Small Business Administration: Status of Achieving Key Outcomes  
and Addressing Major Management Challenges (22-JUN-01,		 
GAO-01-792).							 
								 
This report reviews the Small Business Administration's (SBA)	 
fiscal year 2000 performance report and fiscal year 2002	 
performance plan required by the Government Performance and	 
Results Act of 1993 to assess SBA's progress in achieving	 
selected key outcomes that are important to its mission. SBA's	 
reported progress in achieving its outcomes is mixed. However,	 
GAO had difficulty assessing SBA's progress due to weaknesses in 
its performance measures and data. GAO was unable to assess SBA's
lack of an explanation about how the strategies relate to the	 
outcomes or a discussion regarding strategies for the outcome.	 
GAO identified some improvements from SBA's prior year report and
plan, but several weaknesses remain in SBA's fiscal year 2000	 
performance report and fiscal year 2002 performance plan.	 
Improvements are that the  performance report includes a section 
that summarizes SBA's programs, a matrix that identifies ongoing 
and closed audit reviews, and the number of recommendations	 
associated with each. However, weaknesses included SBA's omission
of time frames or schedules for achieving unmet goals, a lack of 
strategies for meeting unmet goals, and insufficient linkage of  
strategies to indicators and measures.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-792 					        
    ACCNO:   A01233						        
  TITLE:     Small Business Administration: Status of Achieving Key   
             Outcomes and Addressing Major Management Challenges              
     DATE:   06/22/2001 
  SUBJECT:   Performance measures				 
	     Small business assistance				 
	     Strategic planning 				 
	     Reporting requirements				 
	     Program evaluation 				 
	     Government Performance and Results Act		 
	     GPRA						 
	     SBA 8(a) Program					 

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GAO-01-792
     
Report to the Ranking Minority Member, Committee on Governmental Affairs, U.
S. Senate

United States General Accounting Office

GAO

June 2001 SMALL BUSINESS ADMINISTRATION

Status of Achieving Key Outcomes and Addressing Major Management Challenges

GAO- 01- 792

Page 1 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

June 22, 2001 The Honorable Fred Thompson Ranking Minority Member Committee
on Governmental Affairs United States Senate

Dear Senator Thompson: As you requested, we reviewed the Small Business
Administration?s (SBA) fiscal year 2000 performance report and fiscal year
2002 performance plan required by the Government Performance and Results Act
(GPRA) of 1993 to assess the agency?s progress in achieving selected key
outcomes that you identified as important mission areas for the agency. 1
These are the same outcomes we addressed in our June 2000 review of the
agency?s fiscal year 1999 performance report and fiscal year 2001
performance plan to provide a baseline by which to measure the agency?s
performance from year to year. 2 These selected key outcomes are:

 assist small businesses to become self- reliant and successful in the
competitive marketplace,  ensure that businesses and families recovering
from disasters receive

timely assistance, and  ensure that more eligible small businesses
participate in SBA programs

and become more successful. As agreed, using the selected key outcomes for
SBA as a framework, we (1) assessed the progress SBA has made in achieving
these outcomes and the strategies the agency has in place to achieve them,
and (2) compared SBA?s fiscal year 2000 performance report and fiscal year
2002 performance plan with the agency?s prior year performance report and
plan for these outcomes. Additionally, we agreed to analyze how SBA
addressed its major management challenges, including the governmentwide,
high- risk areas of strategic human capital management and information
security that we and SBA?s Inspector General (IG)

1 This report is one of a series of reports on the 24 Chief Financial
Officers Act agencies? fiscal year 2000 performance reports and fiscal year
2002 performance plans. 2 Observations on the Small Business
Administration?s Fiscal Year 1999 Performance Report and Fiscal Year 2001
Performance Plan (GAO/ RCED- 00- 207R, June 30, 2000).

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

identified. Appendix I provides details on how SBA addressed these
challenges. (App. II contains SBA?s comments on a draft of this report.)

SBA?s reported progress in achieving its outcomes is mixed. However, we had
difficulty assessing SBA?s progress due to weaknesses in its performance
measures and data. We were unable to assess SBA?s strategies for achieving
its outcomes because SBA?s plan and report either lack an explanation about
how the strategies relate to the outcomes or a discussion regarding
strategies for the outcome. Specifically, we determined the following:

 Planned outcome: Assist small businesses to become self- reliant and
successful in the competitive marketplace. SBA?s success in achieving this
outcome is mixed. SBA?s performance indicators provide little performance
information on the self- reliance and success of small businesses or on
SBA?s contributions to this outcome. Because of the lack of explanation in
the plan and report regarding how SBA?s strategies for this outcome relate
to helping small businesses succeed, we were unable to assess whether the
strategies are clear and reasonable.

 Planned outcome: Ensure that businesses and families recovering from
disasters receive timely assistance. SBA reported that it met its fiscal
year 2000 goal of providing timely service to disaster victims, yet we have
concerns about the quality of SBA?s performance measures. For example, while
SBA?s fiscal year 2000 performance report shows that it met its 3- day field
presence measure, SBA?s IG determined that this measure has not consistently
been applied by disaster area offices. 3 Neither SBA?s plan nor its report
discusses strategies for accomplishing this goal so we could not determine
how strategies relate to goal accomplishment.

 Planned outcome: Ensure that more eligible small businesses participate in
SBA programs and become more successful. SBA?s reported success varied in
achieving the portion of this outcome regarding having more eligible small
disadvantaged businesses participate in its programs. However, it was not
possible for us to determine SBA?s progress in helping more eligible small
disadvantaged businesses become more successful because SBA has not
developed performance measures that assess the success of its key program in
this area. SBA discusses its strategies for this outcome as a part of its
outcome of helping businesses succeed.

3 Final Audit Report - Results Act Performance Measurement for the Disaster
Assistance Program (Report Number 1- 06, Feb. 15, 2001). Results in Brief

Page 3 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

We identified some improvements from SBA?s prior year report and plan, but
several weaknesses remain in SBA?s fiscal year 2000 performance report and
fiscal year 2002 performance plan. Improvements are that the performance
report includes a section that summarizes SBA?s programs, a matrix that
identifies ongoing and closed audit reviews, and the number of
recommendations associated with each. Also, the performance plan was
presented in a layout that makes the various sections easier to identify and
included SBA?s organizational chart. Another strength of the 2000 report and
2002 plan is that they concisely present SBA?s status in responding to
management challenges identified by SBA?s IG, documents ongoing and closed
GAO reviews, as well as the number of recommendations associated with each.
However, weaknesses included SBA?s omission of time frames or schedules for
achieving unmet goals, a lack of strategies for meeting unmet goals, and
insufficient linkage of strategies to indicators and measures.

