies co-hosted
    six investment roundtables (as discussed previously in response
    to another question). These roundtables enabled both agencies
    to reach out in a collaborative effort to their respective
    stakeholders to identify new opportunities for leveraging each
    other's programs. In addition, USDA State Offices frequently
    collaborate with SBA Regional Offices to conduct outreach and
    meet regularly to discuss new partnership opportunities,
    including joint lending for individual projects. Each agency's
    unique lending parameters facilitate leveraging opportunities.
    For example, a rural business can use a B&I loan guarantee for
    the purchase of real estate and use a SBA guarantee for working
    capital or equipment.

              d. Under the MOU set to expire in April 2013, please
            explain the factors used to measure progress and any
            best practices ascertained under this MOU.

        RESPONSE: USDA conducted two surveys in 2011 and determined
    that there was significant collaboration happening between USDA
    and SBA. The survey questions asked respondents about their
    collaborative efforts with SBA and the factors measured
    mirrored the expectations outlined in the MOU. For example, the
    survey asked respondents about how many projects and trainings
    they conducted jointly with SBA. For a full list of factors,
    see the survey summary above.

        The survey results showed that all respondents collaborated
    with SBA. In fact, in June 2012, GAO agreed that the survey
    results demonstrated significant collaboration between USDA and
    SBA and closed its inquiry on the subject, stating that USDA
    fully implemented its recommendation to increase collaboration
    with SBA.

        Best practices reported through the survey include:

         Participating in networks of Federal, state, and
    local economic development organizations that host monthly
    conference calls to discuss key issues and areas for
    collaboration;

         Co-hosting regular, joint outreach and training
    meetings; and

         Co-hosting statewide conferences.
                          Memorandum of Understanding

                                  between the

                       U.S. Small Business Administration

                                    and the

                         U.S. Department of Agriculture

                                    PURPOSE

        The U.S. Small Business Administration (SBA) and the U.S.
    Department of Agriculture (USDA), acting through the Rural
    Business-Cooperative Service (RBS or Rural Development)
    (together the ``Agencies'' or the ``Parties''), believe that
    there are people and places in rural areas and small
    communities with underserved financial needs, especially
    current and prospective small businesses owned by minorities,
    women, and veterans, that would benefit from a joint effort by
    the Agencies to encourage sustainable growth and development
    financed by loans guaranteed by SBA and by loan guarantees,
    loans, and grants by RBS. The Agencies intend to coordinate
    their programs to assist small businesses in underserved rural
    areas. Each Agency will apply its expertise and experience
    according to its legislative mandate.

        The Agencies enter into this Memorandum of Understanding
    (MOU) to better serve rural areas by:

        1. Improving opportunities for small businesses to start
    and grow;

        2. Coordinating the delivery of development programs;

        3. Increasing the number of small business loans guaranteed
    by SBA and RBS;

        4. Developing relationships with Federal, State, county,
    and local agencies; private organizations; and commercial and
    financial institutions to facilitate and support the
    development of strong rural businesses; and

        5. Fostering and supporting sustainable development,
    livable wage jobs, and quality of life objectives and
    principles.

        The Agencies intend to fist begin the cooperative efforts
    discussed in this MOU within the 10 States listed in Attachment
    A. The Agencies will meet every 3 months to measure progress
    under this MOU, including results and best practices and to
    roll-out this initiative nationwide.

                                   BACKGROUND

                        Department of Agriculture (USDA)

        RBS is one of the Agencies reporting to the Under Secretary
    for Rural Development. RBS offers many programs (``Business
    Programs'') to promote small business development, including
    direct and guaranteed loans and grant assistance. These
    programs are authorized under the Consolidated Farm and Rural
    Development Act, the Food Security Act of 1985, and the Rural
    Electrification Act of 1936.

        RBS administers the Business Programs through a network of
    State Offices and field offices. Rural Development State
    Directors administer the Business Programs in the individual
    States. One such program is the Business and Industry Guarantee
    Loan Program (B&I) which guarantees quality loans made by
    lending institutions.

                      Small Business Administration (SBA)

        SBA acts under the Small Business Act of 1953, as amended,
    and the Small Business Investment Act of 1958, as amended, to
    aid, counsel, assist, and protect the interests of small
    business. SBA guarantees loans and provides business
    development assistance to small businesses. SBA administers its
    programs through district offices throughout the United States.
    SBA provides additional services through its network of
    resource partners; the Small Business Development Centers
    (SBDC), SCORE, U.S. Export Assistance Centers (USEAC), Women's
    Business Centers (WBC), and Veterans Business Outreach Centers
    (VBOC).

