Small Business Administration: Current Structure Presents	 
Challenges for Service Delivery (26-OCT-01, GAO-02-17). 	 
								 
GAO's recent performance and accountability series report on the 
Small Business Administration (SBA) described major management	 
challenges and program risks to efficient delivery of services.  
However, GAO's report did not address how well SBA's organization
was aligned to achieve its mission; that is, the integration of  
organizational components, activities, core processes, and	 
research to support efficient and effective achievement of	 
outcomes. GAO found that SBA's current structure contributes to  
the challenges SBA faces in delivering services to the small	 
business community. In particular, ineffective lines of 	 
communication; confusion over the mission of district offices;	 
complicated; overlapping organizational relationships; and a	 
field structure not consistently matched with mission		 
requirements combine to impede the effective deliver of services.
Restructuring efforts of other federal agencies provide a	 
framework and a set of steps and considerations that may prove	 
useful in addressing the organizational alignment issues present 
in SBA's current structure. Efforts at other agencies also	 
demonstrate the need for buy-in from both internal and external  
stakeholders and the importance of agency efforts to consider the
human impact of restructuring activities, including closure of	 
field offices.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-17						        
    ACCNO:   A02378						        
  TITLE:     Small Business Administration: Current Structure Presents
Challenges for Service Delivery 				 
     DATE:   10/26/2001 
  SUBJECT:   Performance measures				 
	     Agency missions					 
	     Strategic planning 				 
	     Federal agency reorganization			 
	     Small business					 
	     Senior Executive Service				 
	     SBA 8(a) Business Development Program		 

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GAO-02-17
     
Report to Congressional Committees

United States General Accounting Office

GAO

October 2001 SMALL BUSINESS ADMINISTRATION

Current Structure Presents Challenges for Service Delivery

GAO- 02- 17

Page i GAO- 02- 17 Small Business Administration Letter 1

Results in Brief 2 Background 2 Objectives, Scope, and Methodology 5 SBA
Staff Identified Organizational Problems 6 Restructuring Efforts of Other
Federal Agencies Provide a

Framework for SBA Managers 19 Observations 21 Agency Comments 22

Appendix I Legislatively Mandated Programs and Offices in SBA 23

Appendix II Legislatively Mandated Staff Positions at SBA 26

Appendix III SBA Field Locations Visited 27

Appendix IV Comments From the U. S. Business Administration 29

Figures

Figure 1: SBA Headquarters Organization Chart 4 Figure 2: SBA Workforce
1992- 2000 5 Figure 3: SBA Former Headquarters- to- Field Communication

Model With Fully Staffed Regional Offices 7 Figure 4: Current SBA
Headquarters- to- Field Communication

Model 9 Figure 5: SBA District Office- to- Small Business Interaction 11
Figure 6: Organizational Relationships Between SBA Headquarters

and Field Units 16 Figure 7: SBA Offices and Resource Partners in the United
States 18 Contents

Page 1 GAO- 02- 17 Small Business Administration

October 26, 2001 The Honorable Donald A. Manzullo Chairman Committee on
Small Business House of Representatives

The Honorable Christopher S. Bond Ranking Minority Member Committee on Small
Business and Entrepreneurship United States Senate

Our recent performance and accountability series report on the Small
Business Administration (SBA) described major management challenges and
program risks the agency faces to efficient delivery of services. 1 One
important management area that our report did not address was how well SBA?s
organization was aligned to achieve its mission; that is, the integration of
organizational components, activities, core processes and resources to
support efficient and effective achievement of outcomes. Believing that
organizational alignment can be an important factor in determining an
agency?s efficiency and ability to administer its programs, you requested
that we identify and describe (1) SBA?s current organizational alignment and
issues it poses in SBA?s ability to meet its mission and (2) information SBA
should consider in determining if and how to reorganize. In a briefing with
your staff on May 4, 2001, we presented preliminary information on
challenges SBA faces in its current alignment and identified issues to
consider if its leadership decides to undertake an organizational
realignment. This report documents our briefing and, as requested, provides
information on past legislation that mandates certain aspects of SBA?s
current structure and outlines a proposed framework for SBA to use if it
considers restructuring the agency.

1 Major Management Challenges and Program Risks: Small Business
Administration

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

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 02- 17 Small Business Administration

SBA?s current structure contributes to the challenges SBA faces in
delivering services to the small business community. In particular,
ineffective lines of communication; confusion over the mission of district
offices; complicated, overlapping organizational relationships; and a field
structure not consistently matched with mission requirements combine to
impede the efforts of SBA staff to effectively deliver services. Among the
causes of SBA?s structural problems are past realignment efforts during the
mid- 1990s that changed how SBA performed its functions but left aspects of
the previous structure intact, congressional influence over the location of
field offices and centers, and legislative requirements such as specified
reporting relationships.

Restructuring efforts of other federal agencies provide a framework and a
set of steps and considerations that may prove useful to SBA managers if
they decide to address the organizational alignment issues present in SBA?s
current structure. The realignment of the Federal Emergency Management
Agency, for example, demonstrated the importance of tying organizational
realignment to a clear and comprehensive mission statement and strategic
plan, while earlier restructuring efforts at the Department of Energy showed
how progress can be hampered by unclear linkage between an agency?s mission
and a proposed new structure. Efforts at other agencies also demonstrate the
need for buy- in from both internal and external stakeholders and the
importance of agency efforts to consider the human impact of restructuring
activities, including closure of field offices. Some potential restructuring
efforts by SBA would require legislation modifying earlier laws mandating
specific reporting relationships or other aspects of SBA structure. We are
not making any recommendations in this report.

