**SBA BUDGET REQUEST**

**AND**

**PERFORMANCE PLAN**

**FY 2003**

**CONGRESSIONAL SUBMISSION**

####### TABLE OF CONTENTS

EXECUTIVE SUMMARY [3](#executive-summary)

FY 2003 PERFORMANCE PLAN [11](#__RefHeading___Toc3175937)

Strategic Goal 1: Champion Small Business Interests
[12](#strategic-goal-1-champion-small-business-interests-1)

Strategic Goal 2: Empower Entrepreneurs
[15](#strategic-goal-2-empower-entrepreneurs)

Strategic Goal 3: Streamline Disaster Lending
[32](#__RefHeading___Toc3175940)

SBA's CORPORATE MANAGEMENT STRATEGIES [36](#__RefHeading___Toc3175941)

Strategy #1: Integrate Performance with the Budget
[37](#strategy-1-integrate-performance-with-the-budget)

Strategy #2: Manage Human Capital More Strategically
[38](#strategy-2-manage-human-capital-more-strategically)

Strategy #3: Improve Financial Management Information
[39](#strategy-3-improve-financial-management-information)

Strategy #4: Increase Competitive Sourcing
[40](#__RefHeading___Toc3175945)

Strategy #5: Expand E-Government [41](#__RefHeading___Toc3175946)

Strategy #6: Improve Credit Program Management
[43](#strategy-6-improve-credit-program-management)

Strategy #7: Improve IT Management
[51](#strategy-7-improve-it-management)

SUMMARY OF RESOURCES [54](#summary-of-resources)

Budget Crosswalk [55](#budget-crosswalk)

Summary of Budget Authority [57](#__RefHeading___Toc3175951)

Summary of Positions and Full Time Equivalents
[58](#summary-of-positions-and-full-time-equivalents)

Summary of Non Credit Programs & Special Initiatives
[59](#summary-of-non-credit-programs-special-initiatives)

Summary of Congressional Initiatives
[60](#summary-of-congressional-initiatives)

Summary of Credit Programs [62](#summary-of-credit-programs)

Justification of Changes from FY 2002 to FY 2003
[63](#__RefHeading___Toc3175956)

APPROPRIATIONS LANGUAGE AND DESCRIPTION
[76](#appropriations-language-and-description)

APPENDICES [96](#appendices)

Office of Inspector General Management Challenges
[98](#office-of-inspector-general-management-challenges-1)

Data Validation and Verification [109](#__RefHeading___Toc3175960)

Program Evaluation Plan [116](#program-evaluation-plan)

OFFICE OF INSPECTOR GENERAL [119](#office-of-inspector-general)

# EXECUTIVE SUMMARY

Small business is the foundation of our Nation's economy. It remains the
swiftest and surest way of achieving the American Dream, regardless of
one's beginnings. Small businesses serve as market laboratories for
conceiving, testing, and proving new ideas, accounting for more than
half of all innovation. The number of small businesses has increased 49
percent since 1982, and almost a quarter of U.S. households now are
starting a business, own a business or are investing in someone else's
business.

Small businesses:

-   Represent 99 percent of all employers and 51 percent of the private
    workforce,

-   Employ 38 percent of the private workers in the hi-tech field,

-   Provide three-quarters of all net new jobs,

-   Provide 50 percent of all private sector output, and

-   Represent 96 percent of all exporters.

In FY 2003, SBA will celebrate its 50^th^ Anniversary. Many of our
Nation's business success stories (e.g. Intel, FedEx, Ben & Jerry's,
etc.) were built on the foundation of varying forms of SBA assistance
(e.g. capital access, technical assistance, procurement assistance and
disaster relief). In its continuing effort to transform itself into a
more efficient and effective organization the Agency will be guided by
The President's Management Agenda, which includes the following:

-   [Strategic Management of Human Capital]{.underline}

> SBA will restructure its workforce to adapt to the changing needs of
> small businesses and the marketplace, reducing layers of management
> where necessary and relying upon private partners where appropriate.

-   [Competitive Sourcing]{.underline}

SBA will continue to identify and outsource, as warranted, those
activities that are not inherently governmental in nature.

-   [Improved Financial Performance]{.underline}

> SBA will build upon its sound financial management system through
> modernization and the integration of its Loan Monitoring System.

-   [Expanded Electronic Government]{.underline}

> SBA will play a leading role in the government-wide initiative to
> offer electronic services to citizens and small businesses.

-   [Budget and Performance Integration]{.underline}

> SBA will continue to become more transparent and accountable by
> focusing on results and managing its resources accordingly.

While The President's Management Agenda will provide guidance, SBA's
mission emanates from the Small Business Act , which charges the Agency
to:

> *"...aid, counsel, assist, and protect, insofar as is possible, the
> interests of small business concerns in order to preserve free
> competitive enterprise, to* *insure that a fair proportion of the
> total purchases and contracts or subcontracts for property and
> services for the Government...be placed with small business
> enterprises, to* *insure that a fair proportion of the total sales of
> Government property be made to such enterprises, and to maintain and
> strengthen the overall economy of the Nation."*

#### 

#### 

#### 

#### [SBA's Mission and Strategic Framework]{.underline}

A more vibrant small business sector is the product of the strategic
implementation of the SBA mission and is of critical importance to our
national economic growth and health. In pursuit of this mission, SBA
will pursue three major strategic goals:

1.  Champion Small Business Interests

2.  Empower Entrepreneurs

3.  Streamline Disaster Lending

######### Strategic Goal 1: Champion Small Business Interests

Small business is the foundation that supports the Nation's productive
capacity, stimulates innovation, and creates jobs. The SBA's success
rests upon its ability to stimulate economic growth while breaking down
the barriers to free competition. The SBA commits to listen to small
business concerns and the message from its varied partners through small
business trade association conferences and roundtables, through local,
county, and state conferences as well as statewide economic development
summits. SBA will act on behalf of small business needs and interests
and serve as a powerful voice in the policy arena. One of SBA's
objectives is to reduce the onerous legal and regulatory burden that
impacts the country's small businesses. The Agency will continue to
pursue and support legislation and regulations conducive to equity and
fairness and a strong small business community, including issues such as
access to capital, contract opportunities, entrepreneurial development,
pension reform, tax reduction, and health care.

**Strategic Goal 2: Empower Entrepreneurs**

Americans are the world's most prolific entrepreneurs. However, much of
this productive talent lies dormant without tools such as capital,
technical assistance, counseling, a solid business framework, and a
workable business plan. Together with its resource partners, SBA will
continue to provide these tools through a full range of responsive
programs for small businesses to start and expand. SBA will leverage the
resources of each partner to create a synergistic approach to increasing
capital access and to encouraging more business start-ups to help expand
the business playing field.

Strategic Goal 3: Streamline Disaster Lending

SBA has long been a major provider of disaster relief in the form of
access to capital. The September 11^th^ attacks have heightened SBA's
awareness of the need to continue to act in a more creative, responsive,
and efficient way. These tragic events challenged SBA to evaluate its
ability not only to provide assistance within a defined geographical
region, but also to respond to the widespread adverse economic impact to
this country's small business community. SBA met this challenge not only
by working through its resource partners (including the Small Business
Development Centers, SCORE and Women's Business Centers) to provide New
York with additional disaster assistance in less than 72 hours, but also
through an unprecedented nationwide expansion of its Economic Injury
Disaster Loan (EIDL) program. SBA will continue to innovate by providing
an electronic loan application process, streamlining the credit review
process, and expediting loan processing.

#### Managing for Results

Realizing the importance of transparency and accountability for its
results, SBA will deploy its resources in a way that increases its
impact on the small business community. SBA will not simply count the
activities that it undertakes; it will measure and monitor those program
outputs (i.e., the intermediate product of the Agency's activities) that
have demonstrable connections to service outcomes (i.e., the final
impact that citizens and small businesses seek). The graphic on page six
illustrates this connection between program results (i.e., outputs) and
performance goals (i.e., outcomes).

This illustration depicts a general production process whereby the
results of the Agency's activities lead to the achievement of the
Agency's goals for small business. The Agency first sets its performance
goals by identifying the desired impact it seeks to have on small
business. It then identifies the managerial outputs (i.e., results) that
lead to the desired service impacts. The required output levels
determine the activity the Agency must undertake to achieve its goals.
For example, in our logic model, based on available data, every \$33,000
in loans to small businesses leads to one job created. With this
information, we can reasonably extrapolate the number of jobs created
(our performance goal) from our loan dollar volume disbursed (the
program result).

While it is difficult to infer direct causal links between SBA program
results and performance outcomes, taken in the aggregate, SBA activities
can indeed be shown to contribute to the success of small business. This
is done, in part by conducting surveys that validate program impacts and
charting how business sustainability and job creation relate directly to
the availability of capital, credit and procurement opportunities.

**STRATEGIES AND MEANS FOR** **ACHIEVING PERFORMANCE GOALS**

+-------------------------+---------------+----------------------------+
| ***SBA PROGRAM          | ***CONTRIBUTE | ***THESE PERFORMANCE       |
| OUTPUTS***              | TO***         | GOALS***                   |
+-------------------------+---------------+----------------------------+
| **Strategic Goal 1:     |               |                            |
| Champion** **small**    |               |                            |
|                         |               |                            |
| **business**            |               |                            |
| **interests through     |               |                            |
| being**                 |               |                            |
|                         |               |                            |
| **a voice for small     |               |                            |
| business.**             |               |                            |
+-------------------------+---------------+----------------------------+
| > Small business        |               | > **Impacts On Small       |
| > advocacy              |               | > Business**               |
| >                       |               | >                          |
| > Small business        |               | > Regulatory savings       |
| > research              |               | >                          |
| >                       |               | > Reduced legal and        |
| > Regulatory impact     |               | > regulatory burden        |
| > analyses              |               | >                          |
| >                       |               | > Increased regulatory     |
| > State conferences and |               | > enforcement fairness     |
| > roundtables           |               | >                          |
| >                       |               | > Strengthened small       |
| > Ombudsman hearings    |               | > business sector          |
| >                       |               | >                          |
| > Federal regulatory    |               | > Increased customer       |
| > reviews               |               | > satisfaction             |
| >                       |               | >                          |
| > Electronic            |               | > Increased small business |
| > information and       |               | > jobs                     |
| > assistance            |               | >                          |
|                         |               | > Increased small business |
|                         |               | > ownership diversity and  |
|                         |               | > growth in economically   |
|                         |               | > distressed areas         |
|                         |               | >                          |
|                         |               | > Increased number of      |
|                         |               | > start-ups                |
|                         |               | >                          |
|                         |               | > Increased client firm    |
|                         |               | > survival rates           |
|                         |               | >                          |
|                         |               | > Increased share of       |
|                         |               | > Federal procurement to   |
|                         |               | > small businesses and     |
|                         |               | > targeted groups          |
|                         |               | >                          |
|                         |               | > Increased small business |
|                         |               | > export sales             |
|                         |               | >                          |
|                         |               | > Improved 8(a) firms      |
|                         |               | > success rate             |
|                         |               | >                          |
|                         |               | > Increased                |
|                         |               | > commercialization rate   |
|                         |               | > of SBIR projects         |
+-------------------------+---------------+----------------------------+
| Strategic Goal 2:       |               |                            |
| Empower entrepreneurs   |               |                            |
| through access to       |               |                            |
| capital and credit,     |               |                            |
| procurement             |               |                            |
| opportunities and       |               |                            |
| entrepreneurial         |               |                            |
| development assistance. |               |                            |
+-------------------------+---------------+----------------------------+
|                         |               |                            |
+-------------------------+---------------+----------------------------+
| > Business loans        |               |                            |
| >                       |               |                            |
| > Equity financings     |               |                            |
| >                       |               |                            |
| > Surety bond           |               |                            |
| > guarantees            |               |                            |
| >                       |               |                            |
| > Export credit         |               |                            |
| >                       |               |                            |
| > Certification of      |               |                            |
| > small disadvantaged   |               |                            |
| > businesses            |               |                            |
| >                       |               |                            |
| > Certification and     |               |                            |
| > development of 8(a)   |               |                            |
| > firms                 |               |                            |
|                         |               |                            |
| Federal small business  |               |                            |
| procurement             |               |                            |
|                         |               |                            |
| SBIR grants             |               |                            |
|                         |               |                            |
| > Education             |               |                            |
| >                       |               |                            |
| > Counseling            |               |                            |
| >                       |               |                            |
| > Training              |               |                            |
+-------------------------+---------------+----------------------------+
|                         |               |                            |
+-------------------------+---------------+----------------------------+
| **Strategic Goal 3:     |               | Restored housing &         |
| Streamline**            |               | businesses                 |
| **disaster**            |               |                            |
| **lending.**            |               | Jobs retained              |
|                         |               |                            |
|                         |               | Increased survival of      |
|                         |               | businesses                 |
|                         |               |                            |
|                         |               | > Customer satisfaction    |
+-------------------------+---------------+----------------------------+
| > Disaster loans to     |               |                            |
| > families              |               |                            |
| >                       |               |                            |
| > Disaster loans to     |               |                            |
| > businesses            |               |                            |
| >                       |               |                            |
| > Timely response       |               |                            |
| >                       |               |                            |
| > Reduced application & |               |                            |
| > approval time         |               |                            |
+-------------------------+---------------+----------------------------+

