[Senate Hearing 116-84]
[From the U.S. Government Publishing Office]




                                                                                           ------                                
                                                         S. Hrg. 116-84

   REAUTHORIZATION OF THE SBA'S ENTREPRENEURIAL DEVELOPMENT PROGRAMS

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          AND ENTREPRENEURSHIP
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               ----------                              

                              MAY 1, 2019

                               ----------                              

      Printed for the use of the Committee on Small Business and 
                            Entrepreneurship
                            
                            
                            
                            
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   REAUTHORIZATION OF THE SBA'S ENTREPRENEURIAL DEVELOPMENT PROGRAMS
   
   
   
   
   
   




                                                         S. Hrg. 116-84
 
   REAUTHORIZATION OF THE SBA'S ENTREPRENEURIAL DEVELOPMENT PROGRAMS

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          AND ENTREPRENEURSHIP
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 1, 2019

                               __________

      Printed for the use of the Committee on Small Business and 
                            Entrepreneurship
                            
                            
                            
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]            





        Available via the World Wide Web: http://www.govinfo.gov
        
        
        
        
                            ______

               U.S. GOVERNMENT PUBLISHING OFFICE 
 37-795 PDF              WASHINGTON : 2019       
 
 
 
        
        
        
            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                     ONE HUNDRED SIXTEENTH CONGRESS

                              ----------                              
                     MARCO RUBIO, Florida, Chairman
              BENJAMIN L. CARDIN, Maryland, Ranking Member
JAMES E. RISCH, Idaho                MARIA CANTWELL, Washington
RAND PAUL, Kentucky                  JEANNE SHAHEEN, New Hampshire
TIM SCOTT, South Carolina            EDWARD J. MARKEY, Massachusetts
JONI ERNST, Iowa                     CORY A. BOOKER, New Jersey
JAMES M. INHOFE, Oklahoma            CHRISTOPHER A. COONS, Delaware
TODD YOUNG, Indiana                  MAZIE K. HIRONO, Hawaii
JOHN KENNEDY, Louisiana              TAMMY DUCKWORTH, Illinois
MITT ROMNEY, Utah                    JACKY ROSEN, Nevada
JOSH HAWLEY, Missouri
             Michael A. Needham, Republican Staff Director
                 Sean Moore, Democratic Staff Director
                 
                 
                            C O N T E N T S

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                           Opening Statements

                                                                   Page

Rubio, Hon. Marco, Chairman, a U.S. Senator from Florida.........     1
Cardin, Hon. Benjamin L., Ranking Member, a U.S. Senator from 
  Maryland.......................................................     3

                               Witnesses
                                Panel 1

Gutierrez, Allen, Associate Administrator, Office of 
  Entrepreneurial Development, U.S. Small Business 
  Administration, Washington, DC.................................     5
Ware, Hannibal ``Mike,'' Inspector General, Office of Inspector 
  General, U.S. Small Business Administration, Washington, DC....    11

                                Panel 2

Myhre, Michael, CEO, Florida SBDC Network, Pensacola, FL.........    32
Haughton, Kiesha, Managing Director, Maryland Women's Business 
  Center, Rockville, MD..........................................    51
Yancey Jr., W. Kenneth, CEO, SCORE Association, Herndon, VA......    58
Craven, Darcella, President, Veterans Business Resource Center, 
  St. Louis, MO..................................................    77

                          Alphabetical Listing

Cardin, Hon. Benjamin L.
    Opening statement............................................     3
Craven, Darcella
    Testimony....................................................    77
    Prepared statement...........................................    80
    Addendums....................................................   436
Gutierrez, Allen
    Testimony....................................................     5
    Prepared statement...........................................     7
    Responses to questions submitted by Chairman Rubio, Ranking 
      Member Cardin, Senators Scott, Hirono, and Rosen...........   100
Haughton, Kiesha
    Testimony....................................................    51
    Prepared statement...........................................    53
    Responses to questions submitted by Senator Hirono...........   128
Myhre, Michael
    Testimony....................................................    32
    Prepared statement...........................................    34
    Responses to questions submitted by Senator Hirono...........   121
Rubio, Hon. Marco
    Opening statement............................................     1
Ware, Hannibal ``Mike''
    Testimony....................................................    11
    Prepared statement...........................................    13
    Responses to questions submitted by Chairman Rubio...........   114
Yancey Jr., W. Kenneth
    Testimony....................................................    58
    Prepared statement...........................................    60
    Responses to questions submitted by Chairman Rubio and 
      Senator Hirono.............................................   131


   REAUTHORIZATION OF THE SBA'S ENTREPRENEURIAL DEVELOPMENT PROGRAMS

                              ----------                              


                         WEDNESDAY, MAY 1, 2019

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:30 p.m., in 
Room 428A, Russell Senate Office Building, Hon. Marco Rubio, 
Chairman of the Committee, presiding.
    Present: Senators Rubio, Ernst, Romney, Hawley, Cardin, 
Cantwell, Markey, Coons, and Rosen.

OPENING STATEMENT OF HON. MARCO RUBIO, CHAIRMAN, A U.S. SENATOR 
                          FROM FLORIDA

    Chairman Rubio. The hearing will come to order. I want to 
thank everyone who is going to join us here today. I say at the 
outset, we have four votes at 3:00 p.m. so members will fly 
through here at some point, juggle all this, and see how we 
make it work. We are just joking. We must have made someone 
upset in this committee because we keep getting magnets for 
multiple votes, but anyway. The hearing today is titled the 
reauthorization of the SBA's entrepreneurial development 
programs. This is our third in a series of hearings focused on 
reauthorization of the Small Business Act.
    I believe it is vital the committee reauthorizes the Act. 
That we take a look at the SBA's small business programs to 
ensure that they are meeting the needs of today's entrepreneurs 
and operating in an efficient way. In essence, we have 
modernized the program to reflect the realities of today's 
economy. Today we are going to focus on the Small Business 
Administration's four main entrepreneurial development 
programs. The Small Business Development Center, or SBDC 
program, the Women's Business Center, or WBC program, the 
Service Corps of Retired Executives, or SCORE program, and the 
Veterans Business Outreach Center, or VBOC program. Each of 
these programs is providing entrepreneurs and small-business 
owners with specific and tailored training to help them start 
and scale their business. With the SBA's Office of Advocacy 
reporting roughly 30.7 million small businesses in the U.S., 
2.5 million of which are located in the State of Florida, the 
potential impact these programs can have on business creation 
and growth is immense. What do these programs offer our 
Nation's entrepreneurs?
    The SBDC program focuses on providing technical and 
managerial training to entrepreneurs at every stage of business 
creation. The SBDC network is the SBA's largest entrepreneurial 
development program with nearly 1,000 center locations 
nationally in rural and urban areas of the country alike. The 
WBC program offers entrepreneurs business training and 
counseling; however, it specializes in entrepreneurial training 
targeted to meet the unique needs of female entrepreneurs. 
There are more than 100 WBCs located throughout the U.S. The 
SBA supports the SCORE program, which focuses on providing 
entrepreneurs with personalized business mentorship and 
training. SCORE provides services both online and at more than 
300 centers often co-located with SBA district offices.
    The final development program we will be discussing is the 
VBOC program which provides U.S. military veterans and their 
families with entrepreneurship education and assistance at 22 
center locations. In addition, VBOC serves a unique and vital 
role within the Department of Defense Transition Assistance 
Program by providing transitioning members in the military with 
a two day Boots to Business-business entrepreneurship course. 
Undoubtedly, small business owners are benefiting from the 
SBA's development programs. In Florida alone, the SBDC network 
reported that their services impacted more than 280,000 jobs, 
generated more than $36.7 billion in sales, and resulted in the 
creation of more than 4,500 new businesses.
    All of these development programs have not been without 
criticism. Just last Thursday, the SBA's Office of Inspector 
General, OIG, released an audit report on the SBA's oversight 
of the SCORE Association. The audit uncovered systemic issues 
within the SCORE Association and the SBA's oversight of the 
SCORE programs. Specifically, the report notes that the SCORE 
Association misused Federal grant funds. Some of the most 
egregious incidences of misuse include the SCORE Association 
redistributed more than $100,000 worth of grant money to be 
used for year-end bonuses for SCORE employees, 66 percent of 
which went to four senior-level Association executives. The 
Association awarded 9 of the 25 contracts without following the 
cooperative agreements requirements, including a failure to 
solicit proposals through open competition and failure to 
obtain proposals from at least three firms. The CEO of the 
SCORE Association, whose salary from Federal and foundation 
funds totals more than $440,000 a year, solely used Federal 
grant dollars rather than nonprofit foundation funds to hire an 
executive coaching consultant. And the SCORE Association used 
Federal funds for prohibited costs such as alcohol and 
unallowable local travel expenses.
    These egregious infractions of taxpayer dollars went 
undetected by the SBA. Unfortunately, this is not the first 
time that the SCORE Association has been criticized for the 
mismanagement and commingling of Federal funds. Following 
Hurricane Sandy, the SBA awarded a number of disaster technical 
assistance grants to resource partners aiding in recovery 
efforts. The SCORE Association received one such grant. Later 
in 2017, the OIG audited SCORE's use of those disaster 
technical assistance funds, specifically auditing $840,000 
worth of program expenses and the audit reported that SCORE 
failed to consistently comply with grant requirements, 
ultimately recommending that SBA recover approximately 46 
percent of these funds or roughly $391,000 of the total 
disaster grant.
    While the SCORE program did repay these funds to the SBA 
over time, there was clearly an overarching issue within the 
program that has continued to allow for the misuse of Federal 
funds without the SBA detecting it. Unfortunately, concerns 
surrounding the SCORE program do not stop with the misuse of 
taxpayer funds. It has recently come to the attention of the 
committee that the SBA OIG is currently managing three separate 
criminal investigations of embezzlement and whistleblower 
protection violations related to the SCORE program. In one such 
instance, the OIG has substantiated that a SCORE chapter 
treasurer who identified an instance of fraud was removed from 
their position in an act of retaliation for whistleblowing, a 
decision that was sanctioned by a SCORE district director and 
the Association's national vice president of field operations.
    Clearly, after reviewing the Inspector General's audit 
report and the details surrounding these criminal 
investigations, I have severe concerns about the operation, 
oversight, and management of the SCORE program. I look forward 
to not only discussing these concerns but also examining the 
entrepreneurial development programs as a whole throughout 
today's hearing.
    With that, I recognize the Ranking Member.

OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, RANKING MEMBER, A 
                   U.S. SENATOR FROM MARYLAND

    Senator Cardin. Mr. Chairman, thank you very much for 
convening this hearing. As the chairman pointed out, we are 
already going to apologize to the witnesses because there are a 
series of votes that are scheduled to start at 4:00 p.m. this 
afternoon which will interrupt the continuity of our hearing 
and we apologize for that. This is an extremely important 
hearing on the entrepreneurial development programs under the 
SBA as we continue to look in this committee at reauthorizing 
and strengthening the tools that are available under the SBA.
    The SBA provides vital training and support to American 
small businesses through the four programs that the chairman 
has mentioned. They all deal with having resource partners that 
help us provide the services for small businesses in our 
community. The largest, as the chairman pointed out, the Small 
Business Development Centers partner with colleges and 
universities to deliver the training to entrepreneurs at all 
stages of business development. The Women's Business Center 
provides training and mentorship to women entrepreneurs, 
particularly in economically and socially disadvantaged women. 
SCORE program pairs entrepreneurs with expert business mentors 
and training workshops at little to no cost. And the Veterans 
Business Outreach Centers provide business counseling to 
transitioning service members, veterans, and their spouses.
    Mr. Chairman, I just want to brag one moment about one of 
those programs, on the Veterans Business Outreach Center, which 
was started in Maryland as a private enterprise by the 
Montgomery County Chamber of Commerce. And it was a national 
program to help returning warriors, giving them the information 
they needed in order to be more effective in dealing with 
Government contracts and to set up their businesses. It has 
been extremely successful. The program has graduated more than 
1,200 participants who report that their revenues increased by 
an average of 64 percent in the first year of completing this 
very successful program.
    Collectively these four programs have trained more than 1.2 
million entrepreneurs during the Fiscal Year 2018. That is an 
impressive number, but as has been pointed out, it merely 
scratches the surface on the needs that are out there. So, the 
needs are much greater than we are meeting today but it is very 
effective in those that they do meet. Data shows that small 
businesses created by entrepreneurs who receive at least three 
hours of SBA counseling have higher survival rates than small 
businesses created by entrepreneurs who receive less counseling 
or none at all. So, these programs are important programs.
    Last month we heard from Connie Evans, President and CEO of 
the Association for Enterprise Opportunity, made the case for 
increased access to business counseling before the committee 
when she said sufficient capital and credit enable 
entrepreneurs to get their businesses off the ground but 
sometimes those with a vision and passion lack the technical 
skills necessary to keep their doors open. That is where these 
programs come in to make sure that we not only get them off the 
ground, but they can continue and grow and add to the economy.
    Ms. Evans testified that the medium annual revenue growth 
for businesses that receive both capital and technical 
assistance from the SBA microloan program is 30 percent higher 
than businesses that receive only capital. As we examine the 
current state of major SBA entrepreneur development programs, 
my fear is that the SBA is barely scratching the surface of the 
benefits that the entrepreneurial development can bring to the 
American economy, which has experienced a 40-year decline in 
new business formations.
    SBA may have reached more than 1.2 million entrepreneurs in 
Fiscal Year 2018, but the number represents less than 5 percent 
of our Nation's entrepreneurs. Lastly, let me just join the 
chairman in pointing out that first, when we look at 
entrepreneurial programs and target populations that they serve 
in the small business community, we have to put effective 
oversight. And yes, the oversight on the SCORE program that the 
report that we received is very alarming and we need to follow 
up on that to make sure that these actions have been corrected 
and that we have protections in place that prevent any further 
violations of our expectations.
    And one question I will be asking is how do we determine 
accountability for these programs. But I also believe we need 
to make sure that these programs are reaching particularly the 
underserved communities, and how well are we reaching 
communities that have had a hard time with entrepreneurship 
because of historic discrimination and a lack of opportunity. 
Are we really focusing on making up for that disadvantage?
    I look forward to hearing from our witnesses, and I look 
forward to the process this committee is using reevaluating and 
on reauthorizing our programs.
    Chairman Rubio. Thank you. I will work on my first panel. 
Mr. Allen Gutierrez is the Associate Administrator of the Small 
Business Administration's Office of Entrepreneurial 
Development. He previously served in the U.S. Small Business 
Administration from 2001 to 2006. During his tenure with the 
SBA, he served as Senior Advisor to the Chief Operating Officer 
and Senior Advisor to the Office of International Trade.
    Mr. Hannibal Mike Ware is the Inspector General of the 
Small Business Administration. He was confirmed in the Senate 
by unanimous consent last year. He is responsible for 
independent oversight of the SBA's programs and operations. He 
also currently serves as the chairman of the Audit Committee 
for the Council of Inspectors on Integrity and Efficiency. I 
thank you both for being here today. We will open with you, Mr. 
Gutierrez.

 STATEMENT OF ALLEN GUTIERREZ, ASSOCIATE ADMINISTRATOR, OFFICE 
      OF ENTREPRENEURIAL DEVELOPMENT, U.S. SMALL BUSINESS 
                 ADMINISTRATION, WASHINGTON, DC

    Mr. Gutierrez. Great. Thank you very much Chairman Rubio, 
Ranking Member Cardin, and members of the committee for 
inviting me to testify.
    I am proud to serve as Associate Administrator for the 
Office of Entrepreneurial Development at SBA. In this role, I 
administer programs and initiatives that provide counseling and 
training to small businesses. This is my second time at the 
agency, having served at SBA from 2001 to 2006. In between, I 
was a National Executive Director of the Latino Coalition, one 
of the Nation's largest advocacy organizations. The Office of 
Entrepreneurial Development overseeing SBA's primary counseling 
and training programs. Under the OED umbrella are what we 
commonly refer to as SBA resource partners, Small Business 
Development Centers, SBDCs, Women's Business Centers, and 
SCORE.
    Our partnership with these organizations is very valuable 
to OED and the agency, and we have a good relationship with 
them. Since taking on the role with OED, I have worked directly 
with the leadership of each organization to review our 
contractual agreements and performance expectations. This led 
to our establishing common performance matrix across all three 
organizations with a goal of better connecting how 
entrepreneurs that receive counseling might later interact with 
SBA services or loan programs. This will allow us to better 
capture data on new business starts and will encourage greater 
focus on underserved and rural communities.
    Related to this are some recommendations for the committee 
to consider as part of your reauthorization process. Among 
them, we would like to work with you and the resource partners 
to foster better data collection and to remove existing 
limitations. We would also like to work with you to review 
potential performance incentives for SBDCs so as to spur them 
to meet their goals. Some other areas of focus for OED include 
building on our 113 women business centers and our desire to 
establish centers in Idaho and South Carolina, two of several 
states without a WBC presence. Also, we would want to continue 
our efforts with our Emerging Leaders program which has been 
very successful in training small business owners. We are also 
happy coordinating our agency's outreach efforts to Native 
American communities.
    Lastly, we will continue to monitor aspects of the SBDC 
program, for example, first-year evaluations of the new 
performance standards, the ability of the network to match 
increased Federal dollars, and the carryover and utilization of 
fiscal year funds. In view of my colleague's testimony, let me 
also speak to the recent SBA Inspector General's report on the 
SCORE program.
    First, let me say that we work very well with our IG. An 
immediate leadership priority for Administrator McMahon was to 
address outstanding IG recommendations. In our February 
testimony before the committee, she shared the agency resolved 
over 140 IG recommendations during her two-year tenure of which 
90 percent in my office that we also were able to clear as 
well.
    As I mentioned earlier about my own leadership within OED, 
I engaged the resource partners very early in my tenure. With 
all three resource partners, we updated our notices awards, 
established stronger internal controls, and with respect to 
SCORE, our developing REGs and SOPs that have never been in 
place before. These efforts served us very well with the later 
engagement with IG and in their investigation.
    Three of their recommendations are already closed and we 
already have a plan for closing the remaining eight. Chairman 
Rubio, ranking member Cardin, and members of the committee, I 
appreciate the opportunity to testify. Thank you for your 
continued support of the agency on America's small business. I 
look forward to continuing to work with you and your staff.
    [The prepared statement of Mr. Gutierrez follows:]
    
    
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    Chairman Rubio. Mr. Ware.

STATEMENT OF HANNIBAL ``MIKE'' WARE, INSPECTOR GENERAL, OFFICE 
   OF INSPECTOR GENERAL, U.S. SMALL BUSINESS ADMINISTRATION, 
                         WASHINGTON, DC

    Mr. Ware. Chairman Rubio, Ranking Member Cardin, and 
distinguished members of the committee, thank you for the 
opportunity to be here today. I am both proud and grateful to 
represent the dedicated men and women of the Office of 
Inspector General and speak to you about their important work.
    In the last six years, my office has issued 10 reports to 
the administrator regarding entrepreneurial development 
programs offered by SBA. From Fiscal Year 2014 through Fiscal 
Year 2018, we reproduced five reports on the Small Business 
Development Centers and SCORE entrepreneurial development 
programs, and two reports on the Boots to Business program, 
which is the Veterans Business Development program. We are 
currently performing a review of SBA's oversight of Women's 
Business Center's compliance with grant requirements.
    As a result of our work in the grant programs, we issued a 
report and our consolidated findings at the beginning of this 
Fiscal Year. We identified systemic risks which led us to 
identify grants management as one of the most serious 
management and performance challenges facing SBA in Fiscal Year 
2019. Most recently, we published our report on SBA's oversight 
of the SCORE Association in late April, which further 
reinforced the findings of our consolidated report. Across 
these reports, we made 68 recommendations, 56 of which are 
closed. Despite the agency's corrective actions to address our 
recommendations, SBA's decentralized oversight of the agencies' 
grant programs hampers agency-wide improvements. SBA has three 
separate program offices overseen as grant programs, the Office 
of Entrepreneurial Development, the Office of International 
Trade, and the Office of Veteran Business Development.
    SBA then has three program offices responsible for 
awarding, monitoring, and closing out grants to support SBA's 
entrepreneurial development grant programs, the Office of 
Grants Management, the office of Small Business Development 
Centers, and the Office of Women's Business Ownership. Each of 
these offices has its own separate and individual set of 
policies and procedures. Our work also has found SBA's 
processes to monitor how grant recipients spend Federal funds 
and to assess performance of its grant programs was 
ineffective.
    As a result, SBA's grant programs are at a risk of funds 
not being used for their intended purpose and of not achieving 
program goals and objectives. We made four recommendations to 
address these systemic issues, all of which remain open. 
Regarding our report addressing SBA's oversight of SCORE, our 
audit objectives were to determine whether SBA has effective 
oversight to ensure SCORE spend Federal funds in accordance 
with cooperative agreement requirements and measure, achieve 
program goals. We found that program officials did not 
effectively oversee SCORE's use of Federal funds and did not 
accurately measure or report SCORE's performance goal 
achievements.
    Despite the long-standing partnership between SBA's SCORE, 
program officials did not keep track of the total cost of the 
program and did not perform a complete financial examination of 
SCORE. Compounding these issues, SCORE relied on more than 300 
accounting systems to track Federal funds, which affected its 
ability to perform effective oversight. SCORE commingled 
Federal funds with unrestricted donations and used Federal 
funds for unallowable, unallocable, and unsupported costs. We 
questioned over $700,000 of costs that did not adhere to the 
cooperative agreement requirements or were not properly 
supported. We made 11 recommendations as a result of our SCORE 
audit, three of which we closed prior to issuing the report 
because of agency corrective actions.
    In addition, our report, as was the case in several of our 
most recent reports on entrepreneurial development programs as 
well as GAO report 0849, have identified problems with SBA's 
performance system of record, the entrepreneurial development 
management information system or EDMIS. The system is 
inefficient and prone to error. Technology lapses with it 
continue to impact program management. SBA officials 
acknowledged there are systemic issues with its grant 
management processes and have documented plans to address them.
    That said, we will continue to perform reviews and make 
recommendations for corrective action to promote efficiencies 
and effectiveness within SBA's grant programs. Thank you all 
for the opportunity to speak to you today.
    I look forward to your questions.
    [The prepared statement of Mr. Ware follows:]
    