SBA?s mission is to maintain and strengthen the nation?s economy by aiding,
counseling, assisting, and protecting the interests of the nation?s small
businesses and by helping businesses and families recover from natural
disasters. SBA has a total portfolio of about $52 billion, including $45
billion in direct and guaranteed small business loans and other guarantees
and $7 billion in disaster loans. 2 SBA provides small businesses with
access to credit, primarily by guaranteeing loans through its 7( a) program.
SBA provides entrepreneurial assistance through partnerships with private
entities that offer small business counseling and technical

2 As of September 30, 2000. Results in Brief

Background

Page 3 GAO- 02- 17 Small Business Administration

assistance. SBA administers the 8( a) business development program, which is
designed to assist small disadvantaged businesses in obtaining federal
contracts. SBA also makes loans to businesses and families trying to rebuild
in the aftermath of a disaster.

As of May 2001, SBA had 2,859 employees. 3 About three- quarters of SBA?s
staff are assigned to the agency?s 10 regional offices and over 100 other
field locations. In addition to its federal workforce, SBA?s infrastructure
includes over 1,000 resource partners located nationwide who provide
technical and advisory assistance to small businesses. According to SBA, the
agency can have up to 60 appointee staff- 4 presidential appointee
positions, an Office of Personnel Management allowance of 18 noncareer
Senior Executive Service appointees, and 38 other appointed positions.

As shown in figure 1, the agency?s management structure is relatively flat
in headquarters, with 19 offices reporting to the Office of the
Administrator.

3 This number excludes 107 employees in the Office of the Inspector General
and 1,180 in the Office of Disaster Assistance and does not include contract
personnel.

Page 4 GAO- 02- 17 Small Business Administration

Figure 1: SBA Headquarters Organization Chart

Source: SBA.

In the past 10 years, SBA has seen changes made in how it delivers services
and to its organization. The largest change to SBA?s service delivery has
occurred in its lending programs, where the agency went from making loans
directly to guaranteeing loans made by commercial lenders. SBA?s loan
programs have also been the focus of a major organizational change in the
creation of centers to process and service the majority of these loans- work
once handled largely by district office staff. Processing and servicing of
about three- quarters of SBA- guaranteed loans were

Page 5 GAO- 02- 17 Small Business Administration

handled in centers instead of district offices in 2000. In response to
budget reductions, SBA also streamlined its field structure during the
1990s, downsizing the 10 regional offices, moving the workload to either
district offices or headquarters offices, and eliminating most of the
regions? role as an intermediate management layer between headquarters and
the field. SBA created the Office of Field Operations to take over the role
of intermediary.

As shown in figure 2, SBA?s overall workforce has also decreased by more
than 20 percent since 1992.

Figure 2: SBA Workforce 1992- 2000

Note: Employee data were as of September 30 of each year. These numbers
exclude employees in the Offices of the Inspector General and Disaster
Assistance and do not include contract personnel.

Source: GAO analysis of SBA staffing reports.

To assess issues raised by SBA?s current organizational structure, we
conducted 58 interviews with 78 senior SBA officials in headquarters and in
the field. We met with senior officials and obtained documents on both
current SBA alignment and past reorganization efforts from 15 of the 19
headquarters offices reporting to the Administrator. At the request of your
Objectives, Scope,

and Methodology

Page 6 GAO- 02- 17 Small Business Administration

staffs, our scope did not include two of these offices, the Office of
Advocacy and the Office of the Inspector General. We also selected 17 field
locations to visit in consultation with SBA headquarters officials, with the
aim of visiting a mix of geographic areas and office types and sizes. The 17
field locations were a judgmental but representative sample. As shown in
appendix III, we visited offices in the eastern, southern, midwestern, and
western areas of the United States. Among the locations we visited were
small, medium, and large district offices and a variety of centers across
the country, including loan processing and servicing centers, a disaster
area office, and a Business Information Center. At each field location, we
interviewed and gathered documents from the manager of the location and
other program managers. We also held discussions with lenders and lender
associations from the National Association of Government Guaranteed Lenders,
National Association of Development Companies, and Independent Community
Bankers of America. The issues raised in this report represent common themes
we heard from many senior officials in interviews throughout our fieldwork
at the various locations.

Additionally, we conducted a literature review of best practices that
included restructuring experiences of other federal agencies as well as
issue papers and books published by individuals having practical and
research experience in organizational structures. We also analyzed laws
mandating aspects of SBA?s current organization.

We conducted our work from February through June 2001 in accordance with
generally accepted government auditing standards.

Senior SBA officials in headquarters and the field identified aspects of the
current organizational alignment that contribute to the challenges faced by
SBA management, including cumbersome communication links between
headquarters and field units; confusion over the mission of district
offices; complex, overlapping organizational relationships; and a field
structure not consistently matched with mission requirements.

Several SBA district office managers expressed frustration with ineffective
field and headquarters communications. SBA officials told us that prior to
the mid- 1990s restructuring of the regional offices, communication between
headquarters and the field was carried out in a different way from how it is
now. When the regions played a role as a layer of management between
headquarters and the field, they served as a filter. Headquarters SBA Staff
Identified

Organizational Problems

Communication Problems Exist Between Headquarters and Field Offices

Page 7 GAO- 02- 17 Small Business Administration

program offices only had to communicate with the 10 regions to provide
direction or make information requests. The regions would then communicate
to the districts. The regions were also in a position to identify confusing
or redundant information requests and prioritize new initiatives for the
districts. While some SBA officials felt that the regions had a positive
effect on communication between headquarters and the districts, others felt
that the regions were an unnecessary layer of management and were more
likely to be a bottleneck, hampering the effective flow of information
through the agency. SBA?s former headquarters- to- field communication model
is depicted in figure 3.