  -------------------------- ------------- -------------------------------
                                           

                                           

                                           

                                           

                                           

                                           

                                           

                                           

                                           

                                           

                                           

                                           

                                           
  -------------------------- ------------- -------------------------------

The Performance Scorecard shown below maps the Agency's performance
indicators to its strategic goals, summarizes its progress made over the
past 3 years, and presents the goals for the current and subsequent
fiscal years. SBA pledges to identify innovative and cost effective
solutions to improve its service delivery. The President's Management
Agenda will serve as the primary guide in this improvement process, with
a greater emphasis on expanding Internet applications, outsourcing
service delivery, modernizing loan monitoring, and further integrating
budget allocation and performance.

**SBA's STRATEGIC GOALS AND PERFORMANCE INDICATORS**

+-------------------------------------+-----+-----+-----+-----+-----+
|                                     | *   | *   | *   | *   | *   |
|                                     | *FY | *FY | *FY | *FY | *FY |
|                                     | 199 | 200 | 200 | 200 | 200 |
|                                     | 9** | 0** | 1** | 2** | 3** |
+-------------------------------------+-----+-----+-----+-----+-----+
| **Description**                     | *   | *   | *   | *   | *   |
|                                     | *Ac | *Ac | *Ac | *Ta | *Ta |
|                                     | tua | tua | tua | rge | rge |
|                                     | l** | l** | l** | t** | t** |
+-------------------------------------+-----+-----+-----+-----+-----+
| **Strategic Goal 1: Champion Small  |     |     |     |     |     |
| Business Interests**                |     |     |     |     |     |
+-------------------------------------+-----+-----+-----+-----+-----+
| 1.  Regulatory cost savings to      | \$4 | \$3 | \$4 | \   | \$3 |
|     small businesses                | .3B | .6B | .4B | $3. | .0B |
|                                     |     |     |     | 5B[ |     |
|                                     |     |     |     | ^1] |     |
+-------------------------------------+-----+-----+-----+-----+-----+
| **Strategic Goal 2: Empower         |     |     |     |     |     |
| Entrepreneurs**                     |     |     |     |     |     |
+-------------------------------------+-----+-----+-----+-----+-----+
| 2.  Start-ups receiving 7(a) and    | 16, | 16, | 14, | 16, | 15, |
|     504 financing                   | 120 | 630 | 283 | 194 | 480 |
+-------------------------------------+-----+-----+-----+-----+-----+
| 3.  Start-ups receiving 7(a) and    | 69% | 69% | 69% | 70% | 71% |
|     504 loans viable 3 years after  |     |     |     |     |     |
|     receiving loan                  |     |     |     |     |     |
+-------------------------------------+-----+-----+-----+-----+-----+
| 4.  7(a) and 504 loans that go to   | 12, | 12, | 12, | 12, | 12, |
|     minority-owed firms             | 127 | 120 | 009 | 009 | 900 |
+-------------------------------------+-----+-----+-----+-----+-----+
| 5.  Export sales through SBA        | \$3 | \$6 | \$6 | \$5 | \$5 |
|     assistance                      | 49M | 75M | 08M | 37M | 50M |
+-------------------------------------+-----+-----+-----+-----+-----+
| 6.  8(a) firms viable 3 years after | 68% | 65% | TBD | 70% | 70% |
|     graduation                      |     |     |     |     |     |
+-------------------------------------+-----+-----+-----+-----+-----+
| 7.  Jobs created by 7(a) and 504    | 3   | 3   | 3   | 4   | 3   |
|     borrowers                       | 73, | 79, | 74, | 08, | 02, |
|                                     | 143 | 481 | 441 | 172 | 720 |
+-------------------------------------+-----+-----+-----+-----+-----+
| 8.  Jobs created/sustained by SBIC  | 1   | 1   | 1   | 1   | 1   |
|     clients                         | 20, | 60, | 20, | 48, | 42, |
|                                     | 000 | 000 | 000 | 571 | 857 |
+-------------------------------------+-----+-----+-----+-----+-----+
| 9.  Jobs created by SBDC clients    | 70, | 60, | N/A | 50, | 52, |
|                                     | 398 | 395 |     | 000 | 500 |
+-------------------------------------+-----+-----+-----+-----+-----+
| *Federal prime contract dollars:*   |     |     |     |     |     |
| [^2]                                |     |     |     |     |     |
+-------------------------------------+-----+-----+-----+-----+-----+
| 10. To small businesses             | 23  | 22  | 22  | 23  | 23  |
|                                     | .1% | .3% | .0% | .0% | .0% |
+-------------------------------------+-----+-----+-----+-----+-----+
| 11. To women-owned firms            | 2   | 2   | 2   | 5   | 5   |
|                                     | .3% | .3% | .0% | .0% | .0% |
+-------------------------------------+-----+-----+-----+-----+-----+
| 12. To small disadvantaged-owned    | 6   | 6   | 6   | 5   | 5   |
|     firms                           | .5% | .5% | .0% | .0% | .0% |
+-------------------------------------+-----+-----+-----+-----+-----+
| 13. To service disabled             | N/A | N/A | 0   | 3   | 3   |
|     veteran-owned firms             |     |     | .1% | .0% | .0% |
+-------------------------------------+-----+-----+-----+-----+-----+
| 14. To HUBZone-certified firms      | N/A | 0   | 0   | 2   | 3   |
|                                     |     | .3% | .5% | .5% | .0% |
+-------------------------------------+-----+-----+-----+-----+-----+
| **Strategic Goal 3: Streamline      |     |     |     |     |     |
| Disaster Lending**                  |     |     |     |     |     |
+-------------------------------------+-----+-----+-----+-----+-----+
| 15. Homes restored to pre-disaster  | 28, | 23, | 43, | 31, | 30, |
|     conditions                      | 811 | 070 | 519 | 853 | 618 |
+-------------------------------------+-----+-----+-----+-----+-----+
| 16. Businesses restored to          | 7,  | 5,  | 5,  | 7,  | 6,  |
|     pre-disaster conditions         | 365 | 148 | 275 | 011 | 116 |
+-------------------------------------+-----+-----+-----+-----+-----+
| 17. SBA field presence within 3     | 1   | 1   | 1   | 98% | 1   |
|     days                            | 00% | 00% | 00% |     | 00% |
+-------------------------------------+-----+-----+-----+-----+-----+
| 18. Loan applications processed     | 60% | 91% | 94% | 80% | 85% |
|     within 21 days                  |     |     |     |     |     |
+-------------------------------------+-----+-----+-----+-----+-----+
| 19. Customer satisfaction           | N/A | 81% | N/A | 80% | 80% |
+-------------------------------------+-----+-----+-----+-----+-----+

**HIGHLIGHTS**

The President's FY 2003 Budget request for SBA encourages
entrepreneurial activity and growth while providing improved customer
service and savings to the taxpayer. Combining \$35 million from
anticipated carryover balances and recoveries in the Disaster Loan
Programs account with a budget request of \$798 million, which includes
\$18 million for pension benefits previously funded through OPM, SBA
will be able to offer more than \$17 billion in capital and credit
assistance to small businesses and to disaster victims. This budget
request also includes funds to provide management and technical
assistance as well as procurement support to the small business
community. Finally, the FY 2003 budget request includes funding to
implement the President's core management initiatives to create an SBA
that is citizen-centered, market-based, and results-oriented.

#### Presidential Initiatives

The President's FY 2003 Budget request contains several specific program
initiatives that represent his agenda for small business.

-   To complement the celebration of SBA's 50^th^ Anniversary in FY 2003
    and to solicit small business input into the Agency's policy and
    program agenda, the Administration is proposing to initiate a series
    of conferences that will culminate in a national celebration of
    small business. SBA has requested \$1.5 million in funding to
    support involvement with these events starting in FY 2003.

-   To support one of the President's 23 E-Government initiatives to
    create a Government that is more citizen-centered, SBA is requesting
    \$5 million to lead the Federal Government's interagency effort to
    build a portal that reduces the burden of laws and regulations on
    small business. This Business Compliance One-Stop on the Internet
    will build upon SBA's *BusinessLaw.gov* and help small entrepreneurs
    find, understand, and comply with Federal, state, and local laws and
    regulations. The new tool will also offer access to online licensing
    and permitting.

-   To specifically address the small business needs of Native
    Americans, especially those living on reservations, SBA is
    requesting \$1 million to encourage and train entrepreneurs to
    start, grow and expand small businesses within these communities.
    This will support the stimulation of these local economies through
    job creation.

```{=html}
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-   To link resources more closely to results, SBA is requesting
    \$850,000 to evaluate its program services to ensure they are
    meeting the needs of small business customers and that these
    services are being delivered in the most cost effective and
    efficient manner. With the continuing emphasis on tying resources to
    results under the Government Performance and Results Act, SBA must
    ensure that its key delivery programs, especially those that rely on
    private-sector partnerships, produce value for the taxpayer.