SBA has 13 major management challenges, including the governmentwide, high-
risk areas of strategic human capital and information security identified by
us. SBA?s performance plan did have goals, but not measures, related to
strategic human capital management, and the performance report explained its
progress in resolving strategic human capital management challenges. For
example, SBA reported that it has issued a comprehensive workforce plan and
provided leadership training to managers. Similarly, we found that SBA?s
performance plan did have goals, but not measures, related to information
security, but the performance report explained its progress in resolving its
information security challenges. For example, SBA reported that it has
committed more than $1.2 million to enhance information security. We found
that SBA?s performance report and plan addressed many of the challenges we
identified, but did not discuss SBA?s progress in resolving the challenge of
streamlining and automating disaster loan assistance to improve timeliness.

We are recommending that SBA make a number of improvements in its fiscal
year 2001 performance report and fiscal year 2003 performance plan to make
these documents more consistent with GPRA, the Office of Management and
Budget?s (OMB) Circular A- 11, and related guidance.

In commenting on our draft report, SBA said that in revising its plan, it
would take into account our suggestions, but did not comment specifically on
our recommendations. SBA disagreed with our conclusion that its plan lacks
sufficient linkage of strategies to indicators and measures because its use
of diagrams should convey how activities produce outputs, which

Page 4 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

in turn produce outcomes. We continue to believe that it is difficult for a
reader to follow the linkages in SBA's report and plan. SBA also provided
technical clarifications, which were incorporated as appropriate.

GPRA is intended to shift the focus of government decisionmaking,
management, and accountability from activities and processes to the results
and outcomes achieved by federal programs. New and valuable information on
the plans, goals, and strategies of federal agencies has been provided since
federal agencies began implementing GPRA. Under GPRA, annual performance
plans are to clearly inform the Congress and the public of (1) the annual
performance goals for agencies? major programs and activities, (2) the
measures that will be used to gauge performance, (3) the strategies and
resources required to achieve the performance goals, and (4) the procedures
that will be used to verify and validate performance information. These
annual plans, issued soon after the transmittal of the President?s budget,
provide a direct linkage between an agency?s longer- term goals and mission
and day- to- day activities. 4 Annual performance reports are to
subsequently report on the degree to which performance goals were met. The
issuance of the agencies? performance reports, due by March 31, represents a
new and potentially more substantive phase in the implementation of GPRA-
the opportunity to assess federal agencies? actual performance for the prior
fiscal year and to consider what steps are needed to improve performance and
reduce costs in the future. 5

SBA is responsible for aiding, counseling, assisting, and protecting the
interests of the nation?s small businesses and for helping businesses and
families recover from natural disasters. SBA is also a financial institution
with significant commitments and exposure. As of September 30, 2000, SBA?s
total portfolio was about $52 billion, including $45 billion in direct and
guaranteed small business loans and other guarantees and $7 billion in
disaster loans. Since its inception, SBA has, among other things, made 1.1
million small business loans and has approved 1.4 million disaster loans to
individual homeowners, renters, and businesses of all sizes. SBA also
administers the 8( a) business development program, which is designed to
assist small disadvantaged businesses become successful through counseling,
training and assistance in obtaining federal contracts. SBA

4 The fiscal year 2002 performance plan is the fourth of these annual plans
under GPRA. 5 The fiscal year 2000 performance report is the second of these
annual repors under GPRA. Background

Page 5 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

also provides entrepreneurial assistance through partnerships with private
entities that offer small businesses counseling and technical assistance.

This section discusses our analysis of SBA?s performance in achieving its
selected key outcomes and the strategies the agency has in place,
particularly strategic human capital management 6 and information
technology, for achieving these outcomes. In discussing these outcomes, we
have also provided information drawn from our prior work on the extent to
which the agency provided assurance that the performance information it is
reporting is credible.

SBA?s performance in achieving the goal of helping small businesses succeed
is mixed. SBA reported that it met about half of its quantifiable measures
relating to this goal. When goals were not met, SBA did not identify
strategies for achieving the unmet goals in the future. At the time SBA
issued its fiscal year 2000 report, data were not yet available for the
percentage increase of federal prime contracts to small businesses, small
disadvantaged businesses, women- owned businesses, and HUBZone small
businesses. 7 SBA provided us with data that showed that it met only the
small disadvantaged business goal.

We had difficulty assessing SBA?s progress for this outcome because SBA
continues to use output measures without showing how strategies and measures
relate to helping businesses succeed. In support of this goal, SBA lists
four strategies, but does not provide an explanation as to how these
strategies support the overall goal accomplishment of helping businesses
succeed. In addition, SBA included several measures of the number of loans,
but often did not correlate the impact of increasing the number of loans on
small business success. For example, one goal is increasing the number of
loans to veteran- owned businesses to 7,395. The narrative does not explain
why this number is important. In the area of access to business development,
SBA measures the number of clients

6 Key elements of modern strategic human capital management include
strategic human capital planning and organizational alignment; leadership
continuity and succession planning; acquiring and developing staffs whose
size, skills, and deployment meet agency needs; and creating results-
oriented organizational cultures.

7 The HUBZone program provides federal contracting assistance for qualified
small businesses located in historically underutilized business zones.
Assessment of SBA?s

Progress and Strategies in Achieving Selected Key Outcomes

Small Business SelfReliance and Success in the Competitive Marketplace

Page 6 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

being counseled or trained, but does not include outcome information on the
impacts of the counseling or training. SBA?s IG suggested that SBA redefine
current output measures because inconsistencies in the methods used to count
clients mean that one client may be counted more than once. 8 SBA recognizes
that it still relies on output measures, and that for future reports, it
will make an effort to explain how the accomplishment of these output
measures support the established outcome.

In addition, two of the performance indicators - ?expand research, analyses,
and publication of information,? and ?improve small business impact analyses
of regulatory alternatives? - were stated as qualitative indicators and the
actual performance stated as ?achieved? at 100 percent. However, SBA did not
provide criteria or a performance indicator that would explain how it
assessed accomplishment of these goals.

SBA?s performance report includes the following strategies for the
accomplishment of this outcome: (1) improving access to capital and credit,
(2) increasing access to procurement opportunities, (3) act as a voice for
America?s small businesses, and (4) providing access to entrepreneurial
development assistance. These strategies were shown as goals in SBA?s fiscal
year 1999 report. Because of the lack of explanation in the plan and report
regarding how these strategies relate to helping businesses succeed, we were
unable to assess whether they are clear and reasonable.