Figure 3: SBA Former Headquarters- to- Field Communication Model With Fully
Staffed Regional Offices

Source: GAO analysis.

Senior SBA officials in headquarters and the field said that the
realignment- in which the regions were downsized, but not eliminated, and
the Office of Field Operations was created, but never fully staffed-

Page 8 GAO- 02- 17 Small Business Administration

created communication problems. The primary function of the Office of Field
Operations was to facilitate the flow of information between headquarters
and district offices. However, the Office of Field Operations has fewer than
10 staff, and senior SBA officials told us that it would be impossible for
such a small office to have the same information conduit responsibility once
held by multiple staff in each of 10 regional offices. As a result,
headquarters program offices sometimes communicate with the district offices
through the Office of Field Operations, but they more often communicate
directly with district office staff working on the SBA programs they manage.
For example, district officials said that the Office of Capital Access may
make a request for loan information through the Office of Field Operations
or may make the request directly to loan program managers in every district
office. Officials described how these multiple lines of communication with
the district offices have led to district staff being on the receiving end
of conflicting or redundant requests. Finally, regional offices were
downsized but not closed, and they still play a role in monitoring goals and
coordinating administrative priorities with the districts. For example,
officials told us that district office goals are disseminated through the
regions.

In addition, district managers said that districts are on the receiving end
of a flood of information but that the information received may not clearly
indicate priority or may lack practical application. District managers
described how the possibility that important information might be buried
among the large number of messages that are of little concern to them meant
having to spend hours sorting through incoming messages. Furthermore, they
described how important information may not be disseminated at all. For
example, district staff were notified of headquarters blood drives or job
opportunities open only to headquarters staff but said that they were not
formally notified when the former administrator left the agency. Also, a
District Counsel told us that she was not notified when a new SBA General
Counsel was named. Figure 3 depicts current headquarters- to- field
communication in SBA.

Page 9 GAO- 02- 17 Small Business Administration

Figure 4: Current SBA Headquarters- to- Field Communication Model

Source: GAO analysis.

The SBA Inspector General found similar problems with communication within
SBA. In 2000, the Inspector General conducted management challenge
discussion groups with almost 50 senior officials from SBA headquarters,
regional, and district offices and found that communication issues were a
recurring theme in these discussions. Participants in these groups described
the advantages provided by the former regional office structure in funneling
and distilling information and policy directives from headquarters to the
districts and the impossibility of a small Office of Field Operations
playing the same role. The senior officials noted that communication gaps
resulted in confusion and lower morale in the field. They suggested that a
more coordinated approach is needed where issues

Page 10 GAO- 02- 17 Small Business Administration

or problems arising in the field can be channeled to headquarters, and vice
versa. 4

We found disagreement within SBA over the primary customer of the district
offices. Headquarters executives said that the main customer of the district
offices is small businesses, while district office officials told us that
their primary clients are lenders- encouraging them to make more SBA
guaranteed loans, providing support, and conducting oversight reviews. SBA
headquarters executives said that the role of the district office is in
transition. Under the previous administration, since lending activities were
being increasingly centralized, the district offices? role was primarily to
work with small businesses. However, district office managers pointed out
that they are still responsible for a high level of interaction with
lenders, especially smaller lenders with infrequent involvement with SBA
programs. They also noted that they still play a role in servicing problem
loans and have a major role in liquidating defaulted loans. Furthermore,
although district office managers are given dozens of goals each year
related to every SBA program in which they have some involvement, they
believe that lender- related goals matter most because their performance
rating is weighted heavily on aspects of loan activity. Associations
representing lenders that we spoke to also mentioned confusion over whether
the districts? customers are lenders or small businesses.

As shown in figure 5, a small business owner seeking information on SBA?s
main program areas from a district office is likely to be sent to another
location, reinforcing the perception of district office managers that the
lender rather than the small business is their primary customer. Of the
?answers? shown coming from the district office in figure 5, only signing up
for and participating in the 8( a) program is likely to involve much in the
way of district office activity.

4 Advisory Memorandum: Report on the Results of SBA Management Challenge
Discussion Groups, Small Business Administration, Office of the Inspector
General (# 0104- 01, Apr. 4, 2001). Confusion About SBA

District Offices? Primary Customer

Page 11 GAO- 02- 17 Small Business Administration

Figure 5: SBA District Office- to- Small Business Interaction

Note: This chart refers to the following SBA programs or entities: Business
Information Center (BIC), Empowerment Zone (EZ), One- Stop Capital Shop (One
Stop), Women?s Business Center (WBC), Service Corps of Retired Executives
(SCORE), U. S. Export Assistance Center (USEAC), Small Business Development
center (SBDC), and 8( a) Business Development Program (8( a)).

Source: GAO analysis.

Human capital challenges at SBA make the agency?s district office role more
complex. SBA continues to deal with the problem of getting properly trained
people into the right places, especially the districts, to manage the 7( a)
and 8( a) programs. SBA officials said that 7( a) staff have seen their
roles change from loan processors to financial institution overseers and
that 8( a) Business Opportunity Specialists are facing a role change from
program compliance monitors to business development coaches. A 1999 SBA
report on agency modernization pointed to the importance of retraining and
reorienting SBA staff as a part of the agency?s modernization efforts. 5 Our
July 2000 testimony on SBA?s human capital

5 SBA Modernization: Roadmap to the 21st Century, Small Business
Administration, October 1999.

Page 12 GAO- 02- 17 Small Business Administration

challenges noted that some district offices are cross- training staff in
multiple functional areas. 6 Executives told us that training and moving the
right people into the right places to take on these new roles is an ongoing
challenge.

