Small Business Administration: Preliminary Views on Issues	 
Related to the Women's Business Center Program (20-SEP-07,	 
GAO-07-1244T).							 
                                                                 
The Small Business Administration (SBA) provides training and	 
counseling services to women entrepreneurs through the Women's	 
Business Center (WBC) program. With approximately $12 million in 
fiscal year 2007, SBA funded awards to 99 WBCs. However, Congress
and WBCs have expressed concerns about the uncertain nature of	 
the program's funding structure. Concerns have also been raised  
about the possibility that the WBC and two other SBA programs,	 
the Small Business Development Center (SBDC) and SCORE programs, 
are duplicating each other's efforts. This testimony discusses	 
preliminary views on (1) uncertainties associated with the	 
funding process for WBCs; (2) SBA's oversight of the WBC program;
and (3) actions that SBA and WBCs have taken to avoid duplication
among the WBC, SBDC, and SCORE programs. GAO reviewed policies,  
procedures, examinations, and studies related to the funding,	 
oversight, and services of WBCs and interviewed SBA, WBC, SBDC,  
and SCORE officials.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-1244T					        
    ACCNO:   A76508						        
  TITLE:     Small Business Administration: Preliminary Views on      
Issues Related to the Women's Business Center Program		 
     DATE:   09/20/2007 
  SUBJECT:   Discretionary grants				 
	     Federal funds					 
	     Financial management				 
	     Fund audits					 
	     Program evaluation 				 
	     Program management 				 
	     Small business					 
	     Small business assistance				 
	     Strategic planning 				 
	     Women						 
	     Women-owned businesses				 
	     SBA Service Corps of Retired Executives		 
	     Program						 
                                                                 
	     SBA Small Business Development Center		 
	     Program						 
                                                                 
	     SBA Women's Business Center Program		 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** 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-07-1244T

   

     * [1]d071244T.doc

          * [2]In summary:
          * [3]Background
          * [4]Recent Legislation Addresses Some Concerns about the WBC Pro
          * [5]Imbalances in SBA's Staff Resources and Ineffective Communic
          * [6]WBCs Make Some Efforts to Coordinate with SBDCs and SCORE bu
          * [7]GAO Contact and Acknowledgements
          * [8]GAO's Mission
          * [9]Obtaining Copies of GAO Reports and Testimony

               * [10]Order by Mail or Phone

          * [11]To Report Fraud, Waste, and Abuse in Federal Programs
          * [12]Congressional Relations
          * [13]Public Affairs

     * [14]PDF6-Ordering Information.pdf

          * [15]Order by Mail or Phone

Testimony

Before the Committee on Small Business and Entrepreneurship, U.S. Senate

United States Government Accountability Office

GAO

For Release on Delivery
Expected at 10:00 a.m. EDT
Thursday, September 20, 2007

SMALL BUSINESS ADMINISTRATION

Preliminary Views on Issues Related to the Women's Business Center Program

Statement of William B. Shear, Director
Financial Markets and Community Investments

GAO-07-1244T

Mr. Chairman and Members of the Committee:

I am pleased to have the opportunity to be here today to discuss the
Women's Business Center (WBC) Program. The WBC program, one of several
business assistance programs offered by the Small Business Administration
(SBA), provides long-term training, counseling, networking, and mentoring
to women entrepreneurs, especially those who are socially and economically
disadvantaged. With a budget of approximately $12 million in fiscal year
2007, SBA funded awards to 99 WBCs in amounts ranging from $90,000 to
$150,000. However, Congress and WBCs under the program have expressed
concerns about whether WBCs can continue operations without SBA funding
and about the uncertain funding structure of the program. The 5-year
funding cycle for regular awards, which many believed did not offer WBCs
enough time to become self-sustaining, was later supplemented by a pilot
program that provided for an additional 5-year funding cycle for
sustainability awards. But this program too raised concerns because of
uncertainty about its reauthorization and funding.^1 In May 2007, to
address the uncertainties about the pilot program, Congress replaced it by
allowing WBCs--including those that had graduated from the program--to
receive 3-year renewable awards.^2

As you know, Congress created the WBC program in part due to the finding
that existing business assistance programs for small business owners were
not considered adequate to address women's needs, but concerns have also
been raised about whether SBA's business assistance programs are
duplicating each other's efforts. The two other primary business
assistance programs that SBA administers are the Small Business
Development Center (SBDC) and SCORE (formerly called the Service Corps of
Retired Executives) programs. These programs also provide training and
counseling services to aspiring and existing small business owners but are
not expected to target a particular group. Under the terms of the SBA
award, WBCs are required to coordinate with local SBDCs and SCORE chapters
when appropriate.