SBA?s performance plan does not generally categorize its human capital or
information technology strategies by outcome, so we could not determine
specifically how this outcome of helping businesses succeed is impacted by
these strategies. However, in its plan, SBA states that automation and asset
sales will allow staff to shift their attention from the processing of
transactions to using information to analyze programs, activities, and
performance. SBA states that it plans to continue to develop and deliver
training in marketing and outreach, commercial credit analysis, lender
oversight, and lender relations. Additional strategies for human capital and
information technology are discussed in the plan and reports as part of
SBA?s overall internal goal of ?improving SBA management.? In its
performance plan, SBA provides a description of its use of interagency
coordination as a strategy for this outcome. For example, SBA states that

8 Coordination and Performance Measurement in SBA?s Entrepreneurial
Development Programs, Office of Inspector General, U. S. Small Business
Administration (Sept. 2000).

Page 7 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

it meets regularly with the Commerce- directed Trade Promotion Coordinating
Committee to discuss challenges, propose program initiatives, work on
developing new products, and avoid duplication of effort.

SBA reported that it succeeded in meeting its fiscal year 2000 goal of
providing timely service to disaster victims, yet we have concerns about the
quality of SBA?s measures. For example, while SBA?s fiscal year 2000
performance report shows that it met its 3- day field presence measure,
SBA?s IG determined that this measure has not consistently been applied by
disaster area offices. 9 For example, two disaster area offices defined
field presence as the date they arrived at the disaster scene, while one
area office defined the term as the date it was available to assist disaster
victims. SBA did not address this discrepancy in its performance report.
Also, for fiscal years 1999 and 2000, SBA?s performance report shows that it
met its underwriting compliance rate goal. However, SBA?s IG reported that
it did not consider the underwriting compliance rate to be an objective
indicator. SBA did not provide a discussion on this issue in its fiscal year
2000 performance report.

Furthermore, as shown in table 1, SBA adjusted its target goal annually for
its measure of processing disaster loans within 21 days, depending on the
extent to which the goal was accomplished in the previous year. In its
performance report, SBA explained that its performance deteriorated because
of the need to respond to widespread multiple disasters in fiscal years 1998
and 1999, including Hurricane Floyd, that affected 10 states along the East
Coast and caused major widespread flooding in Texas. However, the report
does not explain SBA?s justification for changing its target goal rates in
order to align them with their actual annual performance.

9 See footnote 3. Assistance for Businesses

and Families Recovering From Disasters

Page 8 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

Table 1: SBA Performance Data for Disaster Loan Applications Processed
Within 21 Days (amounts shown in percent)

Loan applications processed within 21 days FY 1998 FY 1999 FY 2000

Goal 90 80 70 Actual 77 60 91 Percent accomplishment 86 75 130

Source: SBA?s Fiscal Year 2000 Performance Report.

SBA?s fiscal year 2000 report acknowledges that SBA considers the disaster
assistance goal difficult to achieve, due to the unpredictability of
disaster activity. Our 2001 Performance and Accountability Series Report on
SBA pointed out that one step that would assist SBA in stabilizing the
indicator for this goal would be to modernize its loan processing in order
to consistently meet its timeliness goals. 10 Presently, few of the
processes followed by SBA loan officers are automated in an integrated
manner, and this lack of automation contributes to processing time. SBA
officials said that they are taking various actions to revise and/ or
clarify the measures for the disaster assistance goal. For example, the 2002
performance plan states that SBA has developed a draft definition of
?effective field presence? to be applied by its Area Directors. Also, SBA
plans to incorporate a ?customer satisfaction indicator? as a measure for
this goal, which will be designed to assess issues related to the quality
and timeliness of services provided.

In its 5- year strategic plan, SBA refers to two completed evaluations to
assist in formulating its strategies for establishing this indicator. One
survey evaluated customer satisfaction with the services provided to
recipients of disaster loans approved after Hurricane George. Another survey
was also done to measure the customer satisfaction level during the disaster
loan making process. According to the strategic plan, the surveys indicated
a high customer satisfaction rate. However, we identified the following
limitations with the results from SBA?s disaster loan making survey: (1) the
survey population may not have been representative of all recipients, (2)
those who were denied loans were not surveyed, (3) the survey response rate
was low, and (4) the selection of

10 Major Management Challenges and Program Risks: Small Business
Administration

(GAO- 01- 260, Jan. 2001).

Page 9 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

response categories may have skewed the responses toward higher ratings.

Neither SBA?s plan nor its report discusses strategies for accomplishing
this goal. However, SBA?s Strategic Plan for fiscal years 2001 through 2006
mentions strategies that include (1) developing a flexible infrastructure of
resources that can be applied to a disaster area, (2) using the Internet to
facilitate the disaster home loan application process, and (3) outsourcing
disaster home loan servicing and carrying out asset sales. Since these
strategies were not discussed in the plan and report, we could not determine
how they relate directly to goal accomplishment.

SBA?s performance plan does not generally categorize its human capital or
information technology strategies by outcome, so we could not determine
specifically how this outcome of providing assistance to families and
businesses recovering from disasters is impacted by these strategies.
Additional strategies for human capital and information technology are a
part of SBA?s overall internal goal of ?improving SBA management.? In its
performance plan, SBA provides a description of its use of interagency
coordination activities as a strategy for this outcome. For example, SBA
states that systematic coordination among federal, state, and local agencies
is necessary before and during a disaster to promote efficient, consistent
action. SBA states that this coordination is described in the federal
response plan and is overseen by the Federal Emergency Management Agency.

