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June 21, 2001

Honorable Christopher Bond

Committee on Small Business

United States Senate

Washington, DC 20510-6350

Dear Senator Bond:

This is in response to your February 14, 2001, letter requesting that
the Office of Inspector General (OIG) conduct a complete accounting of
all activity between the Small Business Administration (SBA) and any
hired car service utilized by SBA from October 1, 1997 to January 20,
2001. In addition to determining SBA's expenses for hired car services
for this period of time, we also determined the number of potential
instances where a hired driver provided home-to-work/work-to-home
transportation to SBA's former Administrator or former Deputy
Administrator, and we estimated the cost of using in-house drivers
rather than hired car services. We compared the results of our analysis
to SBA's December 12, 2000, response to your November 14, 2000, request
for similar information.

**SUMMARY**

From October 1, 1997, to January 20, 2001, SBA expenses for hired car
services totaled \$69,526. The costs SBA reported to you for the period
October 1, 1998, to November 1, 2000, understated hired car service
expenses by approximately nine percent, or \$4,865. For the period
October 1, 1997, to January 20, 2001, we also identified 12 days where
the former Administrator or former Deputy Administrator made potential
home-to-work/work-to-home trips with a hired driver and 4 additional
days where the former Administrator made potential
home-to-work/work-to-home trips on days she either departed for or
returned from an official trip requiring overnight lodging. SBA reported
to you that there were five days where there were
home-to-work/work-to-home trips. Our analysis, based on Fiscal Year 1999
cost data, shows that it would have cost SBA approximately \$22,000 and
\$8,000 in Fiscal Years 2000 and 1999 respectively to use in-house
drivers rather than the approximately \$40,000 and \$15,000 SBA paid the
hired car services. This contrasts with SBA's estimate of over \$64,000
per year to hire two drivers to

replace hired car services. We did not find any evidence to suggest that
SBA intentionally withheld information from Congress in its December 12,
2000, response.

**BACKGROUND**

SBA had two drivers on its payroll on October 1, 1997, the beginning of
the period we reviewed. These drivers worked in SBA's mailroom or print
shop when they were not driving. One driver left SBA during FY 1999, and
SBA has been unable to replace him. As a result, the former
Administrator started using a hired car service on a regular basis, and
the former Deputy Administrator continued using the remaining SBA driver
and used the hired car service on a much more limited basis. SBA's
Office of Administration maintained three leased vehicles, two of which
were used primarily by the former Administrator and the former Deputy
Administrator.

SBA started using one hired car service, but later changed to another
hired car service. SBA did not have official contracts for the hired car
services, but verbally agreed to pay \$30/hour plus a 15 percent
gratuity, with a 3-hour minimum for each trip. An estimated 90 percent
of the time, the hired car service drivers drove one of the cars leased
by SBA instead of using one of the hired car service's own vehicles. SBA
paid \$30/hour plus a 15 percent gratuity whether the driver used a
hired car service vehicle or a vehicle leased by SBA. When services were
provided to the Agency, the hired car service faxed an invoice to SBA
and charged the costs to a government credit card.

We examined:

-   the former Administrator's and former Deputy Administrator's
    itineraries and calendars from October 1, 1997, through January 20,
    2001,

-   requisition documents for the hired car service (SBA Form 2),

-   hired car services' company logs,

-   invoices from the hired car services,

-   government vehicle logs,

-   government credit card statements,

-   National Finance Center payroll records, and

-   documents used by SBA's Office of General Counsel to respond to your
    November 14, 2000, letter to the former Administrator.

To evaluate the use of the hired car services, we reviewed the
appropriate SBA Standard Operating Procedure, the GSA Travel
Regulations, and other available guidelines. We also interviewed hired
car service employees, SBA drivers, other SBA employees and GSA
officials.

**COST OF HIRED CAR SERVICES**

From October 1, 1997, to January 20, 2001, SBA's expenses for hired car
services were \$69,526. SBA's response to you concerning the amount
expended on hired car services for the period October 1, 1998, to
November 1, 2000 differed from the amount we determined for that same
time period by \$4,865. When we requested the details on the reported
costs, SBA re-developed the costs, and the new figure was \$4,588 more
than the amount provided in the December 12, 2000, letter to you. SBA's
re-calculation differed from the amount we determined by \$277. We do
not believe that the unreconciled difference of \$277 is material.