^1The Women's Business Ownership Act of 1988, Pub. L. No. 100-533, S 201,
102 Stat. 2689, 2690 (1988), creating the Women's Business Center program
with demonstration projects that would expire in 1991; the Women's
Business Development Act of 1991, Pub. L. No. 102-191, S 2, 105 Stat. 1589
(1991), made them 3-year projects. In the Small Business Reauthorization
Act of 1997, Pub. L. No. 105-135, S 308, 111 Stat. 2592, 2611 (1997), the
projects were extended to five years. The Women's Business Centers
Sustainability Act of 1999, Pub. L. No. 106-165, S 4, 113 Stat. 1795, 1796
(1999), created 5-year sustainability pilot projects awarded to WBCs who
had completed the first 5-year project.

^2The U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq
Accountability Appropriations Act, 2007, Pub. L. No. 110-28, S 8305, 121
Stat. 112, 209 (2007), amends the Small Business Act to repeal the
sustainability pilot program and to permit WBCs to receive SBA funding on
a continual basis. WBCs currently in the program and those that have
successfully graduated will be eligible to apply for continuous award
funding through 3-year renewable awards of up to $150,000 per year.

In my testimony, I will discuss our preliminary views on these and related
issues affecting the WBC program. My testimony addresses (1) the
uncertainties associated with the funding process for WBCs; (2) SBA's
oversight of the WBC program, including policies and procedures for
monitoring compliance with program requirements; and (3) the services that
WBCs provide to small businesses and actions that SBA and WBCs have taken
to avoid duplication of the services offered by the WBC, SBDC, and SCORE
programs. My remarks are based on our ongoing work, which is exploring
these issues in more detail.

In conducting this work, we reviewed the legislative history of the WBC
program, GAO's previous reports, SBA's policies and procedures for
administering the program, and studies of the program conducted by SBA and
external organizations. For the seven WBCs we visited, we reviewed
documentation SBA uses to oversee WBCs and interviewed WBC officials about
their services, relationship with SBA, and coordination with SBDCs and
SCORE. We also interviewed SBA officials about the WBC, SBDC, and SCORE
programs. In addition, we compared the statutory authority for the 3
programs, interviewed a random sample of 17 WBCs about their services,
relationship with SBA, and coordination with SBDCs and SCORE, and visited
6 SBDCs and the SCORE national office. We discussed the contents of this
testimony with SBA. We conducted our work between August 2006 and
September 2007 in accordance with generally accepted government auditing
standards.

In summary:

           o Until 2007, WBCs were funded on a temporary basis for up to 10
           years at which time it was expected that the centers would become
           self-sustaining. When the program was created by Congress in 1988,
           it began as a demonstration project and then in 1991 Congress
           authorized 3-year projects. In 1997, SBA was authorized to make
           annual regular awards to WBCs for up to 5 years. Because of
           concerns that WBCs could not sustain operations without continued
           SBA funding, in 1999 Congress created a pilot program to extend
           funding an additional 5 years, allowing successful WBCs to receive
           SBA funding for a total of 10 years. However, WBCs continued to
           face funding uncertainties. First, because WBCs sometimes
           established their operations with SBA funds and depended on SBA
           funds to leverage other support, many were concerned about whether
           they could continue operations after 5 to 10 years of receiving
           SBA funding. Second, the sustainability funding was a pilot
           program that had to be reauthorized each year, creating
           uncertainty about whether there was a commitment to continue the
           program. Also, in 2007 the Office of Management and Budget (OMB)
           reported in its Program Assessment Rating Tool (PART), that
           frequent changes by Congress in the WBC program's funding
           structure, delays in extending sustainability funding, and
           uncertainty about the future had created challenges for the
           program.^3 Recent legislation for the WBC program replaced the
           sustainability pilot program with 3-year renewable awards. WBCs
           that have "graduated" from the program after 10 years as well as
           those currently in the regular and pilot sustainability programs
           will be able to compete for the new awards, which could increase
           competition. In addition, exactly how much funding will be
           available in each future 3-year cycle is unclear. But the
           increased competition also provides an opportunity for SBA to
           continue funding high performing centers. Because the WBC program
           is a competitive discretionary award program, WBCs in the program
           compete annually for the maximum award amount but continue to
           receive SBA funds for the length of the project as long as their
           performance is satisfactory. SBA has criteria for ranking new
           applicants and existing program participants for awards and is
           revising its award process to incorporate the new program changes.

