Results Act: Observations on SBA's September 30, 1997, Strategic Plan
(Testimony, 10/29/97, GAO/T-RCED-98-31).

The Small Business Administration's (SBA) September 1997 draft strategic
plan represents an improvement over its March 1997 version. The
September plan contains the six elements required by the Government
Performance and Results Act; the strategic goals are more clearly linked
to the agency's mission and are more amenable to measurement; and the
strategies and performance measures are more clearly linked to the
objectives that they are intended to achieve and measure. Other
improvements in the September plan encompass a mission statement that
now includes the disaster loan program for families and more accurately
reflects SBA's statutory authorities, greater recognition that SBA's
success in achieving its goals and objectives depends on the actions of
others, and the addition of a section discussing how SBA's programs and
activities interact with those of other federal agencies. At the same
time, the September plan could be further improved to better meet the
purposes of the Results Act.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-RCED-98-31
     TITLE:  Results Act: Observations on SBA's September 30, 1997, 
             Strategic Plan
      DATE:  10/29/97
   SUBJECT:  Strategic planning
             Disaster relief aid
             Small business assistance
             Agency missions
             Program evaluation
             Internal controls
             Management information systems
             Congressional/executive relations
             Information resources management
             Interagency relations
IDENTIFIER:  GPRA
             Government Performance and Results Act
             
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Cover
================================================================ COVER


Before the House Committee on Small Business

For Release
on Delivery
Expected at
11:00 a.m.  EST
Wednesday
October 29, 1997

RESULTS ACT - OBSERVATIONS ON
SBA'S SEPTEMBER 30, 1997,
STRATEGIC PLAN

Statement by Stanley J.  Czerwinski
Associate Director, Housing and
Community Development Issues
Resources, Community, and Economic
Development Division

GAO/T-RCED-98-31

GAO/RCED-98-31T


(385701)


Abbreviations
=============================================================== ABBREV

  OMB -
  SBA -
  CFO -
  COSO -
  IG -

============================================================ Chapter 0

Mr.  Chairman and Members of the Committee: 

We are pleased to be here today to provide our views on the September
30, 1997, strategic plan developed by the Small Business
Administration (SBA), pursuant to the Government Performance and
Results Act of 1993 (the Results Act).  As you know, the Results Act
is one of the major steps the Congress has taken in recent years to
fundamentally change the way federal agencies go about their work. 
The Results Act requires agencies to clearly define their missions,
set goals, measure performance, and report on their accomplishments. 

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.  The
agency also provides management training, technical assistance, and
procurement opportunities to small businesses and financial
assistance to the owners of homes and businesses that are damaged or
destroyed by natural disasters.  My statement today will address the
progress SBA has made in developing its strategic plan and the
challenges SBA continues to face in implementing the Results Act.  My
observations are based on our review of the strategic plan that SBA
issued to the Congress and the Office of Management and Budget (OMB)
on September 30, 1997, as well as our review of an earlier version of
SBA's plan dated March 5, 1997.\1

SBA's September 30, 1997, plan represents an improvement over its
March 5, 1997, version.  The September plan contains the six elements
required by the Results Act; the strategic goals, as a group, are
more clearly linked to SBA's mission and are more amenable to
measurement; and the strategies and performance measures are more
clearly linked to the objectives that they are intended to achieve
and measure.  Other improvements in the September plan encompass a
mission statement that now includes the disaster loan program for
families and more accurately reflects SBA's statutory authorities; a
better recognition that SBA's success in achieving certain goals and
objectives in the plan is dependent on the actions of others; and the
addition of a section that discusses how SBA's programs and
activities interact with those of other federal agencies. 

