Results Act: Observations on the Small Business Administration's Draft
Strategic Plan (Correspondence, 07/11/97, GAO/RCED-97-205R).
Pursuant to a congressional request, GAO reviewed the Small Business
Administration's (SBA) draft strategic plan, focusing on: (1) whether it
fulfills the requirements of the Results Act, and GAO's views on its
overall quality; (2) whether it reflects SBA's key statutory
authorities; (3) whether it reflects interagency coordination for
crosscutting programs, activities, or functions that are similar or
complementary to other federal programs; (4) whether it addresses major
management problems that GAO has previously identified; and (5) the
adequacy of SBA's data and information systems for providing reliable
information for measuring results.
GAO noted that: (1) a significant amount of work remains to be done by
SBA before its draft strategic plan can fulfill the requirements of the
Results Act; (2) the plan lacks two required critical elements: (a) a
discussion of the relationship between the long-term goals and
objectives and the annual performance goals; and (b) a description of
how program evaluations were used to establish or revise strategic goals
and a schedule for future program evaluations; (3) furthermore, the four
elements that the plan contains could better conform to the act's
requirements and the Office of Management and Budget's guidance; (4)
many of the goals and objectives appear less outcome-oriented (directed
at the long-term results that SBA wants to achieve), but rather
process-oriented; (5) the strategies, which consist entirely of one-line
statements, are too vague to enable an assessment of whether they would
help achieve the goals and objectives in SBA's plan; (6) furthermore,
because of the way in which the information is presented, the linkage
between specific performance measures, strategies, and objectives is not
clear; (7) while the plan identifies certain key external factors, it
does not yet include a discussion of how the external factors will be
taken into account when assessing progress toward goals; (8) because the
plan is incomplete, the Congress may be missing critical information for
its consultation with SBA; (9) SBA's draft strategic plan reflects
consideration of the key statutory provisions authorizing SBA's programs
and activities; (10) the plan could benefit from more explicit
references to the agency's major statutes and a clearer linkage between
the authorities and the agency's mission, goals, and objectives; (11)
SBA's draft strategic plan does not explicitly address the relationship
of SBA's activities to similar activities in other agencies and provides
no evidence that SBA coordinated with other agencies in developing its
plan; (12) because the plan's strategies are vague, the extent to which
the plan addresses management problems that GAO has previously
identified is unclear; (13) SBA's capacity to provide reliable
information on the achievement of strategic goals is uncertain; (14) not
all of the goals and objectives in the plan are stated in a manner that
is measurable; (15) therefore, it is unclear as to what information will
be needed and how SBA will assemble and store the information; and (16)
however, the plan identifies a number of potential performance measures
for which obtaining reliable and accurate data could be difficult,
expensive, or both.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-97-205R
TITLE: Results Act: Observations on the Small Business
Administration's Draft Strategic Plan
DATE: 07/11/97
SUBJECT: Strategic planning
Agency missions
Interagency relations
Small business assistance
Program evaluation
Management information systems
Congressional/executive relations
Information resources management
IDENTIFIER: SBA Minority Enterprise Development Program
Small Business Innovation Research Program
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Cover
================================================================ COVER
September 1997
GAO/RCED-97-205R
SBA's Draft Strategic Plan
(385690)
Abbreviations
=============================================================== ABBREV
BOP - Federal Bureau of Prisons
CFO - Chief Financial Officers
DEA - Drug Enforcement Administration
DOJ - Department of Justice
FBI - Federal Bureau of Investigation
INS - Immigration and Naturalization Service
NPR - National Performance Review
OMB - Office of Management and Budget
SBA -
R&D -
OIG -
MBDA -
FEMA -
SBIR -
FMFIA -
Letter
=============================================================== LETTER
B-277425
July 11, 1997
The Honorable Richard K. Armey
Majority Leader
House of Representatives
The Honorable John Kasich
Chairman, Committee on the Budget
House of Representatives
The Honorable Dan Burton
Chairman, Committee on Government Reform
and Oversight
House of Representatives
The Honorable Bob Livingston
Chairman, Committee on Appropriations
House of Representatives
Subject: Results Act: Observations on the Small Business
Administration's Draft Strategic Plan
On June 12, 1997, you asked us to review the strategic plans
submitted by the cabinet departments and selected major agencies for
consultation with the Congress as required by the Government
Performance and Results Act of 1993 (the Results Act). This report
is our response to your request concerning the strategic plan of the
Small Business Administration (SBA).