           o SBA has developed written procedures for monitoring the
           performance and financial management activities of WBCs, but
           imbalances in its allocation of staff resources and ineffective
           communication may be limiting assurances that WBCs are in
           compliance and meeting the program's goals. To ensure that WBCs
           are meeting program requirements, SBA conducts semi-annual
           programmatic and financial examinations and requires that WBCs
           submit quarterly reports describing their progress in meeting
           annual performance goals and financial reports showing program
           expenses that qualify for SBA reimbursement. To carry out these
           oversight responsibilities, SBA relies extensively on district
           office technical representatives (DOTRs), but the current
           allocation of responsibilities for oversight may not be effective,
           given the staff levels and expertise in SBA's district offices.
           First, there are concerns that DOTRs may have too many
           responsibilities to be effective. Those we met with all performed
           other full-time agency responsibilities in addition to overseeing
           WBCs in their districts. Second, DOTRs conduct the programmatic
           and financial examinations for SBA, but there have been some
           questions about whether DOTRs have the expertise to conduct the
           financial component. Third, though most WBCs we interviewed spoke
           positively of their relationship with their DOTR, several told us
           that the reduction in district office staffing related to SBA's
           downsizing in recent years had led to staff changes. As a result,
           there are concerns that some of the newer DOTRs might not have
           relevant oversight experience. SBA has taken some steps to adjust
           its oversight procedures to adapt to the changes in staffing in
           the district offices, but DOTRs continue to have a wide range of
           responsibilities that they may not be equipped to carry out
           effectively. In addition some WBCs told us that communication with
           SBA headquarters officials was not meeting all of their needs and
           one study we reviewed reported that 54 percent of 52 WBCs surveyed
           said that SBA could improve its communication with the centers. To
           communicate with WBCs, the Office of Women's Business Ownership
           (OWBO) conducts monthly conference calls with WBCs and DOTRs and
           uses email to communicate policy changes and to request
           information. Some WBCs cited problems with these efforts. For
           example, some WBCs said that the conference calls were not a
           comfortable forum for asking questions, and that some of the email
           communications were confusing and did not always explain why
           information was being requested. Also, some WBCs said that SBA did
           not provide sufficient feedback on their performance.

^3OMB, Program Assessment: Women's Business Centers, http://www.
expectmore.gov (accessed February, 6, 2007).

           o We found that the WBCs we spoke with focused on a different type
           of client than the SBDCs and SCORE chapters in their areas.
           Consistent with the WBC program's statutory authority and SBA
           requirements, WBCs tailor services to meet the needs of
           economically and socially disadvantaged women. SBA's study of WBCs
           showed that they tended to serve clients with businesses that had
           fewer employees and lower revenues than clients of SBDCs and
           SCORE. As described by the terms of the SBA award, WBCs are
           required to coordinate with local SBDCs and SCORE chapters. In
           addition, SBA officials told us that they expected district
           offices to ensure that the programs did not duplicate each other.
           However, based on our review, WBCs appear to lack guidance and
           information from SBA on how to successfully carry out their
           coordination efforts. Most of the WBCs that we spoke with
           explained that in some situations they referred clients to an SBDC
           or SCORE counselor, and some WBCs also took steps to more actively
           coordinate with local SBDCs and SCORE chapters to avoid
           duplication and leverage resources. We learned that WBCs used a
           variety of approaches to facilitate coordination, such as
           memorandums of understanding, information-sharing meetings, and
           co-locating staff and services. However, some WBCs expressed
           concerns related to coordinating services with SBDC and SCORE.
           Some WBCs told us that coordinating services could be difficult
           because the programs are each measured by the number of clients
           they serve, resulting in competition among the service providers
           in some locations. Other WBCs told us that they were unsure how
           they could effectively co-locate with an SBDC. Such concerns
           thwart coordination efforts and could increase the risk of
           duplication in some geographic areas.

Background

The WBC program is administered through the Office of Women's Business
Ownership (OWBO) in SBA's Office of Entrepreneurial Development (OED). The
program was established by the Women's Business Ownership Act of 1988 to
provide long-term training, counseling, networking, and mentoring to women
who own businesses or are potential entrepreneurs after Congress found
that existing business assistance programs for small business owners were
not addressing women's needs. The program's goal is to add more
well-trained women entrepreneurs to the U.S. business community and to
specifically target services to women who are socially and economically
disadvantaged. In fiscal year 2007, SBA funded 99 WBCs throughout the
United States and its territories.

Private nonprofit organizations are eligible to apply for funds to set up
WBCs, and successful applicants are initially awarded cooperative
agreements for a maximum of 5 years. WBCs must raise matching funds from
nonfederal sources such as state and local public funds, private
individuals, corporations and foundations, and program income derived from
WBC services.^4 In the first 2 years of the 5-year award, each WBC is
required to match SBA award funding at one nonfederal dollar for each two
federal dollars. In the last 3 years, the match is one nonfederal dollar
for each federal dollar. WBC award amounts cannot exceed $150,000 each
fiscal year per recipient. Award amounts may vary depending upon a WBC's
location, staff size, project objectives, performance, and agency
priorities.