    
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    Chairman Rubio. Thank you. Mr. Ware let me begin with you. 
If I were to break down your report really two central 
findings, the first is the misuse of Federal grant dollars by 
SCORE for additional excessive staff bonuses and allowable 
contracts prohibited costs including alcohol. In fact, you 
found that the SCORE Association redistributed more than 
$101,000 worth of grant funds to be used for bonuses, 66 
percent of which went to just for senior-level SCORE 
Association executives. That is correct, right?
    Mr. Ware. Yes.
    Chairman Rubio. $62,000 for the Vice President for field 
operations, $41,000 to the Vice President of Finance, $33,000 
to the Vice President of Information Technology, and $33,000--
there are bonuses--to the Vice President of Marketing. All with 
taxpayer funds. That is correct?
    Mr. Ware. This is correct.
    Chairman Rubio. And you also found that the SBA failed to 
detect all of these items?
    Mr. Ware. Yes.
    Chairman Rubio. I believe the report notes that the SBA did 
not adequately monitor SCORE's financial reporting 
requirements, allowing for these bonuses to go undetected. You 
just cited in your opening statement but how many 
recommendations did you make in particular about the monitoring 
of financial reporting requirements? How many have been 
adopted? How many are pending? On the specific matter of the 
misuse of grant dollars for additional or excessive staff 
bonuses and the inability of SBA to spot it, how many 
recommendations for corrective action did you identify or 
recommend in your report on this specific matter, and how many 
have been adopted so far?
    Mr. Ware. On the specific ones relative to the financial, 
we had eight recommendations and I think of the ones that we 
have closed already is, let me see, one right here, one from 
this one and two from the performance side.
    Chairman Rubio. So, of the eight so far, one was adopted 
during the process so there are seven outstanding?
    Mr. Ware. Yes.
    Chairman Rubio. Okay. And then, the second finding outlines 
the failure to effectively collect program metrics and 
establish minimum outcome-based performance measures. If you 
could just repeat how many recommendations on that program in 
particular.
    Mr. Ware. Three for that and one already closed.
    Chairman Rubio. Okay. If I am correct, in 2017 an audit of 
the disaster technical assistance received by SCORE following 
Hurricane Sandy noted that SCORE failed to consistently comply 
with grant requirements. They used grant funds for unallowable 
costs, including non-competitive contract awards, unsupported 
advertising, meal charges. Your office ultimately recommended 
that SBA recover over 46 percent of SCORE's total disaster 
technical assistance grant. What actions need to be taken to 
ensure that the continued misuse of grant dollars in instances 
like this do not persist into the future, whether a 
recommendation is made as part of that finding, how many of 
those have been adopted?
    Mr. Ware. The recommendations were indeed made according--
oh, you are asking specifically how many were made for that?
    Chairman Rubio. For the Hurricane Sandy relief 2017. Do you 
know if there was a list of recommendations provided to them?
    Mr. Ware. Yes. I do not have the specifics on the 2017 
report, but I will be glad to get back to you on that.
    Chairman Rubio. And finally, I am just on the audit. It is 
my understanding that your office is currently working on three 
criminal investigations.
    Mr. Ware. Yes.
    Chairman Rubio. In general terms, can you walk us through 
each investigation and if you have any initial findings on the 
three?
    Mr. Ware. Definitely. Well, two of them have to do with 
embezzlement of funds and basically, the embezzlement of funds 
can happen because of the lax internal controls that are in 
place in SCORE chapter areas. So, in those two cases, you 
either had an individual who opened a checking account and used 
SCORE funds and another one who opened a credit card. We have 
made two arrests, got one conviction, and one already with the 
return of funds for that.
    On the third, the third one is the one that alarms in terms 
of the whistleblower protection and that one is currently in 
the hands of, well, SBA currently. I was going to say the 
acting administrator at this point. What happened in this case 
is that the second one, the one that we already got a 
conviction on, it was at the Seattle, Washington, office and 
the treasurer of that, the volunteer treasurer, notified our 
office that there was fraud in the program. We investigated the 
matter, found that that was the case. Like I said, it had a 
conviction. That office terminated the volunteer and terminated 
the volunteer partly because of the volunteer's work with our 
office.
    Our current investigations verify that, confirmed that that 
was indeed the case, it was partially a reason and that the 
board said that it was fine. They had an outside attorney come 
in to do that, but our findings showed that the outside 
attorney never spoke to the treasurer and never considered the 
fact that that aspect of it in terms of dealing with our 
office.
    We have forwarded those findings to the Office of the 
Administrator as is required under the Whistleblower Protection 
Act, mainly because it is a volunteer. If the person was an 
employee, it would have gone to the Office of the Special 
Counsel.
    Chairman Rubio. So just to cut to the chase, on these three 
cases, these are all at the chapter level, right?
    Mr. Ware. Yes, sir.
    Chairman Rubio. And so, is it your opinion based on looking 
into this that neither the SBA nor the SCORE Association have 
the proper financial oversight, centralized oversight over 
program's chapter locations?
    Mr. Ware. This is the findings of our report and across the 
board. They have 300 different accounting systems at the 
chapter level. Some of those systems are kept on private and 
the volunteers on personal computers. I would say the controls 
are lacking.
    Chairman Rubio. Thank you.
    Senator Cardin. Well, you know, your report is very 
concerning to us and, you know, we try to get Mr. Gutierrez to 
respond on having proper oversight. It seems to me the 
structure itself causes you concern, the fact that there are 
different offices within SBA that are responsible for grant 
making depending on the program and oversight, there is 
different offices. That there is not a consistent standard in 
operation within the SBA to monitor whether the performance is 
being done as expected, evaluation as well as legally required, 
and then in some cases whether they are committing criminal 
activities, the system doesn't lend itself to a common 
oversight system. Is that what we are saying?
    Mr. Ware. That is exactly what I am saying. Do you want me 
to continue? That is exactly what we are saying, and we have 
been working with Mr. Gutierrez as he came in. Once we did this 
comprehensive look at the programs across, based on all the 
work that was done. Because we were wondering, you know, you do 
the one and they make the changes in this one, but each one of 
them is treated kind of in a silo fashion.
    When we elevated everything to take a look across the 
board, we were able to make for central recommendations that 
could address this and one of those was for the agency to take 
a real hard look into whether centralization of these programs 
with a single office or individual responsible for ensuring 
integrity in the programs is a viable practice for the agency.
    Senator Cardin. Let me ask you one more question. Can this 
be done by the agency under existing legislative authority or 
do they need changes in the SBA law in order to implement these 
types of changes?
    Mr. Ware. That is a very good question. I am not a hundred 
percent sure they need changes in existing law, but I have a 
strong inclination that they do not. This is a structural 
decision within SBA as to whether or not they could do it with 
the resources that they have or whether or not that would 
benefit them in other areas.
    Senator Cardin. Of course, Congress sometimes wants to act 
to direct even though they may not have the authority but to 
give clear direction in which way we want to move. Mr. 
Gutierrez, do you want to respond to that question also? Do you 
have the authority to make these changes? Are you looking at 
the recommendations of the IG from the point of view of a more 
consolidated approach to holding the program, resource 
partners, etc. accountable for performance as well as complying 
with the law?
    Mr. Gutierrez. In regards to--thank you, sir. In regards to 
as it relates to grants management, I know that internally from 
the findings that we are working together with the Office of 
Grants Management and other entities within the agency to 
really strengthen and tighten controls and make sure that what 
was the findings to really get to the point of making it 
effective and efficient. Sorry Senator. To make it efficient 
and efficient from that standpoint and within the guidelines of 
the rules and laws.
    Senator Cardin. I would tell you this. Mr. Ware's findings 
are very, very serious and we would expect a more direct answer 
to this committee as we are working on the reauthorization. We 
cannot tolerate the type of lack of compliance with our rules 
that has happened in the SCORE program, so we will need a more 
direct answer as we are doing our work.
    Mr. Gutierrez. Yes, sir. And let me add that to that and 
related to specifically SCORE, today is my official two year 
anniversary coming into at leadership in OED. Since this 
anniversary today, as mentioned in terms of Hurricane Sandy, 
when I first got there out of the 18 that we are finding, 16 
were completed last year. There are two more findings that will 
be done in the next month related to Hurricane Sandy.
    As it relates to, currently right now as it relates to the 
IT findings, I would say that already proactively under my 
leadership when I first began, that is reflective, three 
already being closed and resolved. The other eight that are 
resolved, not unresolved. We have given very effective 
timelines to the idea of when we will be finishing this year. I 
would say that we also--I am sorry, is that we included and 
started the SOPs, regulations, tightening in the notice of 
award, and terms and conditions, things that have never been 
done before within the Office of Entrepreneurial to really have 
full control over this.
    Senator Cardin. Thank you for the answer in regards to the 
SCORE audit but as we pointed out, the SCORE audit it just 
reflects, from the Inspector General's point, a weakness within 
the entire SBA entrepreneur program system, well beyond SCORE.
    So, we really want to have a system in place that has clear 
direction and accountability. So that is not just complying 
with the letter of the law, which they have to do, but also 
that we have a uniform way to evaluate whether they are 
accomplishing the objectives in which Congress set up these 
programs, and it seems to me that in both cases compliance with 
our rules, regulations, laws are not--you do not have the right 
structure for oversight but it is also difficult for us to see 
the value we are receiving.
    My basic understanding is we got great value for the 
entrepreneur programs collectively but obviously we cannot 
evaluate that unless we can understand how individual programs 
are being held accountable within the SBA structure.
    Mr. Gutierrez. Yes, sir and we have, you know, in my 
written and also my oral certainly I have really--we are 
strengthening that within the cooperative agreements. New 
performance matrix really holds all three of the resource 
partners accountable to make sure that we continue in a very 
unison and partnership approach to reach out to as many 
entrepreneurs and small businesses across America. And that is 
something that as mentioned in my written testimony, that 
unfortunately when I first got there I was presented with, for 
example, in SBDCs a 41 percent or close to 27 of the 63 that 
had not been meeting the goals at all or maybe one goal in all. 
That is very disheartening for me knowing that we want to 
continue to provide those tools and services for the future of 
entrepreneurs that are the backbone of the small businesses 
across the country.
    So, I am happy to say that within these two years span we 
have gone from a 41 percent down to 29 percent. That is, you 
know, we wanted to be--I want all of them, we want all the 
resource partners to reach their full capacity as much as 
possible in every State.
    Chairman Rubio. Thank you.
    Senator Romney.
    Senator Romney. Thank you. I appreciate the work that both 
of you do and how important that is to provide for economic 
opportunity for our citizens. Appreciate the work of the 
Inspector General in reviewing the deficiencies in the 
oversight of some of these programs and Mr. Gutierrez 
appreciate also the work that the SBA is taking to implement 
changes that might prevent these kinds of things from occurring 
in the future.
    One question in my mind, it relates to the effectiveness of 
these programs and, you know, as I read the information about 
that the success of these programs and how dramatically 
people's revenues have grown following training in each one of 
these programs and how many people are involved in them, I hope 
that these accurately reflect the kind of a return in 
investment that we would hope to see, but I ask myself whether 
in this day and age, whether some of these programs ought to 
be, ought to transition to more online programs, and likewise 
whether any of these programs should go from being overseen and 
managed by the Federal Government to instead being overseen and 
managed by States?
    I know that is a question kind of out of the blue for both 
of you, but it has been my experiences when I served as a 
Governor that often times States being closer to the economy 
and the needs of the people in their respective jurisdictions 
have a better sense of what is the best way to help people get 
good jobs and to find entrepreneurial activities. Governors at 
each State have Offices of Economic Development. They are 
working very hard to attract businesses to their States but 
also to put people in positions to create new jobs and it seems 
somewhat duplicative to have the Federal Government pursuing 
the same programs that are being pursued by the State 
Government and so I turn to primarily Mr. Gutierrez in this 
regard, but are all of these programs, ones that really require 
Federal oversight and Federal management and Federal grants, or 
should some of these to be returned, at some stage, to the 
State and potentially even online coursing?
    Mr. Gutierrez. Great, thank you, sir, for the question. 
Certainly, I would say that, you know, our SBA bandwidth has 
released our 68th district offices and over 700 personnel 
across the country. Certainly, work very closely with 
organizations, economic developments, with the State leaders to 
really make it a win-win in terms of a partnership.
    In regards to I would say in terms of the technology and 
21st century approach, you know, I know that Administrator 
McMahon was here a couple months ago and she--I mentioned about 
the Women Digitalization Program that will be within my office, 
and we are excited about that because it is really a new way of 
thinking outside the box of having a 24/7 opportunity online to 
help entrepreneurs, women entrepreneurs in this first phase, to 
really have access otherwise that they did not in terms of 
challenges of regional base or brick-and-mortar access, but 
certainly those are things that we are looking at that how we 
can better reach out to the entrepreneurs across the country.
    Senator Romney [presiding]. On behalf of the chairman, 
Senator Coons.
    Senator Coons. Thank you, Mr. Chairman. You know, I have a 
particularly warm spot in my heart for SCORE since it was 
initially founded in Wilmington, Delaware, back in 1953. I have 
seen the great work it is capable of doing. One of my real 
