[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
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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
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12/15/2011................................. Syracuse, NY Dairylea Cooperative Building 40 3 2 35
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4/12/2012.................................. Columbus, OH Columbus Dispatch Kitch Event 27 2 2 23
Room.
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2/14/2012.................................. Fresno, CA Fresno Council of Government 27 3 2 22
Conference Room.
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6/20/2012.................................. Denver, CO Rural Development State 16 3 2 11
Office.
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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.
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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
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USDA National Headquarters, Washington DC August 29, 2010
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USDA National Headquarters, Washington DC September 9, 2010
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USDA National Headquarters, Washington DC April 25, 2012
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Small Business Administration, January 23, 2013
Headquarters, Washington, DC
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Small Business Administration, March 12, 2013
Headquarters Washington, DC
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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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