WBC funding is performance-based, and each additional 12-month budget
period beyond the initial award may be exercised at SBA's discretion.
Among the factors involved in deciding whether to exercise an option for
continued funding are the availability of funds, the extent to which past
WBC funds were spent, and satisfactory performance against SBA-established
performance measures, including the number of clients served and the
number of jobs created. WBCs are required to provide this performance data
to SBA in quarterly reports.

^4When permissible under the terms of the Community Development Block
Grant (CDBG) program, CDBG funds may also be used to match a WBC award.

In the Women's Business Centers Sustainability Act of 1999, Congress
established the sustainability pilot program because of concerns that WBCs
could not become self-sustaining in 5 years and needed continued SBA
funding. Under the sustainability pilot program, WBCs that had been
receiving funding for 5 years could receive sustainability awards for an
additional 5 years. Criteria for receiving awards under the pilot program
were similar to those for receiving the initial awards. WBCs were assessed
on their record of performance and had to provide nonfederal matching
funds equal to one dollar for each federal dollar. Unlike the WBC regular
award, WBC sustainability award amounts could not exceed $125,000 each
budget year per recipient. As noted earlier, Congress recently replaced
these sustainability awards with 3-year renewable awards of not more than
$150,000 each year per recipient. SBA has not yet begun making these new
awards.

In addition to the WBC program, SBA's SBDC and SCORE programs also provide
training and counseling services to small business clients. The SBDC
program was created by Congress in 1980. SBDC services include, but are
not limited to, assisting prospective and existing small businesses with
financial, marketing, production, organization, engineering, and technical
problems and feasibility studies. Each state and U.S. territory has a lead
organization that sponsors and manages the SBDC program. The lead
organization coordinates program services offered to small businesses
through a network of centers and satellite locations in each state that
are located at colleges, universities, community colleges, vocational
schools, chambers of commerce and economic development corporations. In
fiscal year 2007, the SBDC program received $87 million to make awards to
63 lead SBDCs throughout the United States.^5

The SCORE program was founded in 1964 as a nonprofit organization. Under
the Small Business Act, as amended, SCORE is sponsored by and may receive
appropriations through SBA. The SCORE program is designed to provide free
expert advice to prospective and existing small businesses in all aspects
of business formation, advancement, and problem solving. SCORE counselors
are volunteers who assist clients through a Web site, SCORE chapter
offices, SBA district offices, and other establishments. In fiscal year
2007, the SCORE program received $5 million to support its activities and
currently has 389 chapters throughout the United States.

^5The 63 lead centers include one in every state (Texas has four and
California six), the District of Columbia, Guam, Puerto Rico, Samoa and
the U.S. Virgin Islands.

Recent Legislation Addresses Some Concerns about the WBC Program's Funding

Recent legislation addresses concerns about long-term funding for WBCs,
but prior to this legislation, the funding structure had been in flux
since the program's inception in 1988. In establishing the WBC program in
1988, Congress authorized SBA to help private nonprofit organizations
conduct projects that benefit small business concerns owned and controlled
by women. The 1988 act allowed for demonstration projects that terminated
in 1991. However, in 1991, Congress authorized SBA to make awards for
3-year projects, and in 1997 Congress authorized SBA to make awards to
WBCs for 5-year projects. In its 1999 reauthorization of the WBC program,
as noted earlier, Congress added 5-year sustainability funding for WBCs
that successfully completed 5-year projects to provide additional time for
the centers to become self-sustaining. Because the WBC program is a
competitive discretionary award program, WBCs in the program compete
annually for the maximum award amount but continue to receive SBA funds as
long as their performance is satisfactory.

WBCs that we spoke with identified two related factors that have largely
been responsible for their funding uncertainties. First, because until
recently the WBC program offered limited-term funding--in contrast to the
SBDC and SCORE programs, which receive continuous funding--WBCs
"graduated" from SBA support after 5 or 10 years. Several WBCs that we
spoke with expressed concern about the funding term limits and pointed out
that the SBDC and SCORE programs do not have the same limits, even though
SBA also administers those programs. Some WBCs in both the regular and
sustainability programs also said that they were concerned about their
ability to continue operations after losing SBA support. Second, Congress
did not make the additional 5-year term for sustainability funding
permanent. Instead, Congress extended the pilot program with each SBA
reauthorization, creating uncertainty that limited SBA's ability to manage
the program effectively and causing concern among the WBCs themselves.
Several WBCs said that they were concerned that sustainability funding was
not a permanent aspect of the WBC program.