```{=html}
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```
-   To restructure its workforce and ensure competitive sourcing, SBA is
    requesting \$15 million. In FY 2002 SBA will further refine its
    5-year modernization plan and initiate selected pilot projects to
    test and quantify the costs and benefits of various programs to
    improve delivery of services to its customers. This will position
    SBA to make the necessary changes to its programs and delivery
    network. In FY 2003 SBA will implement the successes of the pilot
    program. The \$15 million will fund costs including expansion of
    telecommuting, consolidation of loan servicing centers, relocating
    and retraining employees, and reconfiguration and reduction of
    office space. These expenditures will result in significant cost
    savings in the out years.

```{=html}
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```
-   SBA is requesting \$3.55 million to upgrade its infrastructure in
    support of all of its programs and services and to ensure increased
    security over Federal computer systems. Included in this request is
    \$750,000 to implement an e-documents management system to retain
    and administer SBA's electronic records and \$2.8 million to
    increase system security and improve the infrastructure.

#### Additional Proposals

-   **Budget authority of \$85.36 million for 7(a) loan program.**

The SBA has changed its subsidy rate calculation method for the 7(a)
loan program to more accurately reflect changes in the program over
time. The new calculation method, which weights Preferred Lender loans
in proportion to participation in the program, produced a subsidy rate
estimate of .88 percent - a 20 percent decrease. However, P.L. 107-100
subsequently reduced the fees paid by borrowers and lenders for a
two-year period beginning in October 2002, causing the recently reduced
subsidy rate to double to 1.76 percent. With the requested appropriation
of \$85.36 million for FY 2003, this results in a 7(a) program level of
\$4.85 billion in lending.

> While this statutory change ostensibly poses a significant challenge
> to SBA in meeting increasing loan demand, SBA believes that other
> recent legislation may help it meet this challenge. The combined
> budget authority for the 7(a) program in FY 2002 is \$175 million,
> which includes SBA's annual appropriation of \$78 million, the
> supplemental appropriation of \$75 million, and carryover from FY 2001
> of \$22 million. While the supplemental 7(a) program is executed at a
> different subsidy rate than the regular program (1.67 percent versus
> 1.07 percent, respectively), the total 7(a) loan volume for FY 2002
> equates to \$13.84 billion. Adding this amount to the FY 2003 program
> level of \$4.85 billion produces a two-year program level of \$18.69
> billion, or an annual average of \$9.34 billion, which is consistent
> with historical levels.
>
> Consistent with its strategic goal of empowering entrepreneurs, SBA
> believes that 7(a) resources can be strategically targeted to serve
> those small businesses that have the greatest need. SBA will explore
> creative adaptations to make the 7(a) program more efficient and
> effective. Some adaptations SBA is considering include the increased
> use of the 504 program to finance larger loans for real estate and
> long term capital equipment investment, targeting smaller loans, and
> leveraging resources through the support of state-based Capital Access
> Programs (CAP).

-   

-   

-   

-   

-   

-   

-   

-   **Save taxpayers \$37 million by eliminating redundant and
    duplicative programs.**

> SBA is not seeking funding in FY 2003 for the Program for Investment
> in Microenterprise (PRIME), funded in FY 2002 at \$5 million; the
> Business Learning-Investment-Networking and Collaboration
> (BusinessLINC) program, funded in FY 2002 at \$2 million and
> congressional initiates funded in FY 2002 at \$30 million. These
> changes will free \$37 million allowing SBA to focus on providing a
> greater level of service through its proven core programs. SBA
> services will be improved through the elimination of programs that
> duplicate other Federal, state, local or private-sector services to
> small business.

In summary, SBA's request of \$798 million represents a responsible and
responsive funding level to appropriately serve the needs of America's
small businesses in FY 2003. This budget builds on the President's tax
proposal and other policies to revitalize the economy, invest in human
capital, increase customer satisfaction through expanded electronic
tools, and increase government transparency and accountability. This is
what the President demands and small business deserves.

# 

# 

# 

# 

# FY 2003 PERFORMANCE PLAN 

#### FY 2003 PERFORMANCE PLAN 

## Strategic Goal 1: Champion Small Business Interests

#### 

#### Means and Strategies:

SBA has three major strategies to champion small business interests.
First, SBA is a voice for small business, reaching out to small
businesses to ask what they need and want. The Agency raises small
business concerns to the highest levels of Government, and acts as an
advocate in the legislative and regulatory areas to break down barriers
to small business success. SBA speaks out on issues of major concern to
small business, e.g., pension reform, tax reduction, health care, legal
and regulatory redress, and barriers to international trade.

Second, SBA encourages Federal agencies to treat small businesses
equitably and fairly. Examples include the National Ombudsman's efforts
to make Federal agencies consider the impact of their regulatory
enforcement and compliance processes on small businesses.

Third, SBA is committed to serving the needs of the Nation's 25 million
small businesses by providing information, program
services/transactions, and knowledge through the Internet. With more
than 2 out of 3 small business owners using the Internet, SBA is
expanding its 24/7 access through Internet tools that are
solution-driven.

Results and Resources

+--------------------------+------+-----+------+-------+-----+------+
|                          | **FY | *   | **FY | **FY  | *   | **FY |
|                          | 19   | *FY | 20   | 2     | *FY | 20   |
|                          | 98** | 199 | 00** | 001** | 200 | 03** |
|                          |      | 9** |      |       | 2** |      |
+--------------------------+------+-----+------+-------+-----+------+
| ######                   | **   | *   | **   | **Act | *   | **   |
|                          | Actu | *Ac | Actu | ual** | *Ta | Targ |
|                          | al** | tua | al** |       | rge | et** |
|                          |      | l** |      |       | t** |      |
+--------------------------+------+-----+------+-------+-----+------+
| *Results:*               |      |     |      |       |     |      |
+--------------------------+------+-----+------+-------+-----+------+
| Regulatory cost savings  | \$   | \$4 | \$   | \     | \$3 | \$   |
| to small businesses      | 3.2B | .3B | 3.6B | $4.4B | .5B | 3.0B |
+--------------------------+------+-----+------+-------+-----+------+
|                          |      |     |      |       |     |      |
+--------------------------+------+-----+------+-------+-----+------+
| *Resources (\$000):*     |      |     |      |       |     |      |
+--------------------------+------+-----+------+-------+-----+------+
| > Office of Advocacy     | \$   | \$  | \$   | \$    | \$  | \$   |
|                          | 4    | 4,  | 4    | 4,146 | 4,  | 5    |
|                          | ,079 | 334 | ,480 |       | 920 | ,642 |
+--------------------------+------+-----+------+-------+-----+------+
| Advocacy Database &      | 790  | 800 | 1    | 1,297 | 1,  | 1    |
| Research                 |      |     | ,140 |       | 100 | ,100 |
+--------------------------+------+-----+------+-------+-----+------+
| > National Ombudsman     | 351  | 524 | 514  | 554   | 500 | 500  |
+--------------------------+------+-----+------+-------+-----+------+
| > Business Compliance    | 0    | 0   | 0    | 0     | 200 | 5    |
| > 1-stop portal          |      |     |      |       |     | ,000 |
| > shopusinesslaw.gov     |      |     |      |       |     |      |
+--------------------------+------+-----+------+-------+-----+------+
| > Evaluations            | 0    | 0   | 0    | 90    | 0   | 850  |
+--------------------------+------+-----+------+-------+-----+------+
| > White House/ State     | 0    | 0   | 0    | 0     | 0   | 1    |
| > Conferences            |      |     |      |       |     | ,500 |
+--------------------------+------+-----+------+-------+-----+------+
| > Agency Support Cost    | N/A  | N/A | 2    | 2,396 | 2,  | 2    |
| > Estimates              |      |     | ,289 |       | 789 | ,545 |
+--------------------------+------+-----+------+-------+-----+------+
|                          |      |     |      |       |     |      |
+--------------------------+------+-----+------+-------+-----+------+
| Total                    | \$   | \$  | \$8  | \$    | \$  | \$   |
|                          | 5    | 5,  | ,423 | 8,803 | 9,  | 17   |
|                          | ,220 | 658 |      |       | 509 | ,137 |
+--------------------------+------+-----+------+-------+-----+------+

### Major Accomplishments in FY 2001:

-   [Legislative Changes]{.underline}. SBA's Office of Advocacy
    estimates it saved small businesses \$4.4 billion through its
    legislative and regulatory agenda. Activities that resulted in
    savings came from collaboration with the Departments of Labor and
    Interior, EPA, and OSHA.

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-   [Regulatory Fairness]{.underline}. The National Ombudsman solicited
    comments from small business concerns regarding the regulatory
    enforcement practices used by Federal agencies. Information was used
    to provide feedback to Federal regulatory agencies on improving the
    enforcement and compliance environment.

### Major Activities for FY 2003:

-   [Impact Studies]{.underline}. SBA will continue to reduce the
    regulatory burden to small business encouraging agencies to analyze
    the impact of proposed regulations on small businesses before they
    are published and review and comment on proposed rules as they move
    through the Regulatory Flexibility Act and Administrative Procedures
    Act processes.

-   [Economic Research]{.underline}. SBA will continue to research the
    impact on small business of emerging issues such as a tight labor
    market, barriers to small companies providing health insurance,
    anti-competitive Internet practices, cyber-crime, the overall cost
    of regulations, small business growth patterns, and pension reforms.

-   [Analyze and Propose Legislative Changes]{.underline}. SBA will
    continue to analyze and advocate legislative initiatives from a
    small business perspective.

-   [White House]{.underline} [and State Conferences]{.underline}. To
    serve small business well, SBA must listen to small business
    concerns. The recognition activities of SBA's conferences will
    increase the awareness of small business needs and encourage
    discussions on how to best improve assistance to small business in
    carrying out its role as the Nation's top job creator.

-   (?)

-   [Regulatory Fairness]{.underline}. SBA's National Ombudsman and the
    Federal Regional Regulatory Fairness Boards will convene hearings
    and roundtables throughout the country. The National Ombudsman will
    solicit testimony from small business concerns regarding the
    regulatory enforcement practices used by Federal agencies. Feedback
    from these hearings will be posted on the Ombudsman website and used
    to rate Federal agencies on their small business enforcement
    practices. Information will also be used to make the Federal
    regulatory enforcement and compliance environment more small
    business friendly.

-   (\$500,000)

-   [Business Compliance One-Stop]{.underline}. The primary goal in
    developing this Internet portal (*BusinessLaw.gov*) is to continue
    to help small businesses find, understand, and comply with laws and
    regulations. To avoid significant costs in time and penalties, the
    small business owner must figure out which laws and regulations
    apply to his/her business, understand what is required, and then
    act. It is a tedious and often costly task, complicated in part
    because the rules are imposed by numerous agencies at all levels of
    Government: Federal, state and local. The first phase of this portal
    was unveiled in December 2001. The second phase, is a multi-agency,
    intergovernmental effort managed by SBA as part of the
    Administration's QuickSilver E-Gov initiatives to create a
    client-centered government. These initiatives will enable small
    business to secure licenses and permits over the Internet.

-   [Public/Private Partnerships]{.underline}. The primary goal is to
    increase the leverage of SBA\'s programs and resources by acting as
    a catalyst and coordinator to promote public/private partnerships.
    Partners include Federal agencies, state, county, and local
    governments, financial institutions, large corporations, educational
    institutions, non-profit organizations, and business trade
    associations.

### Cross-Cutting Issues:

Serving as a voice for small business, reviewing agency regulatory
proposals for small business impact, and serving as the guardian for
regulatory fairness require close collaboration with major Federal
regulatory agencies. In all, the Office of Advocacy monitors the
regulatory proposals of Federal agencies, as well as administration
policies and congressional initiatives that effect small business.

The Office of the National Ombudsman, by statute, works with the 34
Federal Regulatory agencies covered under SBREFA to effect changes in
Federal regulatory compliance and enforcement processes to reduce their