                                     SCOPE

        Many rural parts of the country have suffered decades of
    poverty reflected in unemployment and underemployment rates in
    excess of 20 percent. Shifting demand, global competition, and
    changing demographics have escalated the conditions that cause
    pockets of persistent poverty, loss of jobs, and declining
    population and investment capital in many rural areas. SBA and
    RBS intend to work together to stimulate small business
    creation and expansion in rural areas.

        SBA and Rural Development each intend to use their
    respective resources to provide small businesses in rural areas
    with loan guarantees and technical assistance in an effort to
    help build diverse and sustainable economies, reverse
    population decline, create and sustain jobs, and improve
    quality of life. When possible, the Agencies will coordinate
    efforts with State, county, and local agencies; private
    organizations; financial institutions; industry associations;
    and local organizations, such as Chambers of Commerce and
    community development organizations. SBA resource partners,
    universities including Historically Black Colleges and
    Universities, and other education institutions may be asked to
    participate in various ways as SBA and RBS work together to
    help rural businesses start and grow.

        Through the cooperation outlined in this MOU, the Agencies
    will support smart growth strategies to enhance the livability
    and sustainability of rural communities, combat sprawl, and
    promote growth that strengthens and diversifies rural
    economies.

        Both Agencies realize that some joint training and outreach
    activities contemplated in this MOU may be subject to
    additional negotiation and a separate signed agreement pursuant
    to SBA's cosponsorship authority (15 U.S.C. Sec. 633(h)).

                             AREAS OF COLLABORATION

        RBS and SBA intend to coordinate delivery of their
    respective programs to rural areas by joint activities which
    may include, but are not limited to, the following:

                             Marketing and Outreach

        1. Each Agency's field offices intend to advise potential
    small business borrowers of the other Agency's credit programs
    that may support all or a portion of the small business'
    financing needs. RBS and SBA field offices will exchange
    promotional and reference materials, including brochures and
    training schedules, and will distribute the other Agency's
    information to its field network and its potential applicants
    when appropriate.

        2. Each Agency's field offices intend to coordinate
    referrals of small business applicants to one another when
    appropriate and consistent with each Agency's mission.

        3. Each Agency intends to coordinate its outreach to local
    and national financial institutions to increase awareness of
    the relevant SBA and RBS programs of the Agencies and the
    special characteristics of and potential for economic
    development in areas, subject to availability of funds.

        4. Both RBS and SBA will encourage their networks of
    resource partners to refer rural businesses to the other
    Agency's resources, where appropriate. Rural Development's
    network includes National and State Rural Partnership Councils,
    State and sub-State Offices, and Appropriate Technology
    Transfer to Rural Areas. SBA's network includes Small Business
    Development Centers, SCORE Chapters, U.S. Export Assistance
    Centers, Veteran Business Outreach Centers and Women's Business
    Centers. By mutual agreement, USDA and SBA may identify
    pairings of State and district offices to explore mutual best
    practices available to serve clients.

        5. The Agencies intend to develop working relationships
    with other Federal, State, county, and local agencies; private
    organizations; and educational and financial institutions to
    facilitate and support the development of strong rural
    businesses.

                               Use of Technology

        6. The Agencies will link to each other's Internet Home
    Pages. Each Agency will ensure that the locations and addresses
    of the other Agency's field offices may be accessed from its
    Web site. To the extent available and practicable, other
    technology links will be explored and implemented by mutual
    consent.

                             Agency Cross Training

        7. Each Agency, to the extent practical and to the extent
    funds are available, intends to develop joint field training
    seminars and provide representatives to explain programs,
    credit analysis techniques, and processing and servicing
    policies to the staff of the other Agency during these training
    seminars.

                           Joint Lending Engagements

        8. SBA and RBS would like to explore ways each Agency may
    capitalize on the strengths of the existing SBA and RBS loan
    program processes and procedures already established by each
    Agency, such as delegated lending authority and lender
    oversight requirements.

                   Local/Regional Food Supply Network Lending

        9. SBA and RBS would like to exchange information and
    discuss ways to increase lending to food processors and other
    borrowers who play a role in the local food supply chain.