**HIRED CAR SERVICE COSTS**

  --------------- ---------- ------------ -------------- ------------ --------------
  **TIMEFRAME**   **ACTUAL   **SBA        **DIFFERENCE   **SBA        **DIFFERENCE
                  COST PER   RESPONSE**   FROM COST PER  UPDATE**     FROM COST PER
                  OIG**                   OIG**                       OIG**

  FY 1998         \$5,918    None         Not applicable Not          Not applicable
                                                         applicable   

  FY 1999         \$14,671   \$11,048     \$3,623        \$14,636     \$35

  FY 2000         \$40,289   \$39,047     \$1,242        \$40,047     \$242

  10/1/00 --      \$3,197    \$3,197      \$0            \$3,197      \$0
  11/1/00                                                             

  11/2/00 --      \$5,451    None         Not applicable Not          Not applicable
  1/20/01                                                applicable   

  **Total**       \$69,526   \$53,292     \$4,865        \$57,880     \$277
  --------------- ---------- ------------ -------------- ------------ --------------

**HOME-TO-WORK/WORK-TO-HOME WITH HIRED CAR SERVICES**

For the period October 1, 1997, through January 20, 2001, we identified
12 days where there were potential home-to-work/work-to-home trips the
former Administrator or former Deputy Administrator made with a hired
car service. Three of these days had been reported to the Committee in
SBA's letter,[^1] dated December 12, 2000. Therefore, we identified nine
additional days with potential trips that had not been reported by SBA.
The 12 potential instances we identified were within the period reported
by SBA, i.e., January 1, 1998, to November 1, 2000, and involved costs
of \$1,725. Of the nine days we identified that SBA did not report to
you:

-   In three instances, SBA identified these as potential
    home-to-work/work-to-home and questioned the former Administrator.
    The former Administrator informed the Office of General Counsel
    (OGC) that she drove her own vehicle. In comparing the SBA
    itineraries/drivers' notes on the bill to the hours billed, it
    appears that the hired driver was used in these instances.

-   In five instances, SBA did not identify these as
    home-to-work/work-to-home and therefore did not question the former
    Administrator. The former Administrator declined to be interviewed
    by the OIG.

-   In one instance, SBA did not identify this as
    home-to-work/work-to-home and therefore did not question the former
    Deputy Administrator. Since the itinerary for the day in question is
    missing, the appearance of home to work is based solely on general
    notations on the hired car services' billing to SBA, and as this was
    an isolated incident, we did not interview the former Deputy
    Administrator.

We identified four additional potential home-to-work/work-to-home trips
the former Administrator made with a hired driver that involved costs of
almost \$450. These instances occurred on days the former Administrator
either departed for or returned from an official trip requiring
overnight lodging. Pursuant to 41 CFR § 301-10.420, an agency may
authorize/approve reimbursement for home to work or work to home on
these days. In accordance with this regulation, SBA determined that, as
a general rule, SBA employees would not be reimbursed for home to work
transportation on a day travel is performed, except under certain
conditions set forth in SOP 20 11 4, "Travel," that justify the use of a
taxi when there is an overall advantage to the Government. SBA records
do not contain sufficient information to determine whether the four
trips in question fall under any of the enumerated conditions.