negative impact on small businesses.

### Critical External Factors:

Critical success factors for the Office of the National Ombudsman are
successful integration into SBA field functions, active participation by
the 50 Board members, more effective use of the Internet, and partnering
with regulatory agencies. Other critical success factors for championing
the interests of small business include developing productive
public-private sector partnerships and a good collaborative relationship
with trade associations.

## Strategic Goal 2: Empower Entrepreneurs 

### Means and Strategies:

The SBA sponsors a number of programs that provide services directly to
clients. The overarching goals for these programs empower entrepreneurs
and help small business clients become viable in a competitive
marketplace.

SBA has something to offer to *all* small businesses but seeks
especially to reach those that need help the most. Major impediments to
small business success include inadequate access to financing, limited
management and technical assistance, lack of procurement assistance and
certification and development assistance. SBA programs provide access to
loans and equity; contract and procurement assistance; and counseling,
education, information, and training. The outcomes of these programs are
job creation, revenue generation, business longevity and contracting.
The SBA accomplishes these goals through three principal program areas:
Capital and Credit, Procurement, and Entrepreneurial Development.

### I. Programs that support small business capital and credit needs:

Small businesses cite inadequate access to capital and credit on
reasonable terms as a serious impediment to start-up and growth. One of
SBA's objectives is to expand the parameters within which a conventional
lender can make a small business loan. As the Nation's preeminent "gap
lender" for small business, SBA identifies and helps to fill the credit
gap in the commercial marketplace. SBA guarantees funding for: longer
terms; new start-up businesses in emerging industries; businesses with
lower levels of collateral; and businesses with limited track records,
all of which are credit-worthy but not readily served in the
conventional credit marketplace.

One way that SBA measures the performance of these programs is by
tracking the number of start-ups financed that survive for three years,
and the growth of firms measured by job creation that have obtained SBA
debt or equity financing.

SBA delivers financial assistance programs through a network of field
offices and lending partners, who work with small businesses on a
one-to-one basis. SBA also processes many of its loans through
centralized processing centers located in Sacramento, California and
Hazard, Kentucky, relying on its lending partners for credit decisions.

SBA products currently include:

-   [General Business 7(a) Loan Guaranty Program]{.underline}. SBA
    guarantees small business loans of up to \$1 million (with a maximum
    loan size of \$2 million) for virtually every business purpose. The
    guaranty can be for as much as 85 percent on loans of \$150,000 or
    less and 75 percent on loans of more than \$150,000. Borrowers may
    have more than one SBA loan at a time, as long as the total amount
    guaranteed does not exceed the SBA's guaranty cap of \$1 million.
    The only exceptions to these limits are for loans approved under the
    Export Working Capital Program (which receive a guaranty of up to 90
    percent), and the Defense Loan and Technical Assistance (DELTA) Loan
    Program.

-   [504 Certified Development Company (CDC) Loans]{.underline}. This
    program provides small businesses with long-term, fixed-rate
    financing for the purchase of land, buildings and long-life capital
    equipment. SBA fully guarantees (at 100 percent) debentures issued
    by the CDC for up to 40 percent of the project cost not to exceed
    \$1.0 million or \$1.3 million for projects that meet specific
    public policy purposes. The remaining 60 percent is provided by
    borrower injection (10-20 percent) and private capital sources.

-   [Microloans]{.underline}. These loans provide capital to small
    businesses that traditional lenders historically have not served.
    SBA makes loans up to \$750,000 to intermediaries who in turn make
    very small loans (\$35,000 and under) available to entrepreneurs
    traditionally considered unbankable because of inexperience with
    credit, lack of assets, or the need for technical assistance. A key
    component of the Microloan program is the intermediary's ability to
    provide technical assistance to the micro-business, through SBA
    grants.

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-   [United States Export Assistance Centers (USEACs)]{.underline}. SBA,
    the Department of Commerce, the Ex-Im Bank and the U.S. Department
    of Agriculture jointly staff these one-stop trade promotion and
    export finance assistance centers located in 19 cities across the
    country.

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-   [Small Business Investment Company (SBIC) Program]{.underline}.
    SBICs serve one of the most important missions of the Agency-
    helping qualified small enterprises secure equity to start, maintain
    or grow a business. The SBIC program facilitates the formation of
    privately-owned and operated investment companies as sources of
    equity capital and long-term debt financing to new or expanding
    small businesses; and supplementing investment companies' private
    capital with funds made available through SBA guarantees. SBICs are
    licensed and regulated by the SBA. SBICs use their own funds, plus
    funds from borrowing with an SBA guaranty, referred to as
    "leverage," to make venture capital investments in small business.
    The entire private capital of an SBIC is placed at risk ahead of the
    funding guaranteed by the SBA.

-   [New Market Venture Capital (NMVC) Program]{.underline}. This
    program provides equity-type capital and operational assistance
    funds to small businesses located in defined low-income areas. The
    program is modeled on the SBIC program but also includes grant
    awards to the NMVC companies to allow for more intensive technical
    assistance.

-   [Surety Bond Guarantee Program]{.underline}. This program issues
    bid, payment and performance bond guarantees to surety companies for
    construction, service and supply contracts that do not exceed \$2
    million. SBA's guarantees provide sureties necessary incentives to
    issue bonds to small contractors who could not otherwise compete in
    the contracting industry.

Results and Resources

*(Dollars in thousands based on* *net* *loan approvals*[^3]*)*

+---------------------------+------+------+------+------+------+------+
|                           | **FY | **FY | **FY | **FY | **FY | **FY |
|                           | 19   | 19   | 20   | 20   | 20   | 20   |
|                           | 98** | 99** | 00** | 01** | 02** | 03** |
+---------------------------+------+------+------+------+------+------+
|                           | **   | **   | **   | **   | **   | **   |
|                           | Actu | Actu | Actu | Actu | Targ | Targ |
|                           | al** | al** | al** | al** | et** | et** |
+---------------------------+------+------+------+------+------+------+
| *Results*:                |      |      |      |      |      |      |
+---------------------------+------+------+------+------+------+------+
| > Start-up firms          | 16   | 16   | 16   | 14   | 16   | 15   |
| > obtaining 7(a) and 504  | ,640 | ,120 | ,630 | ,283 | ,194 | ,480 |
| > financing               |      |      |      |      |      |      |
+---------------------------+------+------+------+------+------+------+
| > Start-up firms with     | 70%  | 69%  | 69%  | 69%  | 70%  | 71%  |
| > 7(a) and 504 financing  |      |      |      |      |      |      |
| > surviving three         |      |      |      |      |      |      |
| > years[^4]               |      |      |      |      |      |      |
+---------------------------+------+------+------+------+------+------+
| > Export sales through    | \    | \    | \    | \    | \    | \    |
| > financing & other SBA   | $413 | $349 | $675 | $608 | $537 | $550 |
| > assistance              | ,000 | ,000 | ,000 | ,000 | ,000 | ,000 |
|                           |      |      |      | [^5] |      |      |
+---------------------------+------+------+------+------+------+------+
| Jobs created by SBA 7(a)  | 278  | 313, | 324  | 305  | 324  | 209  |
| borrowers [^6]            | ,426 | 322  | ,964 | ,509 | ,254 | ,993 |
+---------------------------+------+------+------+------+------+------+
| Jobs created by SBA 504   | 53   | 59   | 54   | 68   | 83   | 98   |
| borrowers                 | ,288 | ,821 | ,517 | ,932 | ,918 | ,903 |
+---------------------------+------+------+------+------+------+------+
| Jobs created/sustained by | 91   | 120  | 160  | 120  | 148  | 142  |
| SBIC                      | ,429 | ,000 | ,000 | ,000 | ,571 | ,857 |
+---------------------------+------+------+------+------+------+------+
| *Outputs:*                |      |      |      |      |      |      |
+---------------------------+------+------+------+------+------+------+
| > Number of 7(a) loans    | 42   | 43   | 43   | 42   | 4    | 4    |
| > approved                | ,270 | ,636 | ,748 | ,958 | 7,50 | 4,00 |
|                           |      |      |      |      | 0^5^ | 0^6^ |
+---------------------------+------+------+------+------+------+------+
| > Number of 504 loans     | 4    | 5    | 4    | 5    | 6    | 7    |
| > (gross)                 | ,930 | ,284 | ,565 | ,213 | ,480 | ,600 |
+---------------------------+------+------+------+------+------+------+
| > Dollar volume of 7(a)   | \$   | \$   | \$   | \$   | \$1  | \$   |
| > loans (net)             | 8.5B | 9.5B | 9.7B | 9.1B | 0.5B | 6.8B |
+---------------------------+------+------+------+------+------+------+
| > Dollar volume of 504    | \$   | \$   | \$   | \$   | \$   | \$   |
| > loans (net)             | 1.8B | 2.0B | 1.8B | 2.3B | 2.8B | 3.3B |
+---------------------------+------+------+------+------+------+------+
| > Number of 7(a) & 504    | 11   | 10   | 9    | 9    | 12   | 12   |
| > loans to women          | ,108 | ,244 | ,921 | ,969 | ,457 | ,500 |
+---------------------------+------+------+------+------+------+------+
| > Number of 7(a) & 504    | 5    | 5    | 5    | 5    | 5    | 5    |
| > loans to veterans       | ,915 | ,477 | ,215 | ,099 | ,099 | ,676 |
+---------------------------+------+------+------+------+------+------+
| > Number of 7(a) & 504    | 10   | 12   | 12   | 12   | 12   | 12   |
| > loans to minorities     | ,897 | ,127 | ,120 | ,009 | ,009 | ,900 |
+---------------------------+------+------+------+------+------+------+
| > Number of 7(a) and 504  | 16   | 16   | 14   | 14   | 16   | 15   |
| > loans to start-ups      | ,640 | ,120 | ,450 | ,283 | ,194 | ,480 |
+---------------------------+------+------+------+------+------+------+
| > SBIC financing to       | 1    | 1    | 2    | 1    | 1    | 1    |
| > start-ups               | ,456 | ,169 | ,180 | ,700 | ,800 | ,800 |
+---------------------------+------+------+------+------+------+------+
| > Dollars of 7(a) and 504 | N/A  | N/A  | N/A  | \$   | \$   | \$   |
| > loans to start-ups      |      |      |      | 2.9B | 3.3B | 2.5B |
+---------------------------+------+------+------+------+------+------+
| > Dollars of SBIC         | \$   | \$   | \$   | \$   | \$   | \$   |
| > financing to start-ups  | 1.6B | 1.8B | 2.7B | 2.0B | 2.1B | 2.3B |
+---------------------------+------+------+------+------+------+------+
| > Number of 7(a) loans    | 26   | 26   | 26   | 27   | 25   | 28   |
| > below \$150,000         | ,002 | ,464 | ,227 | ,107 | ,900 | ,000 |
+---------------------------+------+------+------+------+------+------+
| > Dollars of 7(a) loans   | \$   | \$   | \$   | \$   | \$   | \$   |
| > below \$150,000         | 1.8B | 1.9B | 1.9B | 2.0B | 2.0B | 2.1B |
+---------------------------+------+------+------+------+------+------+
| > Number of Microloans    | 1    | 1    | 2    | 2    | 2    | 2    |
|                           | ,091 | ,434 | ,107 | ,295 | ,200 | ,200 |
+---------------------------+------+------+------+------+------+------+
| > Number of Surety Bonds  | 13   | 9    | 7    | 6    | 6    | 7    |
| > Guaranteed              | ,305 | ,399 | ,034 | ,320 | ,300 | ,000 |
+---------------------------+------+------+------+------+------+------+
| > Number of export loans  | 431  | 429  | 480  | 425  | 420  | 450  |
+---------------------------+------+------+------+------+------+------+
| *Resources (\$000):*      |      |      |      |      |      |      |
+---------------------------+------+------+------+------+------+------+
| > Capital Access          | \$   | \$   | \$   | \$25 | \$25 | \$27 |
| > Operating Expenses      | 19   | 20   | 24   | ,395 | ,276 | ,104 |
|                           | ,002 | ,943 | ,391 |      |      |      |
+---------------------------+------+------+------+------+------+------+
| > Special Initiatives     |      |      |      |      |      |      |
+---------------------------+------+------+------+------+------+------+
| > USEAC                   | 2    | 3    | 3    | 2    | 3    | 3    |
|                           | ,831 | ,100 | ,065 | ,579 | ,100 | ,100 |
+---------------------------+------+------+------+------+------+------+
| > Microloan Technical     | 14   | 19   | 19   | 18   | 17   | 17   |
| > Assistance              | ,094 | ,148 | ,243 | ,385 | ,754 | ,500 |
+---------------------------+------+------+------+------+------+------+
| > PRIME Technical         | 0    | 0    | 0    | 15   | 5    | 0    |
| > Assistance              |      |      |      | ,000 | ,000 |      |
+---------------------------+------+------+------+------+------+------+
| > New Market Venture      | 0    | 0    | 0    | 120  | 29   | 0    |