OBJECTIVES, SCOPE, AND
METHODOLOGY
------------------------------------------------------------ Letter :1
Specifically, you asked us to review SBA's draft plan and assess (1)
whether it fulfills the requirements of the Results Act and to
provide our views on its overall quality; (2) whether it reflects
SBA's key statutory authorities; (3) whether it reflects interagency
coordination for crosscutting programs, activities, or functions that
are similar or complementary to other federal programs; (4) whether
it addresses major management problems that we have previously
identified; and (5) the adequacy of SBA's data and information
systems for providing reliable information for measuring results.
We obtained the March 5, 1997, draft strategic plan that SBA provided
to congressional committees. It is important to recognize that SBA's
final plan is not due to the Congress and the Office of Management
and Budget (OMB) until September 1997. Furthermore, the Results Act
anticipated that it may take several planning cycles to perfect the
process and that the final plan will continue to be refined as future
planning cycles occur. Thus, our comments reflect a snapshot of the
plan at this time. We recognize that developing a strategic plan is
a dynamic process and that SBA is continuing work to revise the draft
with input from OMB, congressional staff, and other stakeholders.
Our overall assessment of SBA's draft strategic plan was generally
based on our knowledge of SBA's operations and programs, our reviews
of SBA, and other existing information available at the time of our
assessment. Specifically, the criteria we used to determine whether
SBA's strategic plan complied with the requirements of the Results
Act were the Results Act and the Office of Management and Budget's
(OMB) guidance on developing the plans (OMB Circular A-11, Part 2).
To make judgments about the overall quality of the plan, we used our
May 1997 guidance for congressional review of the plans
(GAO/GGD-10.1.16) as a tool. To determine whether the plan contained
information on interagency coordination and addressed management
problems, and whether SBA had adequate systems in place to provide
reliable information on performance, we reviewed reports on audits of
SBA's fiscal year 1995 and 1996 financial statements and the agency's
fiscal year 1996 Federal Managers' Financial Integrity Act (FMFIA)
report. We also relied on our general knowledge of SBA's operations
and programs and on the results of our previous work. In determining
whether SBA's draft strategic plan reflects major statutory
responsibilities, as you requested, we coordinated our review with
the Congressional Research Service and relied on our independent
analysis of the statutory provisions applicable to SBA. Our work was
performed in June and July 1997. We obtained comments from SBA on a
draft of this report.
BACKGROUND
------------------------------------------------------------ Letter :2
SBA is an independent agency created in 1953 to aid, counsel, assist,
and protect the interests of small businesses. With a permanent
staff of about 4,400 employees and an annual operating budget of
about $800 million, SBA administers loan and other programs that
annually provide over $10 billion in small business financing. SBA
provides new and established small businesses with financial
assistance, including venture capital and financing for long-term
assets; provides management training, technical assistance, and
procurement opportunities to both small businesses and small
businesses owned by disadvantaged individuals; and assists small
contractors in obtaining bid, performance, and payment surety bonds
for construction and other contracts. In addition, SBA provides
financial assistance to the owners of homes and businesses that are
damaged or destroyed by natural disasters, such as hurricanes and
floods.
SBA's March 5, 1997, draft strategic plan defines SBA's mission as
follows: "It is the Mission of the Small Business Administration
(SBA) to serve America's small businesses to (1) help preserve free
competition, (2) contribute to strengthening the Nation's economy,
and (3) assist disaster-ravaged communities recover from their
losses." SBA's strategic plan presents seven goals for accomplishing
the agency's mission. These goals are to (1) improve access to
capital for small businesses to start and grow; (2) reduce burdensome
regulations and unnecessary paperwork; (3) enhance education,
counseling, and information for small businesses; (4) serve as the
President's "eyes and ears," reporting back to him on the needs of
small businesses, and function as an advocate for small businesses;
(5) provide a "lifeline" to disaster-ravaged communities; (6)
exercise effective and efficient executive management of the agency's
activities; and (7) through the Office of Inspector General (OIG),
improve SBA's management. The section of the plan outlining the
objectives, strategies, and measures for achieving the last goal is
presented as, in effect, a strategic plan for SBA's OIG.
In January 1994, OMB designated the entire SBA as a performance
planning and reporting pilot under the Results Act (portions of other
agencies were also designated). In addition, SBA was required to
prepare performance plans for several fiscal years. In March 1994,
SBA entered into a performance agreement with the President that set
forth the President's policy goals for SBA and established a basis
for measuring the agency's progress in achieving those goals. This
agreement with the President has played a major role in fashioning
the strategic goals in SBA's draft strategic plan. Three of the four
policy goals explicitly outlined in the agreement between SBA and the
President--to increase capital access, reduce the regulatory burden,
and be the President's eyes an ears for small businesses--are among
the seven goals in SBA's draft strategic plan.