SBA also faces the human capital challenge posed by the agency?s accelerated
losses of experienced personnel, a problem we have identified across the
federal government. 7 Senior SBA officials pointed out that the loss of
experienced personnel is especially troubling at SBA because some of these
staff are the ?institutional memory? that newer staff seek out when they
need information but find themselves stymied by the agency?s cumbersome
organizational and communication lines. The SBA Inspector General?s
management challenge discussion groups also raised concerns over SBA?s aging
workforce and the potential loss of institutional memory as people retire. 8

We found evidence of complex, overlapping organizational relationships,
particularly between field and headquarters units. Senior SBA officials said
that district office success depends on their ability to obtain information
or support from many other offices. For example, the district offices have a
direct relationship not only with both the Office of Field Operations and a
regional office but also with the headquarters offices managing their
programs. Senior officials said that although some of these complex
organizational relationships stem from legislative requirements such as
specified reporting relationships, past realignment efforts that changed how
SBA performed its functions while leaving aspects of the previous structure
intact (e. g., downsizing and taking away much of the role of regional
offices but not closing those offices) have also played a part.

District staff working on SBA loan programs report to their district
management, while loan processing and servicing center staff report

6 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). 7 High Risk Series: An Update (GAO- 01- 263, Jan. 2001) and Managing
for Results: Human Capital Management Discussions in Fiscal Year 2001
Performance Plans (GAO- 01- 236, Apr. 2001).

8 Advisory Memorandum: Report on the Results of SBA Management Challenge
Discussion Groups, Small Business Administration, Office of the Inspector
General (# 0104- 01, Apr. 4, 2001). SBA Organizational

Relationships Are Complicated

Page 13 GAO- 02- 17 Small Business Administration

directly to the Office of Capital Access. Yet, the district office loan
program staff sometimes need to work with the loan processing and servicing
centers to get information or to expedite loans for lenders in their
district. Because loan processing and servicing centers report directly to
the Office of Capital Access, requests that are directed to the centers
sometimes must go from the district through the Office of Capital Access
then back to the centers. District managers and staff said that the effect
of these relationships is that sometimes they cannot get answers to
questions when lenders call and that they have trouble expediting loans
because they lack authority to direct the centers to take any action. The
Office of Capital Access commented that they rely on the district offices to
handle the most difficult loans and to work with infrequent lenders, while
the centers process the more standard loans made by frequent lenders. Lender
association representatives said that the lines of authority between
headquarters and the field can be confusing and can mean that practices vary
from district to district.

The SBA Inspector General?s management challenge discussion groups also
described how district staff were concerned that centralization has resulted
in district offices being increasingly ?out of the loop? on decisions
affecting their small business customers or potential customers. 9 SBA?s
1999 report on agency modernization also described the district offices?
view that centers are not responsive enough to the field, but it pointed out
that centralization has freed up district staff to do more marketing and
working with small businesses. 10

District managers also said that they are tasked with maximizing the number
of loans generated in their area while, at the same time, the Office of
Capital Access must make sure that the total number of loans stays below the
ceiling set by the SBA appropriation. They said that in 1997, they were told
to stop the lenders in their area from generating more loans because of the
appropriation ceiling, even though the district?s goal was designed to
generate more loans.

The Office of Government Contracting and Business Development oversees
implementation of the 8( a) program by district office staff (who report to
district management). It directly manages Government

9 ibid. 10 SBA Modernization: Roadmap to the 21st Century, Small Business
Administration, October 1999.

Page 14 GAO- 02- 17 Small Business Administration

Contracting field staff in six Area Offices and numerous posts of duty, and
business development staff in three Division of Program Certification and
Eligibility Centers. However, Business Opportunity Specialists in district
offices working on the 8( a) Business Development program compete with
Procurement Center Representatives working for the Office of Government
Contracting. Officials said that staff working on both programs are working
with the same procurement officials in other agencies to encourage more
contracting activity, respectively, for procurement preference programs and
small minority- owned businesses enrolled in the 8( a) program. Moreover, we
reported in 2000 that SBA did not have enough Procurement Center
Representatives to review contracts at over 2,000 federal procurement
centers. 11 The SBA Inspector General?s management challenge discussion
groups also identified the need for greater cooperation and coordination
among these programs. 12 Also, 8( a) staff in the districts said they work
with, but have no authority over, the Division of Program Certification and
Eligibility Centers to facilitate the approval of 8( a) program applications
from firms the district will work with once the firms are in the program. 13
Senior district office staff said that firms find it difficult to navigate
the process and express frustration that they have to deal with more than
one office.

The Office of Entrepreneurial Development has primary responsibility for the
operation of over 1,000 Small Business Development Centers, Women's Business
Centers, Service Corps of Retired Executives chapters, and One- Stop Capital
Shops. Business Information Centers are overseen by staff in the district
offices. One district official said that district offices should be given
more complete responsibility for entrepreneurial development programs in
their districts so that they can create more customized programs better
suited to the unique needs of their area. Also, the SBA staff operating the
Business Information Centers report directly to their local district
manager, but also receive direction and resources from the Office of
Entrepreneurial Development. In addition, as reported by the

11 Small Businesses: Limited Information Available on Contract Bundling?s
Extent and Effects (GAO/ GGD- 00- 82, Mar. 2000). 12 Advisory Memorandum:
Report on the Results of SBA Management Challenge Discussion Groups, Small
Business Administration, Office of the Inspector General (# 0104- 01, Apr.
4, 2001).

