    Loan Monitoring System: SBA Needs to Evaluate Use of Software
    (30-NOV-01, GAO-02-188).

    The Small Business Reauthorization Act of 1997 requires the Small
    Business Administration (SBA) to complete mandated planning
    activities before developing a loan monitoring system (LMS). In
    February 2000, GAO testified that SBA had made substantial
    progress in completing the mandated planning actions and made
    recommendations on additional steps needed for each action, and
    for project management and control of LMS. In August 2000, GAO
    found that SBA had completed its work on only one recommendation.
    SBA's actions to develop and implement LMS software were not
    consistent with the Small Business Reauthorization Act of 1997
    and SBA's agreement with the House Committee on Small Business
    not to acquire hardware or software before completing the
    mandated planning. These actions could result in significant
    project cost increases and delays.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-02-188
        ACCNO:   A02510
      TITLE:     Loan Monitoring System: SBA Needs to Evaluate Use of
    Software
         DATE:   11/30/2001
      SUBJECT:   Computer software
    	     Information resources management
    	     Loan accounting systems
    	     Strategic information systems planning
    	     Systems design
    	     SBA Loan Monitoring System

    ******************************************************************
    ** This file contains an ASCII representation of the text of a  **
    ** GAO Testimony.                                               **
    **                                                              **
    ** No attempt has been made to display graphic images, although **
    ** figure captions are reproduced.  Tables are included, but    **
    ** may not resemble those in the printed version.               **
    **                                                              **
    ** Please see the PDF (Portable Document Format) file, when     **
    ** available, for a complete electronic file of the printed     **
    ** document's contents.                                         **
    **                                                              **
    ******************************************************************
    GAO-02-188

    A

    Report to Congressional Requesters

    November 2001 LOAN MONITORING SYSTEM SBA Needs to Evaluate Use of Software

    GAO- 02- 188

    Letter 1 Recommendation for Executive Action 2 Agency Comments 2

    Appendixes

    Appendix I: GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System 4

    Appendix II: Comments From the U. S. Small Business Administration 20

    Abbreviations

    LMS loan monitoring system SBA Small Business Administration

    Lett er

    November 30, 2001 The Honorable Donald 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

    The Small Business Reauthorization Act of 1997 mandated planning activities
    that the Small Business Administration (SBA) is required to complete before
    it begins to develop a loan monitoring system (LMS). In February 2000, we
    testified that SBA had made substantial progress in completing the mandated
    planning actions, and we made recommendations on additional steps needed for
    each action and for project management and control of LMS. In August 2000,
    we briefed your staff that SBA had made progress in addressing our LMS-
    specific recommendations; however, SBA had completed its work on only one
    recommendation. As you requested, for our current review, we evaluated SBA?s
    actions to develop and implement software for LMS. To fulfill this
    objective, we collected and analyzed information and

    documentation on planning actions that SBA has taken for LMS. We conducted
    interviews with SBA officials on the processes and methodologies used for
    planning. We also interviewed SBA officials to identify changes in LMS
    planning. In addition, we analyzed contract documents and agency records
    concerning the development and

    implementation of software for LMS. We conducted our review at SBA
    headquarters in Washington, D. C., from April 2001 through September 2001,
    in accordance with generally accepted government auditing standards.

    On October 9, 2001, we provided a detailed briefing to your office on the
    results of this work, which is included in appendix I. The purpose of this
    letter is to provide the briefing slides to you and to officially transmit
    our recommendation to the Administrator, Small Business Administration.

    In summary, we reported that SBA?s actions to develop and implement LMS
    software were not consistent with the Small Business Reauthorization Act of
    1997 and SBA?s agreement with the House Committee on Small Business

    not to acquire hardware or software before completing the mandated planning.
    We concluded that these actions could result in significant project cost
    increases and delays. We made a specific recommendation to address these
    risks.

    Recommendation for We recommend that the Administrator direct the Chief
    Information Officer Executive Action

    to take the actions necessary to bring the LMS project in compliance with
    the Small Business Reauthorization Act and with SBA?s agreement with the
    House Committee on Small Business. Such actions should include an evaluation
    of prototype software and documentation in accordance with SBA?s system
    development methodology and generally accepted system development practices.
    The evaluation should consider the extent to which the software satisfies
    requirements already identified for the electronic processing of loan
    guarantee applications; the potential impact of changes in requirements, as
    business processes and requirements of lender oversight and risk management
    are identified; and the costs and benefits of alternative courses of action:
    whether the software should be (1) separated from LMS and implemented, (2)
    separated from LMS and further modified

    to meet mission needs, or (3) held in suspense until all LMS requirements
    and plans have been completed.