The Results Act requires that an agency's strategic plan contain the
following six critical elements: (1) a comprehensive mission
statement; (2) agencywide long-term goals and objectives for all
major functions and operations; (3) approaches (or strategies), and
the various resources needed, to achieve the goals and objectives;
(4) a relationship between the long-term goals and objectives and
annual performance goals; (5) identification of key factors, external
to the agency and beyond its control, that could significantly affect
the achievement of the strategic goals; and (6) a description of how
program evaluations were used to establish or revise strategic goals
and a schedule for future program evaluations.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :3
A significant amount of work remains to be done by SBA before its
draft strategic plan can fulfill the requirements of the Results Act.
The plan lacks two required critical elements: (1) a discussion of
the relationship between the long-term goals and objectives and the
annual performance goals and (2) a description of how program
evaluations were used to establish or revise strategic goals and a
schedule for future program evaluations. Furthermore, the four
elements that the plan contains could better conform to the act's
requirements and OMB's guidance. Many of the goals and objectives
appear less outcome-oriented (directed at the long-term results that
SBA wants to achieve), but rather process-oriented, such as serving
as the President's eyes and ears. The strategies, which consist
entirely of one-line statements, are too vague to enable an
assessment of whether they would help achieve the goals and
objectives in SBA's plan. Furthermore, because of the way in which
the information is presented, the linkage between specific
performance measures, strategies, and objectives is not clear. Also,
while the plan identifies certain key external factors, it does not
yet include a discussion of how the external factors will be taken
into account when assessing progress toward goals. Because the plan
is incomplete, the Congress may be missing critical information for
its consultation with SBA.
SBA's draft strategic plan reflects consideration of the key
statutory provisions authorizing SBA's programs and activities. The
plan could benefit from more explicit references to the agency's
major statutes and a clearer linkage between the authorities and the
agency's mission, goals, and objectives.
SBA's draft strategic plan does not explicitly address the
relationship of SBA's activities to similar activities in other
agencies and provides no evidence that SBA coordinated with other
agencies in developing its plan. For example, the plan does not
identify how SBA's programs are coordinated with the Department of
Commerce's Minority Business Development Agency (MBDA), even though
MBDA offers the same types of assistance as SBA to clients (minority
small businesses) that are often the prime focus of SBA's assistance.
In addition, SBA's strategic plan might benefit by an explicit
acknowledgement of the extent to which SBA must rely on other federal
agencies in carrying out its federal procurement-related
responsibilities, such as the 8(a) minority enterprise development
program.
Because the plan's strategies are vague, the extent to which the plan
addresses management problems that we have previously identified is
unclear. For example, we have identified problems with SBA's
liquidation of guaranteed loans and of small business investment
companies (SBIC). SBA's plan proposes improving its liquidation
processes, but it does not describe the specific strategies that will
help achieve the objectives. The plan also does not directly address
other identified problems. For example, independent audits of SBA's
financial statements have identified internal control weaknesses,
including SBA's failure to reconcile certain fund balances with those
of the Treasury Department.
SBA's capacity to provide reliable information on the achievement of
strategic goals is uncertain. Not all of the goals and objectives in
the plan are stated in a manner that is measurable. Therefore, it is
unclear as to what information will be needed and how SBA will
assemble and store the information. However, the plan identifies a
number of potential performance measures for which obtaining reliable
and accurate data could be difficult, expensive, or both. Also, the
plan does not clearly address how to correct problems with existing
information systems that have been identified by SBA and its
independent auditors, nor does it identify the sources of other
information that would logically be needed for the identified
performance measures.
SBA'S STRATEGIC PLAN DOES NOT
YET FULFILL THE REQUIREMENTS OF
THE RESULTS ACT
------------------------------------------------------------ Letter :4
SBA's draft strategic plan does not reflect the six requirements of
the Results Act, and a significant amount of work remains to be done
by SBA before its draft strategic plan can fulfill those
requirements.
SBA'S PLAN DOES NOT CONTAIN
ALL CRITICAL ELEMENTS
---------------------------------------------------------- Letter :4.1
SBA's draft plan does not discuss the relationship between strategic
goals and annual performance goals. While strategic plans are not
required to identify specific performance measures, OMB Circular A-11
recommends that the plans briefly outline (1) the type, nature, and
scope of the performance goals to be included in subsequent annual
performance plans; (2) the relationship between the performance goals
and the general goals and objectives; and (3) the relevance and use
of the performance goals in helping determine the achievement of
goals and objectives.