| > Capital Technical Asst. |      |      |      |      | ,880 |      |
+---------------------------+------+------+------+------+------+------+
|                           | **FY | **FY | **FY | **FY | **FY | **FY |
|                           | 19   | 19   | 20   | 20   | 20   | 20   |
|                           | 98** | 99** | 00** | 01** | 02** | 03** |
+---------------------------+------+------+------+------+------+------+
|                           | **   | **   | **   | **   | **   | **   |
|                           | Actu | Actu | Actu | Actu | Targ | Targ |
|                           | al** | al** | al** | al** | et** | et** |
+---------------------------+------+------+------+------+------+------+
| > Loan Subsidies          |      |      |      |      |      |      |
+---------------------------+------+------+------+------+------+------+
| > 7(a) General Business   | 182  | 131  | 112  | 106  | 175  | 85   |
|                           | ,435 | ,648 | ,283 | ,724 | ,075 | ,360 |
+---------------------------+------+------+------+------+------+------+
| > 7(a) DELTA              | 1    | 762  | 285  | 32   | 346  | 302  |
|                           | ,037 |      |      |      |      |      |
+---------------------------+------+------+------+------+------+------+
| > Y2K                     | 0    | 170  | 110  | 1    | 0    | 0    |
+---------------------------+------+------+------+------+------+------+
| > 504 CDC                 | 0    | 0    | 0    | 0    | 0    | 0    |
+---------------------------+------+------+------+------+------+------+
| > 504 DELTA               | 38   | 43   | 3    | 0    | 21   | 22   |
+---------------------------+------+------+------+------+------+------+
| > New Market Venture      | 0    | 0    | 0    | 0    | 21   | 0    |
| > Capital                 |      |      |      |      | ,952 |      |
+---------------------------+------+------+------+------+------+------+
| > SBIC Participating      | 15   | 22   | 22   | 27   | 0    | 0    |
| > Securities              | ,471 | ,232 | ,692 | ,624 |      |      |
+---------------------------+------+------+------+------+------+------+
| > SBIC Debentures         | 8    | 4    | 0    | 0    | 0    | 0    |
|                           | ,955 | ,858 |      |      |      |      |
+---------------------------+------+------+------+------+------+------+
| > Microloan Guaranty      | 298  | 92   | 96   | 159  | 163  | 168  |
+---------------------------+------+------+------+------+------+------+
| > Microloan Direct        | 1    | 1    | 2    | 2    | 1    | 3    |
|                           | ,111 | ,369 | ,323 | ,668 | ,730 | ,465 |
+---------------------------+------+------+------+------+------+------+
| > Agency Program Support  | N/A  | N/A  | 117  | 168  | 214  | \    |
| > Cost Estimates          |      |      | ,658 | ,428 | ,721 | $193 |
|                           |      |      |      |      |      | ,408 |
+---------------------------+------+------+------+------+------+------+
| **Total**                 | *    | *    | *    | *    | *    | *    |
|                           | *\$2 | *\$2 | *\$3 | *\$3 | *\$4 | *\$3 |
|                           | 45,2 | 04,3 | 02,1 | 67,1 | 20,0 | 30,4 |
|                           | 72** | 65** | 49** | 15** | 18** | 29** |
+---------------------------+------+------+------+------+------+------+

### Major Accomplishments in FY 2001: 

*Loan and equity programs*

#### 

#### [7(a) and CDC Loans]{.underline}. Approved 42,958 general business loans for approximately \$9.1 billion and 5,213 Certified Development Company loans for \$2.3 billion. 

-   

-   

-   [Asset Sales]{.underline}. Continued the Agency's asset sales
    program by holding a third and fourth sale to the private sector in
    December 2000 and August 2001 of 18,756 and 31,068 loans. SBA
    realized \$674 million and \$884 million respectively in gross
    revenues from these sales.

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-   [SBICs]{.underline}. Licensed 51 new SBICs with private capital of
    \$1.1 billion. Provided \$4.46 billion in equity investment through
    4,277 small business financings, of which 12 percent went to
    companies owned at least 50 percent by minorities and 4 percent was
    to companies owned at least 50 percent by women; conducted exams on
    a cycle of 10.9 months for leveraged SBICs.

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-   [Surety Bonds]{.underline}. Provided 6,320 bid and final bond
    guarantees, resulting in contracts valued at \$1.4 billion. Expanded
    oversight of the Surety Bond Program by completing 6 surety audits,
    7 surety reviews and one area office review.

-   [Microloans]{.underline}. Approved 16 new Microloan intermediary
    lenders and approved 2,295 loans for \$31.8 million to new and
    existing microenterprises.

-   [Technical Assistance]{.underline}. Provided \$ 15 million in
    technical assistance grants to 86 PRIME program recipients.

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-   [Export Loans]{.underline}. Provided 425 export loans worth an
    estimated \$167 million.

**Major Activities for FY 2003:**

-   [Lender Oversight]{.underline}. Improve lender oversight and
    portfolio analysis by using a risk management framework to analyze
    the performance and risk characteristics of individual lenders. SBA
    loan portfolio elements of the framework include evaluation of
    portfolio and financial performance measures, geographic and
    industry concentrations, growth rates, and related market trends.
    These objectives will be accomplished by: (1) implementing and
    refining the basic lender oversight and risk management components
    of the loan monitoring system (LMS); (2) expanding loan portfolio
    analysis activities; (3) continuing institutional analysis of
    individual SBA lenders using early warning indicators; (4) expanding
    the compliance review process to include operational or regulatory
    reviews of lenders' SBA activity; and (5) conducting safety and
    soundness reviews of non-bank lenders.

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-   [7(a)]{.underline}. Develop creative adaptations to the program to
    make it more efficient and effective, enabling SBA to reach more
    small business clients.

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-   [E-Lending]{.underline}. Anticipate the development of an online
    self-assessment tool to help a potential borrower understand what is
    required to qualify for an SBA guaranty.

-   [Relationship Management]{.underline}. Complete implementation of a
    new district-based lender program to streamline and improve
    interactions with SBA's key 7(a) lending partners, such as providing
    training and information on SBA loan products and procedures.

-   [Asset Sales]{.underline}. Continue the Asset Sales program with
    plans to hold 2 to 3 sales in FY 2003.

-   [Partnerships]{.underline}. Expand partnership alliances to provide
    lending and advisory services to veterans, Native Americans, women,
    other entrepreneurs and small business non-governmental
    organizations (NGOs).

-   [Surety Bonds]{.underline}. Increase contractor and surety
    participation and raise the total number of surety bonds issued for
    small businesses.

-   

-   

-   [Certified Development Company (CDC) Reform]{.underline}. SBA will
    make the necessary changes to increase the use of this program for
    plant and equipment capital investments.

-   

-   

-   [Microloan Program]{.underline}. Increase the number of
    intermediaries.

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-   [USEAC.]{.underline} Increase export sales and the number of first
    time small exporters.[\
    ]{.underline}

#### Human Capital:

Over the past several years, technological advancement has greatly
changed not only the small business environment but also the SBA
environment. For SBA employees, one of the major changes has been to
move from transaction processing to analysis, marketing and outreach.
Automation and privatization of loan functions allow staff to shift
attention from "retail" transaction processing to outreach, marketing,
and analysis of programs, activities, and performance of SBA's partners.

SBA will provide training for employees in marketing and outreach,
commercial credit analysis, lender oversight, lender relations, and
basic and advanced liquidation procedures. The Agency will encourage
leadership training and management training for middle management
employees. SBA will also promote technology and computer skills
enhancement as it continues to upgrade its systems.

Through its workforce restructuring initiative pilot SBA will also
implement means to identify where the field resources can add value such
as with lender and customer relationship management, resource partner
oversight, and more effective use of technology to allow for
telecommuting and distance training for SBA's staff and resource
partners, and reduction in rent costs.

### Evaluations, Analyses and Surveys:

Developing an econometric demand model for the 7(a) loan program is an
objective of the risk management aspect of SBA's loan monitoring system.
In FY 2000, a contract was awarded to: 1) carry out a literature survey
of existing models and experience in estimating demand for loans; 2)
suggest an approach to estimate demand; and 3) determine data
availability for the suggested demand model. The contractor found that
there was little literature and experience with estimating the demand
for guaranteed loans, but that a step-wise approach using successively
more sophisticated econometric models would provide insight into the
demand for 7(a) loans.

For FY 2002 the agency has contracted with the Office of Federal Housing
and Enterprise Development to develop an econometric model by FY 2004 to
assist the Agency in predicting loan portfolio performance for 7(a)
under a variety of economic scenarios.

### Cross-Cutting Issues:

SBA is working with the United States Department of Agriculture, the
National Federation of Community Development Credit Unions, state and
local development agencies, and other groups interested in the Agency's
programs.

In the international marketplace, 19 agencies under the
Commerce-directed Trade Promotion Coordinating Committee (TPCC) offer
both financial and business development assistance to small exporters.
SBA meets regularly with these groups to discuss challenges, propose
program initiatives, work on developing new products, and avoid
duplication of effort in relation to meeting small business needs.

The U.S. Export Assistance Center (USEAC) network is a good example of
Federal government interagency crosscutting. From its inception, this
network of offices, comprised primarily of personnel from SBA, DOC and
Ex-Im Bank, have been cross-trained in each other\'s programs for more
seamless delivery of export assistance to small businesses. SBA/USEAC
personnel deliver SBA\'s Export Trade Assistance Partnership (E-TAP)
program to small businesses interested in getting into exporting. A
similar program called Global Diversity Initiative (GDI) is offered by
DOC but focuses solely on minority companies. USEAC personnel from SBA
and DOC frequently combine their efforts locally, offering a combined
E-TAP/GDI program to their communities.

The Departments of Defense, Veterans Affairs and Labor and the National
Veterans Business Development Corporation are also important partners in
helping veteran and service disabled veteran-owned businesses succeed.

### Critical External Factors:

Key to SBA's success in providing access to capital and credit is a
cooperative working relationship with the various stakeholders,
including, but not limited to, the National Association of Government
Guaranteed Lenders (NAGGL), the National Association of Development
Companies (NADCO), the National Association of Small Business Investment
Companies (NASBIC), and the Association for Enterprise Opportunity.

Although the demographics, terms and conditions, and purposes of the
7(a), 504, Microloan, and SBIC programs vary significantly, economic
conditions strongly affect the demand for these products.

Finally, Congressional support of the programs, particularly those
elements that require legislative changes, is a critical success factor.

**II.** **Programs that support small business access to procurement:**

SBA's statutory mission is to ensure a fair share of Federal procurement
goes to small businesses. The Agency is responsible for promoting the
use of small businesses in the approximately \$200 billion Federal
procurement marketplace. SBA's efforts help ensure that Federal agencies
comply with statutory requirements to buy a portion of their goods and
services from small businesses. SBA, working with Federal agencies,
negotiates procurement goals, monitors performance, encourages the use
of small business sources, and provides procurement training and
technical assistance to small firms. Based on FY 2000 data, agencies are
awarding approximately 38 percent of Federal procurement prime and
subcontract dollars to small businesses. In addition, SBA certifies the
small businesses\' eligibility for procurement preference programs.

SBA's strategy to improve small business access to procurement
opportunities has four key elements:

-   Increase the number of opportunities for small businesses to perform
    Federal contracts at the prime and subcontract levels;

-   Increase the economic viability of small and small disadvantaged
    businesses by providing contract opportunities and other business
    development assistance to those firms who qualify;

-   Promote the economic development of HUBZones, and increase the
    economic viability of small businesses located in them; and

-   Facilitate commercialization of Federal research and development
    performed by small businesses.

    SBA's programs currently include:

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-   [PRO-Net]{.underline}. The Procurement Marketing and Access Network,