At the same time, the September plan could be further improved to
better meet the purposes of the Results Act.  The relationship of one
of the plan's goals--leading small business participation in the
welfare-to-work effort--to SBA's mission is unclear.  In addition,
SBA's September plan does not discuss the human, capital, and other
resources needed by SBA to carry out the strategies identified in the
plan; does not include comprehensive schedules of future program
evaluations for major SBA programs; and does not consistently link
identified external factors to the particular goal or goals they
could affect or describe how each factor could affect the achievement
of the goal.  In a departure from the March version, SBA's September
plan includes as appendices separate strategic plans for SBA's Office
of Inspector General and Office of Advocacy; however, the
relationship between the goals and objectives in the plans included
in the appendices and those in SBA's plan is not explicit. 


--------------------
\1 Results Act:  Observations on the Small Business Administration's
Draft Strategic Plan (GAO/RCED-97-205R, July 11, 1997). 


   PURPOSE AND REQUIREMENTS OF THE
   RESULTS ACT
---------------------------------------------------------- Chapter 0:1

The Results Act is the centerpiece of a statutory framework to
improve federal agencies' management activities.\2 The Results Act
was designed to shift the focus of attention of federal agencies from
the amount of money they spend, or the size of their workloads, to
the results achieved by their programs.  Agencies are expected to
base goals on their results-oriented missions, develop strategies for
achieving their goals, and measure actual performance against the
goals. 

The Results Act requires agencies to consult with the Congress in
developing their strategic plans.  This consultation gives the
Congress the opportunity to help ensure that the agencies' missions
and goals are focused on results, are consistent with the programs'
authorizing laws, and are reasonable in light of fiscal constraints. 
The products of these consultations are to be clearer guidance to
agencies on their missions and goals, which should lead to better
information to help the Congress choose among programs, consider
alternative ways to achieve results, and assess how well agencies are
achieving them. 

The Results Act required SBA and other executive agencies to complete
their first strategic plans and submit them to the Congress and OMB
by September 30, 1997.  The act also requires that agencies submit
their first annual performance plans, which set out measurable goals
that define what will be accomplished during a fiscal year, to the
Congress after the President submits his fiscal year 1999 budget to
the Congress.  OMB requested that agencies integrate, to the extent
possible, their annual performance plans into their fiscal year 1999
budget submissions.  OMB, in turn, is required to include a
governmentwide performance plan in the President's fiscal year 1999
budget submission to the Congress. 


--------------------
\2 Other parts of the framework include the Chief Financial Officers
Act of 1990, the Paperwork Reduction Act of 1995, and the
Clinger-Cohen Act of 1996. 


   IMPROVEMENTS IN SBA'S SEPTEMBER
   30 STRATEGIC PLAN
---------------------------------------------------------- Chapter 0:2

SBA's September 30, 1997, strategic plan is an improvement over the
March 5, 1997, version of the plan.  The September plan includes the
two required elements that were lacking in the March version.  First,
the September plan includes a section on how program evaluations were
used to develop the plan and mentions some specific evaluations that
SBA plans in the future, such as those for business information
centers.  Second, it includes a section entitled "Linkages to Annual
Performance Plans" that recognizes the need to link (1) the strategic
goals in the plan to annual performance goals and (2) SBA's annual
budget submissions to annual performance goals. 

In addition, the five goals in the September plan--which are to (1)
increase opportunities for small business success, (2) transform SBA
into a 21st century, leading edge financial institution, (3) help
businesses and families recover from disasters, (4) lead small
business participation in welfare-to-work, and (5) serve as the voice
of America's small businesses--are, as a group, more clearly linked
to SBA's statutory mission than the goals in the March version of the
plan. 

Also, the inclusion of date-specific performance objectives to help
measure performance makes the strategic goals and objectives in the
September plan more amenable to a future assessment of SBA's
progress.  For example,

  -- Under the goal of increasing opportunities for small business
     success, one of SBA's performance objectives is as follows:  "By
     the year 2000, SBA will help increase the share of federal
     procurement dollars awarded to small firms to at least 23
     percent."