Several of the WBCs that we spoke with said that funding uncertainties
made it difficult to establish an annual program budget with performance
goals. Each year, SBA requires that WBCs participating in its program
submit project-year proposals with performance goals in anticipation of an
award. WBCs are not guaranteed funding each year because SBA makes awards
each year at its discretion. Also, because the program is competitive and
performance based, WBCs may receive varying award amounts each year. As
noted, WBCs in the regular program can receive annual awards up to
$150,000, and those in the sustainability program can receive annual
awards up to $125,000.

OMB's 2007 PART report found that frequent changes by Congress in the WBC
program's funding structure, delays in extending sustainability funding,
and uncertainty about the future had created challenges for the program.^6
OMB's report also noted that SBA had taken steps to foster more consistent
management of the WBC program but added that long-term planning was
problematic because of the program's funding structure. When we spoke with
officials at OMB, they emphasized that SBA appeared to be making a
significant effort to assist WBCs, given the program's limitations. They
also noted that the funding challenges that WBCs faced after graduating
from the sustainability pilot could be related to the fact that these
organizations operate resource-intensive programs and collect nominal
revenues in program fees, largely because of their focus on economically
disadvantaged clients, causing them to rely heavily on external support.

Our preliminary review indicates that WBCs that perform satisfactorily
continue to receive funds until they complete the program, and SBA
indicates that it will fund WBCs through the project term, subject to
availability of funds. But SBA officials in headquarters and the district
offices were aware of the challenges WBCs faced in planning annual budgets
without knowing how much they would receive or whether sustainability
funds would continue to be available. In discussing the WBC program's
limited term funding, some SBA district office officials emphasized that
the agency had invested in creating successful WBCs and should be working
to make those that performed well permanent SBA partners.

^6OMB, Program Assessment: Women's Business Centers, http://www.
expectmore.gov (accessed, February 6, 2007).

Recent legislation for the WBC program replaces the sustainability pilot
program with 3-year renewable awards, providing an opportunity for SBA to
continue funding WBCs. Current program participants and those that have
successfully graduated will be eligible to apply for continuous funding
through these awards. The award process will remain competitive and the
number of organizations competing could increase while SBA's annual budget
for the WBC program may not increase beyond the approximate $12 million
provided in the last 5 years. However, increased award competition
provides an opportunity for SBA to continue funding high-performing
centers. Prior to the new program changes, SBA officials emphasized that
the WBC program is the agency's only performance based program and said
that they believed this provided an incentive for WBCs to continuously
improve. SBA officials told us that by the end of fiscal year 2007, 26
WBCs would have graduated since the beginning of the program. SBA has
criteria for ranking new award applicants and performance-based criteria
for placing existing program participants into three funding categories
for annual awards. As a result of the new legislation, which allows
graduated WBCs to re-enter the pool of applicants for continuous funding
and which changes the existing 5-year sustainability project terms going
forward, SBA has begun revising its existing award process. SBA just
completed making WBC awards for fiscal year 2007 to fund activities in
fiscal year 2008, and SBA officials told us that they plan to begin
providing the 3-year renewable awards in fiscal year 2008.

Imbalances in SBA's Staff Resources and Ineffective Communication with WBCs
Could Reduce the Effectiveness of Oversight Procedures

Our preliminary review found that SBA had developed written procedures for
monitoring the performance and financial management activities of WBCs and
has taken steps to measure the WBC program's effectiveness. Since 1997, as
a condition of continued funding, SBA has been required to assess WBCs'
performance at least annually through programmatic and financial
examinations.^7 SBA also requires that WBCs submit performance and
financial reports quarterly to describe their progress in meeting annual
performance goals and to detail program expenses that qualify for SBA
reimbursement. Some of the performance data that SBA collects from WBCs
are reported in the agency's annual performance reports through several
output and outcome measures that are meant to evaluate the WBC program's
performance and effectiveness. As part of a broader impact assessment of
its business assistance programs, in 2004, SBA initiated a 3-year
longitudinal study of the WBC program, surveying clients served by WBCs
nationwide.

^7Small Business Reauthorization Act of 1997, Pub. L. No. 105-135, Section
S 308(a), 111 Stat. 2592, 2611 (1997); see also 15 U.S.C. Section S
656(h).