                       Harmonizing Loan Program and Forms

        10. In order to serve the largest number of rural
    businesses as efficiently as possible, SBA and RBS will explore
    the possibility of making their financial programs more
    complementary, such as minimizing differences in program fees,
    and processing and closing procedures, to the extent permitted
    by the statutes and regulations which govern the respective
    programs. Any harmonization efforts will be documented through
    a separate written agreement.

                         Program Management and Review

        11. At least semiannually, each SBA District Director,
    Branch Manager, or designee will meet with his/her counterpart
    Rural Development State Director or designee to review previous
    joint activities and outline additional cooperative efforts.
    They should initiate, in cooperation with local organizations,
    at least one special joint project each year to support the
    growth and development of rural businesses in their districts.

        12. SBA District Directors and Rural Development State
    Directors will designate a senior staff member to implement the
    special projects under this MOU and coordinate service
    delivery.

        13. At least annually, SBA's Associate Administrator for
    Field Operations, USDA's Administrator for Business and
    Cooperative Programs, and RBS's Deputy Administrator for
    Business Programs or their designees will review the previous
    year's joint activities and outline additional cooperative
    efforts.

                        TERM, AMENDMENTS AND TERMINATION

        This MOU will take effect on the date of execution and will
    remain in effect for 3 calendar years, at which time the
    Parties may extend the MOU for an additional 2 years by mutual
    written agreement. The Parties may amend this MOU at any time
    by mutual written agreement. Either Party may terminate this
    MOU upon giving 60 days written notice to the other Party. This
    agreement is subject to available funding and applicable
    statutes and regulations.

                                CONTACT PERSONS

        For SBA, the Associate Administrator for Field Operations
    will be the officer responsible for this MOU. For RBS, the
    Deputy Administrator for Cooperative Programs will be the
    responsible officer.

                                   SIGNATURES

        The following individuals have authority to commit their
    respective Agencies to the terms of this MOU.

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                                  Attachment A

                                 LIST OF STATES

        Arkansas
        Indiana
        Iowa
        Kansas
        Louisiana
        Maine
        Michigan
        Minnesota
        New Mexico
        Nevada
        North Carolina
        North Dakota
        Ohio
        Oregon
        Virginia
        Vermont
        Washington
         A S B D C - Association of Small BUsiness Development Centers

                                  REPRESENTING

                                 AMERICAS SBDC

                                  Statement of

                                   C. E. Rowe

                                 President/CEO

               Association of Small Business Development Centers

                          Hearing on GAO Report 12-819

                          Committee on Small Business

                          US House of Representatives

                                 March 20, 2013

        Chairman Graves, Ranking Member Velazquez, Members of the
    Committee, thank you for the opportunity to submit testimony on
    the Government Accountability Office's (GAO) report on
    Entrepreneurial Assistance Programs (GAO-12-819).

        As you know, for over 30 years the Small Business
    Development Centers has been providing front line services to
    entrepreneurs and small business owners while growing and
    developing an infrastructure dedicated to assisting all small
    business owners and providing them free one-to-one consulting
    and advice on how to improve, finance, market and manage their
    businesses. The result of our efforts and the support of our
    host states and institutions has been the establishment of a
    nationwide network of nearly 1,000 locations with over 4,500
    dedicated professional business advisors that annually assist
    hundreds of thousands of small businesses and entrepreneurs of
    every conceivable type in every state and territory.

        Today's hearing focuses on GAO's report on the need to
    improve program collaboration, data tracking and performance
    management. At SBDCs we focus on those concepts every day and
    have been for decades. Program accountability is a basic tenet
    of our accreditation process as authorized in the Small
    Business Act. Each SBDC must develop and implement a strategic
    plan focused on continuously improving services and skills to
    provide to their clients--the small business community--with
    high value, up-to-date and needed services. SBDCs provide
    assistance to small business of all types, all demographics and
    all regions, but, those services can't be stagnant our
    unresponsive to market, national or global changes. We are
    always expanding and improving our services in an effort to
    support the growing needs of the small business sector and to
    adapt to a changing business environment.

        We have evolved a very specific evaluation criteria that
    rely upon the confirmation and attribution of the entrepreneurs
    and small business owners we work with every day, often for
    extended periods, because they are the only ones truly able to
    knowledgeably comment.

        Each SBDC has performance goals on job creation, sales
    growth, capital infusion and business starts. All of this used
    to monitor the progress and quality of services provided to
    small business. These services must be timely, appropriate for
    the business and directly linked to the improvement or business
    results, or we won't report the outcome.