Furthermore, SBA's draft strategic plan does not describe how program
evaluations were used to establish or revise strategic goals or
include a schedule for future program evaluations to help measure
progress toward strategic goals, as required by the Results Act. The
section of the plan concerning the SBA's OIG references future audit
work and evaluations that will be done by that office to help improve
SBA's management, but this information does not appear to meet the
Results Act's requirements for substantive program evaluations.
OBSERVATIONS ON THE OVERALL
QUALITY OF SBA'S PLAN
---------------------------------------------------------- Letter :4.2
Overall, SBA's draft strategic plan is not yet sufficient to achieve
the purposes of the Results Act and improve management and make
programs more effective. Our specific observations are discussed in
the following sections.
MISSION STATEMENT
---------------------------------------------------------- Letter :4.3
SBA's mission statement is results-oriented in that it articulates
the intended results of SBA's efforts to assist small businesses:
preserving free competition, strengthening the nation's economy, and
helping disaster-ravaged communities. In accordance with the
guidance in OMB Circular A-11, the mission statement could be
improved by more directly incorporating key aspects of SBA's
legislative mandate to aid, counsel, assist, and protect the
interests of small businesses. In addition, because it mentions
assisting only small businesses, the mission statement does not
encompass one significant activity of SBA's--making loans to
individuals who have suffered disaster losses. As of May 1997,
disaster loans to individuals accounted for more than 50 percent of
the $767 million in disaster loans made by SBA during fiscal year
1997.
STRATEGIC GOALS/OBJECTIVES
---------------------------------------------------------- Letter :4.4
OMB Circular A-11 suggests that strategic plans should set out the
long-term programmatic, policy, and management goals of the agency
and that the goals and objectives should elaborate on how the agency
is carrying out its mission.
SBA's draft strategic plan lists seven strategic goals for
accomplishing its mission. In addition, the plan lists from two to
four policy or program objectives for each goal--a total of 24
objectives for the seven goals. Generally, the goals cover the major
functions and operations of SBA. However, not all of the goals
elaborate on how SBA carries out its mission. Only the first and
third goals in SBA's plan--to improve access to capital for small
businesses to start and grow and to enhance education, counseling,
and information for small businesses--describe outcomes logically
linked to fulfilling SBA's statutory mission. The remaining goals
are expressed as processes--reducing burdensome regulations and
unnecessary paperwork, serving as the President's eyes and ears,
providing a lifeline to disaster-ravaged communities, exercising
efficient executive management, and improving SBA's management
through the OIG's operations--rather than as long-term results that
SBA wants to achieve.
Similarly, some of the objectives associated with the goals are
expressed more as processes than as results, making linkage to
mission less clear. For example, the objectives listed under the
fifth goal--to provide a lifeline to disaster-ravaged
communities--describe the characteristics of the assistance
("customer-focused" and "cost-efficient") rather than a result that
SBA intends to achieve.
Some of the goals and objectives lend themselves to performance
measurement; that is, data could be gathered that would allow SBA
and/or the Congress to assess the extent to which the goals or
objectives are being achieved. However, the plan does not clearly
indicate how progress would be measured. It could be difficult, for
example, to measure a real reduction in the paperwork burden on small
businesses. Moreover, some objectives are not outcome-oriented and
do not imply a target that might be measured. (As discussed below,
the Results Act does not require that strategic plans identify
specific performance measures; however, in accordance with the
guidance in OMB Circular A-11, plans should briefly describe the
type, nature, and scope of the performance goals to be included in
subsequent annual performance plans and recognize the relevance and
use of performance goals in helping determine the achievement of
goals and objectives.) For example, the first goal--to improve access
to capital--includes the objective "offer specialized capital access
by providing bonding opportunities, venture capital, and export
financing." Because SBA currently offers these services to small
businesses, the plan might more usefully state their intended outcome
in a way that is directed at achieving the goal.
STRATEGIES TO ACHIEVE GOALS
AND OBJECTIVES
---------------------------------------------------------- Letter :4.5
Under the Results Act, the strategic plans' sections on strategies
are to briefly describe the operational processes; the technologies;
and the human, capital, information, or other resources needed to
achieve goals and objectives. Additionally, OMB Circular A-11
recommends that strategies outline how agencies will communicate
strategic goals throughout the organization and hold managers and
staff accountable for achieving these goals. With the exception of
the plan dealing with the OIG's efforts, SBA's plan does not meet
these requirements.