SBA relies heavily on District Office Technical Representatives (DOTRs) to
carry out oversight responsibilities, but our preliminary review suggests
that the downsizing of SBA's staffing may have created challenges for
DOTRs in fulfilling their assigned responsibilities. District directors
currently assign the role of DOTR as a collateral duty to district office
staff. In 2001, we reported that DOTRs had been given an increased role in
assessing WBCs' performance to ensure that the programs were fiscally
sound and functioning smoothly. To this end, we reported that DOTRs were
receiving intensive training each year at the postaward conference at SBA
headquarters on how to monitor the WBCs' programmatic and financial
activities. DOTRs are expected to conduct the WBC's programmatic and
financial examinations semiannually, but also have other program duties
and full-time agency responsibilities. SBA has a list of 23
responsibilities for DOTRs, some of which involve oversight, including (1)
reviewing the WBC's requests for project revisions, (2) determining the
extent to which the WBC is meeting the match requirement, (3) reviewing
the scope and quality of services provided to clients, (4) reviewing all
WBC signage and media, and (5) helping to resolve problems. DOTRs are also
expected to act as advocates for the WBCs within their district. Some of
the DOTRs' responsibilities related to this role include (1) ensuring that
the district office displays and distributes WBC brochures; (2) collecting
success stories from WBCs to be used for publicizing the program; and (3)
including WBCs in district office conferences, workshops, and other events
for women business owners.

The DOTRs' total responsibilities for the WBC program appear to be
substantial, particularly since this oversight is a collateral role. Given
SBA's downsizing in recent years, some DOTRs may have more
responsibilities than they had in the past to perform their WBC program
duties effectively, and others new to the role may lack the necessary
experience and training. Although most WBCs we interviewed spoke
positively of their relationship with their DOTR, several told us that the
reduction in district office staffing had led to changes, including
assigning DOTR responsibilities to a different district office staff
member. DOTRs still attend required training for the WBC program annually
at SBA headquarters, and SBA provides them with a handbook to assist them
in performing their duties. However, district office staff at one location
felt that DOTRs were not adequately trained to conduct the financial
component of WBC programmatic and financial examinations and told us that
SBA headquarters had previously coordinated financial examinations for
WBCs.^8 When we followed up with OWBO officials, they said that in 2004 a
requirement was added that WBCs' financial records be certified annually
by a certified public accountant (CPA), both because the agency recognized
that some DOTRs lacked this expertise and because of isolated incidents of
mismanagement of WBC award funds. OWBO officials also said that they were
coordinating with SBA's Office of SBDCs, which is also under OED, to use
SBDC financial examiners for these onsite financial reviews of WBCs but
added that recently there had not been enough staff to do all of the
reviews. The officials also said that OED was reviewing how future
financial audits for all of SBA's business assistance programs would be
conducted.

Our preliminary review found that SBA had taken some steps to adapt
program oversight procedures to staffing changes in district offices. For
example, before January 2007 DOTRs conducted programmatic and financial
examinations four times a year, and SBA switched to semiannual
examinations to conserve its staff resources. In March 2007, SBA also
revised its reporting procedures for WBCs to streamline communication and
reduce review and processing times. For example, WBCs had previously
submitted quarterly financial reports with reimbursement requests through
the district office but now submit them directly to OWBO and copy the
district office. These and other revisions that SBA has made to date
appear to have been made on an as-needed basis and were not part of a
strategic process or plan to revise its oversight activities.

WBCs also cited concerns about communication with SBA. One study that we
reviewed reported that 54 percent of 52 WBCs surveyed said that SBA could
improve its communication with them.^9 OWBO, which administers the
program, conducts monthly conference calls with the WBCs and DOTRs, but
some WBCs said that the calls were not a good forum for asking questions
though the topics covered in the call may raise questions. OWBO also uses
email to communicate policy changes and make interim information requests,
but several WBCs said these communications often came without sufficient
explanation and mentioned areas in which policy changes or program
requirements were unclear. The study specifically noted that better
communication should include an effort to seek information from WBCs on
how SBA's frequent information requests and policy changes impacted WBC
operations. Some WBCs also told us that they were not sure how well they
were performing because they did not receive feedback on semi-annual
examinations or the reports they submitted quarterly to SBA. SBA officials
told us that they are aware of this concern and are taking steps to make
the performance-based funding process more transparent.

^8SBA headquarters still coordinates bi-annual financial audits for SBDCs.

^9Center for Women's Leadership at Babson College, "The Impact and
Influence of Women's Business Centers in the United States," April 2005.