  -- Under the goal of transforming SBA into a 21st century, leading
     edge financial institution, one of SBA's performance objectives
     is as follows:  "By the year 2000, SBA will expand the Chief
     Financial Officer (CFO) annual financial audit to include a
     separate opinion on whether SBA's internal control structure
     meets Committee of Sponsoring Organizations (COSO) of the
     Treadway Commission standards for financial reporting.\3 By the
     year 2002, SBA will receive an unqualified opinion on its
     internal control structure for financial reporting."

SBA also improved its strategic plan by more clearly and explicitly
linking the strategies in the September plan to the specific
objectives that they are intended to achieve.  Also, some of the
strategies are more detailed and more clearly indicate how they will
enable SBA to accomplish its goals and objectives.  For example,
under the objective of "implementing effective oversight" of lenders
and other resource partners, SBA's strategies include (1)
establishing loan program credit, service, and mission standards to
measure lenders' performance and (2) developing a scoring system,
based on objective criteria, that measures and determines whose
performance is consistent with the laws and regulations governing SBA
programs.  Furthermore, certain strategies recognize the crosscutting
nature of some activities; for example, a strategy for achieving
SBA's strategic goal to "help businesses and families recover from
disasters" is to combine SBA's home loss verification with that of
the Federal Emergency Management Agency's home inspections. 

We also observed certain other changes which we believe have improved
SBA's strategic plan: 

  -- The mission statement in SBA's September plan appears to
     incorporate observations we made in our July report:  It is
     concise and reflects SBA's key statutory authorities of aiding,
     counseling, and assisting small businesses and of providing
     disaster assistance to families and businesses. 

  -- In general, the September plan does a better job of recognizing
     that SBA's success in achieving certain goals and objectives in
     its plan is dependent on the actions of others.  For example,
     one of the strategies under the objective "expanding small
     business procurement opportunities" calls for SBA to "work with
     other federal agencies to set higher small business procurement
     goals and assist these agencies in meeting those goals."

  -- SBA significantly improved its September plan by more clearly
     and explicitly linking performance measures to the specific
     objectives that they are intended to assess.  Performance
     measures are directly linked to 11 of the 14 performance
     objectives in the plan.  An exception is SBA's fifth goal of
     serving as a voice for America's small business, where the
     performance measures are listed as a group at the end of the
     discussion of the goal's three objectives. 


--------------------
\3 COSO, a private-sector initiative jointly sponsored by the
American Accounting Association, the American Institute of Certified
Public Accountants, the Financial Executives Institute, the Institute
of Internal Auditors, and the Institute of Management Accountants
provides, among other things, a standard against which entities can
assess their internal control systems. 


   SBA'S STRATEGIC PLAN CAN BE
   FURTHER IMPROVED
---------------------------------------------------------- Chapter 0:3

While SBA's September 30, 1997, strategic plan is an improvement over
the March 1997 version that we reviewed, we believe that further
revisions to the plan as SBA continues to implement the Results Act
and build on current efforts would enable SBA's plan to better meet
the purposes of the Results Act. 

As noted earlier, while the five goals in the September plan are more
clearly linked to SBA's statutory mission, the relationship of one
goal--leading small businesses' participation in the welfare-to-work
effort--to SBA's mission is unclear.  While the performance objective
for this goal places emphasis on helping small businesses meet their
workforce needs, the subsequent discussion implies a focus on helping
welfare recipients find employment; for example, the plan states that
"SBA's goal is to help 200,000 work-ready individuals make the
transition from welfare to work .  .  .  ." It is not clear in the
plan why SBA is focusing on welfare recipients and not on other
categories of potential employees to help meet small businesses'
workforce needs. 

Under the Results Act, strategy sections in the strategic plans are
to briefly describe items, such as the human, capital, information,
or other resources needed to achieve goals and objectives.  The
strategy sections in SBA's September plan lack such a discussion.  At
the same time, the plan recognizes the need for information on
resources needed to achieve the goals and objectives, and states that
accountable program managers will develop an annual business plan
that contains a set of program activities, milestones, and resources
for each objective and strategy in the plan. 