The strategies outlined in SBA's draft plan consist entirely of
one-line statements. Because they lack detail, most are too vague or
general to enable an assessment of whether or not they would help
achieve the goals and objectives in the plan. For example, it is
unclear from SBA's plan how establishing a risk management database
or completing a Certified Development Company loan liquidation pilot
will help SBA to improve small businesses' access to credit.
OMB Circular A-11 states that strategies should include schedules for
initiating or completing "significant" actions. Because of their
brevity, it is difficult to assess whether the proposed strategies in
SBA's plan might be considered significant. However, those that
might be deemed significant in terms of the time and resources
required--for example, developing and expanding on-line services for
small businesses or implementing a small and disadvantaged business
procurement reform program--lack schedules as well as resource
estimates.
SBA's plan could also be improved by making the linkage between the
strategies and goals/objectives more explicit. In SBA's draft plan,
the objectives are listed as a group, followed by the strategies,
which are also listed as a group. While the objectives and
strategies may be linked, the linkage is not easy to follow, which
reduces the plan's value to users in SBA, the administration, and the
Congress. One way that SBA could improve the linkage would be to
clearly describe the key strategies, objective by objective, that it
intends to use to accomplish each of its goals. This structure would
help make the plan meaningful to employees throughout the agency,
including those delivering services.
RELATIONSHIP BETWEEN GENERAL
AND ANNUAL PERFORMANCE GOALS
---------------------------------------------------------- Letter :4.6
Under the Results Act, each general goal must be linked to annual
performance goals. A performance goal is the target level of
performance expressed as a tangible, measurable objective against
which actual achievement is to be compared. An annual performance
goal is to consist of two parts: (1) the measure that represents the
specific characteristic of the program used to gauge performance and
(2) the target level of performance to be achieved during a given
fiscal year for the measure. While strategic plans are not required
to identify specific performance measures, OMB Circular A-11
recommends that the plans briefly relate general goals and objectives
to annual performance goals.
While SBA's draft strategic plan lists 66 potential performance
measures (excluding those for the OIG), it does not appear to meet
the guidance set forth in the circular. Examples of target levels
for some performance measures and a brief explanation of how
achieving those target levels will help achieve the strategic goal
could help to meet these requirements.
In addition, SBA's strategic plan could be improved by making the
linkage between the proposed performance measures, strategies, and
objectives more explicit. In the draft plan, the performance
measures are listed as a group following the strategies (which, as
noted above, are also listed as a group following the objectives).
Consequently, the plan is unclear as to which of the measures SBA
proposes to use to assess its progress in achieving each of the
objectives. Such a linkage is important because it will allow the
Congress and SBA to judge whether or not the agency is achieving its
goals.
The annual performance plans required by the Results Act should help
the Congress and the executive branch make informed decisions by
providing a simple, straightforward linkage between plans, budgets,
and performance results. The Results Act attempts to establish this
linkage by requiring agencies to base the goals in their annual
performance plans on the program activity structures used in their
budget submissions. SBA's draft plan does not explicitly recognize
the need to link the identified objectives or measures in the plan to
the program activity structure in SBA's budget.
KEY EXTERNAL FACTORS
---------------------------------------------------------- Letter :4.7
OMB Circular A-11 recommends that strategic plans briefly describe
each key external factor--economic, demographic, social, or
environmental conditions--and how each may influence the achievement
of goals and objectives. SBA's draft plan lists a number of such
factors associated with each strategic goal. But the plan does not
yet include a discussion of how the external factors will be taken
into account when assessing progress toward goals. Furthermore, as
discussed below, the plan does not make clear the extent to which the
success of many SBA programs depends on the actions of other federal
agencies.
THE PLAN REFLECTS SBA'S KEY
STATUTORY AUTHORITIES
------------------------------------------------------------ Letter :5
SBA's draft strategic plan reflects consideration of the key
statutory provisions authorizing SBA's programs and activities.
However, while not required by the Results Act, the plan might
benefit from a discussion that explicitly references SBA's major
statutes and links the authorities to the agency's goals and
objectives.\1 This linkage is provided, for example, under the goal
of being a lifeline to disaster-ravaged communities: The plan
discusses SBA's role under section 7(b) of the Small Business Act in
providing financial assistance to victims of natural disasters. The
other six goals do not explicitly reference a statutory authority.
Such express linkage throughout the strategic plan would help to
ensure that the agency's stated goals and objectives include
consideration of the entire spectrum of the agency's key statutory
authorities.