WBCs Make Some Efforts to Coordinate with SBDCs and SCORE but Appear to Lack the
Guidance Needed to Improve These Efforts

Based on our preliminary review, we found that the WBCs we spoke with
focused on a different type of client than the SBDCs and SCORE chapters in
their areas, and several WBCs actively coordinated with the other programs
to avoid duplicating services. But based on our review to date, the
centers appear to lack guidance and information from SBA on how to
successfully coordinate. Consistent with the WBC program's statutory
authority and SBA requirements, WBCs tailor services to meet the needs of
economically and socially disadvantaged women. According to one academic
study and WBCs we reviewed, WBCs offered services emphasizing financial
literacy and more intensive long-term business plan training.^10 Through
our work, we also found that WBCs tended to serve smaller businesses with
fewer employees and lower revenues than SBDCs and SCORE. According to an
SBA study of WBCs, WBC clients had businesses with an average of 2.5
employees that produced average annual revenues of $63,694, while other
SBA business assistance programs served businesses with an average of 4.5
employees and $175,076 in annual revenue.^11

Most WBCs told us that they referred clients to the SBDCs and SCORE when
appropriate, and several coordinated services with the other programs to
leverage resources and avoid duplication. SBA officials told us that they
expected district offices to ensure that the programs did not duplicate
each other, and the program requirement suggests that WBCs can promote
coordination through co-sponsorship arrangements or memorandums of
understanding. However, SBA has not provided detailed guidance explaining
how WBCs could effectively coordinate with SBDC and SCORE. Lacking such
guidance, WBCs used a variety of approaches to facilitate coordination.
Some coordination efforts were initiated by local business assistance
providers, including WBCs, and involved a memorandum of understanding or
regularly scheduled meetings. For example, a WBC in Wisconsin coordinated
with SBDC, SCORE, and other small business service providers in the area
to develop a detailed triage system for small business clients in their
area. In order to better coordinate services, the WBC and other Wisconsin
business assistance providers developed a flow chart to help service
providers divide resources and determine where to refer customers. In some
cases, we found that the SBA district office was active in the
coordination effort and participated in regular meetings or organized
events that included all of the programs. Several WBCs were co-located
with an SBDC, allowing the two programs to benefit from shared office
space and other resources.

^10Center for Women's Leadership at Babson College, "The Impact and
Influence of Women's Business Centers in the United States," April 2005.

^11SBA, Office of Entrepreneurial Development, "Initial Impact Study of
Entrepreneurial Development Resources," November 29, 2004.

However, our preliminary review also found that some WBCs experienced
challenges in their attempts to coordinate services with SBDC and SCORE.
Some WBCs told us that coordinating services could be difficult. Several
WBCs told us that they had considered co-locating or sharing space with an
SBDC or SCORE chapter in order to reduce costs but feared that co-location
would inhibit the WBC's ability to maintain its identity and reach its
target client group of low-income women. WBCs and SBDCs are both measured
on the number of clients that participate in small business training and
counseling services, and one WBC told us that co-location would cause WBCs
to compete for clients. Also, in some instances SBA encouraged WBCs to
provide services similar to those that SBDCs were already providing to
small businesses. For example, one WBC told us that staff were encouraged
to develop a government procurement curriculum although an SBDC in their
area was already providing this service to small business clients. These
concerns and uncertainties thwart coordination efforts and could increase
the risk of service duplication in some geographic areas.

Mr. Chairman, this concludes my prepared statement. I would be pleased to
respond to any questions that you or other members of the Committee may
have.

GAO Contact and Acknowledgements

For additional information about this testimony, please contact William B.
Shear at (202) 512-8678 or [16][email protected] . Contact points for our
Offices of Congressional Affairs and Public Affairs may be found on the
last page of this statement. Individuals making key contributions to this
testimony include Kay Kuhlman, Assistant Director; Bernice Benta, Michelle
Bracy, Tania Calhoun, and Emily Chalmers.

(250369)

This is a work of the U.S. government and is not subject to copyright
protection in the United States. This published product may be reproduced
and distributed in its entirety without further permission from GAO.
However, because this work may contain copyrighted images or other
material, permission from the copyright holder may be necessary if you
wish to reproduce this material separately.

[17]www.gao.gov/cgi-bin/getrpt?GAO-07-1244T .

To view the full product, including the scope
and methodology, click on the link above.

For more information, contact William B. Shear at (202) 512-8678 or
[email protected].

Highlights of [18]GAO-07-1244T , a testimony before the Committee on Small
Business and Entrepreneurship, U.S. Senate

September 2007

SMALL BUSINESS ADMINISTRATION

Preliminary Views on Issues Related to the Women's Business Center Program

The Small Business Administration (SBA) provides training and counseling
services to women entrepreneurs through the Women's Business Center (WBC)
program. With approximately $12 million in fiscal year 2007, SBA funded
awards to 99 WBCs. However, Congress and WBCs have expressed concerns
about the uncertain nature of the program's funding structure. Concerns
have also been raised about the possibility that the WBC and two other SBA
programs, the Small Business Development Center (SBDC) and SCORE programs,
are duplicating each other's efforts.