    PRO-Net, is one of SBA\'s key tools in ensuring that small
    businesses participate fully in the Federal market for goods and
    services. In accordance with statutory and regulatory requirements,
    PRO-Net is the authoritative database of firms certified under the
    8(a) Business Development and HUBZone Empowerment Contracting
    Programs, and as small disadvantaged businesses. The Federal
    acquisition community, state and local governments, and prime
    contractors use PRO-Net in identifying small business vendors.

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-   [Prime Contracting]{.underline} [Program]{.underline}. Through the
    Prime Contracting Program, SBA works with Federal agencies to
    increase small business opportunities in the Federal acquisition
    process by reviewing their acquisition plans and making appropriate
    recommendations to set aside opportunities for small businesses. SBA
    provides small business sources to acquisition officials and
    counsels small businesses on how to sell to the Federal Government.

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-   [Subcontracting Program]{.underline}. Under the Subcontracting
    Program, SBA works with the Federal Government\'s large prime
    contractors to ensure that small businesses receive a fair share of
    subcontracting opportunities. SBA accomplishes this by reviewing the
    subcontracting plans of large prime contractors and by bringing
    together large and small businesses to facilitate the formation of
    mutually beneficial private sector relationships.

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-   [Women Business Owners' Program]{.underline}. The Federal Contract
    Assistance for Women Business Owners' Program encourages Federal
    agencies to develop long-term comprehensive strategies that expand
    opportunities for women-owned small businesses in order to meet the
    5 percent women-owned small business goal.

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-   [Natural Resources Sales]{.underline} [Assistance
    Program]{.underline}. The purpose of the Natural Resources Sales
    Assistance Program is to aid and assist small business in obtaining
    its fair share of Federal property offered for sale or disposal by
    other means. Within this Government-wide program, our efforts have
    concentrated on Federal timber, royalty oil, coal leases, other
    mineral leases, and Federal surplus property.

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-   [Certificate of Competency Program]{.underline}. The Certificate of
    Competency Program provides an appeal process to small businesses
    that have been denied contracts with the U.S. Government for a lack
    of "responsibility" or a perceived inability to perform
    satisfactorily.

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-   [Size Standards]{.underline}. SBA develops small business size
    standards for Federal programs so that small business assistance is
    provided to its intended beneficiaries.

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-   [HUBZone Empowerment Contracting Program]{.underline}. The HUBZone
    Empowerment Contracting Program helps small businesses that are
    located in, and employ residents of, \"historically underutilized
    business zones.\" The program provides for Federal contract
    set‑asides, sole source awards, and price evaluation preferences in
    unrestricted procurements for qualified HUBZone small businesses.
    The government-wide statutory goal for this program is to award 3
    percent of the total Federal procurements to such firms in FY 2003.
    Through this program, SBA seeks to increase employment, promote
    capital investment, and encourage economic development in these
    communities. To accomplish this, SBA certifies eligible firms,
    maintains a database of certified firms, and conducts random and
    targeted compliance reviews. SBA also uses its procurement
    assistance professionals to assist these firms in marketing Federal
    contract opportunities.

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-   [8(a) Business Development Program]{.underline}. The 8(a) Business
    Development Program assists firms owned and controlled by socially
    and economically disadvantaged individuals to enter and succeed in
    the economic mainstream. SBA helps eligible small businesses in a
    structured developmental process over a 9-year program participation
    term. SBA provides access to business development opportunities
    authorized under section 8(a) of the Small Business Act. Assistance
    includes access to sole source and limited competition Federal
    contract opportunities. We work with Federal acquisition agencies to
    develop contract opportunities for program participants, and assist
    firms with partnering, teaming, and joint venture arrangements in
    support of their business development plans.

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-   [7(j) Program]{.underline}. Under the 7(j) Program, SBA awards
    grants, contracts, and cooperative agreements for the development of
    training and technical assistance to companies owned and controlled
    by socially and economically disadvantaged individuals, or companies
    located in areas of high unemployment, and firms located in areas of
    low income.

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-   [SBIR and STTR Programs]{.underline}. SBA encourages small business
    innovation by establishing government-wide policy for the SBIR and
    STTR Programs. Through award of research and development assistance
    grants, these programs promote the flow of innovative products and
    services from small businesses to Federal and commercial markets.
    Through the FAST Program, SBA will provide matching fund cooperative
    agreements to state organizations to strengthen the technological
    competitiveness of small businesses. The Rural Outreach Program
    provides cooperative agreements to approximately 25 states to
    increase participation in the SBIR Program.

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-   [Small Disadvantaged Businesses]{.underline}. SBA certifies
    qualifying companies as Small Disadvantaged Businesses (SDBs).
    Certification enables eligible companies to obtain certain
    procurement preferences. This activity has been funded under Economy
    Act Agreements with the top 20 Federal procuring agencies.

Results and Resources

*(Dollars in Thousands)*

<table style="width:100%;">
<colgroup>
<col style="width: 40%" />
<col style="width: 0%" />
<col style="width: 10%" />
<col style="width: 0%" />
<col style="width: 9%" />
<col style="width: 0%" />
<col style="width: 10%" />
<col style="width: 0%" />
<col style="width: 10%" />
<col style="width: 0%" />
<col style="width: 8%" />
<col style="width: 0%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"><strong>FY 1998</strong></td>
<td colspan="2"><strong>FY 1999</strong></td>
<td colspan="2"><strong>FY 2000</strong></td>
<td colspan="2"><strong>FY 2001</strong></td>
<td><strong>FY 2002</strong></td>
<td colspan="2"><strong>FY 2003</strong></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"><strong>Actual</strong></td>
<td colspan="2"><strong>Actual</strong></td>
<td colspan="2"><strong>Actual</strong></td>
<td colspan="2"><strong>Estimate</strong></td>
<td><strong>Target</strong></td>
<td colspan="2"><strong>Target</strong></td>
</tr>
<tr class="odd">
<td colspan="2"><em><strong>Results</strong></em></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2">Share of Federal Prime procurement contracts:</td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"><ul>
<li><p>To small businesses</p></li>
</ul></td>
<td colspan="2">23.4%</td>
<td colspan="2">23.1%</td>
<td colspan="2">22.3%</td>
<td colspan="2">23.0%</td>
<td>23.0%</td>
<td colspan="2">23.0%</td>
</tr>
<tr class="even">
<td colspan="2"><ul>
<li><p>To women-owned businesses</p></li>
</ul></td>
<td colspan="2">2.2%</td>
<td colspan="2">2.3%</td>
<td colspan="2">2.3%</td>
<td colspan="2">2%</td>
<td>5.0%</td>
<td colspan="2">5.0%</td>
</tr>
<tr class="odd">
<td colspan="2"><ul>
<li><p>To small disadvantaged businesses</p></li>
</ul></td>
<td colspan="2">6.6%</td>
<td colspan="2">6.5%</td>
<td colspan="2">6.5%</td>
<td colspan="2">6.0%</td>
<td>5.0%</td>
<td colspan="2">5.0%</td>
</tr>
<tr class="even">
<td colspan="2"><ul>
<li><p>To service disabled veteran-owned businesses</p></li>
</ul></td>
<td colspan="2">N/A</td>
<td colspan="2">N/A</td>
<td colspan="2">N/A</td>
<td colspan="2">.1%</td>
<td>3.0%</td>
<td colspan="2">3.0%</td>
</tr>
<tr class="odd">
<td colspan="2"><ul>
<li><p>To HUBZone-certified firms</p></li>
</ul></td>
<td colspan="2">N/A</td>
<td colspan="2">N/A</td>
<td colspan="2">0.3%</td>
<td colspan="2">.5%</td>
<td>2.5%</td>
<td colspan="2">3.0%</td>
</tr>
<tr class="even">
<td colspan="2">Share of all procurement to Small Firms</td>
<td colspan="2">N/A</td>
<td colspan="2">N/A</td>
<td colspan="2">38%</td>
<td colspan="2">38%</td>
<td>38%</td>
<td colspan="2">38%</td>
</tr>
<tr class="odd">
<td colspan="2">SBIR commercialization rate</td>
<td colspan="2"></td>
<td colspan="2">39%<a href="#fn1" class="footnote-ref" id="fnref1"
role="doc-noteref"><sup>1</sup></a></td>
<td colspan="2">39%</td>
<td colspan="2">TBD</td>
<td>TBD</td>
<td colspan="2">TBD</td>
</tr>
<tr class="even">
<td colspan="2">8(a) clients viable and competitive 3 years after
graduation</td>
<td colspan="2">N/A</td>
<td colspan="2">N/A</td>
<td colspan="2">65%</td>
<td colspan="2">68%</td>
<td>70%</td>
<td colspan="2">70%</td>
</tr>
<tr class="odd">
<td colspan="2">Number of 8 (a) firms in program during fiscal year</td>
<td colspan="2">6,098</td>
<td colspan="2">5,969</td>
<td colspan="2">6,383</td>
<td colspan="2">6,942</td>
<td>6,500</td>
<td colspan="2">7,500</td>
</tr>
<tr class="even">
<td colspan="2">Cumulative number of HUBZone firms certified</td>
<td colspan="2">N/A</td>
<td colspan="2">329</td>
<td colspan="2">1,843</td>
<td colspan="2">4,000</td>
<td>6,000</td>
<td colspan="2">8,000</td>
</tr>
<tr class="odd">
<td colspan="2">Number of firms registered in PRO-Net</td>
<td colspan="2"></td>
<td colspan="2">183,750</td>
<td colspan="2">204,148</td>
<td colspan="2">210,000</td>
<td>212,000</td>
<td colspan="2">212,000</td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"><em><strong>Resources ($000)</strong></em></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"><blockquote>
<p>SBIR Outreach</p>
</blockquote></td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">496</td>
<td colspan="2">1,500</td>
<td>500</td>
<td colspan="2">500</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>SBIR FAST</p>
</blockquote></td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">3,500</td>
<td colspan="3">3,000</td>
<td>3,000</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Government Contracting /Business Development Operating Expenses</p>
</blockquote></td>
<td colspan="2">$16,601</td>
<td colspan="2">$18,300</td>
<td colspan="2">$18,576</td>
<td colspan="2">$19,926</td>
<td colspan="3">$20,658</td>
<td>$22,907</td>
</tr>
<tr class="odd">
<td>Non-Credit Initiatives</td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td></td>
</tr>
<tr class="even">
<td><blockquote>
<p>7(j) Technical Assistance</p>
</blockquote></td>
<td colspan="2">2,850</td>
<td colspan="2">2,600</td>
<td colspan="2">3,950</td>
<td colspan="2">3,241</td>
<td colspan="3">3,600</td>
<td>3,600</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>BusinessLINC</p>
</blockquote></td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">0</td>
<td colspan="2">6,919</td>
<td colspan="3">0</td>
<td>0</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Pro-Net</p>
</blockquote></td>
<td colspan="2">232</td>
<td colspan="2">363</td>
<td colspan="2">454</td>
<td colspan="2">450</td>
<td colspan="3">TBD</td>
<td>500</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Small Disadvantaged Business</p>
</blockquote></td>
<td colspan="2">10,409</td>
<td colspan="2">9,750</td>
<td colspan="2">8,643</td>
<td colspan="2">1,796</td>
<td colspan="3">1,516</td>
<td>1,500</td>
</tr>
<tr class="even">
<td><blockquote>
<p>HUBZone Program</p>
</blockquote></td>
<td colspan="2">2,000</td>
<td colspan="2">2,000</td>
<td colspan="2">1,978</td>
<td colspan="2">1,791</td>
<td colspan="3">TBD</td>
<td>2,000</td>
</tr>
<tr class="odd">
<td>Agency Support Cost Estimates</td>
<td colspan="2">N/A</td>
<td colspan="2">N/A</td>
<td colspan="2">34,228</td>
<td colspan="2">38,333</td>
<td colspan="3">40,439</td>
<td>43,341</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Total</strong></td>
<td colspan="2"><strong>$ 32,092</strong></td>
<td colspan="2"><strong>$ 33,013</strong></td>
<td colspan="2"><strong>$ 68,325</strong></td>
<td colspan="2"><strong>$</strong> <strong>77,456</strong></td>
<td colspan="3"><strong>$ 69,713</strong></td>
<td><strong>$ 77,348</strong></td>
</tr>
</tbody>
</table>
<aside id="footnotes" class="footnotes footnotes-end-of-document"
role="doc-endnotes">
<hr />
<ol>
<li id="fn1"><p>SBA began implementing a new SBIR program reporting
system in Spring 2001 that will measure the program’s commercialization
success. It will establish an initial baseline commercialization rate
that may not be comparable to the findings of the 1999 study or previous
surveys due to differences in methodology. Under the new system, firms
participating in the program will provide information annually on sales
and investments associated with their SBIR projects. Commercialization
results will not be available until FY 2002 due to time required to
acquire the database system resources and inform participating firms
about the new reporting process. <a href="#fnref1" class="footnote-back"
role="doc-backlink">↩︎</a></p></li>
</ol>
</aside>

TBD denotes "to be determined."

#### Major Accomplishments in FY 2001:

-   [FAST]{.underline}. Awarded approximately 30 cooperative agreements
    totaling \$3.5 million under the Federal and State Technology