SBA?s reported success in achieving the portion of its outcome that more
eligible small disadvantaged businesses participate in its programs was
mixed. SBA reported that it met its output measure that at least 60 percent
of small disadvantaged firms (including 8( a) firms) receive federal
contracts and its measure that at least 3.4 percent of 8( a) firms receive
mentoring. However, SBA reported that it did not meet its measure of
certifying a total of 12,000 small disadvantaged business firms as being
eligible to receive price credits when bidding on prime contracts or to
perform as subcontractors in certain industries. SBA said that it is
reevaluating its goal for the number of small disadvantaged business firms
it will certify because the number of firms seeking certification was much
smaller than projected. SBA does not explain the strategies it is using to
reevaluate this goal. SBA?s original projection of the number of firms it
would certify was based on the number of firms that had previously
selfcertified as small disadvantaged businesses. Our work has shown that a
variety of factors, including uncertainty about the program, the Eligible
Small Business

Participation and Success Due to SBA Programs

Page 10 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

administrative and financial burden of applying, and questions regarding the
benefits of the program may have contributed to the number of small
disadvantaged business certifications being lower than anticipated by SBA.
11

It is not possible to determine SBA?s progress in accomplishing the portion
of its outcome that more eligible small disadvantaged businesses will become
more successful because SBA?s current success measure is not aligned with
the mission of the 8( a) business development program, SBA?s key program in
this area. SBA?s measure for the 8( a) business development program does not
capture program success in terms of the number of competitive firms that
exit the program without being unreasonably reliant on 8( a) and that can
compete in the mainstream economy, as required by the Small Business Act, as
amended. SBA?s performance report states that it will measure achievement by
the percentage of firms that are economically viable 3 years after
graduation and states that SBA began capturing the data for this measure in
fiscal year 2000. SBA?s basis for reporting that it has just begun to
collect this data is unclear because SBA reported on actual performance in
previous years.

SBA includes this outcome in its plan as a part of its outcome of helping
businesses succeed. The strategies include: (1) developing methods to
improve access to contracting opportunities for 8( a) firms; (2) working
with other agencies to reform and improve the program; and (3) developing
legislative, regulatory, and procedural documentation for the reform
recommendations. In the human capital area, SBA noted, among other things,
that it plans to provide sufficient financial and analytical training to
Business Opportunity Specialists to help them more accurately evaluate a
company?s business profile and competitive potential. SBA?s performance plan
does not generally categorize its information technology strategies by
outcome, so we could not determine specifically how it is impacted by this
strategy. Additional strategies for information technology are a part of
SBA?s overall internal goal of ?improving SBA management.? In its
performance plan, SBA provides a description of its use of interagency
coordination activities as strategies for this outcome. For example, SBA
states that it participates in monthly meetings with other

11 Small Business: Status of Small Disadvantaged Business Certifications
(GAO- 01- 273, Jan. 19, 2001).

Page 11 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

federal agencies to discuss strategies to increase small business
participation in federal contracts.

For the selected key outcomes, this section describes major improvements or
remaining weaknesses in SBA?s (1) fiscal year 2000 performance report in
comparison with its fiscal year 1999 report and (2) fiscal year 2002
performance plan in comparison with its fiscal year 2001 plan. This section
also discusses the degree to which SBA?s fiscal year 2000 report addresses
concerns and recommendations by the Congress, us, SBA?s IG, and others.

SBA made some improvements in its performance reporting, but in certain
areas, additional effort is warranted. The fiscal year 2000 performance
report includes more clearly labeled headings and provides more guidance so
that the reader can quickly identify specific information. For example, the
2000 performance report includes a section that summarizes SBA?s programs
and a section that exclusively discusses SBA?s goals, resources, and
outcomes. Another strength of the 2000 report is that it concisely presents
SBA?s status in responding to management challenges identified by SBA?s IG,
documents ongoing and closed GAO and IG reviews, as well as the number of
recommendations associated with each.

However, several weaknesses we previously noted remain in SBA?s report. For
example, the 1999 performance report did not discuss data limitations that
could affect the quality of data used by SBA to assess performance. Also,
although the 1999 report generally discussed the reasons certain goals were
not met, it did not include time frames or schedules for achieving the unmet
goals. In comparison, the 2000 performance report did discuss data
limitations, but did not include time frames or schedules for achieving the
unmet goals. The 2000 performance report does include a narrative
explanation of why the goal accomplishment fell short, but as with the 1999
report, it does not provide strategies for meeting unmet goals. In addition,
SBA does not sufficiently link its strategies to indicators and measures and
does not consistently provide summarized explanations about the data that
are presented.

Another limitation of the fiscal year 2000 report is that it did not provide
a brief summarization in its section that addresses the number of indicators
that were met. SBA did present this information in its fiscal year 1999
report. Although this information is included elsewhere in the report, we
believe that such a narrative leading into the ?Performance Indicators?
Comparison of SBA?s

Fiscal Year 2000 Performance Report and Fiscal Year 2002 Performance Plan
With the Prior Year Report and Plan for Selected Key Outcomes

Comparison of Performance Reports for Fiscal Years 1999 and 2000

Page 12 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

section for the 2000 report would have been helpful in determining SBA?s
approach in presenting these indicators. For example, in fiscal year 1999,
SBA had a total of 59 indicators, and in 2000, it only had 16. Since the
data are presented without SBA?s explanation for the substantial reduction
of indicators, we did not have any insight into SBA?s rationale for doing
so. We believe that the lack of a discussion on this action inhibits our
capability to track a clear link between the identified strategies and the
corresponding indicators and measures in order for decisionmakers to
determine if progress has been made in achieving outcomes.

We noted that SBA?s presentation of information in the plan was an
improvement from the fiscal year 2001 plan. The layout of data was better
designed, and SBA included its organizational chart, as well as more
graphics to illustrate its points. Also, the fiscal year 2002 plan addresses
SBA?s mission, strategic goals and objectives, core values, and budgetary
requirements. Another improvement from the fiscal year 2001 plan is that
SBA?s fiscal year 2002 plan generally discusses SBA?s crosscutting
activities with other agencies and discusses human capital resources needed
to achieve SBA?s planned performance. However, the plan lacks a clear link
of how strategies relate to outcomes and how they link to indicators and
measures. Specifically, it is difficult to ascertain how SBA?s measures will
indicate successful performance beyond meeting output targets.

We have identified two governmentwide, high- risk areas: strategic human
capital management and information security. Regarding strategic human
capital management, we found that SBA?s performance plan did have goals, but
not measures, related to strategic human capital management, but SBA?s
performance report explained its progress in resolving strategic human
capital management challenges. For example, in July 2000, we said that SBA
had begun to take the steps necessary to better manage its human capital
activities, but needed to do more. 12 SBA reported that, among other things,
it has (1) issued a comprehensive workforce transformation plan, (2) issued
a contract to conduct a workload and staffing analysis of SBA headquarters,
and (3) provided leadership training to executives and senior managers. With
respect to information security,

12 Small Business Administration: Steps Taken to Better Manage Its Human
Capital, But More Needs To Be Done (GAO- T- GGD/ AIMD- 00- 256, July 20,
2000). Comparison of

Performance Plans for Fiscal Years 2001 and 2002

SBA?s Efforts to Address Its Major Management Challenges Identified by GAO

Page 13 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

we found that SBA?s performance plan did have goals, but not measures,
related to information security, and SBA?s performance report explained its
progress in resolving its information security challenges. For example, SBA
stated that it has, among other things, (1) committed more than $1.2 million
in personnel and contract support to enhance computer security, (2)
increased the number of authorized personnel for information technology
security, and (3) issued an updated computer security policy document.