        Every SBDC undergoes a program review from SBA program
    managers annually. They undergo a financial review from SBA
    analysts every two years and an in-depth Accreditation review
    every five years. These reviews are focused on program
    performance, marketing and attention to meeting needs of our
    local small businesses and ensuring quality and consistency in
    SBDC services.

        To support quality management, SBDCs constantly track and
    monitor the work they do and the services they provide in order
    to ensure the value to the small business client. Each client
    meeting or electronic exchange are recorded in their database
    and used to monitor progress as well as obtain timely feedback.
    The client's progress and results are measured as well, not by
    our staff but by the client. For the past ten years, the ASBDC
    has commissioned an independent research project on the
    effectiveness and efficiency of SBDC assistance. This is in
    addition to the research that every program conducts throughout
    the year.

        Unfortunately, all of our goals and metrics don't appear in
    the GAO report. In Appendix III, only the ``capital infusion''
    and ``business starts'' goals of the SBDC program are reported.
    Our ``job creation'' and ``sales growth'' goals are not. ``Cost
    per business start'' and ``Cost per job supported'' are shown
    but, those aren't goals. They are measurements from outcomes
    and support, though they do stem from the goals.

        The value of the SBDC networks' efforts to apply metrics
    and performance management is reflected in the studies of SBDC
    client success. In particular, GAO cites the SBA study by
    Concentrance in Appendix V. That longitudinal survey detailed
    the results of SBDC assistance and confirmed the results of the
    annual ``Economic Impact of SBDC Counseling Activities'' in
    which SBDCs participate. Those results are all based on our
    goals of sales growth, job creation, capital infusion and
    business starts.

        The ASBDC Members agree with GAO that collaboration between
    government programs is a good idea. We strive to work with
    other programs to achieve better results for the small business
    community. That is why you will see that SBDCs are twice
    mentioned in the examples provided by GAO of ``illustrative
    Examples of Economic Activities''. We also can provide the
    Committee with examples of our collaboration with the Delta
    Regional Authority in Tennessee and Missouri; the US Department
    of Commerce in Maryland, New York, and Oregon; or the US
    Department of Agriculture in Texas and Iowa--just to name a
    few.

        Despite that, SBDC lack of coordination with the USDA Rural
    Business Enterprise Grant (RBEG) Program was mentioned
    specifically in the report. This is inconsistent with the
    general attitude among SBDCs to do what is best for the client
    using whatever resources are available. Other programs are
    often identified through our Accreditation process as SBDC
    Stakeholders because of the active coordination in support of
    the small business sector.

        It is true that SBA, SBDCs and the USDA RBEG Program don't
    have shared policies and procedures. However, the lack of
    shared policies and procedures in this case isn't due to a lack
    of collaboration.

        First, SBA doesn't manage SBDCs in a ``top down'' fashion.
    SBA provides guidance on program requirements and services,
    sets goals, and reviews performance. SBDCs and SBA work to
    develop national programs like the programs for veterans but,
    in the main SBDCs operate in response to local/regional small
    business needs and concerns.

        Second, SBDCs (particularly those serving rural states like
    Iowa) are fully aware of the RBEG program. Several SBDCs
    receive RBEG funding but, RBEG is a competitive grant program
    funding rural economic development projects. SBDCs often apply
    and win awards, but, the funding can't be considered steady.
    Also, because it is a competitive grant program it has a
    distinctly different purpose from SBDCs.

        Regardless, the goal of ASBDC's testimony isn't to
    criticize GAO. We think this report speaks to a serious issue
    and raises important questions. Frankly, the task GAO undertook
    was enormous. Giving an overview of 52 programs is a lot of
    work if you simply categorize those programs. That effort is
    only complicated by trying to define ``economic development''
    in each of the targeted areas and apply performance metrics to
    that definition. To understand the inter-relationships that
    exist in 50 states, individual districts and territories as
    well as the local communities seems insurmountable.

        Our goal is to focus on one corner--SBA and SBDCs in the
    context of the report. We can't speak to other programs and how
    they perform, but, we know that SBDCs are regularly reviewed,
    regularly assessed for performance, challenged by goals and
    focused on leveraging the resources of other programs to
    enhance our impact. We agree with GAO's findings--data
    tracking, goal setting, performance management and
    collaboration are the fundamental keys to success of any
    economic development program. To that end, we have attached a
    chart outlining how SBDCs apply the best practices in GAO's
    report. That's the path the SBDC networks have been following
    for years and will continue to follow.

        Thank you.

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