Due to the following limitations in the documentation, we must qualify
our results concerning home-to-work/work-to-home transportation. Our
conclusions are based on SBA daily itineraries and the information
included in car service billings. First, the itineraries reviewed may
not accurately reflect the events that actually transpired. Various SBA
officials informed us that these itineraries constantly changed, but SBA
employees did not always update the final itinerary. Second, some of the
itineraries could not be located, in particular, many of the former
Deputy Administrator's. Third, invoices from the hired car services did
not detail all the stops for each trip, and the hired car services did
not update changes to the SBA-provided itinerary. Lastly, since the
hired car services did not retain driver logs, there was no way to
independently verify the former Administrator's and former Deputy
Administrator's itineraries through these hired car services. We
requested a meeting with the former Administrator to discuss
home-to-work/work-to-home issues, but she informed us that an interview
with the OIG would not be productive, as she had already discussed these
matters in detail with the Office of General Counsel last Fall. Also,
given the additional passage of time and the absence of any personal
records that could provide more detail, the former Administrator
concluded that it would not be fruitful to discuss this matter further.
She also reiterated her view that the hired car services were used
appropriately and for official business, and that SBA records
documenting such use were not necessarily complete or accurate. We did
not attempt to interview the former Deputy Administrator.

**COST OF USING IN-HOUSE DRIVERS VERSUS HIRED CAR SERVICES**

While our analysis shows that it should have cost almost \$25,000 less
to have an in-house driver rather than the hired car services for the
former Administrator and former Deputy Administrator during Fiscal Years
1999 and 2000, this is based on assumptions that may not be fully
realizable. If SBA had used in-house drivers rather than the hired car
services, it would have spent approximately \$22,000 and \$8,000 for
driver salaries and fringe benefits for the time spent driving
government officials in Fiscal Years 2000 and 1999 respectively, rather
than the approximately \$40,000 and \$15,000 SBA paid the hired car
services those two years. The \$22,000 and \$8,000 were determined using
the average hourly wages for the two SBA drivers for Fiscal Year 1999,
including their actual overtime and fringe benefits, times the number of
hours billed by the hired car services for those two years. In
determining these costs, we made the following assumptions:

-   the employee would spend all time not needed for driving gainfully
    employed in SBA's mailroom or print shop, so that portion of his
    (her) salary and fringe benefits would not be included under driver
    expenses,

-   the number of hours charged by the hired car services would be the
    same number needed by an in-house driver, and

-   the amount of overtime the SBA drivers would need would remain the
    same if the hired car service was not used.

We did not factor in the cost of gas for the leased vehicles since the
hired drivers used these vehicles 90 percent of the time, and we
considered the difference to be de minimus.

Our analysis contrasts with SBA's estimate of \$64,180 to employ two
drivers per year. SBA's analysis was based on the premise that 80
percent of two drivers' time was needed to replace the hired car
services. This appears to be overstating the amount of time needed for
these positions. The hired car services billed SBA for approximately
1,168 hours in FY 2000, the year SBA hired the car services for the
entire year, or 56 percent of one employee's time, rather than 80
percent of two employees' time.

There are other issues that need to be considered before conclusions are
reached concerning future actions. While we made the assumption that a
driver could be gainfully employed in SBA's mailroom or print shop when
not needed to drive the car, there may not be specific work at those
specific times that an employee can work on and leave as necessary.
Further, SBA may not be able to hire a qualified employee for this
position. We were told that a reason that a driver position was not
filled was because no one to whom the position was offered accepted it
after learning that he/she would be on call 24 hours a day/seven days a
week. Conversely, while we used the number of hours billed by the hired
car services, the actual number of hours needed may actually be less.
For example, the car service charged a 3-hour minimum for trips from SBA
Headquarters to Ronald Reagan Washington National Airport. Roundtrip,
the distance is 10.2 miles, and can be completed in less than 30 minutes
during non-rush hour traffic.

\* \* \* \* \*

We are continuing our internal review in this area. We plan to make
recommendations to SBA to ensure that internal controls over the use of
hired car services and leased vehicles are adequate to improve
accountability, and that SBA recover any funds that were inappropriately
spent. Should you or your staff have any questions or need additional
information, please contact me at 205-6586 or Robert G. Seabrooks,
Assistant Inspector General for Auditing at

205-7203.

Sincerely,

> ![](media/image2.png){width="2.1368055555555556in"
> height="0.7097222222222223in"}

Phyllis K. Fong

Inspector General

cc: Honorable John F. Kerry

[^1]: SBA's letter reported five days, however, SBA's records reflected
    direct home-to-work/work-to-home trips for only three of these five
    days.