    Agency Comments In commenting on a draft of this report (see appendix II for
    written comments), the Administrator of the Small Business Administration
    stated

    that the agency agreed with the recommendation and that he had requested the
    Office of the Chief Information Officer to implement it.

    We are sending copies of this report to the Chairman, Senate Committee on
    Small Business and Entrepreneurship, and to the Ranking Minority Member,
    House Committee on Small Business. We are also sending copies

    of this report to the Director, Office of Management and Budget. Copies will
    also be made available to others upon request.

    Should you or your staff have any questions concerning this report, please
    contact me at (202) 512- 6240. I can also be reached by e- mail at koontzl@
    gao. gov. Key contributors to this assignment were Nabajyoti Barkakati,
    James R. Hamilton, E. Randolph Tekeley, and Daniel K. Wexler.

    Sincerely yours, Linda D. Koontz Director, Information Management Issues

    Appendi xes GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring

    Appendi x I System

    Comments From the U. S. Small Business

    Appendi x II

    Administration (310335) Lett er

    GAO?s Mission The General Accounting Office, the investigative arm of
    Congress, exists to support Congress in meeting its constitutional
    responsibilities and to help improve the performance and accountability of
    the federal government for the American people. GAO examines the use of
    public funds; evaluates federal programs and

    policies; and provides analyses, recommendations, and other assistance to
    help Congress make informed oversight, policy, and funding decisions. GAO?s
    commitment to good government is reflected in its core values of
    accountability, integrity, and reliability.

    Obtaining Copies of The fastest and easiest way to obtain copies of GAO
    documents is through the Internet. GAO?s Web site (www. gao. gov) contains
    abstracts and full- text files of GAO Reports and current reports and
    testimony and an expanding archive of older products. The Testimony Web site
    features a search engine to help you locate documents using key words and
    phrases. You can print these documents in their entirety, including charts
    and other graphics.

    Each day, GAO issues a list of newly released reports, testimony, and
    correspondence. GAO posts this list, known as ?Today?s Reports,? on its Web
    site daily. The list contains links to the full- text document files. To
    have GAO E- mail this list to you every afternoon, go to our home page and
    complete the easy- to- use electronic order form found under ?To Order GAO
    Products.?

    Order by Mail or Phone The first copy of each printed report is free.
    Additional copies are $2 each. A check or money order should be made out to
    the Superintendent of Documents. GAO also accepts VISA and Mastercard.
    Orders for 100 or more copies mailed to a single address are discounted 25
    percent. Orders should be sent to:

    U. S. General Accounting Office P. O. Box 37050 Washington, D. C. 20013

    To order by Phone: Voice: (202) 512- 6000 TDD: (301) 413- 0006 Fax: (202)
    258- 4066

    Visit GAO?s Document GAO Building Distribution Center Room 1100, 700 4th
    Street, NW (corner of 4th and G Streets, NW)

    Washington, D. C. 20013 To Report Fraud, Contact: Waste, and Abuse in

    Web site: www. gao. gov/ fraudnet/ fraudnet. htm, E- mail: fraudnet@ gao.
    gov, or

    Federal Programs 1- 800- 424- 5454 (automated answering system).

    Public Affairs Jeff Nelligan, Managing Director, NelliganJ@ gao. gov (202)
    512- 4800 U. S. General Accounting Office, 441 G. Street NW, Room 7149,
    Washington, D. C. 20548

    a

    GAO United States General Accounting Office

    Page i GAO- 02- 188 SBA Loan Monitoring System

    Contents

    Page 1 GAO- 02- 188 SBA Loan Monitoring System United States General
    Accounting Office

    Washington, D. C. 20548 Page 1 GAO- 02- 188 SBA Loan Monitoring System

    A

    Page 2 GAO- 02- 188 SBA Loan Monitoring System

    Page 3 GAO- 02- 188 SBA Loan Monitoring System

    Page 4 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 5 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 6 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 7 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 8 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 9 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 10 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 11 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 12 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 13 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 14 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 15 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 16 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 17 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 18 GAO- 02- 188 SBA Loan Monitoring System

    Appendix I GAO?s October 9, 2001, Briefing on Small Business
    Administration?s Loan Monitoring System

    Page 19 GAO- 02- 188 SBA Loan Monitoring System

    Page 20 GAO- 02- 188 SBA Loan Monitoring System

    Appendix II

    United States General Accounting Office Washington, D. C. 20548- 0001

    Official Business Penalty for Private Use $300

    Address Correction Requested Presorted Standard

    Postage & Fees Paid GAO Permit No. GI00
    *** End of document. ***