The draft plan does not discuss mandated programs or duties that
either are ancillary functions for key program responsibilities (such
as SBA's adjudicative functions that support its key contracting and
loan programs) or that potentially are subsumed under other key
program functions in the plan. The plan should mention these
activities if their resource requirements will affect the achievement
of goals and objectives in the plan.
--------------------
\1 OMB Circular A-11 suggests that an agency's mission statement may
include a brief discussion of the agency's enabling or authorizing
legislation; this suggestion, however, does not extend to the
statement of goals and objectives.
CROSSCUTTING PROGRAM ACTIVITIES
ARE NOT SUFFICIENTLY IDENTIFIED
------------------------------------------------------------ Letter :6
SBA's draft strategic plan does not explicitly address the
relationship of SBA's activities to similar activities in other
agencies and provides no evidence that SBA coordinated with other
agencies in developing its plan. For example:
-- The Minority Business Development Agency, located in the
Department of Commerce, operates a network of centers throughout
the country that provide management and technical assistance to
minority businesses. There is no mention of coordination with
MBDA in SBA's draft strategic plan, even though MBDA offers the
same type of assistance as SBA, and to clients (minority small
businesses) that are often the prime focus of SBA's assistance.
-- The Federal Emergency Management Agency (FEMA) is the lead
federal agency for assisting victims of hurricanes, floods, and
other natural disasters. As described, the SBA plan includes in
the mission statement "assist disaster-ravaged communities
recover from their losses" and has as one its strategic
objectives to "provide a 'lifeline' to disaster-ravaged
communities." While SBA's plan briefly mentions promoting better
cooperation with FEMA and other agencies, the plan does not
indicate how SBA's efforts relate strategically to those of
FEMA.
-- There is no mention in SBA's plan of the "harmonization" efforts
for the export program activities of SBA and the Export-Import
Bank. In 1993, the Trade Promotion Coordinating Committee, an
interagency group, recommended that the bank and SBA harmonize
their working capital guarantee programs to make them more
customer-focused and take advantage of the agencies' respective
strengths. As we recently reported, the harmonization efforts
between these two agencies are not complete.\2 Among other
things, the lack of harmonization has caused increased paperwork
and processing delays for lenders and exporters.
In addition, SBA's strategic plan might benefit by an explicit
acknowledgement and discussion that the agency must, by necessity,
rely on other federal agencies in carrying out much of its federal
procurement-related activities. For example, SBA's 8(a) minority
enterprise development program provides procurement opportunities to
businesses that are owned and controlled by disadvantaged
individuals, and one performance measure listed by SBA is the
increase in the number of 8(a) firms with developmental experiences.
However, SBA must depend on the other federal agencies to award
contracts and, usually, to select the contractors.
A similar situation exists with SBA's Small Business Innovation
Research (SBIR) program, under which small businesses propose
innovative ideas that meet the specific research and research and
development (R&D) needs of the federal government. A performance
objective of SBA is to increase the commercialization of research and
ensure that small businesses participate in federal R&D efforts.
Because the SBIR program is administered by other federal agencies,
SBA's ability to achieve this performance objective will not be
solely in the control of SBA.
--------------------
\2 See Export Finance: Federal Efforts to Support Working Capital
Needs of Small Business (GAO/NSIAD-97-20, Feb.13, 1997).
PLAN DOES NOT CLEARLY ADDRESS
PREVIOUSLY IDENTIFIED
MANAGEMENT PROBLEMS
------------------------------------------------------------ Letter :7
Two of the goals in SBA's draft plan are directed at better managing
the agency. For example, the plan outlines actions by the OIG to
improve the accuracy of SBA's accounting and management information.
The plan also acknowledges the challenge of managing a growing
workload with fewer employees. However, the plan is vague on how SBA
intends to correct specific problems that we and others have
previously identified. For example:
-- In 1991, we reported that SBA was incurring significant losses
on liquidated loans in the agency's 7(a) program, in part
because of overvalued or nonexistent collateral and a failure to
make the most of recoveries when collateral existed.\3 We noted
that at the time of our report, SBA's monitoring of private
lenders' liquidation activities was limited. One of the draft
strategic plan's objectives is to improve the loan liquidation
process and rely on lenders to assist in liquidation activities,
and the plan identifies "recoveries on defaulted loans" as a
performance measure. However, the plan does not describe a
strategy that will help achieve the objective.