    Partnership (FAST) Program to provide technical assistance to small
    high technology business concerns in the states to strengthen their
    technological competitiveness in the marketplace.

-   [SBIR and STTR Programs]{.underline}. Awarded approximately 25
    cooperative agreements totaling \$1.5 million under the Rural
    Outreach Program to support state-wide outreach to small high
    technology businesses located in States that are underrepresented in
    awards under the Small Business Innovation Research (SBIR) and the
    Small Business Technology Transfer (STTR) Programs.

-   [HUBZone Empowerment Contracting Program]{.underline}. Implemented
    an enhanced electronic application for HUBZone certification to make
    on-line processing a reality, to include use of Geo coding mapping,
    and the HUBZone Contracting Opportunity search engine, which
    furthers the goal of making the HUBZone Program one of the Federal
    Government's first virtual/e-commerce programs.

-   [Government Contracting]{.underline}. Secured the largest small
    business set-aside in the Federal Government from the U.S. Navy,
    titled the \"Defense Information Systems Network (DISN) Satellite
    Transmission Services - Global (DSTS-G)."

**Major Activities for FY 2003:**

-   [PRO-Net]{.underline}. Integrate PRO-Net into the electronic
    commerce network by expanding its capabilities and standardizing
    automated registration.

-   [7(j) Management and Technical Assistance Program]{.underline}.
    Broaden the reach and increase the depth of the 7(j) Management and
    Technical Assistance Program to help SBA's 8(a) participants become
    viable firms.

-   [HUBZone Program]{.underline}. Intensify HUBZone Program outreach to
    the small business and acquisition communities to ensure broader use
    of the program as an economic development tool.

-   [Government Contracting]{.underline}. Develop strategies, including
    regulatory and statutory changes, to streamline small business
    procurement programs and ensure a balance between promoting contract
    efficiency and supporting small business needs.

-   [Procurement Goals]{.underline}. Continue to work aggressively with
    Federal agencies by securing commitment to statutory procurement
    goals (e.g., 23 percent procurement preference goals for Federal
    prime contracts including 5 percent Small Disadvantaged Business, 5
    percent for Women Owned Small Businesses, 3 percent HUBZone, and 3
    percent Service Disabled Veteran-Owned Small Businesses) and
    implementing specific strategies to achieve established procurement
    goals.

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-   [8(a) Business Development Program]{.underline}. Continue efforts to
    restructure the 8(a) Business Development Program by automating and
    streamlining the 8(a) application.

, and create a nationwide multi-media 8(a) academy.

#### Evaluations, Analyses, and Surveys:

In FY 2001 SBA began a study of the potential economic development
impact of the HUBZone Program in distressed urban and rural communities.

#### Cross-Cutting Issues:

SBA works with all major Federal Government agencies to ensure that
small businesses receive a fair share of Government procurement
contracts.

#### Critical External Factors

SBA helps small businesses succeed by working with other Federal
agencies to achieve the desired results. A critical success factor for
reaching the procurement targets and the SBIR program target mandated by
Congress is the active participation of Federal agencies.

The Administration's management reforms include, among other things,
focusing on competitive sourcing and expanding electronic government.
Agencies must complete public-private competitions or direct conversions
on at least 5 percent of their commercial activities in FY 2002 and 15
percent in FY 2003. The use of small business procurement preference
programs will help agencies meet their goals because OMB guidance in
Circular A-76 (Performance of Commercial Activities) allows agencies to
convert a commercial activity to contract performance without a cost
comparison.

As the Federal Government expands the use of electronic government,
small businesses must adapt to these changes. SBA, through its resource
partners, must continue to provide outreach and training to educate
small businesses on the Government's electronic procurement strategy. As
of October 1, 2001, agencies were required to publish all procurement
opportunities over \$25,000 in Federal Business Opportunities
(FedBizOpps), the Government-wide single point of entry. FedBizOpps
allows sellers and service providers to access and download information
through commercial electronic means such as e-mail and other web-based
technology, which improves the access of information on Federal
procurements. In addition, the Government plans to use the Central
Contractor Registration database as the Government-wide single point of
vendor registration. SBA is working with the Defense Department to use
Pro-Net as the official source to validate information on small
businesses.

SBA is also working with an Interagency Acquisition Working Group and
OMB's Office of Federal Procurement Policy to assess its small business
procurement programs and develop strategies for streamlining the
programs. In addition to streamlining our programs, SBA must also find
alternative performance measures so that it can better measure the
success of its programs. (See Section on Program Evaluation.)

**III.** Programs that support small business entrepreneurial
development needs:

Lack of management and technical assistance is often an impediment to
small business success. Therefore, empowering entrepreneurs through
counseling, education, training and information is one of SBA's
principal objectives. SBA annually assists more than 1.3 million small
businesses through a vast network of resource partners. Business
development information, education and training are offered at over
1,100 locations nationwide. These include the Online Women's Business
Center, SCORE Online, approximately 1,000 Small Business Development
Centers (SBDCs), 11,500 Service Corps of Retired Executive (SCORE)
volunteers, 78 Business Information Centers (BICs), 16 Tribal Business
Information Centers (TBICs), 4 Veterans Business Outreach Centers, and
83 Women's Business Centers (WBC). The Agency is also continuing to
create citizen-centered Internet applications that empower small
entrepreneurs to easily access government information when and where
they want. Based on the American Customer Satisfaction Index, with the
Federal Government average being 69, SBA's Women's Business Centers and
SCORE and clients rated satisfaction at 75 and 68 respectively in 2001.

-   [Paul D. Coverdell Drug-Free Workplace Program (DFWP)]{.underline}.
    Funds SBDCs and intermediary organizations to provide financial and
    technical assistance to assist small businesses in implementing DFWP
    programs. Examples of services provided by intermediaries include
    drug free workplace policy development and training, drug testing,
    Employee Assistance Program services and general drug-free workplace
    education.

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-   [Women's Business Centers (WBC)]{.underline}. Provide grants to
    non-profit organizations to train and counsel women entrepreneurs.
    In addition, the Online Women's Business Center offers a 24-hour a
    day Internet site with information aimed specifically at women
    entrepreneurs.

-   [Service Corps of Retired Executives (SCORE)]{.underline}. Through a
    network of 11,500 counselors and 389 chapter locations, SCORE
    provides counseling and training services to over 375,000 clients
    annually. E-mail counseling is the fastest growing outreach
    activity.

-   [Small Business Development Centers (SBDC)]{.underline}. Provide
    management and technical assistance to small businesses though a
    network of nearly 1,000 service centers located throughout the
    United States, Puerto Rico, U.S. Virgin Islands, Guam and American
    Samoa.

-   [Business Information Centers (BICs)]{.underline}. A network of 78
    locations provides entrepreneurs access to computers and other
    business resource materials. Pre-business and in-business counseling
    and training are also available at BIC locations using SCORE
    volunteers.

-   [National Women's Business Council]{.underline}. Serves as an
    independent advisor to the President, Congress, and the Interagency
    Committee on Women's Business Enterprise on issues concerning women
    in business, and the effectiveness of Federal programs designed to
    foster women's entrepreneurship.

-   [Veterans Business Development]{.underline}. Formulates, executes,
    and promotes policies and programs that help small businesses owned
    and controlled by veterans and service-disabled veterans. The office
    also ensures veterans access to capital through marketing and
    outreach efforts and no less than 3 percent of Federal prime and
    subcontracts.

Results and Resources

*(Dollars in Thousands)*

+--------------------------+-----+-------+------+------+------+-----+
|                          | *   | **FY  | **FY | **FY | **FY | *   |
|                          | *FY | 1     | 20   | 20   | 20   | *FY |
|                          | 199 | 999** | 00** | 01** | 02** | 200 |
|                          | 8** |       |      |      |      | 3** |
+--------------------------+-----+-------+------+------+------+-----+
|                          | *   | **Act | **   | **   | **   | *   |
|                          | *Ac | ual** | Actu | Actu | Targ | *Ta |
|                          | tua |       | al** | al** | et** | rge |
|                          | l** |       |      |      |      | t** |
+--------------------------+-----+-------+------+------+------+-----+
| ***Results:***           |     |       |      |      |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| Jobs created by SBDC     | 53, | 7     | 60   | N/A  | 50   | 52, |
| clients                  | 541 | 0,398 | ,395 |      | ,000 | 500 |
+--------------------------+-----+-------+------+------+------+-----+
|                          |     |       |      |      |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| ***Outputs:***           |     |       |      |      |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| > Customer satisfaction  |     |       |      |      |      |     |
| > rate:                  |     |       |      |      |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| > Women's Business       | N/A | N/A   | N/A  | 75   | TBD  | TBD |
| > Centers                |     |       |      |      |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| > BICs                   | N/A | N/A   | 93%  | 88%  | 90%  | 90% |
+--------------------------+-----+-------+------+------+------+-----+
| > SBDC[^7]               | 85% | 86%   | 87%  | 87%  | 87%  | 87% |
+--------------------------+-----+-------+------+------+------+-----+
| > Veterans Business      | N/A | 85.6% | N/A  | N/A  | 85%  | 85% |
| > Opportunity Centers    |     |       |      |      |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| > SCORE                  | N/A | N/A   | N/A  | 68   | TBD  | TBD |
+--------------------------+-----+-------+------+------+------+-----+
| > SBDC clients counseled | 5   | 59    | 582  | 609  | 627  | 6   |
| > and trained            | 47, | 5,391 | ,598 | ,646 | ,935 | 34, |
|                          | 037 |       |      |      |      | 215 |
+--------------------------+-----+-------+------+------+------+-----+
| > SCORE clients          | 3   | 38    | 377  | 387  | 399  | 4   |
| > counseled and trained  | 54, | 4,854 | ,524 | ,938 | ,576 | 03, |
|                          | 239 |       |      |      |      | 572 |
+--------------------------+-----+-------+------+------+------+-----+
| > BICs clients           | 1   | 12    | 134  | 142  | 146  | 1   |
|                          | 08, | 3,527 | ,358 | ,148 | ,412 | 47, |
|                          | 918 |       |      |      |      | 876 |
+--------------------------+-----+-------+------+------+------+-----+
| > TBIC clients           | 2,  | 3,913 | 3    | 5    | 5    | 0   |
|                          | 815 |       | ,843 | ,385 | ,546 |     |
+--------------------------+-----+-------+------+------+------+-----+
| > Women's Business       | 9,  | 3     | 45   | 60   | 62   | 6   |
| > Center clients served  | 000 | 0,630 | ,223 | ,767 | ,590 | 3,, |
|                          |     |       |      |      |      | 216 |
+--------------------------+-----+-------+------+------+------+-----+
| > Veteran Business       | >   | > N/A | > 7  | 8    | 8    | 8,  |
| > Opportunity Center     | N/A |       | ,373 | ,127 | ,300 | 500 |
| > clients                |     |       |      |      |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| > Small Business         | N/A | N/A   | 191  | 200  | TBD  | TBD |
| > Classroom users        |     |       | ,000 | ,000 |      |     |
| > (Internet)             |     |       |      |      |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| > ***Resources           |     |       |      |      |      |     |
| > (\$000):***            |     |       |      |      |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| > Office of Veterans     |     |       |      |      |      |     |
| > Business Development   |     |       |      |      |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| > Veterans Business      | 371 | 733   | 615  | 0    | 750  | 750 |
| > Outreach               |     |       |      |      |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| > Veterans Corporation   | N/A | N/A   | N/A  | 4    | 0    | 0   |
|                          |     |       |      | ,000 |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| > Office of              | \   | \$    | \$6  | \$6  | \$5  | \   |
| > Entrepreneurial        | $4, | 5,296 | ,700 | ,331 | ,669 | $5, |