13 SBA said that it established the Program Certification and Eligibility
Central Office Duty stations in response to Congressional direction that it
establish field offices as may be necessary to efficiently perform its
functions and responsibilities (P. L. 100- 656, section 101).

Page 15 GAO- 02- 17 Small Business Administration

SBA Inspector General, SBA officials identified a disconnect between SBA
small business financing and technical assistance programs. Officials noted
that a more holistic approach would be for SBA to track SBA borrowers to
identify those who may need technical assistance. 14 SBA?s agency
modernization report also called for the development of crosstrained teams
of SBA staff in order to link SBA programs and better serve the agency?s
customers. 15

We also found a situation where divided responsibility for a program was
working well. The Office of Disaster Assistance handles the processing of
loan applications from disaster victims then sends the loans to the Office
of Capital Access, which services them in four Disaster Home Loan Servicing
Centers around the country. SBA officials described this as a positive
relationship, allowing each of the two SBA offices to handle the aspects of
the disaster loan program they are best suited to manage.

Figure 6, depicts the variety of organizational relationships we found
between SBA headquarters and field units.

14 ibid. 15 SBA Modernization: Roadmap to the 21st Century, Small Business
Administration, October 1999.

Page 16 GAO- 02- 17 Small Business Administration

Figure 6: Organizational Relationships Between SBA Headquarters and Field
Units

Note: This chart refers to the following SBA offices: Office of Field
Operations (OFO), Office of Government Contracting/ Business Development
(GC/ BD), Office of the General Counsel (OGC), Government Contracting Area
Offices (GC Areas), 8( a) Division of Program Certification and Eligibility
Centers. This chart also uses the term ?storefronts? to characterize Small
Business Development Centers, Business Information Centers, Women?s Business
Centers, and other such locations where the public accesses SBA programs.

Source: GAO analysis of SBA organization.

Senior SBA officials said that some of SBA?s past efforts to change the
agency?s alignment have led to current problems because too much of the
prior structure was left intact. For example, the creation of loan
processing and servicing centers moved some, but not all, loan- related
workload out of the district offices. District offices retained
responsibility for the more difficult loans and loans made by infrequent SBA
lenders. Similarly, regional offices were downsized but not eliminated
during the 1990s. Although most of the workload of the regions was
transferred to

Page 17 GAO- 02- 17 Small Business Administration

other offices, the regional offices remained open and still retain some
organizational responsibility for overseeing the districts, along with the
newly created Office of Field Operations.

SBA managers also told us that some offices and centers are not located to
best accomplish the agency?s mission. For example, Iowa has two district
offices located less than 130 miles apart and neither manages a very large
share of SBA?s lending program or other workload. SBA has a loanprocessing
center in Hazard, Kentucky; although, according to SBA officials, the center
is in an area with a small employment base, relatively high costs, and is
remote from major transportation hubs, making it difficult to attract and
retain staff and to oversee loan- processing activities at the site. SBA
also has another loan- related center located in New York City; a very high-
cost area where it has trouble attracting and retaining staff. Figure 7
shows locations of SBA offices around the country.

Page 18 GAO- 02- 17 Small Business Administration

Figure 7: SBA Offices and Resource Partners in the United States

Source: SBA.

SBA officials stressed that congressional direction has played a part in
SBA?s current structure. SBA officials pointed out that Congress has

Page 19 GAO- 02- 17 Small Business Administration

created many new offices, programs, aspects of existing programs, and pilot
projects and has prescribed reporting relationship, grade, and/ or type of
appointment for several senior SBA officials. Appendix I lists 78 offices
and programs or program changes created by laws. Appendix II lists 11 SBA
staff positions and specific reporting relationships required by
legislation. SBA officials also said that congressional influence over the
agency?s field structure has led to placement of field activities in less
than optimal locations and prevented the agency from closing or
consolidating some of its inefficiently located field offices. Our March
2000 report on the Government Contracting program noted that Congress
directed the deployment of SBA?s scarce Procurement Center Representatives
in 17 specific locations. 16 Also, SBA?s current appropriation includes a
specific provision precluding the agency from shifting funds between
appropriation accounts to relocate offices or employees, or reorganize
offices, programs, or activities without notifying the Appropriations
Committees. 17

Organizational alignment is crucial if an agency is to maximize its
performance and ensure its accountability. 18 Although difficult to make,
the choices that go into aligning an organization to support its strategic
and programmatic goals have enormous implications for further decisions. As
we testified in 1995, the key to any reorganization plan- and the key to
building a consensus behind it- is the creation of specific, identifiable
goals. 19 In other words, the first thing to do is to understand what goals
the

16 According to SBA Procurement Center Representative guidance, Conference
Reports to the SBA Continuing Appropriations for fiscal years 1988, 1989,
1991, 1992, and 1993 and P. L. 100- 590, Small Business Reauthorization and
Amendment Act of 1998 specify that Procurement Center Representative
coverage is required in the following locations: Connecticut; Iowa;
Kentucky; Louisiana; Maine; Minnesota; Montana; Omaha, Nebraska; Las Vegas,
Nevada; New Hampshire; North Carolina; North Dakota; Oregon; Rhode Island;
Tennessee; West Virginia; and Clarksburg, West Virginia. Small Businesses:
Limited Information Available on Contract Bundling?s Extent and Effects
(GAO/ GGD- 00- 82, Mar. 2000).

17 This restriction applies to all agencies funded by H. R. 5548, which
makes appropriations for the Departments of Commerce, Justice, and State,
the Judiciary, and related agencies for the fiscal year ending Sept. 30,
2001. H. R. 5548 became part of P. L. No. 106- 553.