concerns here is that, if I understand your conclusions right, 
Mr. Inspector General, there is a lack of consistent coherent 
oversight in terms of grants administration in no small part 
because there are 300 different chapters. How many full-time 
employees does SCORE have Mr. Gutierrez? Is it 30?
    Mr. Gutierrez. Are you saying the SCORE Association or my 
office, I am sorry.
    Senator Coons. How many folks work at SBA overseeing SCORE?
    Mr. Gutierrez. We have the Office of Entrepreneur Education 
that oversees that and that is roughly around six individuals, 
two primarily oversee it on a daily basis.
    Senator Coons. And how many volunteers are there as part of 
the 300 chapters of SCORE around the country?
    Mr. Gutierrez. I don't--I wouldn't----
    Senator Coons. May I suggest 11,000. Okay. My recollection 
is that one of the things that has made SCORE really stand out 
is it has a huge number of volunteers providing free mentoring 
and counseling to small businesses and startups. A vast network 
of volunteers around the country relative to a very small total 
oversight staff. I know we may get to hear more about that in 
the next round, but I just wanted to put this in some context 
because at least in my State I have seen and heard a number of 
instances where SCORE did really positive work for virtually no 
cost, but now we are hearing from you some concerning 
allegations. There have been I think you said three 
prosecutions and several hundred thousand dollars to $600,000 
of misappropriated, inappropriately spent Federal funds.
    It is our job in reauthorizing SCORE specifically and the 
SBA more broadly to understand what is being done right, what 
is being done wrong, and what are the statutory changes. I 
think Senator Cardin asked this question previously. Are there 
ways in which current statute limits the SBA's ability to 
implement the IG's recommendations?
    Mr. Gutierrez. No, sir. I would say that under my watch it 
is just a matter of really having it from top going down of 
making it a priority to making sure that we continuously, like 
I mentioned, for example, earlier this year, even before the IG 
report came out, we recognized in terms of what we called a 
fiscal agent co-sponsorship that the SCORE network had been 
doing with the field as well as with us in headquarters after 
next week, small business week, we are eliminating that. And 
that is a proactive approach and looking at----
    Senator Coons. How long do you think it will take you to 
fully implement all of the IG's recommendations about SCORE?
    Mr. Gutierrez. In the eight that are remaining, I think 
that the two that are going to take a little bit longer, that 
we will work with at SCORE and sitting down with Kenneth and 
his leadership team, is the remedy and recovery, two of those 
recommendations that will take--I would like to work with 
Kenneth and give him the opportunity and staff to provide us 
any additional information or things that would be helpful for 
us to present to the IG for consideration.
    Senator Coons. How long do you think it will take you to 
complete the IG's recommendations. You said you will need a 
little more time. Give me a year, five years, two weeks? How 
long do you think it will take?
    Mr. Gutierrez. We have it in the report no later than by 
next year all will be resolved and the eight that are pending.
    Senator Coons. Mr. Inspector General.
    Mr. Ware. 2020 is the last date was that they provided us 
in terms of reconciling the figures.
    Senator Coons. Do you find that credible?
    Mr. Ware. I found, in my experience at SBA, that under this 
under this current administration they have really put their 
foot on it in terms of making sure that they meet our--or they 
asked for a small extension. It was not anything really 
egregious.
    Senator Coons. I got to say I enjoyed a very constructive 
relationship with the administrator, Mrs. McMahon. I have known 
Mr. Yancey and SCORE broadly. I was quite struck by this report 
and I am eager to hear if there are any barriers in terms of 
statutory needs, resource, or support needs but I think we need 
to get an update on the progress you are making.
    Senator Cardin. Would the gentleman yield the floor 
momentarily?
    Senator Coons. Absolutely.
    Senator Cardin. The fact that we do not have an 
administrator, a deputy administrator, seems to me it is going 
to make it more challenging to meet deadlines and, you know, it 
is hard to hold an agency accountable when you do not have the 
leadership there, just to point that out.
    Senator Coons. That is correct. Let me ask the last 
question. The response is to the IG's report states SBA did not 
conduct an annual financial analysis of SCORE because Congress 
did not require it. Is there any reason that we should not 
require it going forward?
    Mr. Gutierrez. What I would say, sir, is that I am--it is 
my understanding from the SCORE Association and headquarters 
and Kenneth Yancey that they are consolidating all the 
financial systems to their headquarters. What that will be and 
will be implementing from my office is annual financial review 
besides their audit report that they do with a third party. So, 
we will be able to implement that this year coming later.
    Senator Coons. Is there any reason we should not require 
that?
    Mr. Gutierrez. No. I mean we are going to be doing it. We 
are going to be--that is one of the things that we are working 
with Mr. Ware in saying what is the plan of action we are going 
to take under the serious things that came out on the report.
    Senator Coons. Well, I am co-sponsoring a bill to 
reauthorize SCORE. I think that bill is going to end up being a 
vehicle for some specific and targeted work in response to the 
IG's report but also to try to sustain what I view is the very 
valuable work in SCORE nationally now over decades. So, I look 
forward to the second panel and I really appreciate your work 
Mr. Inspector General and your appearance here before us today. 
Thank you, Mr. Chairman.
    Senator Hawley. I am going to now ask my round of 
questions. I just want to--what my colleagues have said, the 
chairman, Senator Cardin, Senator Coons, Senator Romney, about 
just how striking this report is. I wish we did not have to 
talk about what we are talking about here today, but Mr. 
Gutierrez let me just start with you. Your written testimony, 
which I have read, it appears it was submitted prior to the 
revelations of the IG report. Is that correct?
    Mr. Gutierrez. The written testimony, I do not know the 
exact date it was submitted but----
    Senator Hawley. But you did not know about the misallocated 
funds, the embezzlement, the excessive bonuses, the retaliation 
against whistleblowers, and so forth. At the time that you 
submitted your written testimony you did not know about any of 
that.
    Mr. Gutierrez. Well my staff and myself were very closely, 
as a closing, came about through Mike's office in terms of 
getting to--in my requirement to respond before the official 
came out publicly in terms of all the record requirements and 
recommendations that they came out with and how we would 
resolve them and working with the staff.
    Senator Hawley. So, I guess my point is and I am not sure I 
follow your answer. My point is that I assumed you did not know 
about it because your written testimony gives absolutely no 
indication that there are any issues at all that we should be 
aware of and yet the IG's report is really quite jaw-dropping. 
I am just wondering, you have been in this role for two years. 
There are previous IG reports that document a number of these 
problems. Just help us understand.
    I mean, what are we looking at here? What is the scope of 
the problem and are we really--how can we trust the steps can 
be taken now? We have had previous reports in the past. It 
appears that these problems are endemic. That they are ongoing, 
and they are quite severe. I mean help us and I am struggling 
to understand here why at this point we should trust your 
office with any taxpayer money at all.
    Mr. Gutierrez. That was a question I asked myself the first 
day I walked in there and saw all the reports that they gave 
me. That was very alarming for me, very disturbing, given that 
it is taxpayers dollars. And our role as the Office of 
Entrepreneur Development is to provide that environment to be 
able to help entrepreneurs and small businesses.
    This is the perfect example I mentioned a bit earlier. When 
I was approached by the Sandy recommendations that the findings 
from Mr. Ware's office, previous leadership did not want to 
take a strong stance on it. Myself and under the leadership of 
Administrator McMahon in reference to 140 that were cleared, 90 
percent cleared out of my office, as we take this very 
seriously and want to move forward. That was my first step. My 
second step was, as I mentioned, creating, putting together a 
standard of operating procedures, regulations, more terms and 
conditions in the notice of awards to really under look and 
provide more oversight as it relates to all this.
    There is still more, and I am not trying to skirt that. And 
certainly, we are going to be working very closely to make sure 
that the eight are still going to be resolved and be taken care 
of, and make sure that we get them done in a timely manner.
    Senator Hawley. You know, in light of these reports my 
staff reached out to the folks in my home State of Missouri who 
work in this area, economic business development, to see if any 
of the revelations that are detailed in Mr. Ware's report were 
a surprise them and I am sorry to say that the near-universal 
reaction is that they were not surprised. That they, to put it 
mildly, among professionals in the field in my State, neither 
SCORE nor the SBDC programs are considered particularly 
worthwhile. I mean this is, I have to say, it is a big problem 
and I just, as we consider additional funding in the future, I 
have a lot of questions. And this report has raised a lot of 
questions in the track record area. It has raised a lot of 
questions. I yield back to the chairman.
    Chairman Rubio [presiding]. The following question here. 
And I apologize, Mr. Gutierrez if you have been asked this 
already after I stepped out but let us close the loop on the 
SCORE program. I guess, do you feel like you have a handle on 
what the systemic flaws are that allowed individual chapters to 
sort of walk away from the appropriate practices, and do we 
have in place, are you building and putting in place a plan to 
remediate those flaws?
    Mr. Gutierrez. Yes, sir. I would say that as I began, 
certainly not only with SCORE to be honest with you but with 
all the resource partners and really looking inside out in all 
the cooperative agreements, what are the things that were 
missing there to hold them accountable, from performance matrix 
to financial oversight to grants management.
    And specifically going back to SCORE, it certainly that not 
only, as I mentioned, the regulations, the SOPs, strengthening 
the terms and conditions within the grants awards, more 
oversight with my staff, and really, from top down, really it 
is important for me and it is vital that we really have more of 
a tighter control on everything. And that has been a culture 
change that I have brought within that office in the last two 
years.
    Now, I will say that from a district level perspective as 
well, we have--throughout our 68 district offices too. We have 
implemented a system internally as it relates to share point as 
via annual meetings, visits that our representatives have with 
the different SCORE chapters to making sure that we are 
following up on that. And then lastly mention we have--
previously it was the annual reviews, the financial review that 
we are going to be implementing at their headquarters.
    Now that they are consolidating other accounting systems in 
headquarters, we will also be doing that as well, visiting and 
making sure that we have the financial reviews done on a yearly 
basis.
    Chairman Rubio. And my final question has to do with 
overlap of some of the programs, or let me say, some overlap is 
expected between the SBDCs, WBCs, the Veterans Business 
Outreach Centers but you cannot walk into, for example, a Small 
Business Development Center and receive the same training that 
you get through a Women's Business Center or a Veterans 
Business Outreach Center but they are only 116 WBCs, are only 
22 VBOCs nationally so it is impossible for every entrepreneur 
to have proximity and access to those unique services that 
those programs provide.
    So, what can we do, what suggestions do you have? Have you 
given any thinking to how the SBA entrepreneur development 
partners utilize the existing network of centers to ensure that 
all entrepreneurs and small-business owners are able to receive 
these specialized resources even when a physical center is not 
accessible to them for one of those two programs be it Women's 
Business Center or the Veterans Business Outreach Center, or 
even in the reverse a Small Business Development Center?
    Mr. Gutierrez. Yes, I would say that a couple of things, 
sir. It would be that first and foremost as we mention the 
women's visualization outreach that we are going to be rolling 
out, one of the things that we have coming up in the next month 
and a half is socialization. And I have mentioned this to all 
the trade associations and their boards and chairman's that we 
will be working hand-in-hand providing the tool kits and 
information to work together as it relates to a 24/7 approach 
for women entrepreneurs coming in, if they do come into an SBDC 
Center, that they can have an additional avenue to direct women 
entrepreneurs to be using the women digitalization platform.
    As it relates to, I think collaboration is a very important 
thing that is needed too. That is something that we are 
requiring within our district offices to really work with all 
the previous resource partners, the trifecta of SCORE, or SBDCs 
and WBCs, if WBCs are located in that area, to really work 
closely together in the collaboration with district offices to 
make that a resource available to--I have seen and experience 
it in different parts of the country where it becomes a win-win 
situation for that entrepreneur.
    Chairman Rubio. Well, I thank you both for being here. I am 
going to call the second panel before someone shows up and asks 
another question. But I thank you both for your time. This is a 
topic we are going to have to explore as we work through this 
reauthorization. I know members will have additional questions 
about it, so thank you. And while we transition up at the desk, 
I am going to go ahead and introduce the second panel.
    Mike Myhre is the CEO of the Florida Small Business 
Development Center Network under the University of West 
Florida's Office of Economic Development and Engagement in 
Pensacola. Prior to this position, Mr. Myhre was the Minnesota 
State Director of The Office of Entrepreneurship and Small 
Business Development, and he led the Minnesota Small Business 
Development Network. Kiesha Haughton is the Managing Director 
of the Maryland Women's Business Center. She has more than 12 
years of experience in entrepreneurship and small-business 
economic development with Government agencies and nonprofits.
    Kenneth Yancey is the CEO of the SCORE Association, a 
position he has held for the past 26 years. Before joining 
SCORE, Mr. Yancey served as the Executive Director for the 
National Business Association. And Darcella Craven is the 
President of the Veterans Business Resource Center located in 
St. Louis, Missouri. In this capacity, Ms. Craven is dedicated 
to assisting honorably discharged veterans and their families 
with starting and expanding businesses. In 2015 the Small 
Business Administration presented her with a Veterans Business 
Outreach Center of the Year Award as part of the National Small 
Business Week.
    I thank you all for being here. I am just going to start 
from left to right and recognize you first Mr. Myhre. Thank you 
for being here.