As shown in table 2, we identified four major management challenges facing
SBA. We found that SBA?s performance report discussed progress in resolving
many of the challenges we identified, but it did not discuss SBA?s progress
in resolving the challenge of streamlining and automating disaster loan
assistance to improve timeliness. Of the four major management challenges we
identified, SBA?s performance plan had (1) a goal and measures related to
one of the challenges; (2) a goal, but no measures, directly related to one
of the challenges; (3) a goal and measures indirectly applicable to one of
the challenges; and (4) had no goals and measures related to the last
challenge.

Table 2: Summary of SBA?s Treatment of GAO?s Major Management Challenges in
Its Fiscal Year 2002 Performance Plan

Four major management challenges identified by GAO Management challenge
Applicable goals and

measures

Focus the 8( a) program on helping firms obtain contracts to increase
procurement activities Goal and measures. Strengthen human capital,
information technology, budget, and financial management practices to help
modernize SBA

Goal, but no measures. Continue to improve oversight of lending partners to
correct program weaknesses Indirect goal and measures. Streamline and
automate disaster loan processing to improve timeliness No goal and
measures.

Source: GAO?s analysis of SBA?s data.

GPRA is intended to shift the focus of government decisionmaking,
management, and accountability from activities and processes to the results
and outcomes achieved by federal programs. In order for such a shift to
occur, the information presented in GPRA plans and reports needs to be
presented in a logical format that allows the reader to easily discern how
the agency plans to accomplish its goals and objectives and how the measures
will indicate successful performance beyond meeting output Conclusions

Page 14 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

targets. We had significant difficulty assessing SBA?s progress in achieving
its outcomes because of weaknesses in the report and plan. Although improved
over last year in terms of presentation issues, SBA?s fiscal year 2000
performance report and fiscal year 2002 performance plan do not follow GPRA
guidance in several areas. SBA did not provide criteria or a performance
indicator to explain the accomplishment of its qualitative measures. We
believe, as we stated in our fiscal year 1999 report, that SBA is still
relying heavily on outputs without sufficiently linking them to achievement
of the outcome. SBA?s performance report also lacks information about time
frames or schedules and strategies for achieving unmet goals. In our view,
SBA?s fiscal year 2000 performance report and 2002 performance plan do not
present information in a logical manner linking strategies to outcomes,
indicators, and measures.

To make SBA?s plan and report more useful for decisionmakers and more
consistent with GPRA, OMB Circular A- 11, and related guidance, we recommend
that the Administrator of SBA ensure that the fiscal year 2001 performance
report and fiscal year 2003 performance plan (1) clearly link strategies to
outcomes, indicators, and measures; (2) present criteria or a performance
indicator to explain the accomplishment of the goal when using qualitative
measures; and (3) provide information about strategies, time frames, and
schedules for achieving unmet targets.

Our evaluation was generally based on the requirements of GPRA, the Reports
Consolidation Act of 2000, guidance to agencies from OMB for developing
performance plans and reports (OMB Circular A- 11, Part 2), previous reports
and evaluations by us and others, our knowledge of SBA?s operations and
programs, our identification of best practices concerning performance
planning and reporting, and our observations on SBA?s other GPRA- related
efforts. We also discussed our review with agency officials in the Office of
the Administrator and with SBA?s IG. The agency outcomes that were used as
the basis for our review were identified by the Ranking Minority Member of
the Senate Governmental Affairs Committee as important mission areas for the
agency and generally reflect the outcomes for all of SBA?s programs or
activities.

We identified the major management challenges confronting SBA, including the
governmentwide, high- risk areas of strategic human capital management and
information security, in our January 2001 performance and accountability
series and high- risk update and SBA?s IG identified them in December 2000.
We did not independently verify the information Recommendations

Scope and Methodology

Page 15 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

contained in the performance report and plan, although we did draw from
other GAO work in assessing the validity, reliability, and timeliness of
SBA?s performance data. We conducted our review from April through June 2001
in accordance with generally accepted government auditing standards.

SBA provided written comments on a draft of this report. In its response,
SBA said that it intended to conduct a major review of its current plan once
it has an Administrator confirmed and senior political leadership in place.
In revising the plan, SBA said that it would take into account our comments
and would fully comply with GPRA, as well as promote President Bush's
agenda. SBA disagreed with our conclusion that its fiscal year 2000
performance report and 2002 performance plan do not present information in a
logical manner linking strategies to outcomes, indicators, and measures;
however, SBA did not comment specifically on the report's recommendations.
SBA said it believes the 2002 budget and performance plan offers a clear
logical construct that helps the reader to understand how SBA activities can
contribute to the success of a firm, as defined by job creation, revenue
generation, and viability in the marketplace. SBA also said that it used
logical diagrams extensively to convey how activities produce outputs, which
in turn contribute to outcomes. We continue to believe that it is difficult
for a reader to follow SBA's report and plan. While SBA employed diagrams
and tables that should have helped the reader, inconsistencies in SBA's use
of terms such as strategies and outcomes make following SBA's logic a
laborious process. SBA also provided technical clarifications, which were
incorporated as appropriate. SBA?s comments are in appendix II.

As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days after
the date of this report. At that time, we will send copies to appropriate
congressional committees, the Acting SBA Administrator, and the Director,
Office of Management and Budget. Copies will also be made available to
others on request. Agency Comments

and Our Evaluation

Page 16 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

If you or your staff have any questions, please call me at (202) 512- 8678.
Key contributors to this report were Susan Campbell, Cheri Truett, and Tina
Morgan.

Sincerely yours, Davi M. D?Agostino Director Financial Markets and Community
Investment

Appendix I: Observations on SBA?s Efforts To Address Its Major Management
Challenges

Page 17 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

Table 3 identifies the major management challenges confronting the Small
Business Administration (SBA), including the governmentwide high- risk areas
of strategic human capital management and information security. The first
column lists the management challenges that we and/ or SBA?s Inspector
General (IG) have identified. The second column discusses what progress, as
discussed in its fiscal year 2000 performance report, SBA has made in
resolving its challenges. The third column discusses the extent to which
SBA?s fiscal year 2002 performance plan includes performance goals and
measures to address the challenges that we and the IG identified. The SBA IG
told us that in the fiscal year 2000 Performance and Accountability Report,
SBA did not update its description of the actions it has taken in response
to the challenges to reflect actions taken since the IG?s December 2000
management challenges report.