18 Human Capital: Taking Steps to Meet Current and Emerging Human Capital
Challenges (GAO- 01- 965T, July 17, 2001). 19 Government Reorganization:
Issues and Principles (GAO/ T- GGD/ AIMD- 95- 166, May 17, 1995).
Restructuring Efforts

of Other Federal Agencies Provide a Framework for SBA Managers

Page 20 GAO- 02- 17 Small Business Administration

agency is trying to achieve and then to build an organization around those
goals.

For example, SBA managers would need to begin any restructuring efforts with
an examination of how current activities, core business processes, and
resources are aligned to support SBA?s mission and how those efforts help to
achieve agency goals. A report on the Federal Emergency Management Agency 20
points to the critical part played by that agency?s development of a clear
and comprehensive mission statement that it used as a guide to
reorganization. On the other hand, in 1995 we identified the lack of linkage
between mission and structure as a missing piece of restructuring efforts at
the Department of Energy. 21 Our earlier review of SBA?s human capital
management has shown that SBA has completed the critical first element of
this process in developing a shared vision of its mission and has
consistently communicated that vision in its planning documents. 22 SBA?s
next step would be to build an organization around its shared vision and
goals.

SBA managers would need to obtain extensive input from internal and external
stakeholders first to identify (1) how well the current structure is aligned
with the agency?s mission and strategic plan and establishes clear lines of
authority and accountability, (2) how well the current structure facilitates
communication with both internal and external customers, (3) how well the
number and location of offices facilitates the agency meeting its mission as
efficiently and effectively as possible, and (4) the extent of buy- in for
the current structure from internal and external customers. SBA managers
would use this information to develop a prototype organization structure.
Next, SBA would present the proposal to the stakeholders, obtain their input
on the prototype, and revise it accordingly.

Use of this step- by- step approach could help increase acceptance of the
changes- a critical need for any restructuring effort. Without this
acceptance, restructuring is impeded. For example, we reported in 2000

20 Learning From the Leaders: Results- based Management at the Federal
Emergency Management Agency, Jerry Ellig, Ph. D., Senior Research Fellow,
Mercatus Center at George Mason University, Mar. 29, 2000.

21 Department of Energy: A Framework for Restructuring DOE and Its Missions

(GAO/ RCED- 95- 197, Aug. 1995). 22 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).

Page 21 GAO- 02- 17 Small Business Administration

that employee resistance to organizational changes was hampering
restructuring efforts at the Department of Agriculture. 23 In another
report, we noted that Nuclear Regulatory Commission staff confusion over the
direction of their agency impaired their ability to focus on results or make
as full a contribution as they might otherwise make. 24 Our work has shown
that many agencies continue to struggle with clearly understanding how what
they do on a day- to- day basis contributes to agency results. Some agencies
have begun to use performance agreements to strengthen the alignment of
daily operations with results- oriented performance goals. Emerging benefits
of results- oriented performance agreements are that they (1) strengthened
alignment of results- oriented goals with daily operations; (2) fostered
collaboration across organizational boundaries; (3) enhanced opportunities
to discuss and routinely use performance information to make program
improvements; (4) provided results- oriented basis for individual
accountability; and (5) maintained continuity of program goals during
leadership transitions. 25

SBA?s current organizational alignment has some weaknesses that contribute
to challenges in delivering services to the small business community. When
budget constraints forced SBA to downsize, it responded by significantly
reducing but not eliminating the regions, and by creating a headquarters
office to handle field operations. While there is considerable disagreement
among senior SBA officials about which structure is preferable, it is clear
that by leaving remnants of the regions in place and creating only a very
small Office of Field Operations, SBA has not enhanced communications along
organizational lines. Instead, organizational relationships, as shown in
figure 6, are complicated. The centralization of a majority of loan
processing and the planned transition of district staff from processing
loans to working with small businesses leaves unanswered questions for
district managers whose performance is still rated solely on aspects of loan
activity. In addition, senior officials believe that some SBA offices and
centers are not located to best accomplish the agency?s mission.

23 USDA Reorganization: Progress Mixed in Modernizing the Delivery of
Services

(GAO/ RCED- 00- 43, Feb. 2000). 24 Management Reform: Elements of Successful
Improvement Initiatives

(GAO/ T- GGD- 00- 26, Oct. 15, 1999). 25 Managing for Results: Emerging
Benefits From Selected Agencies? Use of Performance Agreements (GAO- 01-
115, Oct. 30, 2000). Observations

Page 22 GAO- 02- 17 Small Business Administration

Restructuring is admittedly a difficult endeavor and there is no perfect
organizational alignment. If SBA leadership decided to restructure the
agency, any plan would need to begin with examining key questions about the
organization to establish a framework for restructuring. Such a framework
would need to support SBA?s mission and strategic plan, establish clear
lines of accountability, facilitate communication, and offer a rational
justification for office location. Restructuring efforts would also need to
include getting buy- in from stakeholders and minimize the impact of changes
on SBA employees as much as possible. Congressional support for SBA
restructuring would be a necessary aspect of any changes SBA proposes.
Moreover, some changes may require legislation modifying mandated structural
elements specified in earlier laws.

We received written comments on a draft of this report from SBA. SBA did not
disagree with our findings and offered technical comments, which we have
incorporated where appropriate. SBA?s comments appear in appendix IV.

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 15 days after the date of this report. At
that time, we will send copies of this report to the Chairman of the Senate
Committee on Small Business and Entrepreneurship, the Ranking Minority
Member of the House Committee on Small Business, other interested
congressional committees, and the Administrator of the Small Business
Administration. We will make copies available to others on request. This
report will also be available on our homepage at http:// www. gao. gov.