    STATEMENT OF MICHAEL MYHRE, CEO, FLORIDA SBDC NETWORK, 
                         PENSACOLA, FL

    Mr. Myhre. Thank you, Chairman Rubio, Ranking Member 
Cardin, and members of the committee, and thank you for your 
leadership and serving on this important committee that 
recognizes how vital supporting small business success is to 
the American economy. And thank you also for inviting me to 
testify today.
    America's SBDCs have a unified purpose and that is to 
utilize our intellectual capital and resources to help small 
businesses realize unimaginable possibilities for prosperity, 
both for their business and for our economy. We achieve this 
purpose by providing our Nation's job creators and economic 
contributors with access to world-class professional expertise, 
help them create new possibilities, and be more competitive and 
profitable, while being responsible and accountable stewards 
that are laser focused on generating economic outcomes that 
contribute to the prosperity of the American economy. Our 
success in this effort has been validated repeatedly over the 
past 40 years and we appreciate your past and continued 
support.
    In my written testimony, I outline a number of key 
characteristics shared by America's SBDCs, some that have been 
identified as best practices in GAO review of 52 
entrepreneurial assistance programs across Commerce, HUD, SBA, 
and USDA, including our shared commitment to a culture of 
innovation, continuous improvement, and performance excellence 
through our SBDC's accreditation process, a quality and 
continuous improvement process based on the principles of the 
NIST-Baldrige performance of excellence program. Also, out of 
shared commitment to significantly leverage SBDC Federal 
program funding, all SBDCs are required to raise an investment 
to provide more than half of the total program budget.
    In Florida, we have 40 investing partners that help bring 
nearly two to every--$2 of non-Federal investment to every 
dollar of Federal investment. We also have a shared commitment 
to a culture of collaboration and cooperation that balances the 
performance expectations of all of our investing partners, 
including those of Congress, our Federal, our State, and our 
local Governments, sponsoring institution of higher education 
among many others. Finally, we also have a shared commitment to 
serve the diverse and complex needs of our existing and 
aspiring small businesses and to assure that those services are 
available to all individuals, including underserved 
communities, women, and proudly our veterans.
    One of the areas though that I take great pride in is the 
vital role in which we contribute to disaster response and 
recovery, which often goes unrecognized and unmeasured by our 
Federal agency partner. As a critical member of the State 
Emergency Response Team, the Florida SBDC network is the 
State's leader for business response and recovery. As such, we 
are committed to being the first responders and on the front 
lines to ensure our State's principal job creators and economic 
contributors have the professional guidance that they need to 
successfully navigate the often overly complex recovery 
process, including leading the coordination of Federal and 
State recovery resources for small business, and helping 
administer the State of Florida small business Emergency Bridge 
Loan program, a short-term, quick capital program for those 
businesses impacted by disaster. Regrettably, we do not receive 
any additional funding for our disaster response and recovery 
efforts.
    And Mr. Chairman and members, I would be remiss if I did 
not mention our fellow Floridians, American citizens, and small 
businesses in the Florida Panhandle who are still in dire need 
seven months following Hurricane Michael. I plead that we come 
together, that Congress comes together, to pass a disasters 
supplement bill that is much needed by the community in order 
to make a recovery before it is too late.
    Now, it has been 10 years since the authorizing language of 
the SBDC program has been reauthorized, longer for some other 
ED programs. SBDC's entrepreneurial development budget includes 
$247 million in Florida, excuse me, in Federal taxpayer 
investment and deserves a thorough review to ensure that each 
program's continued relevance is in alignment with the assessed 
needs of America small business. Regular reauthorization will 
help ensure that each program is accomplishing Congress' intent 
in contributing to taxpayer return on investment. As the 
committee undertakes reauthorization, I recommend that the 
committee do five things.
    First, clearly define each entrepreneurial development 
program's purpose and small business market focus to avoid 
duplication of efforts and market confusion. Once that is 
defined, I recommended that appropriate performance metrics are 
defined that align with each program's intended purpose, market 
focus, and contribute to meaningful economic outcomes. Where it 
is determined that program purpose and market focus overlap, 
consider economies of scales and enhance program service 
delivery through consolidation or integration of programs. When 
establishing each program's performance, consider an equitable 
method for determining, negotiating, and allocating these 
performance goals that account for individual market and 
economic conditions. Performance goals should not be punitive 
but rather motivate and drive behavior. Strengthen also the SBA 
and SBDC economy and foster shared partnership and shared 
investment by clarifying the specific authorities and 
responsibilities of each partner, including clarifying the 
required terms the agency must adhere to for negotiating and 
collaborating with the association of America's SBDCs.
    In any area of disaster recovery, mandate SBA disaster 
recovery coordination and collaboration with each SBDC program 
when responding to a disaster event. And streamline a funding 
mechanism for SBDCs to receive disaster supplement funding to 
assist in both short-term and the long-term recovery needs a 
small businesses is impacted. Also increase the SBDC program 
authorization and support appropriate increases for effective 
entrepreneurial development programs to expand both capacity 
and enhanced capabilities.
    And finally, improve the ability of SBDCs to operate and 
manage entrepreneurial and Small Business Development programs 
across Federal agencies, like those that exist in Commerce, 
DLA, and USDA. So, in closing, I look forward to working with 
the committee and the committee staff to ensure that we are 
providing all entrepreneurs and small-business owners the 
resources that they need to start and grow their business, and 
if necessary recover and recover successfully. And I welcome 
your questions.
    [The prepared statement of Mr. Myhre follows:]
    
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
    
    Chairman Rubio. Thank you.
    Ms. Haughton.

   STATEMENT OF KIESHA HAUGHTON, MANAGING DIRECTOR, MARYLAND 
             WOMEN'S BUSINESS CENTER, ROCKVILLE, MD

    Ms. Haughton. Thank you, Chairman Rubio, Ranking Member 
Cardin, and distinguished members of the committee for the 
opportunity to share this testimony with you.
    My name is Kiesha Haughton. I am the Managing Director of 
the Maryland Women's Business Center and have also served as 
Secretary of the Board of Directors for the Association of 
Women Business Centers, the national organization that 
represents women's entrepreneurial development, I would like to 
thank the committee for holding this hearing today. Maryland 
WBC is part of a network of 114 women's business centers. The 
WBC program is a public-private partnership with over 30 years 
of success in providing training, counseling, and mentoring, 
and access to capital for women-owned businesses nationwide.
    In Fiscal Year 2018, centers reached more than 151,000 
clients assisting with millions in private capital infusion, 
leading to nearly 12,000 new businesses. According to the SBA's 
2015 OED report, 96 percent of the WBC clients reported revenue 
growth total in $658 million and 25,000 jobs created. The 
Maryland WBC headquartered in Rockville with two satellite 
offices in Frederick and Bowie is proud to be amongst this 
network. We are also proud to be the only WBC located at an 
HBCU through our partnership with Bowie State University. WBC's 
often tailor services to meet the needs of their local 
community.
    The Maryland WBC has met the demands of our small business 
community by rolling out specialized program offerings like our 
procurement, advanced tech, international trade, childcare, 
retail, and women's business leadership programs. We are 
particularly proud of our procurement series that helps 
businesses position themselves to take on Government contracts. 
This program has supported clients like Houri Tamizifar who is 
the owner of Cynuria Consulting and winning contracts that 
increase sales by over 400 percent in her first and second-year 
business. Charlisa Watson, owner of CRW Associates has secured 
a $66 million grant or contract with the Department of Defense 
after receiving our business and procurement assistance.
    While many things are going well, Congress should still act 
to strengthen and modernize the WBC program. For over 30 years 
the maximum grant amount remains capped at $150,000. 
Legislation to reauthorize the WBC program should increase that 
cap, allowing well-established centers like the Maryland WBC to 
expand their impact with increased funding support. As the only 
WBC in Maryland, our center receives significant demand for our 
services, but due to the cap, we currently only cover three 
counties in our State, leaving in 21 jurisdictions without 
coverage. Increasing the cap in our grant would enable us to 
assist more entrepreneurs.
    Therefore, I recommend Congress raise the cap on individual 
center grants to $350,000. This would require additional funds 
for the program so the WBC is asking for $30 million in funding 
for the WBC program in Fiscal Year 2020. As a practitioner, I 
fully support this request and encourage Congress to consider a 
growth potential of the return on investment of this 
authorization level. Another improvement would be the removal 
of burdensome reporting procedures and establishing an improved 
reporting system as EDMIS is problematic and in need of 
updating, as we heard earlier. Since current reporting 
requirements for all SBA resource partners are not the same, we 
would also like to see consistency on audits, grant reporting 
requirements, and grant application opportunities which would 
include this disaster relief.
    Additionally, and important to note, funds raised above the 
Federal match are subject to Federal spending guidelines, 
creating a disincentive to overmatch their funds. Lastly, while 
some WBCs stand alone, others are hosted by larger 
organizations or universities. The Maryland WBC is hosted by 
Rockville Economic Development, Inc. (REDI) and thanks to 
community support and partnerships with economic development 
organizations in Montgomery, Frederick, and Prince George's 
counties, the Maryland WBC has grown increasingly self-
sufficient over the years.
    However, there is no established process for centers to 
graduate from their host organization and transition into a 
stand-alone center. Statewide impact can be challenging for 
WBCs hosted by local jurisdiction named host or other large 
organizations when attempting to raise funds in a competitive 
and often territorial environment due to branding confusion. 
When reauthorizing the WBC program, I would ask Congress to 
implement a clear transition process with continuity of 
services for WBCs ready to graduate from their host who are 
newly established, stand-alone entities without having to close 
down and reapply as a new center. The WBC program fills a 
growing need for the distinct populations served, and I am 
thankful for the committee's continued bipartisan support of 
this program.
    As a proven program, I urge Congress to make these 
necessary changes during the reauthorization process to 
maximize our success. I appreciate the opportunity to testify 
today and I am happy to answer any questions.
    [The prepared statement of Ms. Haughton follows:]
    
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    Chairman Rubio. Thank you.
    Mr. Yancey.

   STATEMENT OF KENNETH YANCEY, JR., CEO, SCORE ASSOCIATION, 
                          HERNDON, VA

    Mr. Yancey. Chairman Rubio, Ranking Member Cardin, and 
members of the committee, thank you for inviting me to testify 
today regarding the reauthorization of the SCORE program.
    Founded 55 years ago as a resource partner of the Small 
Business Administration, SCORE has now helped more than 11 
million entrepreneurs to achieve their dreams of starting or 
growing a small business. This is accomplished through SCORE's 
Nationwide network of 11,000 volunteers who offer free and 
confidential business advice and provide educational workshops. 
Today, SCORE stands as a uniquely American organization, and 
its fusion of two historic national ideals, the entrepreneurial 
spirit and volunteerism.
    My written testimony provides SCORE's request regarding 
changes to enabling legislation and reauthorization. At SCORE 
we believe our client success is our success. Our mission is to 
foster vibrant small business communities through mentoring and 
education. This creates small business success, in turn, 
creating jobs and strengthening the American economy. Helping 
our clients means meeting them where they are and serving them 
how they want to be served, whether that is in person or 
online. Our online educational programming includes weekly 
webinars, video mentoring options, and virtual conferences. Our 
volunteers come from all across the country with first-hand 
knowledge gained through their experience in all areas of 
industry and business.
    Last year they generously gave 4.3 million hours of their 
time to serve our clients. In return, clients rated our 
volunteers with a net promoter score of 85. To provide context, 
a net promoter score of 50 is considered excellent while 70 and 
above is considered world class. As you all know and we have 
discussed, the SBA Office of the Inspector General recently 
audited SCORE and the report was released last week. SCORE is 
taking these findings very seriously. There are some legitimate 
issues that need to be immediately addressed. We have already 
met with SBA and are committed to working with them to remedy 
all items in the report.
    We also believe that there is additional information 
available that will clear up misperceptions and alleviate some 
of the concerns raised in the report. We will collaborate with 
SBA on solutions that will strengthen the SCORE program and the 
SBA oversight process. SCORE is committed to being better 
stewards of the Government funding we receive. To that end, we 
are in the process of centralizing accounting for all 300 SCORE 
chapters, an initiative we first identified as critical in 
2016. This new system eliminates issues related to commingling 
of funds at the chapter level. With this system, no chapter 
will maintain cash, debit cards, or checks which significantly 
lessens the risk of theft. This will also make it easier and 
more efficient for the SBA to perform financial oversight 
audits as suggested by the report.
    I mentioned that we believe there are misrepresentation, or 
excuse me, misperceptions. By this, I mean that the audit 
report does not tell the whole story. For example, at no point 
did we intentionally disregard the policies and procedures 
related to the awarding of contracts. As an example, we reached 
out to numerous hotels in various cities when choosing a 
location for our 2017 National Leadership Conference. The hotel 
chosen was the only one in Baltimore with the necessary room 
count and dates available. It was also the best cost based on 
room rates, food, and travel expenditures. However, our process 
and the result was not properly documented for the Inspector 
General. We will not make this mistake again. The IG audit 
reported not having whistleblower policies in place and an 
accusation of discouraging volunteers to use the policy. In 
fact, we do have a whistleblower policy in place and the 
chapter situation where this policy applied, it was effectively 
used.
    Another issue in the report related to excessive bonuses. 
Today we have a staff of only 24 people serving 11,000 
volunteers and over 300,000 clients. Offering a competitive 
compensation package is one way we can assure that we deliver 
on our mission. We perform a salary survey every three years 
with a third party vendor to ensure that we are appropriately 
compensating our employees based on industry standards. We are 
happy to share this data with you, with the SBA, and with the 
Office of Inspector General.
    We are not perfect. We can and will improve. We stand by 
our mission, vision, values, and clients' success. With your 
support, we can ensure that this valuable program continues to 
achieve its mission of helping anyone who dreams of opening or 
growing a business.
    Thank you for your attention and I look forward to 
answering any and all questions that you have, sir.
    [The prepared statement of Mr. Yancey follows:]
    
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    Chairman Rubio. Thank you.
    Ms. Craven.