-- In 1995, we testified that weaknesses in SBA's management and
oversight had contributed to losses in the liquidation of SBICs,
which obtain funds through SBA-guaranteed loans and/or selling
preferred stock to SBA.\4 While SBA's draft plan calls for
improving the SBIC liquidation process, it does not describe the
actions that SBA plans to take to achieve the objective.
-- Over the past few years, we have reported and testified often on
the difficulties that SBA has had in implementing many of the
changes to the 8(a) minority business development program
mandated by the Congress.\5 Among other things, we reported that
SBA had not developed an information system able to provide the
basic data needed to manage the 8(a) program and--of particular
relevance to the Results Act--to evaluate its effectiveness. A
September 1995 report by SBA's Inspector General also concluded
that SBA could not determine whether the 8(a) program was
accomplishing its intended purpose. One strategy in SBA's draft
plan calls for improving the automated tracking system for the
8(a) program, and the plan identifies as a potential performance
measure "increased numbers of disadvantaged firms helped by the
8(a) program." However, the plan is not clear on the specific
actions SBA intends to take in order to obtain the information
needed for the performance measure.
-- The 1996 independent audit of SBA's financial statements
identified a number of internal control weaknesses, including
one deemed to be a material weakness. The material weakness
related to SBA's failure to reconcile certain fund balances with
those of the Treasury Department. Without accurate and complete
reconciliations, SBA can neither fully support its fund balances
with Treasury or ensure proper asset accountability and control
and proper matching of revenues and expenses.
In addition, SBA--like many federal agencies--faces a major challenge
in managing information resources to ensure that information
technology tools and resources are consistent with the agency's
mission. While SBA's draft plan cites information technology
initiatives as part of the strategies for achieving several
objectives, the plan does not yet contain a discussion of SBA's
information technology strategy. This strategy should include how
SBA plans to address the "year 2000 problem," which involves the need
for computer systems to be changed to accommodate dates beyond 1999,
as well as any significant information security weaknesses--two
issues that we have identified as high risk across the government.
(The report on the audit of SBA's fiscal year 1995 and 1996 financial
statements cited the agency's failure to provide adequate protection
of computer users' security codes, which negates the control of
separation of duties and provides an opportunity for unauthorized
transactions.) In addition, the information technology strategy
should contain information on how SBA plans to comply with the
Clinger-Cohen Act of 1996. The act calls for agencies to implement a
framework of modern technology management based on the practices
followed by leading private-sector and public-sector organizations
that have successfully used technology to dramatically improve
performance and meet strategic goals.
--------------------
\3 Small Business: Improving SBA Loan Collateral Liquidations Would
Increase Recoveries (GAO/RCED-92-5, Dec. 19, 1991).
\4 Small Business Administration: Status of Small Business
Investment Companies (GAO/T-RCED-95-145, Mar. 28, 1995) and Small
Business Administration: Better Oversight of SBIC Programs Could
Reduce Federal Losses (GAO/T-RCED-95-285, Sept. 28, 1995).
\5 For example, see Small Business: Status of SBA's 8(a) Minority
Business Development Program (GAO/T-RCED-96-259; Sept. 18, 1996);
Small Business Administration: 8(a) Is Vulnerable to Program and
Contractor Abuse (GAO/OSI-95-15, Sept. 7, 1995); Small Business:
SBA Cannot Assess the Success of Its Minority Business Development
Program (GAO/T-RCED-94-278; July 27, 1994); Small Business: Problems
Continue With SBA's Minority Business Development Program
(GAO/RCED-93-145; Sept. 17, 1993); and Small Business: Problems in
Restructuring SBA's Minority Business Development Program
(GAO/RCED-92-68, Jan. 31, 1992).
SBA'S CAPACITY TO PROVIDE
RELIABLE INFORMATION ON THE
ACHIEVEMENT OF STRATEGIC GOALS
IS UNCERTAIN
------------------------------------------------------------ Letter :8
To measure progress in achieving goals, SBA needs reliable data.
SBA's draft strategic plan has not yet been developed sufficiently to
identify all of the data needed to measure performance because not
all of the goals and objectives in the plan are stated in a manner
that is measurable. However, the plan identifies a number of
performance measures for which obtaining reliable and accurate data
could be difficult, expensive, or both because of weaknesses with
SBA's current information systems.
