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 			 

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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

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a

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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
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