This testimony discusses preliminary views on (1) uncertainties associated
with the funding process for WBCs; (2) SBA's oversight of the WBC program;
and (3) actions that SBA and WBCs have taken to avoid duplication among
the WBC, SBDC, and SCORE programs. GAO reviewed policies, procedures,
examinations, and studies related to the funding, oversight, and services
of WBCs and interviewed SBA, WBC, SBDC, and SCORE officials.

[19]What GAO Recommends

Because this testimony is based on an ongoing engagement, it does not
include recommendations. GAO anticipates making recommendations in its
final report.

Until 2007, WBCs were funded on a temporary basis for up to 10 years, at
which time it was expected that the centers would become self-sustaining.
Beginning in 1997, SBA made annual awards to WBCs for up to 5 years.
Because of concerns that WBCs could not sustain their operations without
continued SBA funding, in 1999, Congress created a pilot program to extend
funding an additional 5 years. Due to continued uncertainty about WBCs'
ability to sustain operations without SBA funding, in May 2007, Congress
passed legislation authorizing renewable 3-year awards to WBCs that
"graduated" from the program after 10 years, as well as to current program
participants. Like the current awards, the 3-year awards are competitive,
and more centers may be applying for limited dollars. SBA is currently
revising its award process to incorporate the new program changes.

Though SBA has oversight procedures in place to monitor WBCs' performance
and use of federal funds, staff shortages from the agency's downsizing and
limited communication may hinder SBA's oversight efforts. SBA relies
extensively on district office technical representatives (DOTRs) to
oversee WBCs, but these staff members also have other job responsibilities
and may not have the needed expertise to conduct some oversight
procedures. SBA provides annual training and has taken steps to adjust its
oversight procedures to adapt to staffing changes, but concerns remain.
Some WBCs also cited communication problems, and one study reported that
54 percent of 52 WBCs responding to the study's survey said that SBA could
improve its communication with the centers. For example, some WBCs told us
that SBA did not provide sufficient feedback on their performance.

Under the terms of the WBC award, the centers are required to coordinate
with local SBDCs and SCORE chapters. SBA officials told us that they
expected district offices to ensure that the programs did not duplicate
each other. However, based on our preliminary review, we found that SBA
provided limited guidance on how to successfully carry out coordination
efforts. Most of the WBCs that we spoke with explained that in some
situations they referred clients to an SBDC or SCORE counselor, and some
WBCs also took steps to more actively coordinate with local SBDCs and
SCORE chapters to avoid duplication and leverage resources. However, some
WBCs told us that coordinating services was difficult, as the programs
were each measured by the number of clients served and could end up
competing for clients. Such concerns thwart coordination efforts and could
increase the risk of duplication in some geographic areas.

GAO's Mission

The Government Accountability Office, the audit, evaluation, and
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 GAO Reports and Testimony

The fastest and easiest way to obtain copies of GAO documents at no cost
is through GAO's Web site ( [20]www.gao.gov ). Each weekday, GAO posts
newly released reports, testimony, and correspondence on its Web site. To
have GAO e-mail you a list of newly posted products every afternoon, go to
[21]www.gao.gov and select "E-mail Updates."

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. Government Accountability Office 441 G Street NW, Room LM Washington,
DC 20548

To order by Phone: Voice: (202) 512-6000
TDD: (202) 512-2537
Fax: (202) 512-6061

To Report Fraud, Waste, and Abuse in Federal Programs

Contact:

Web site: [22]www.gao.gov/fraudnet/fraudnet.htm
E-mail: [23][email protected]
Automated answering system: (800) 424-5454 or (202) 512-7470

Congressional Relations

Gloria Jarmon, Managing Director, [24][email protected] , (202) 512-4400
U.S. Government Accountability Office, 441 G Street NW, Room 7125
Washington, DC 20548

Public Affairs

Susan Becker, Acting Manager, [25][email protected] , (202) 512-4800 U.S.
Government Accountability Office, 441 G Street NW, Room 7149 Washington,
DC 20548

References

Visible links
  16. mailto:[email protected]
  17. fhttp://www.gao.gov/cgi-bin/getrpt?GAO-07-1244T
  18. fhttp://www.gao.gov/cgi-bin/getrpt?GAO-07-1244T
  20. fhttp://www.gao.gov/
  21. fhttp://www.gao.gov/
  22. fhttp://www.gao.gov/fraudnet/fraudnet.htm
  23. mailto:[email protected]
  24. mailto:[email protected]
  25. mailto:[email protected]
*** End of document. ***