Please contact me at (202) 512- 8678 if you or your staff have any
questions. Major contributors to this report were Susan Campbell, David
Lewis, and Alexandra Martin- Arseneau.

Davi M. D?Agostino, Director Financial Markets

and Community Investment Agency Comments

Appendix I: Legislatively Mandated Programs and Offices in SBA

Page 23 GAO- 02- 17 Small Business Administration

Public law Program/ office established

Small Business Act Amendments of 1961, P. L. No. 87- 305, 75 Stat. 666
(1961)

 Added 8( d) Subcontracting Program Housing and Urban Development Act of
1970, P. L. No. 91- 609, 84 Stat. 1770 (1970)

 Surety bond guarantees Small Business Investment Act Amendments of 1972,
P. L. No. 92- 595, 86 Stat. 1314 (1972)

 Loans to the handicapped Small Business Amendments of 1974, P. L. No. 93-
386, 88 Stat. 742 (1974)

 Capital ownership development program (7( j)) Small Business Investment
Act Amendments of 1976, P. L. No. 94- 305, 90 Stat. 663 (1976)

 Pollution control facilities

 Office of Advocacy Small Business Act and Small Business Investment Act of
1958 Amendments, P. L. No. 95- 89, 91 Stat. 553 (1977)

 Loans to finance residential or commercial construction for sale Small
Business Energy Loan Act, P. L. No. 95- 315, 92 Stat. 377 (1978)

 Loans to enable small business concerns to design, engineer, manufacture,
distribute, market, install, or service certain energy measures Small
Business Act and Small Business Investment Act Amendments of 1978, P. L. No.
95- 507, 92 Stat. 1757 (1978)

 Governmentwide procurement goals Small Business Act Amendment, P. L. No.
95- 510, 92 Stat. 1780 (1978)

 Service Corps of Retired Executives transferred to SBA Small Business
Administration Authorizations, P. L. No. 96- 302, 94 Stat. 833 (1980)

 External economic database

 Preferred Lenders Program

 Loan guarantees for qualified employee trusts

 State of Small Business report

 Small Business Development Centers

 Development company debentures Small Business Export Expansion Act of
1980, P. L. No. 96- 481, 94 Stat. 2321 (1980)

 Office of International Trade Small Business Innovation Development Act of
1982, P. L. No. 97- 219, 96 Stat. 217 (1982)

 Small Business Innovation Research program Small Business Secondary Market
Improvements Act of 1984, P. L. No. 98- 352, 98 Stat. 329 (1984)

 Secondary market for sale of guaranteed loans Small Business Computer
Security and Education Act of 1984, P. L. No. 98- 362, 98 Stat. 431 (1984)

 Cosponsorship authority Continuing Appropriations, 1985, P. L. No. 98-
473, 98 Stat. 1837 (1984)

 Disaster loans for small businesses affected by El- Nino- related ocean
conditions Omnibus Trade and Competitiveness Act of 1988, P. L. No. 100-
418, 102 Stat. 1107 (1988)

 Guaranteed loans for small business concerns engaged in or adversely
affected by international trade Women?s Business Ownership Act of 1988, P.
L. No. 100- 533, 102 Stat. 2689 (1988)

 Certified Lenders Program

 National Women?s Business Council Small Business Administration
Reauthorization and Amendment Act of 1988, P. L. No. 100- 590, 102 Stat.
2989 (1988)

 Deferred participation loans for pollution control facilities

 Preferred surety bond guarantee program Business Opportunity Development
Reform Act of 1988, P. L. No. 100- 656, 102 Stat. 3853 (1988)

 Guaranteed loans to 8( a) participants

 Small Business Competitiveness Demonstration Program Departments of
Commerce, Justice, State, the Judiciary, and Related Agencies Appropriations
Act, 1991, P. L. No. 101- 515, 104 Stat. 2101 (1990)

 Tree Planting Program

 Central European Enterprise Development Commission

Appendix I: Legislatively Mandated Programs and Offices in SBA

Appendix I: Legislatively Mandated Programs and Offices in SBA

Page 24 GAO- 02- 17 Small Business Administration

Public law Program/ office established

SBA Reauthorization and Amendments Act of 1990, P. L. No. 101- 574, 104
Stat. 2814 (1990).

 Small Business Technology Transfer demonstration program

 Pilot Technology Access Program

 Office of Rural Affairs

 Pilot Rural Development Loan Program

 Tourism demonstration program

 Expanded duties of SBDCs to include assisting rural small business White
House Conference on Small Business Authorization Act, P. L. No. 101- 409,
104 Stat. 885 (1990).

 Planning and administration of conferences at state and local levels
Appropriations for Departments of Commerce, State and the Judiciary and
related agencies for 1992, P. L. No. 102- 140, 105 Stat. 782 (1992).

 Pilot technology access program expanded to Small Business Development
Centers

 Microloan demonstration program Women?s Business Development Act of 1991,
P. L. No. 102- 191, 105 Stat. 1589 (1991).

 Women?s demonstration projects program Small Business Credit and Business
Opportunity Enhancement Act of 1992 P. L. No. 102- 366, 106 Stat. 986
(1992).

 Defense economic transition assistance program under 7( a)

 Transfers examination of Small Business Investment Companies from
Inspector General to Investment Division

 Extended Small Business Development Center Program to include helping
small businesses affected by base closings Small Business Research and
Development Enhancement Act of 1992, P. L. No. 102- 564, 106 Stat. 4249
(1992).

 Small Business Technology Transfer pilot program

 Small Business Innovation Research program expanded Small Business
Administration Reauthorization and Amendments Act of 1994, P. L. No. 103-
403, 108 Stat. 4175 (1994).