The Results Act requires that strategic plans include a schedule of
future program evaluations.  SBA's plan mentions certain program
evaluations planned by SBA for future fiscal years; for example, the
plan states that in fiscal 1998, SBA will (1) assess the results of
counseling services provided by two pilot Women Business Centers and
(2) conduct an assessment of the effectiveness and efficiency of
existing United States Export Assistance Centers.  The plan also
states that SBA will continue its goal monitoring of field and
headquarters offices.  However, the September plan does not contain
schedules of future comprehensive program evaluations for SBA's major
programs, such as the 7(a) loan program, which is SBA's largest small
business lending program, and the 8(a) business development program,
which supports the establishment and growth of small firms by
providing them with access to federal procurement opportunities.  In
addition, while SBA acknowledges in the September plan that it needs
a more systematic approach for using program evaluations for
measuring progress toward achieving its goals and objectives, the
plan does not outline how SBA will develop and implement such an
approach.  It should be noted that the IG's plan references future
audits and evaluations that the IG plans to conduct as part of its
effort to improve SBA's management. 

Under OMB's Circular A-11, strategic plans are to briefly describe
key external factors and how each factor may influence achievement of
the goals and objectives.  A section added to the September plan
identifies four external factors--the state of the economy, continued
congressional and stakeholder support, public-private cooperation,
and interagency coordination--that could affect the achievement of
the plan's goals.  However, with the exception of the "interagency
coordination" factor, the plan does not link these factors to
particular goals or describe how each could affect achievement of the
plan's goals and objectives.  Also, the plan does not articulate
strategies that SBA would take to mitigate the effects of these
factors.  The added section also discusses how SBA's programs and
activities interact with other federal agencies' programs and
activities.  While SBA states that it will work with other federal
agencies to coordinate its activities, the section does not provide
evidence that SBA coordinated with the other agencies in the plan's
development. 

The September plan, while recognizing the need for reliable
information to measure progress toward the plan's goals and
objectives, notes that SBA currently does not collect or report many
of the measures that it will require to assess performance.  The plan
would benefit from brief descriptions of how SBA plans to collect the
data to measure progress toward its goals and objectives.  Similarly,
a section in the September plan discusses SBA's efforts to improve
internal controls and to obtain an unqualified opinion on its
internal control structure for financial reporting by the year 2002. 
While this section implies that SBA will address management problems
identified by GAO and others, such as SBA's failure to reconcile
certain fund balances with those of the Department of Treasury and
the problem of overvalued or nonexistent collateral on liquidated
7(a) loans, specific strategies to address the identified management
problems are not described. 

Unlike the March version that we reviewed, SBA's September plan
includes, as appendices, separate strategic plans for SBA's Office of
Inspector General (IG) and Office of Advocacy.  In the March version
of the plan, the IG material was presented under one of the plan's
seven goals, while the Office of Advocacy material did not appear at
all.  Generally, the goals and objectives in the IG and Advocacy
plans appear consistent with, and may contribute to the achievement
of, the goals and objectives in SBA's plan, but the relationship is
not explicit.  SBA's plan makes little mention of the IG and Advocacy
plans and does not indicate if or how the IG and Advocacy activities
are intended to help SBA achieve the agency's strategic goals. 
Similarly, the IG and Advocacy plans do not make reference to the
goals and objectives in the SBA plan.  These plans could be more
useful to decisionmakers if their relationships were clearer. 

In summary, SBA has made progress in its strategic planning efforts,
based in part on its consultation with the Congress.  As I noted
earlier, SBA's September 1997 strategic plan includes several
improvements that make it more responsive to the requirements of the
Results Act.  However, as is the case with many other agencies, SBA's
development of a plan that conforms to the requirements of the
Results Act and to OMB's guidance is an evolving process.  As my
testimony notes, there are still several areas where improvements
need to be made to SBA's strategic plan in order to meet the purposes
of the Results Act. 


-------------------------------------------------------- Chapter 0:3.1

This concludes my statement.  I would be pleased to respond to any
questions you or members of the Committee may have. 


*** End of document. ***