We found that SBA?s performance report discussed the agency?s plans and
progress in responding to most of its challenges, but it did not discuss the
agency?s progress in resolving the challenge of streamlining and automating
disaster loan processing to improve timeliness. The plan discusses SBA?s
efforts to improve timeliness, but not as a result of automated loan
processing. Of SBA?s 13 major management challenges, its performance plan
had (1) goals, but no measures that were related to 11 of the challenges,
and (2) no goals or measures related to two of the challenges. However, SBA
discussed strategies for 12 of the 13 challenges. Appendix I: Observations
on SBA?s Efforts To

Address Its Major Management Challenges

Appendix I: Observations on SBA?s Efforts To Address Its Major Management
Challenges

Page 18 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

Table 3: SBA?s Major Management Challenges Major management challenge

Progress in resolving major management challenge as discussed in the fiscal
year 2000 performance report

Applicable goals and measures in the fiscal year 2002 performance plan GAO-
designated governmentwide, high risk

Strategic human capital management: GAO has identified shortcomings at
multiple agencies involving key elements of modern strategic human capital
management, including strategic human capital management planning and
organizational alignment; leadership continuity and succession planning;
acquiring and developing staffs whose size, skills, and deployment meet
agency needs; and creating results- oriented organizational cultures. This
has also been identified as a challenge in GAO?s 2001 Performance
Accountability high risk Series SBA report, and by SBA?s Inspector General.

SBA refers to its plans and progress in addressing this challenge, and
identifies it as a

?major issue.? Specifically, the report describes how SBA plans to transform
its workforce by (1) training and retraining staff; (2) relocating
personnel, (3) planning for succession and leadership development, and (4)
surveying personnel and developing a workforce improvement plan. SBA?s
internal goal of improving management specifically mentions ?transforming
the workforce.? Also, in our July 20, 2000, testimony on this issue, we
noted that SBA had begun to take such steps for better managing its human
capital activities, such as undertaking various workforce planning
activities, including developing competency models and related training for
some core functions and realigning and deploying some staff.

This has been designated as a highrisk challenge for the first time. This
issue is listed under the goal of improving SBA management. However, no
applicable measures for this goal were stated; the plan reports that these
indicators will be published after a review by the incoming SBA
Administrator. However, in the section on management challenges, SBA states
that it has identified the goals of (1) identifying the knowledge, skills,
abilities and other characteristics that employees need to perform
successfully; (2) developing a succession plan for senior leaders and
candidate development programs; and (3) ensuring that employees receive
adequate training to improve job performance. The plan also states that SBA
has prepared an analysis that projects future workforce needs, expanded
training and candidate development programs, and contracted for a workload
and staffing study.

Appendix I: Observations on SBA?s Efforts To Address Its Major Management
Challenges

Page 19 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

Major management challenge Progress in resolving major management

challenge as discussed in the fiscal year 2000 performance report

Applicable goals and measures in the fiscal year 2002 performance plan

Information Security - Our January 2001 high- risk update noted that the
agencies? and governmentwide efforts to strengthen information security have
gained momentum and expanded. Nevertheless, recent audits continue to show
federal computer systems are riddled with weaknesses that make them highly
vulnerable to computer- based attacks and place a broad range of critical
operations and assets at risk of fraud, misuse, and disruption. (SBA?s IG
also identified this issue as a management challenge for fiscal year 2001.)

SBA refers to its progress in addressing this issue. SBA addressed the need
to improve its information systems security as a management challenge. Since
1999 SBA says that it has committed more than $1.2 million in personnel and
contract support to enhance computer security; increased the number of
authorized personnel for information technology (IT) security and acquired
additional contractor support; issued an updated computer security policy
document that incorporated security policies covering the latest technology;
documented the computer security program and produced guidance documents and
templates for the performance of computer security functions; completed
certification and accreditation reviews for eight of the most sensitive
systems; and developed a security training program. SBA reported that it
continues to work on critical infrastructure protection and security plans.
SBA also reported that during fiscal year 2000, it took actions that
corrected and closed poor information system internal controls as a Federal
Managers? Financial Integrity Act material weaknesses. These actions
included conducting reviews of critical system controls, providing training
to system users, improving controls over application development and system
access, and developing an entitywide disaster recovery plan. An Independent
Auditor?s Report on SBA?s fiscal year 2000 financial statements confirms the
significantly improved internal control over the information system
environment, and that it no longer considers information systems as a
material weakness. However, the report also noted that while SBA?s
development of an entitywide security program is a good start, the program
is not fully implemented and thus a reportable condition.

The plan addresses information technology security but does not include any
direct measures related to it. SBA?s goal to improve management includes an
objective to modernize information systems, with a performance goal of
providing effective and efficient information technology support to program
delivery. In describing this performance goal, SBA discusses the need for a
strong information technology security program as part of its overall System
Modernization Initiative, as well as the need for a continuous commitment of
resources and management attention to security. The plan also responds to
the IG- identified information systems security challenge and notes a goal
to fully implement and maintain an ongoing information security program
aimed at understanding and reducing its information security risks.

Appendix I: Observations on SBA?s Efforts To Address Its Major Management
Challenges

Page 20 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

Major management challenge Progress in resolving major management

challenge as discussed in the fiscal year 2000 performance report

Applicable goals and measures in the fiscal year 2002 performance plan GAO-
designated major management challenge

Streamline and automate disaster loan processing to improve timeliness. In
our 2001 Performance and Accountability Series SBA report, we stated that
SBA needs to be able to quickly expand its loan processing capabilities,
including hiring and training damage inspectors, loan officers and other
staff to provide consistent timely assistance.

SBA?s performance report does not specifically address this challenge.
However, the report does include an indicator of providing quality and
timely service to disaster victims, in which these measures are used: (1)
field presence within 3 days, (2) the underwriting compliance rate, and (3)
processing loan applications within 21 days. Although this indicator has
measures that address providing timely service, the report does not have a
discussion on how automation will assist them in achieving timeliness. In
the Performance Accountability Series report, we stated that in June 2000,
SBA began using an expedited system that streamlines the processing of
certain home and personal property loans. As part of its agencywide
modernization efforts, SBA is in the midst of a larger project to reengineer
loan processing overall, including increased use of automation.

There are no references to direct applicable goals or measures on the issue
of streamlining and automation for disaster assistance. However, the primary
goal of helping families and businesses recover from a disaster is cited in
the plan, along with the measures of field presence within 3 days, assessing
the customer satisfaction rate, and processing loan applications within 21
days.