 Export working capital financing

 Accredited Lenders Program

 Premier Certified Lenders pilot program

 Pilot program for very small business concerns

 Mobile Resource Center pilot program

 Office of Women?s Business Ownership

 Prepayment of development company debentures

 Deferred participation loan pilot of Microloan program Small Business
Regulatory Enforcement Fairness Act of 1996, P. L. No. 104- 121, 110 Stat.
857 (1996).

 Oversight of regulatory enforcement Small Business Programs Improvement
Act of 1996, P. L. No. 104- 208, 110 Stat. 3009- 725 (1997).

 Risk management database

 Preferred lender standard review program

 Private sector disaster loan servicing demonstration program

 Loan liquidation pilot program for development companies Small Business
Reauthorization Act of 1997, P. L. No. 105- 135, 111 Stat. 2592 (1997).

 Welfare- to- work microloan initiative

 Criminal background checks on loan applicants

 Women?s Business Centers

 SBA review of bundled contracts

 Small Business Technology Transfer outreach program

 Service disabled veterans program

 Trade assistance for small business concerns adversely affected by NAFTA

 Small business export promotion

 HUBZone program

 Defense Loan and Technical Assistance Program Department of Transportation
and Related Agencies Appropriations Act, 1999, P. L. No. 105- 277, 112 Stat.
2681 (1999).

 Drug- free Workplace demonstration program Small Business Year 2000
Readiness Act, P. L. No. 106- 8, 113 Stat. 13 (1999).

 Year 2000 Computer Problem program

Appendix I: Legislatively Mandated Programs and Offices in SBA

Page 25 GAO- 02- 17 Small Business Administration

Public law Program/ office established

A bill to authorize the establishment of a disaster mitigation pilot program
in the Small Business Administration, P. L. No. 106- 24, 113 Stat. 39
(1999).

 Disaster Mitigation pilot program Veteran?s Entrepreneurship and Small
Business Development Act of 1999, P. L. No. 106- 50, 113 Stat. 233 (1999).

 Office of Veterans Business Development

 Repayment deferral for active duty reservists

 Disaster assistance for military reservists? small businesses

 Entrepreneurial assistance to veterans and active duty reservists Program
for Investment in Microenterprises Act of 1999, P. L. No. 106- 102, 113
Stat. 1471 (1999).

 Program for Investment in Microentrepreneurs Women?s Business Center
Sustainability Act of 1999, P. L. No. 106- 165, 113 Stat. 1795 (1999).

 Women?s business centers sustainability pilot program Appropriations for
the Departments of Labor, Health and Human Services, Education and related
agencies, 2001, P. L. No. 106- 554, 114 Stat. 2763A- 653 (2000).

 New Markets Venture Capital Program

Appendix II: Legislatively Mandated Staff Positions at SBA

Page 26 GAO- 02- 17 Small Business Administration

The following list shows legislatively mandated staff positions at SBA: 
Section 4( b)( 1) of the Small Business Act establishes that the management

of SBA is vested in an administrator who is appointed by the President and
confirmed by the Senate. The President also may appoint a deputy
administrator who is to serve in the event of the administrator?s absence or
disability.  Section 21( h) of the act provides that the administrator
shall appoint an

associate Administrator for Small Business Development Centers who is to
report to an official who is not more than one level below the Office of the
Administrator.  Section 26( a) of the act provides for a director of the
Office of Rural

Affairs.  Section 29( g) of the act provides for an assistant administrator
for the

Office of Women?s Business Ownership to be appointed by the administrator.
This position is a Senior Executive Service position. The assistant
administrator for Women?s Business Centers is a noncareer appointee. 
Section 30( b) of the act requires that the administrator appoint a Small

Business and Agriculture Regulatory Enforcement Ombudsman, who is to report
directly to the administrator.  Section 32( b) of the act provides for an
associate administrator for

Veterans Business Development, who is to be an appointee in the Senior
Executive Service and is to report to and be directly responsible to the
administrator.  Section 201 of the Small Business Investment Act provides
for an associate

administrator for the Small Business Investment Division. The associate
administrator is appointed by the administrator and is compensated at the
rate provided by law for other associate administrators.  Sections 4, 7(
j)( 10), and 8( a)( 8) of the act provide for the associate

administrator for Minority Small Business and Capital Ownership Development
to manage the small business and capital ownership development program. The
associate administrator is to be responsible to and report to the
administrator and is to be a career appointee in the Senior Executive
Service.  Section 7( j)( 11)( E) establishes a Division of Program
Certification and

Eligibility as part of the Office of Minority Small Business and Capital
Ownership Development to be headed by a director who is to report directly
to the associate administrator for Small Business and Capital Ownership
Development.  15 U. S. C. 634a provides for a Chief Counsel for Advocacy.
Appendix II: Legislatively Mandated Staff

Positions at SBA

Appendix III: SBA Field Locations Visited Page 27 GAO- 02- 17 Small Business
Administration

Washington, D. C. Miami, FL Kansas City, MO Cedar Rapids, IA Minneapolis, MN
San Francisco, CA Los Angeles, CA Fresno, CA Sacramento, CA

Kansas City Regional Office Kansas City Preferred Lenders Program Review
Branch Sacramento Low Doc Processing Center Sacramento Preferred Lenders
Program Processing Center Fresno Loan Servicing Center Sacramento Disaster
Area Office Minneapolis United States Export Assistance Center Minneapolis
Business Information Center Appendix III: SBA Field Locations Visited

District Offices Regional Offices Other Field Locations

Page 28 GAO- 02- 17 Small Business Administration

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

(250037)

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