  STATEMENT OF DARCELLA CRAVEN, PRESIDENT, VETERANS BUSINESS 
                 RESOURCE CENTER, ST. LOUIS, MO

    Ms. Craven. Good afternoon Chairman Rubio, Ranking Member 
Cardin, members of the committee, and ladies and gentlemen in 
the gallery.
    I am Darcella Craven, a service-connected veteran and 
President of Veterans Business Resource Center or the VBRC. The 
VBRC has been in business since 2004, and we assist veterans 
and military families who startup and expansion of small 
business. We are headquartered in St. Louis, Missouri, and 
operate the VBOC in region seven of the SBA which covers 
Missouri, Kansas, Iowa, Nebraska, and Southern Illinois. And 
because of that I am really happy to see that Senator Ernst and 
Senator Hawley are part of this committee. It makes me excited.
    VBRC has helped thousands of military families and military 
affiliated personnel navigate the small business world through 
seminars, webinars, one-on-one counseling, outreach events, and 
training. Please review my written statement and the documents 
I provided for the impact that the VBRC and the VBOC has had in 
the Midwest. We know there is no shortage of information out 
there for small business owners. One simply has to put small 
business assistance in Google and a million links pop up. One 
of those is the SBA's website, which is a treasure trove of 
information and videos. It is amazing. However, ladies and 
gentleman, if I give you a gold brick and you do not comprehend 
the value of gold, it is simply a beautiful doorstop. I suggest 
to you that one of the most important tasks that we do at VBOCs 
is help our military-affiliated personnel understand the value 
of the information they are exposed to through not only SBA 
family resource partners but the broader community. We get our 
clients to the right resource, at the right time, with the 
right information.
    The national VBOC program boasts amazing success stories 
and has helped thousands since its inception, yet there are 
still so many more who are not aware of all the available 
resources, or if they are, they do not comprehend how to 
actually navigate those resources. Each partner has its own 
niche and the VBOC stand prepared to help navigate those 
resource partners offerings. Again, right resource, right time, 
right information. I have been in this game for over 20 years 
and I can see the positive evolution of the Small Business 
Development Centers, the SCORE chapters, and the Women's 
Business Centers.
    I have witnessed the movement from the separate entities 
being this is me, mine sort of like the Daffy Duck cartoon 
through to the mentality of a collaborative partnership that 
really works together to assess entrepreneurial need and help 
small businesses get the job done. Yet, if I had a dime for 
every time a client said that they did not understand a 
resource partner or how to navigate them, I could just retire 
and focus on my dog's Instagram account for the rest of my 
life. Ladies and gentlemen, part of what we do at the VBOC is 
ensure that the word gets out about the many Federal, State, 
and local resources that are available, both Government and 
non-Government. We also bust up all the myths out there that 
there are grants being offered by the SBA and they are just 
waiting for veterans and small businesses to come and get them, 
that we work with vocational rehabilitation for our service 
connected veterans who are in the VR&E program and help them to 
navigate that space, that is a whole other thing, work with the 
rural communities and all the stuff and challenges that they 
have, and we ensure that military spouses and families are not 
forgotten.
    To that point, we must ensure that our programs are truly 
focused on military families and we just don't throw the name 
military family over top of an existing program just to placate 
that community. Throughout my time at the VBRC, I have 
witnessed the frustration of the military personnel in dealing 
with other resource partners, not because the partner was 
incapable, but because there was a misunderstanding in 
communication. As we used to say in the Army, bottom line up 
front, the language barrier is real. VBOCs provide that 
translation not only from the military member but to the 
provider but vice versa. The VBRC has only succeeded because we 
enter a community with the spirit of collaboration as our lead 
for our charge. We look to see what is already happening in the 
community, how is this ship turning, and we asked how we can 
help.
    In that, in our region, for example, we have offices inside 
the Kansas City SBA because as we are having a conversation 
with a client, it is much easier to pick up and walk down the 
hall rather than make a phone call. We work collaboratively 
with universities to bring Boots to Business to Reboots in Iowa 
that are Ag-based. We work and share offices at the Urban 
League Empowerment Center in Ferguson, Missouri, in a community 
that we all know has been hard hit. We make sure that the 
veterans in that community are getting the same service. We 
partner with St. Louis district to host week-long national 
small business training so that we can celebrate small 
businesses completely. We move clients to the well-established 
military Veterans Service Center at Bellevue University. There 
is no need to reinvent the wheel. It already exists.
    We partner with the Kansas SBA to bring the 2019 Kansas 
Supplier's Conference in conjunction with way too many partners 
to name here. We have 100 percent participation by our SCORE 
and SBD chapters on all seven military posts in our region and 
I will take a hooah for that. As military members and 
entrepreneurs, we are used to finding resources and 
collaborating to make a mission. We understand how to read the 
environment and pivot as necessary, and indeed this program's 
growth is proof that centers can and have collaborated.
    Consider this as I conclude, in 2018 alone we had 4,827 
counseling sessions, participated in 146 training events, had 
over 45 outreach events, and that is willfully old because it 
is my problem for not getting stuff in, and conducted 38 Boots 
to Business sessions all with 3 staff members and over 100 
volunteers.
    I ask you to understand that if we are truly to record our 
impact and not just activity, we need to ensure funding and 
legislation that allows us to hire the appropriate staff and 
pay them well so that we can maintain consistency across 
entrepreneurial development programs. We need to ensure that 
our programs are not only stabilized, but they can grow.
    Thank you for your time. I welcome any questions and make 
it a powerful day.
    [The prepared statement of Ms. Craven follows:]
    