Appendix I: Observations on SBA?s Efforts To Address Its Major Management
Challenges

Page 21 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

Major management challenge Progress in resolving major management

challenge as discussed in the fiscal year 2000 performance report

Applicable goals and measures in the fiscal year 2002 performance plan

Strengthen human capital, information technology, budget, and financial
management practices to help modernize SBA.

SBA refers to its plans and progress in addressing these issues. Strengthen
human capital: This issue is discussed under the governmentwide, high- risk
areas identified by GAO. Information Technology: This challenge was
identified in our 2001 Performance and Accountability Series SBA report. In
the 2000 performance report, SBA addressed the need to improve key
information technology processes in describing its actions on the management
challenge identified by the IG concerning modernizing major loan monitoring
and financial management systems. SBA noted that since 1999 it has taken
various steps, including strengthening and institutionalizing its IT
planning and investment control process, and has completed an IT
architecture document and established procedures for its maintenance. Our
evaluation of SBA?s actions to implement the recommendations in our May 2000
report a confirmed that it had drafted procedures for investment management,
architecture maintenance, and software development and acquisition. However,
implementation of the procedures was needed in each of these areas. Budget:
The 2000 report does not address this issue, but in our January 2001
Performance Accountability Series report, we stated that SBA has made some
progress in integrating performance management into its budget formulation
process, but SBA has not tracked spending according to goals because
budgeting and accounting series are aligned with SBA?s organizational
structure rather than by strategic goal. SBA reported that it has developed
a cost allocation methodology to assign costs to each major program,
activity, and149 function. Financial Management: No material weaknesses were
identified in the fiscal year 2000 financial audit, and all but one 1994
material weakness was closed. Our 2001 Performance Accountability Series
report notes SBA?s lack of compliance with the Federal Financial Management
Improvement Act of 1996, due to deficiencies in SBA?s financial reporting
process and general computer control deficiencies. SBA plans to resolve the
Federal Financial Management Improvement Act (FFMIA) issue with its systems
modernization effort.

The goal of improving SBA management is stated, and the indicators of
managing for results, transforming the workforce, modernizing the
information systems, improving financial management, improving credit
program management, and creating electronic government are listed. However,
no measures were provided for these issues; the plan states that this will
be addressed after a review by the incoming SBA Administrator.

Appendix I: Observations on SBA?s Efforts To Address Its Major Management
Challenges

Page 22 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

Major management challenge Progress in resolving major management

challenge as discussed in the fiscal year 2000 performance report

Applicable goals and measures in the fiscal year 2002 performance plan GAO-
and IG- designated major management challenges

Continue to improve oversight of SBA?s lending partners to correct oversight
weaknesses.

This challenge was identified in our 2001 Performance and Accountability
Series SBA report, and by SBA?s IG.

The performance report primarily addresses the progress SBA has made in
addressing this issue. The performance report addresses this challenge by
stating that it will implement the plan in its strategic plan for lender
oversight. The strategic plan states: (1) SBA is developing a risk
management system that will benchmark lender performance; (2) SBA is
developing a monitoring system that will contribute to the overall lender
evaluation process.

There were no applicable direct goals or measures. However, one of the
performance goals in the fiscal year 2002 plan is to improve SBA management,
which includes the indicator of modernizing their information systems. No
specific measure was provided. However, the plan states that these measures
will be determined after a review by SBA?s incoming Administrator. A part of
the modernization effort involves developing an automated loan monitoring
system (LMS) that is designed to automate the business functions necessary
to manage SBA?s portfolio. The LMS will include components that address loan
management, lender management, and risk management. Focus the 8( a) program
on helping firms obtain contracts to increase procurement opportunities.

SBA?s IG specifically stated that more participating companies need access
to business development and contracts in the 8( a) Business Development
program.

This challenge was identified in our 2001 Performance and Accountability
Series SBA report, and by SBA?s IG.

The performance report refers to the plans and the progress SBA has made to
address this issue. Generally, SBA plans to implement our recommendation
that it refocus the role of the district office staff to place their highest
priority on helping inform firms about the Federal procurement process. b
Also, along with the Department of Defense and the Office of Management and
Budget, SBA sponsored the formation of a Rapid Improvement Team, which is
comprised of key stakeholders to identify solutions and recommend actions
for government wide 8( a) program improvement. SBA also plans to propose
other changes that it believes will make the program more successful.

The plan contains the goal of helping businesses succeed and identified
improving access to procurement opportunities as an objective. The measures
for this were not presented. The plan?s section on management challenges
states that SBA plans to refocus the district staff office?s role pertaining
to the 8( a) program and to send out a new 8( a) Standard Operating
Procedure to the field during the 2001 calendar year. Also, the plan points
out how SBA is working with other federal agencies to improve the 8( a)
program, as it also stated in its fiscal year 2000 performance report.

Appendix I: Observations on SBA?s Efforts To Address Its Major Management
Challenges

Page 23 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

Major management challenge Progress in resolving major management

challenge as discussed in the fiscal year 2000 performance report

Applicable goals and measures in the fiscal year 2002 performance plan IG-
designated major management challenge

SBA needs to improve its managing for results processes and produce reliable
performance data.

The performance report refers to the progress SBA has made to address this
issue. SBA has drafted guidance on the preparation of organizational
performance goals and indicators that it plans to distribute to its staff.
This guidance will also include standards and procedures for data
verification and validation.

This is a new IG challenge. One of the performance goals in the fiscal year
2002 plan is to improve SBA management, and managing for results is an
indicator. However, no specific measures were provided. Under the section
for management challenges, SBA states that it will rely on developed
guidance involving the preparation of organizational performance goals and
indicators; develop and promulgate standards and procedures for data
verification and validation; issue guidance to providers on how to count
clients served and client counseling and training sessions. SBA faces
significant challenges in modernizing its information systems for loan
monitoring and financial management.

The performance report refers to the progress SBA has made to address this
issue. The report states that SBA has started to upgrade its systems for
loan monitoring and financial management, but implementing those plans will
require sustained commitment to achieve objectives and overcome systems
development obstacles. The agency has identified modernizing these systems
as a major priority and has made progress in developing information
technology procedures and controls. SBA needs to continue to formulate and
implement sound procedures for system development and acquisition to enable
more effective and efficient loan monitoring and financial management.