A number of problems have been identified with SBA's existing
information systems:
-- According to an assessment by SBA's Office of Information
Resources Management, in addition to developing new systems to
meet the needs of evolving program operations, SBA needs to
resolve problems with incompatible systems and data and
inadequate access to data in order for the information systems
to adequately support the management of program operations. Our
past work has shown that in some cases SBA has not established
the controls to ensure that information systems contain timely
and accurate information.\6
-- SBA received an unqualified audit opinion on its fiscal year
1996 financial statements. Notwithstanding this, as previously
mentioned, a number of internal control weaknesses continued to
be reported by the auditors. For example, the auditors found
that SBA did not maintain comprehensive inventory records of
acquired property and noted that complete and reliable data were
difficult to obtain from SBA's loan accounting databases.
-- SBA's Federal Managers' Financial Integrity Act reports have
cited weaknesses with the agency's data systems. For example,
the agency's fiscal year 1996 FMFIA report cited as a material
weakness the data system for SBA's surety bond guarantee
program, noting that the system "is outdated and does not meet
the needs of management" and that its reports "are inaccurate
and unreliable." The report also noted a need for an improved
system for tracking the lenders participating in the agency's
lending programs.
Furthermore, many of the objectives and performance measures cited in
the draft plan would require information from sources other than
SBA's existing information systems. For example, the plan cites
measures such as the increased number of businesses created,
maintained, or expanded; the increased numbers of jobs; the increased
taxes paid; and the increased sales of client small businesses. In
order for these to be effective performance measures for SBA's
strategies, SBA would need not only information on the number of
businesses, jobs, etc., but also information that would enable it to
attribute the changes in these numbers to its programs. SBA's
Inspector General has reported on the difficulty of measuring job
creation for just one program--the 7(a) guaranteed loan program. In
its November 1994 report, the OIG concluded that the more direct the
correlations made between the information collected and the success
of the program, the greater the need for accuracy and that regardless
of the methodology used, the actual number of jobs attributable to a
7(a) loan would be difficult to measure definitively because many
other variables can affect job creation.
Because of these factors, SBA's draft strategic plan would benefit
from a discussion of (1) what it has done, is doing, or plans to do
to address previously cited problems with its existing information
systems and (2) the ease or difficulty it foresees in obtaining
additional data with which to measure results. Once SBA develops its
final performance measures, it may need to consider appropriate
system modifications to capture needed data. Key requirements of the
Chief Financial Officers Act of 1990 are the development of cost
information to enable the systematic measurement of performance and
the integration of systems--program, accounting, and budget systems.
--------------------
\6 Small Business Administration: Better Planning and Controls
Needed For Information Systems (GAO/AIMD-97-94, June 27, 1997).
AGENCY COMMENTS
------------------------------------------------------------ Letter :9
We provided SBA with a draft of this report for review and comment.
While SBA agreed with our observations, it pointed out that our
report is based on a version of its strategic plan that the agency
prepared in March 1997 and that it had made a number of changes to
its plan since that time that address issues raised in our report.
(See enc. I.)
In addition, SBA outlined a number of other actions that will
strengthen the agency's strategic planning process, improve the
report that the agency ultimately transmits to the Congress, and go a
long way in addressing the issues raised in our report. Among other
actions, SBA noted that it will address the management weaknesses not
identified in its strategic plan, including improving the agency's
internal controls. SBA also noted that program evaluation functions
are an important element for effective management of any organization
and that it will incorporate program evaluation efforts into its
strategic plan. SBA stated that although it has numerous
collaborative program efforts ongoing with other federal agencies, it
also clearly recognizes that agencies need to coordinate their plans.
Therefore, SBA stated it has developed a schedule for ensuring
crosscutting reviews of its strategic plan and will share the next
draft of its plan and discuss mutual issues with its partner
agencies. Finally, SBA stated that management of the agency will be
based on strategic objectives and performance goals and that
evaluations of senior managers' performances will be based on how
well goals in the annual plans are achieved.
---------------------------------------------------------- Letter :9.1
As arranged with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this letter
until 30 days from its issue date. At that time, we will send copies
of this letter to the Minority Leader of the House of
Representatives; Ranking Minority Members of your Committees; the
Chairmen and Ranking Minority Members of the House and Senate
Committees on Small Business; the Administrator, SBA; and the
Director, Office of Management and Budget.
Please call me at (202) 512-7632 if you or any of your staff have any
questions about this report. Major contributors to this report
include Dave Wood, Stan Ritchick, Scott Riback, and James Hamilton.
Judy A. England-Joseph
Director, Housing and Community
Development Issues
Enclosure
(See figure in printed edition.)Enclosure I
COMMENTS FROM THE SMALL BUSINESS
ADMINISTRATION
============================================================== Letter
(See figure in printed edition.)
(See figure in printed edition.)
*** End of document. ***