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    Senator Cardin [presiding]. Well, let me thank all the 
witnesses as we indicated at the beginning of the hearing. We 
are shuffling back and forth because there is a series of votes 
on the floor of the United States Senate. So, I have already 
cast my vote on this vote and so chairman Rubio is going to 
vote and then he will be coming back. So, Ms. Haughton, I want 
to start with you if I might. Sorry I missed your testimony, 
but I have been briefed about it.
    I have been educated as to why we have limited service for 
the women business centers in Maryland and I have been told it 
is because we had the local capacity through resource partners 
to be active in Rockville through a group that was prepared to 
provide the services that are needed. And as you have pointed 
out, you have also provided services up in Frederick and in 
Bowie but because of the cap of $150,000, it makes it difficult 
for you to expand services although you are prepared to do 
that.
    So, if the cap was raised, you say you could handle 
services in other counties. How would you go about doing that 
in Maryland?
    Ms. Haughton. So typically, thank you for the question 
Senator Cardin. Typically, the way we work within the State of 
Maryland is we partner with the economic development 
organization as well as other resource partners. And so, in 
Frederick, Montgomery, and Prince George's County, we get 
funding support from the county of Prince George's County. We 
get funding from the city within Bowie, the city of Rockville, 
Montgomery County Government, as well as the economic 
development organization, and the economic development 
organization in Frederick. What we look to do when we expand 
into other counties is to also encourage the economic 
development organizations there to partner with our program to 
ensure its success. So, it is critical for us that as we look 
to move on, besides getting the Federal dollars which, we know 
we have to match dollar-for-dollar to work with the local 
economic organizations to ensure that we meet that match.
    Senator Cardin. But there may well be areas on which the 
resources locally are not as available in other counties that 
are underserved, and therefore, we are really dependent upon 
the resources of a community which works to the disadvantage of 
underserved communities, does it not?
    Ms. Haughton. So, it does, and it is interesting you say 
that because, for example, we have been in communications in 
Southern Maryland and resources are scarce there, so what we 
had talked about is doing a collaborative tri-County support 
for the program so that we can make sure the services for women 
entrepreneurs are available to them. So, for us it is critical 
that we engage them at whatever capacity they are able to 
assist in supporting our program but also to reach out into the 
community. We have a lot of volunteers that participate in 
assisting our women entrepreneurs and so we do tap into that as 
well.
    Senator Cardin. And I thought Senator Coons point in the 
last panel was very accurate and that is there is a relatively 
small amount of Federal funds involved here that is leveraging 
a lot of activity in the private sector and volunteers, etc. We 
recognize that but we want to make sure that it is fair. That 
is underserved communities get the needs that are required that 
they need even more than other communities and it is becoming a 
challenge. If any of you want to respond, you heard the 
Inspector General talk about the loose structure within the SBA 
on both the grant making and on accountability. How do you find 
working with the SBA as to the understandings of the mission 
and accountability and performance in the grants that you are 
receiving?
    Mr. Myhre. I would be happy to respond.
    Senator Cardin. I am going to interrupt for a moment.
    Senator Markey has not yet on his roll call. Please do. Now 
with the question.
    Senator Markey. An excellent question so do not forget it. 
In Massachusetts we are very proud of our Women's Business 
Center, the Center for Women and Enterprise headquartered in 
Boston. They were founded in 1995 and are set to expand in 
their efforts to cover New England, Vermont, Rhode Island, and 
it uses the SBA funds and programs we are discussing today to 
make a real difference in the region. And the Women's Business 
Center serving Eastern Massachusetts trained and counseled over 
1,200 women, and they helped those women-owned businesses 
create over 1,000 new jobs and put $30 million into our 
region's economy. And the Center for Women and Enterprise did 
all that using a staff two people dedicated to this mission and 
that is because there is a $150,000 cap on these Women Business 
Center grants.
    And they told me directly that they could do so much more 
so I would like to echo what I have heard so far, what I know 
Ms. Haughton has already spoken to, and I would just like you, 
if you could briefly to just expand on that, that if you lifted 
the cap what happens in terms of opportunities for women and 
job creation?
    Ms. Haughton. Thank you for that question. One of the 
things that we--the reason why we are asking for the cap 
increase is because we know that there are constraints in what 
we are actually been at being able to perform and do in our 
State. If we were able to get the cap increase to $350,000, 
which is what we are asking for, we would literally be able to 
expand more effectively throughout the State of Maryland. We 
are already right now----
    Senator Markey. By extension in Massachusetts.
    Ms. Haughton. Exactly. For every Women's Business Center, 
and I can only speak to mine right now, but for every Women's 
Business Center, it is the same situation. If there was an 
increase in the cap, they would be able to expand more. And 
then the other thing I would add to that is, instead of 
creating new centers, it makes sense to increase the cap for 
centers that have already proven they are effective, they are 
efficient in what they are doing, they have a record of their 
performance, and it makes sense to enable those centers to be 
able to expand into other areas instead of just recreating new 
centers.
    Senator Markey. Exactly and I thank you so much. And, you 
know, I apologize because the roll call is on the floor and I 
don't want to miss--but I did not want to miss asking that 
question.
    Ms. Haughton. Thank you.
    Senator Markey. Sign me up for this mission to increase the 
cap.
    Ms. Haughton. Awesome. Will do.
    Senator Cardin. Thank you, Senator Markey. Now, if we go 
back to the question as to how effective you are and how clear 
it is to you the accountability standards as a resource partner 
in the grants that you are receiving and how this is being 
evaluated by SBA.
    Mr. Myhre. Certainly. Thank you for the question Senator 
Cardin. I think it is extremely clear from an SBDC's 
perspective. When you look at the Small Business Act and you 
look at the code of Federal regulations, there is a clear 
understanding what types of reviews and accountability SBDCs 
are subject to in order to receive the Federal funding which 
they receive.
    All SBDCs are required by the agency to go through annual 
project office reviews and every other year program manager 
reviews, which are really programmatic reviews looking at the 
centers or SBDC's compliance and performance, but also in 
statute we are required to go through every other year 
financial reviews but as an educated CPI will tell you that 
they meet almost every single standard as relates to general 
governing accounting practices. So, they are really financial 
audit examinations. Furthermore, SBDCs are part of institutions 
of higher education, generally public institutions of higher 
education, and therefore are also subject to their own now 
university reviews and to our State auditor reviews.
    So, we are reviewed consistently to assure that we are 
being good stewards of the taxpayer dollars that we receive, 
that all resources are allowable and allocable to their 
intended purposes, and that funds are not being commingled or 
spent any unallowable way.
    Senator Cardin. Thank you. I appreciate that.
    Ms. Craven. Senator, I am going to add that plus as a 
nonprofit organization we also have a whole lot of folks making 
sure that we are doing things properly. I think the challenge 
that we have as the new kids on the block with the SBA is that 
we are so entrepreneurial. We are looking to pivot, we are 
looking to do all these things, and the SBA has regulations and 
rules they must follow.
    So, it often causes us to kind of say, okay, well we want 
to do this. Our grants manager gets us every time, she is like, 
no you can't do that. Here are the rules you have to follow. 
So, we have a great time with them. As a matter fact, we have 
such a good relationship that throughout our time, we have been 
doing this since 2008, we have moved from a Web-cat database 
which was similar to EDMIS, to now a Neoserra which is much 
more dynamic, and it makes for a lot easier for us to put in 
data and put information and parse that out as we need to.
    So, our challenge is not really us with them, it is them 
keeping us to make sure that we are ensuring that we are 
following our notice awards because again as an entrepreneurial 
agency, we are constantly wanting to jump and do these kinds of 
things. So, I would say the SBA folks do a great job of making 
sure that we keep in order. I would also, if I had a magic 
wand, I would and I know as a taxpayer I do not want to see 
this, but as a person who tries to help small businesses, I 
would love to see them have a little more flexibility in how 
they can work with the programs here.
    I mean it is really difficult to try to figure out ways to 
ensure that we are giving good information to the clients that 
are coming out as in keeping with all of these rules that you 
have to do, oh, and by the way, the entrepreneur is trying to 
take off and do things, so.
    Senator Cardin. Mr. Yancey, in the SCORE program, how? That 
is what the recent audit was?
    Mr. Yancey. Yes, sir. My perception is over the last number 
of years the SBA is doing more and better to hold us 
accountable as an organization. The call for the IG audit is 
the first audit that our organization has had in many years. I 
go back 26, I think it has been at least 10 since the IG came 
in and visited us. I think as Mr. Gutierrez said a little bit 
earlier, there is a great deal more focus on the transactional 
aspects of our relationship. How we follow through and follow 
up on the rules and regulations, and clearly you saw that the 
answer to that, in several instances, is not well. I do think 
that there are some systemic issues with us, and I am counting 
on SBA, the Office of Entrepreneurial Development, and 
certainly the IG to help us get everything on track. And I 
believe that they will, and we will stay there.
    Senator Cardin. So, and any one of you, I am interested as 
to how easy it is for you to interact with other resource 
partners in your same areas. I recognize that you do not have 
any others in Maryland, but do you have contact with Women 
Business Centers and you share issues with the Veterans 
resource partners? Is there a sharing of information and do you 
recognize how the grants are being used in other communities so 
that you can use best practices to try to expand the services 
that you are providing?
    Mr. Yancey. Senator Cardin, if I may. I believe that there 
is excellent sharing particularly at the local level where 
resources exist in communities or where they are close. I think 
that there is excellent referral opportunities, best practices. 
I think we share clients is not the right term, but we move 
clients back and forth depending on the expertise and the 
benefit that different programs bring at the national level. I 
have good relationships with my counterpart at ASBDC, with 
Women's Business Centers brand new to the position, and 
expecting similar so I think the opportunities are good to 
continue and I think the relationships are positive.
    Mr. Myhre. Senator, the SBDC has great collaboration and I 
think I would say what Mr. Yancey said, it is more at the local 
level and it is necessarily at the State level. Florida is a 
very large State and as you indicated earlier, WBC, SCORE, and 
VBOCs are not in every market, therefore requiring SBDCs to be 
more flexible in the scope of services in which they must serve 
or offer and in the markets in which they must serve.
    But I can tell you that from my former experience in 
Minnesota, I actually stood up and created SCORE chapters 
within SBDC markets because we came to an agreement at the 
Statewide about what the specific services and markets we would 
focus on through each program. And through that type of 
collaboration, we were able to expand the services of many of 
the programs that were not in existing markets previously, 
assuring that the full scope of services and the diversity of 
services could be available to all entrepreneurs no matter what 
stage of the life cycle in which they were at.
    Ms. Craven. And to add to that, I am going to say, yes now. 
I have been in this business for a while and when I first 
started, the answer to that question would have been a 
resounding no. Not one resource partner wanted to work with 
each other, period. I have my numbers to get, you go and get 
yours. That was kind of how it was. Over the last, gosh, maybe 
15 years?
    We have built solid relationship specifically in the region 
seven or sometimes it is just us coming and supporting your 
event so that the other organization can see that we really are 
here to help you and we are not here to take your client or any 
of those kinds of things. You have that mentality because I 
strongly believe that a lot of the metrics that are being asked 
for from all of us are very activity-based metrics. How many 
folks can you get, how many businesses can you start, tell me 
how many counseling hours you did.
    Those are all important and we like to see them so that we 
can measure how you are spending your hour, but it is harder to 
really, truly show impact for how you developed a business from 
the woman who walks in the door and has no complete idea what 
she wants to do all the way through to a business who is now 
hiring 75 other people who look and act just like her from her 
community. Trying to measure those activities is very impact 
and it takes a lot more time. Unfortunately, we all sometimes 
only have a year to try to get those in, so I think if we can 
move away from a whole lot of just activity-based metrics, 
still want to use those, but then also figure out a way how you 
can include some of the more impact based metrics, I think that 
you would not have that problem at all across the country.
    Senator Cardin. Just by observations, I have seen different 
centers, especially in the Small Business Development Centers, 
that have different capacities and a lot of it is local 
abilities. I recognize that. And the fact that there is not a 
lot of Federal resources going into any one particular program 
based on the services that they have, it seems to me that 
sharing of information, particularly about local capacity to 
expand service is very important to leverage these programs to 
the maximum extent possible.
    So, I think that the sharing of information will challenge 
communities to do better and provide additional services. I 
really do think though that there is a need for special 
attention to underserved communities and that is a requirement 
that is on the program. I recognize that, but when you look at 
the numbers, we are still not reaching where we should in 
underserved communities. So, as we are looking at 
reauthorization, we would welcome your suggestions and thoughts 
as to how we can better accommodate the objectives of these 
programs.
    We have already heard about cap increases. I recognize 
that, but there may be other aspects in reauthorization where 
we can help you share information, build greater capacity in 
communities that do not have that capacity today to be able to 
apply for and get these grants, and then with particular 
emphasis on underserved communities. We would appreciate that 
information. I know the chairman will be returning momentarily. 
The next vote started around four minutes ago. What I am going 
to do because I know they are trying to keep these votes moving 
now on a 10-minute cycle because people are anxious on the 
floor of the Senate. We are going to go into a brief recess, 
and the chairman should be returning, as I said, momentarily. 
Thank you.
    [Recess.]
    Chairman Rubio [presiding]. Nobody else is here. Everybody 
else is voting. I think maybe though, let me just get this one 
out of the way because I do want to get to other topics other 
than SCORE, but and I am sorry I am going to ask this.
    Mr. Yancey, I wanted to ask, first of all, and I do not 
want to make this about you because it is not. This is a 
systemic issue that you are talking about. So, but I am asking 
this for a reason. Your compensation is largely from foundation 
funds, meaning raised from the private sector, is that correct?
    Mr. Yancey. A portion of my income, yes, does come from the 
foundation.
    Chairman Rubio. But, when an executive coach consultant was 
hired, it used solely Federal grant funds rather than not-for-
profit foundation funds. That is what the IG found, is that 
correct?
    Mr. Yancey. Yes.
    Chairman Rubio. Why is that?
    Mr. Yancey. It was a mistake on our part. We had not 
thought to divide that cost. We will happily fix that. We do, 
sir, provide a stipend from the foundation to the association 
every year just to make sure that we do not improperly take 
advantage of the Federal dollar on that side of our business, 
and it is not enough to cover that particular expense with the 
coach. And that was inappropriate. It is totally on my watch, 
totally on my head, and we will fix it.
    Chairman Rubio. And the Board of Directors solely use 
Federal grants and not the not-for-profit foundation funds to 
support the meeting expenses. Do you put that in the same 
category?
    Mr. Yancey. We will put that in same category. One-twelfth 
of our board time spent on the development foundation side and 
we will make sure that one-twelfth of those costs are properly 
accounted for. Again, the stipend which is $4,000 a year is 
certainly sufficient for some minor accounting things but not 
sufficient for that meeting, and you know it is again my 
responsibility, my fault, and my apologies, and I will fix it.
    Chairman Rubio. And how about the argument you heard made 
already that it is very difficult to manage at the district 
level where the funds are being spent and decisions are being 
made of such a large number of--the argument is that there 
should be some more centralized oversight and more uniform 
standards. Is that something that you think would be 