This is a new IG challenge. The fiscal year 2002 plan states the goal of
improving SBA management, which includes indicators of modernizing the
information systems and improving financial management. However, no specific
measures were provided. In the plan?s management challenges section, SBA
lists the goals of (1) adopting policies and procedures and defining
processes for investment selection, control and evaluation; (2) developing a
systematic process for architecture development; (3) establishing policies
and procedures for architecture maintenance and setting a target date for
implementation; (4) developing a plan to institutionalize and enforce
agencywide use of SBA?s Systems Development Methodology; and (5)
establishing policies and procedures for software development and
acquisition, and develop a mechanism to enforce them.

Appendix I: Observations on SBA?s Efforts To Address Its Major Management
Challenges

Page 24 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

Major management challenge Progress in resolving major management

challenge as discussed in the fiscal year 2000 performance report

Applicable goals and measures in the fiscal year 2002 performance plan

Maximizing program performance requires that SBA fully implement its human
capital management strategies.

Discussed under our ?Government- wide high risk areas? section in this
report. This is a new IG challenge. The fiscal

year 2002 plan states the goal of improving SBA management, which includes
an indicator for transforming the workforce. However, no specific measures
were provided. The plan states that these measures will be determined after
a review by SBA?s incoming Administrator. SBA needs better controls over the
business loan guarantee purchase process. The performance report refers to
the progress

SBA has made to address this issue. The Office of Field Operations and
Capital Access have 1) implemented a Guarantee Purchase Review program and
an automated system for tracking for field guaranties procedures; 2) issued
a procedural notice to all employees on the tracking systems, and 3)
rewritten the guarantee purchase section of the standard operating
procedures for servicing and liquidation.

The fiscal year 2002 plan states the internal goal of improving SBA
management and includes an indicator of modernizing their information
systems. No specific measures were provided. The plan states that these
measures will be determined after a review by SBA?s incoming Administrator.
However, in the management challenges section SBA?s goals for this is to (1)
ensure that SBA denies liability or reduces its payment on the guaranty when
a lender has failed to comply with SBA standards, and (2) implement an
automated system for tracking circumstances when the field office records of
guarantees have been repaired and lenders have released SBA from guaranty
liability on questionable lender practices. SBA?s plan states that thus far,
SBA has (1) implemented procedures to review 10 percent of all guaranty loan
purchases, (2) established a tracking system to follow up on purchase
reviews, (3) initiated development of a Guaranty Repair Tracking System, (4)
initiated revision of its Standard Operating Procedures and the development
of a training course, and (5) modified the Delinquent Loan Collection system
to identify loans that have significant origination or servicing
deficiencies.

Appendix I: Observations on SBA?s Efforts To Address Its Major Management
Challenges

Page 25 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

Major management challenge Progress in resolving major management

challenge as discussed in the fiscal year 2000 performance report

Applicable goals and measures in the fiscal year 2002 performance plan

SBA needs clearer standards to determine economic disadvantage. The
performance report refers to the plans and

progress SBA has developed to address this issue. The 8( a) program office
is working with other agencies to reform the program and develop
legislative, regulatory, and procedural documentation for the reform
recommendations. SBA is also anticipating issuing procedural guidance on the
definition

?economic disadvantage? based on revisions to be made by the interagency
task force referred to above.

There were goals but no measures. This is a management challenge as a result
of a fiscal year 2000 challenge that participants who are wealthy are
allowed to remain in the 8( a) program. However, the 2002 plan?s section on
management challenges states that SBA has goals to redefine ?economic

disadvantage?, and to provide sufficient financial and analytical training
to Business Opportunity Specialists to help them more accurately evaluate a
company?s business profile and competitive potential. According to the plan,
the actions taken or planned are that SBA has (1) added provisions to the
regulations to prevent 8( a) applicants and participants from transferring
assets to family members; (2) modified annual review procedures designed to
access continuing program eligibility and provided training to SBA field
staff, and (3) worked with other federal agencies to improve the program.
SBA needs to clarify its rules intended to defer 8 (a) Business Development
participants from passing through procurement activity to non- Section 8( a)
Business Development firms.

The performance report refers to the plans and progress SBA has developed to
address this issue. The 8( a) program office will work with the Office of
Size Standards to develop an appropriate size and category for value- added
resellers, and issue procedural guidance to the field to implement the
regulatory change. Also, SBA has already published a notice on the Federal
Register seeking comment on valueadded resellers.

There were goals but no measures. However, the plan?s management challenges
section states that SBA plans to tighten a key program definition to
preclude the passthrough practice of making only minor modifications to the
products of other manufacturers. Also SBA plans to define value- added
resellers (VARs) as legitimate business categories and has already published
a notice seeking comment on VARs. The 8( a) program is to use this
information to work with the Office of Size Standards to develop an
appropriate size and category for VARs.

Appendix I: Observations on SBA?s Efforts To Address Its Major Management
Challenges

Page 26 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

Major management challenge Progress in resolving major management

challenge as discussed in the fiscal year 2000 performance report

Applicable goals and measures in the fiscal year 2002 performance plan

Preventing loan fraud requires additional measures, including the necessary
legislative authority and funding.

The performance report refers to the plans and progress SBA has developed to
address this issue. The IG will work with SBA to develop and present the
needed law change to the Congress and continue to work on the design and
development of the loan- monitoring component of the systems modernization
by including data elements to identify any package involved in a loan
application.

There were goals but no measures. However, the plan?s management challenges
section states that SBA?s actions towards addressing this issue is to submit
a legislative proposal that 1) requires all loan agents to provide SBA with
the information necessary to conduct criminal background checks, including
social security numbers; and 2) authorizes SBA to conduct criminal
background checks on loan agents. Also, SBA plans to identify all loan
agents through a registration process and track their association with
individual loans and submit legislation authorizing SBA to conduct criminal
background checks on all business loan applicants. Also, a loan agent
tracking system will be a component of SBA?s Partner Information Management
system. a Information Technology Management: SBA Needs to Establish Policies
and Procedures for Key IT

Processes, (GAO/ AIMD- 00- 170, May 31, 2000).

b Small Business Administration: SBA Could Better Focus Its 8( a) Program to
Help Firms Obtain Contracts, (GAO/ RCED- 00- 196, July 20, 2000).

Appendix II: Comments From the U. S. Small Business Administration

Page 27 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

Appendix II: Comments From the U. S. Small Business Administration

Appendix II: Comments From the U. S. Small Business Administration

Page 28 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

Appendix II: Comments From the U. S. Small Business Administration

Page 29 GAO- 01- 792 SBA's Status of Achieving Key Outcomes

We did not include a point by point response to SBA?s specific comments.

(250027)

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