appropriate given what we learned?
    Mr. Yancey. I think that it is absolutely required, and we 
recently completed a futures initiative related to our program, 
and what we recognize is that we need to centralize far more 
functions than just that. We have spent the last two years 
developing a centralized accounting system. It is now being 
rolled out to 20 chapters. We will have all chapters on board 
in 2020. We believe it is absolutely the right thing to do, and 
as I mentioned in my verbal testimony, it does eliminate all 
checks at the chapter level, all cash at the chapter level, 
debit cards and credit cards, so the opportunity for risk, 
theft, or any other type of issues at the chapter level will be 
lessened dramatically.
    Chairman Rubio. Okay. Mr. Myhre, the Florida SBDC network 
has played a vital role in disaster recovery. I don't think a 
lot of people associate these programs when we think of 
disasters we think about FEMA but the incredible role this has 
played in--could you, and we have had a series of disasters not 
just Northwest Florida but hurricanes, the previous year where 
we had all this red tide and algae blooms that have always had 
a tremendous impact on small businesses. So, could you sort of 
walk us through a little bit, describe the specific role that 
the SBDCs have played following disasters in Florida which has 
been a State impacted, unfortunately, by a number of disasters 
over the last few years.
    Mr. Myhre. Certain. A number of places across the country 
have been impacted by major events but Florida especially over 
the last two and a half years, four major hurricanes----
    Chairman Rubio. Don't say that too much because then we got 
to share the money with these other places. Florida has been 
unusually----
    [Laughter.]
    Mr. Myhre. Florida. Florida has been hit hard.
    Chairman Rubio. This is a joke in case people are watching.
    Mr. Myhre. There is not one square acre in Florida that has 
not been touched by a major event over the last two years.
    Chairman Rubio. Good job.
    [Laughter.]
    Mr. Myhre. Four hurricanes, red tides, algae blooms. It has 
been a constant in full-time job, especially for Florida SBDC 
because of our position in Florida statute. We are defined as 
the State's principal Small Business Development organization 
or agency. And because of that particular placement, we are 
part or an instrumental part and defined as a primary principal 
partner as the State's Emergency Response Team, specifically 
for business industry and economic stability.
    So, we work hand-in-hand with Florida Department of 
Economic Opportunity, the Department of Emergency Management, 
and we are there at the State Emergency Operations Center when 
a major event occurs. So, when FEMA and SBA come in to 
Tallahassee and into that SEOC, we are there with our State 
agency partners to drive and direct the work. I think that that 
is a unique quality of Florida. I think that we are probably 
the national leaders in that respect, making sure it is the 
State that is really driving the bus rather than the Federal 
government when it comes to the allocation or appropriation of 
those Federal resources immediately following a disaster event.
    So, the Florida SBDC works hand-in-hand with SBA, and the 
cooperation and collaboration especially with the number of 
events that occurred over the last two and a half years has 
actually significantly improved, but it was not always that 
way. It would be the fact that SBA would come on in and simply 
move forward on their own and in their own judgment, but the 
State has done a much better job of just basically instructing 
the agency to work directly with the SBDC.
    So, after Hurricane Michael, I am proud to say that within 
10 days we stood up 10 business recovery centers well before 
FEMA stood up its first disaster recovery centers. That created 
certain challenges and chaos in certain areas, but we put two 
of our mobile assistance centers right in the heart of the most 
impacted areas after Hurricane Michael, had SBA personnel there 
to assist the businesses and the citizens, the homeowners, 
renters, etc. with disaster assistance in Panama City and in 
Mexico Beach.
    So, I am very proud of that work and the assistance that we 
have been able to provide, but that takes away from what it is 
that we are charged to do, and for that, for all intents and 
purposes, the performance expectations that our agency expects 
of us on blue sky days has been a full-time job. No additional 
Federal resources or State resources to do that work so it has 
taken away from core operations and now it creates challenges 
about what we do in the long term. We have been challenged in 
fact that while there is the RISE Act that was not intended to 
be a mechanism to provide resources for all of the 
entrepreneurial development programs to provide long-term 
recovery assistance. It has not been proven to be fruitful for 
us. And what I mean by that is we were basically instructed go 
to EDA or go to HUD where there is disaster supplement money 
following Hurricane Irma. And we did that, and we put an 
application forward to EDA and we did not get funded. And that 
was to provide the long-term necessary assistance that small 
businesses needed well after FEMA and SBA left to ensure that 
we were not just giving them Federal Government assistance, 
that is these disaster loans and more debt service to add to 
their financial burden, but helping them make sure that they 
were able to recover their markets, expand their markets, you 
know, recoup or rebuild their businesses to assure that they 
would be paying that taxpayer debt service.
    So you know, that is what keeps me up at night right now is 
what am I going to do to make sure that I have to allocate our 
general operation funds, this long-term recovery system that is 
still needed so desperately, and in Monroe County, which is the 
Florida Keys for those that don't know, to the other adversely 
impacted areas, the Southeast, or excuse me, the Northeast into 
the Southwest, parts of the State and certainly now to 
panhandle of Florida.
    Chairman Rubio. Thank you. Miss, I am sorry if I 
mispronounce this, Ms. Haughton. Haughton, got it. Yes, when 
you look at the statue not only explicitly requires Women 
Business Centers to provide financial, management, and 
marketing assistance to small businesses owned and controlled 
by women but from your testimony it is clear that this program 
provides women entrepreneurs with much more than what the 
statute describes.
    So, as we move forward with the authorization process, how 
can the Small Business Act be modernized to better reflect the 
services that are being provided by Women's Business Centers?
    Ms. Haughton. Well I had mentioned a number of different 
things that we think need to be consistent across the board for 
all entrepreneurial development programs, but I think it is 
important to note that the Women's Business Centers are most 
impactful when they have the flexibility to pivot and to really 
meet the needs that we find are arising within the communities 
we serve. And so, we need to be able to have the flexibility to 
tailor programs specific to the needs that we see of our women 
entrepreneurs.
    Chairman Rubio. After you have heard today repeatedly, the 
Women's Business Centers provide counseling and training 
tailored to fit the needs of these entrepreneurs. There are 
only 116 of these centers across the country so it is 
impossible for them with only 116 centers to be everywhere. In 
Maryland, how is the WBC program in general partnered with the 
other resource partners to ensure that entrepreneurs have 
access to those unique services even if they do not have a 
physical center nearby?
    Ms. Haughton. Right. Well, thank you for that question. I 
think partnership is critical and that is how we operate our 
Women's Business Center, That is how most Women's Business 
Centers operate because, as you mentioned, our resources are 
scarce and so just at this table here we have worked with some 
Small Business Development Centers. We have referrals that we 
do back and forth, particularly on the local level.
    We have a conference, an annual conference, where we had 
the VBOC actually participating in it and we recently had a 
meeting with our local SCORE chapters to really identify what 
are the expertise that their counselors bring that we can tap 
into for our women entrepreneur. I think collaboration and 
partnership is critical and we do not only do it with the SBA 
resource partners but just going within the community and 
pulling in on volunteers that are willing to, you know, devote 
their time to support our entrepreneurs is also key.
    Chairman Rubio. Thank you. Ms. Craven, throughout this 
reauthorization process one of the challenges that keeps coming 
up in over and over again is the lack of clear and consistent 
metrics on the SBA's entrepreneurial development programs. 
Currently the annual performance report includes metrics on the 
number of clients that are served by the VBOCs, the number of 
Boots to Business participants, the number of businesses formed 
from the program but as a practitioner of the program, do you 
believe that the metrics are giving us a full picture of 
everything the VBOCs are doing?
    Ms. Craven. As with all things in small business, Senator, 
the answer is it depends. So, if we are just talking about, as 
I said before, activity-based things, then yes, we can measure 
how many times people come to a program. You could have numbers 
driven things, those are all possible. Unfortunately, what we 
are not able to measure is how long it takes sometimes for a 
person to hear a bit of information and then finally get to a 
resource partner.
    We here at the VBRC we could actually, we do actually have 
a process where I can measure when you first call me, how long 
it takes you to actually sign up so we can measure that 
particular time, then how long it takes you to respond back to 
an email or a phone call or come to an event, and then we can 
measure all the different pieces, so how long does it take you 
to go to the SCORE concert that we suggested you get to or the 
SBDC class that you are supposed to go to or did you go through 
the certification training. We can do all those kinds of 
things. That is really harder to measure, a person's mentality 
to call up Darcella and say, Darcella we sent you to a program, 
but we see yet that you haven't gone. Why not? She is going to 
come back and say, I have got these problems, I have got kids 
in school, or something happened. Life exists. There is all 
these other things that can impact. I need a new job. There are 
all these other things that are really harder to try to 
measure. So again, it depends.
    Yes, if you just want activity-based stuff, we got that. 
All of us can do activity-based things. If you just want to 
know how many businesses I can start in Missouri, if you give 
me $3,000 I can get you 30 of them by the end of the week. It 
does not cost that much to start a business. What it does cost 
though is the time to make sure that that really is the right 
business for you. Do you have resources? Do you have a 
community that can support you? You think you want to start a 
small business because you want to spend more time with your 
children, probably not going to be the right thing to do, start 
a small business.
    So, there are all these other little nuances that really 
take a lot more time and I think the challenge comes in that, 
as I said before, many times we have this year to try to get 
all of that in and sometimes the answer might be no, Darcella 
came to the program and it is a year and a half, and she still 
hasn't called me back.
    Chairman Rubio. So, it is not a perfect analogy, but it is 
similar to a conversation I have had often in the office with 
constituents during casework, so we can measure metric, how 
many cases come in and how many get closed and there are a lot 
of cases where you write a letter to a Federal agency, you get 
a response. Here is your response, case is over, or you can 
decide we are not happy with the response. We are going to try 
this five different ways until we get you the outcome but it 
takes longer and the longer you spend on an individual case, 
the longer it is to close the case and a longer it is to close 
the case if you are just measuring it on, you are just looking 
at the metrics and you are saying, what its taking forever to 
close some of these cases but if they are complex.
    And I would imagine I think what you are saying is that 
when you get people in this program or any of the specialized 
entrepreneurial programs, volume matters clearly, but 
additional to the value is we are trying to help a unique 
subset of individuals and the reason why these programs exist 
is because there are unique challenges that people in that 
profile are facing to get entrepreneurship. So that is a long 
way of saying it. Is that more or less along the lines of 
what--because I think that comparison is something many members 
of the Senate would understand. If it makes sense or it seems 
to align.
    Ms. Craven. Absolutely. You said it perfectly. Thank you. 
Yes, it really does and particularly when we are talking about 
veterans and military family members. Often times there are so 
many other things they have that are competing for their time 
and attention that sometimes they come to us and they say, we 
heard this person at a tap program who said something about 
small business, and we think he was tall guy. So, we have got 
to figure out which business were you in, how did they got--oh 
yeah, that was Joe, here is his number. There are just all 
these other things. Absolutely.
    Chairman Rubio. So, I guess my last question is on, if you 
go back to a recent SBA Office of Inspector General report they 
noted that there were some inefficiencies in the Boots to 
Business program in particular. They noted that there were 
improvements needed to better reach the program's targeted 
population and increase program participation. I guess again as 
someone who is a VBOC Director, do you find that to be true and 
if so what could we do to improve the reaching, the targeted 
population and increasing participation in the program?
    Ms. Craven. Thank you. So, we are all singing on the same 
sheet of music and I want to do some clarifications. The Boots 
to Business program is designed to help transitioning military 
members and their families with comprehension and understanding 
of what small business might be as an option afterwards. So 
that is a 10,000 ft. view of entrepreneurship. How we try to 
make it a little more clear and local and specific is we bring 
in local entrepreneurs, and SBDC, the SCORE chapters, whoever 
that resource partner is. Sometimes it there is a chamber, or 
it is a local attorney. We bring those people in to actually 
explain that education.
    So, it is actually quite--it is not quite correct to say 
that the program needs to be changed a little bit because it is 
really an assessment program. Now where it is more specific is 
when it is when it is a reboot, it is off the military post, 
and we can kind of have much more specific education programs 
around agriculture or food trucks, for example. But what I will 
say is that in order to make it better, to kind of been improve 
it because we are always looking for improvement, sometimes a 
veteran or military family member can come into that training, 
it is not mandatory by the way, so they can choose, select to 
come into that training, sometimes they are three to six years 
out still.
    So, they still have three to six years to serve in the 
military. If we can narrow that down to have the Department of 
Defense or the people, whomever is in control of that, you 
could nail that down to people who are two years or less, that 
would be amazing. That would really help with showing the true 
impact of that information because if you still have got six 
more years to go, Uncle Sam can still send you wherever Uncle 
Sam wants to send you. A couple of other things that we could 
do is encourage them to bring their military spouse or their 
significant other. Nothing worse than seeing a person getting 
new information and then the spouse doesn't, so that is a 
disaster waiting to happen, and then also maybe doing a pre-
assessment of those clients who do elect to come.
    It is a very different conversation if I am having 
conversations with 70 percent of the room who has no idea what 
entrepreneurship even is versus 70 percent of the room who used 
to be National Guard reservists and had small businesses before 
they deployed. If I could get that information prior to that 
class, we could make that much more impactful because you can 
bring in different counselors and different resource partners.
    Chairman Rubio. I appreciate all of you and your patience 
with these votes today and the running around and we still have 
one more so starting at any minute now. So, I want to thank all 
of you for being here. I appreciate all of our witnesses' time 
and the insights that you have given us. This is third. We have 
nine of these different hearings as we go through and try to 
reauthorize, but it is very useful because it allows us to help 
push modernization in adapting these programs to a rapidly 
changing economy with a perhaps needs and challenges that 20 
years ago, 10 years ago, were not as acute as they are today. 
And I think even in the concept of entrepreneurship itself is 
changing as technology has displaced people, so it has opened 
up new opportunities.
    I think in some ways technology has made it easier than 
ever to go into business on your own as an independent 
contractor, in other ways it has made it more challenging. You 
know, depending on what industry you are in, but nonetheless, 
unique opportunities and in particular with our Florida which 
is a State that has many veterans. I am always interested in 
during their time in the service of our country these people, 
our veterans, pick up real skills, in many cases are unique 
skill sets that could have commercial applicability and helping 
them channel that is sometimes difficult in terms of--unless 
you have the right people helping you with that guidance.
    So, as I said, by the way it is also hard in many cases to 
acquire capital for a startup because you have been serving 
your country for 20 years. What were you doing two years ago? I 
was in Iraq, you know. And so, it is a real challenge as we 
have seen. Nonetheless, I thank you all because your insights 
today are going to be very useful to move forward.
    The record for this hearing will remain open for two weeks, 
and any statements or questions for the record should be 
submitted by Wednesday, May 15th at 5:00 p.m.
    Again, thank you all for being here, and with that, the 
meeting is adjourned.
    [Whereupon, at 4:26 p.m., the hearing was adjourned.]

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