| > Development            | 543 |       |      |      |      | 828 |
+--------------------------+-----+-------+------+------+------+-----+
| > SBDC                   | 71, | 8     | 84   | 85   | 90   | 88, |
|                          | 561 | 9,817 | ,074 | ,993 | ,010 | 000 |
+--------------------------+-----+-------+------+------+------+-----+
| > Drug Free Workplace    | 0   | 0     | 3    | 3    | 3    | 3,  |
|                          |     |       | ,469 | ,498 | ,000 | 000 |
+--------------------------+-----+-------+------+------+------+-----+
| > SCORE                  | 3,  | 3,660 | 3    | 3    | 5    | 5,  |
|                          | 937 |       | ,471 | ,750 | ,000 | 000 |
+--------------------------+-----+-------+------+------+------+-----+
| > Business Information   | 499 | 700   | 495  | 499  | 500  | 475 |
| > Centers                |     |       |      |      |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| > Women\'s Business      | 4,  | 8,000 | 8    | 11   | 12   | 12, |
| > Centers                | 292 |       | ,926 | ,989 | ,000 | 000 |
+--------------------------+-----+-------+------+------+------+-----+
| > National Women\'s      | 473 | 600   | 600  | 714  | 750  | 750 |
| > Business Council       |     |       |      |      |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| > Survey of Women        | 992 | 750   | 783  | 691  | 694  | 0   |
| > Business Owners        |     |       |      |      |      |     |
+--------------------------+-----+-------+------+------+------+-----+
| > Native American        | 607 | 0     | 0    | 0    | 0    | 1,  |
| > Economic Development   |     |       |      |      |      | 000 |
+--------------------------+-----+-------+------+------+------+-----+
| > Agency Support Cost    | N/A | N/A   | 45   | 50   | 49   | 53, |
| > Estimates:             |     |       | ,953 | ,349 | ,755 | 067 |
+--------------------------+-----+-------+------+------+------+-----+
| Total                    | \$  | \$11  | \    | \    | \    | \$1 |
|                          | 89, | 1,923 | $155 | $166 | $167 | 69, |
|                          | 957 |       | ,086 | ,995 | ,551 | 278 |
+--------------------------+-----+-------+------+------+------+-----+

#### Major Accomplishments in FY 2001:

-   [Paul D. Coverdell]{.underline} [Drug Free Workplace
    Program]{.underline}. In FY 2001, SBA awarded funds to 13
    intermediaries and 8 SBDCs to help small businesses address the
    issue of drugs in the workplace. During 2001, SBA estimates that
    10,974 small businesses and 16,458 working parents were educated,
    and approximately 1,701 small businesses set up drug-free workplace
    programs.

-   [Women's Business Centers]{.underline}. SBA opened 16 new women's
    business centers, funded 7 sustainability centers and served 60,767
    clients.

-   [Service Corps of Retired Executives]{.underline}. SCORE conducted
    387,938 counseling and training sessions in FY 2001 and continued to
    expand the number of clients served through e-mail counseling.

-   [Small Business Development Centers]{.underline}. SBDCs counseled
    and trained 609,646 clients.

-   [Business Information Centers]{.underline}. SBA opened ten new BICs
    and served 142,148 clients.

-   [Tribal Business Information Centers]{.underline}. SBA's network of
    16 TBICs served 5,385 clients.

-   [Veterans Outreach.]{.underline} SBA provided operating funds to
    four Veterans Business Outreach Program Centers and entered into
    MOUs with the Departments of Veterans Affairs and Labor, the
    Association of Small Business Development Centers (ASBDC) and the
    Service Corps of Retired Executives (SCORE) to provide improved
    outreach to the Veteran population.

#### Major Activities for FY 2003:

-   [Paul D. Coverdell Drug-Free Workplace Program]{.underline}. SBA\'s
    intermediary grantees and SBDC partners educate small businesses on
    the benefits of a drug-free workplace. They also educate parents
    that work for small businesses on how to keep their children
    drug-free and provide financial assistance to small businesses as
    they set up drug-free workplace programs. Through these resource
    partners, it is estimated that approximately 1,500 small businesses
    will implement a drug free workplace program.

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-   [Native American Economic Development Program]{.underline}. As a
    group, the nearly 2 million Native Americans residing in the United
    States are the poorest people in this country. The unemployment rate
    is 70 percent on some reservations and averages 45 percent.
    Furthermore, there are more than 555 Federally recognized Tribes in
    the United States. These tribes are extraordinarily diverse in
    language, culture, and natural resources. Small Business ownership
    is one of the most important economic tools available to Native
    Americans.

> Through the Native American Economic Development Program, SBA will
> fund tribes currently engaged in economic development to help them
> create businesses and meet specific cultural needs of their individual
> communities. The Native American Economic Development Program will
> replace SBA's Tribal Business Information Center (TBIC) program. In FY
> 2003, SBA will also work with grantees to make culturally sensitive
> information available 24 hours a day, 7 days a week via the Internet.

-   [Women\'s Business Center Program]{.underline}. Providing continuing
    support to 49 new centers from previous years and 29 sustainability
    centers from previous years. The level of funding will also allow
    SBA to make new funding available to five new WBCs. The WBC program
    will also continue to expand the Online to provide services 24 hours
    a day 7 days a week.

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-   [Service Corps of Retired Executives (SCORE]{.underline}). To
    provide increased support for client outreach, systems
    modernization, web site development, marketing and administrative
    expenses, SBA will continue to work with SCORE to expand email
    counseling available to clients at times most convenient to the
    small business customer.

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-   

-   

-   [Business Information Centers (BICs)]{.underline}. To continue to
    support SBA's network of approximately 80 Business Information
    Centers. Funding will also allow SBA to open between two and five
    new BICs in locations with a demonstrated need.

-   [Small Business Development Center Program]{.underline}. The SBDC
    program is SBA\'s largest resource partnership, serving over 600,000
    clients each year through counseling and training. SBA provides
    funding to 58 lead centers, providing services at nearly 1,000
    locations throughout the United States, Puerto Rico, U.S. Virgin
    Islands, Guam and American Samoa. In FY 2003, SBA will continue to
    encourage SBDCs to provide services to the small business client at
    times and places most convenient to its customers. SBA will also
    focus on expanding the training materials that are available via the
    Internet and work with the SBDC community to provide services more
    effectively and efficiently.

-   [Veterans Business Development]{.underline}. SBA will continue to
    improve agency data collection, enhance coordination of outreach and
    service delivery activities with the National Veterans Business
    Development Corporation and other resource partners, and develop a
    national web and community based Veteran Entrepreneur Training
    program (NET VET).

#### Evaluation, Analyses and Surveys:

SBA has contracted with the University of Michigan to conduct customer
satisfaction surveys of its program clients. Using the American Customer
Satisfaction Index (ACSI), SBA is able to measure customer satisfaction
for each program client group over time. The Agency will continue to use
customer satisfaction as a useful measurement to evaluate its program
outcomes for resource allocations.

-   SBA conducted a review of the SBDC program. Historically, SBA has
    been inhibited in its effort to measure its overall effectiveness
    due to the lack of a system to validate and verify the impact data
    from the SBDC program. The SBDCs are an important component to the
    SBA network of partners, receiving 11 percent of SBA\'s total
    resources in this budget. While the SBA has conducted a program
    review of the SBDC network and has found anecdotal evidence that the
    program addresses local needs, the review recommended that the SBDC
    network work more as a network rather than as separate state
    organizations, increase the use of Internet technology in
    counseling, training, and answering FAQs, and evaluate and
    disseminate \"best practices.\" Accordingly, SBA will seek to more
    rigorously evaluate the effectiveness of these centers by developing
    reliable performance measures.

#### Cross-cutting Programs:

SBA provides management and technical assistance through partnerships
with other Federal, state and local agencies and the private sector. For
example, SBA and the Department of Commerce (DOC) provide different
products and services to American minority businesses, and focus on
different market segments. SBA provides counseling and
technical/management assistance to help small firms write business
plans, apply for loans, compete for federal contracts, and run their
businesses. SBA focuses on long-term competency-based skills and
institution building. DOC provides services to minority businesses,
regardless of size, and seeks to enhance the continued development of
these firms by increasing their access to resources and markets.

The Office of Veterans Business Development is working in conjunction
with the Department of Veterans Affairs' Center for Veterans Enterprise,
the Department of Labor Assistant Secretary for Veterans Employment and
Training, the DOL Office of Disability Policy, the Association of Small
Business Development Centers, the Service Corps of Retired Executives,
the National Veterans Business Development Corporation and the organized
veterans community to implement significant outreach to the veterans and
service-disabled veterans small business community, including mobilizing
significant private sector resources.

SBA is also working with the Department of Commerce (DOC), the National
Institute of Science and Technology (NIST), the United States Department
of Agriculture (USDA) and the Minority Business Development Agency
(MBDA) of the DOC on E-Commerce outreach and training.

#### Critical External Factors:

No other SBA program exemplifies the importance of "shared outcomes"
more than the "access to entrepreneurial development assistance"
programs. With the positive and cooperative assistance from a host of
business resource partners, SBA is able to reach more than a million
small firms annually. A critical success factor is the active
cooperation and support of SBA's resource partners and the ability to
identify means that increase the effectiveness and efficiency of service
delivery through access to and training in the use of the Internet.

[]{#__RefHeading___Toc3175940 .anchor}Strategic Goal 3: Streamline
Disaster Lending

**Means and Strategies:**

In the wake of physical disasters, SBA\'s disaster loans are the primary
form of Federal assistance for non-farm, private-sector disaster losses
for individuals and businesses. The disaster loan program is the only
form of SBA assistance not limited to small businesses. SBA's disaster
loans help homeowners, renters, businesses of all sizes, and nonprofit
organizations fund rebuilding and recovery efforts.

SBA disaster assistance is a critical source of financial assistance in
disaster-ravaged communities. It is crucial to respond to disaster
victims as quickly and efficiently as possible. Agency strategies to
help disaster victims include (1) developing a flexible infrastructure
of resources that can be applied to a disaster area, (2) using the
Internet to facilitate the disaster home loan application process, and
(3) outsourcing disaster home loan servicing and carrying out asset
sales.

Current interest rates charged to borrowers are determined according to
statutory formulas: i.e., a lower rate, not to exceed 4 percent, is
available to applicants without credit available elsewhere; and a higher
rate, not to exceed 8 percent, is for those with credit available
elsewhere. SBA offers physical disaster loans to individuals, physical
disaster loans to businesses of any size, and economic injury loans to
small businesses without credit available elsewhere. SBA also offers
Disaster Loan assistance to (1) businesses that have essential employees
who are reservists and National Guard members that are activated during
a period of military conflict; and (2) eligible small businesses to fund
specific projects to prevent disaster damage.

The dollar volume of approved loans varies from year-to-year, reflecting
the inability to plan for and accurately forecast the next disaster.
SBA's primary objective is to offer victims quality, timely,
easy-to-access, and cost-effective help to rebuild their homes and
businesses. Customer satisfaction is a key element of success for this
program.

#### 

#### Programs that support disaster victims:

SBA operates a direct loan program to assist victims of physical
disasters, and supports the servicing and collection of these loans
after they have been made. The Agency makes disaster loans totaling
approximately \$1 billion each year and has an active portfolio of about
\$4 billion. In FY 2001, SBA included a large number of disaster loans
in its Assets Sale Program.

Recent legislation was passed to establish two additional categories of
economic injury disaster loans. The Pre-disaster Mitigation Pilot Loan
Program is a 5-year program that provides financial assistance to small
businesses located in designated communities participating in the
Federal Emergency Management Agency's (FEMA) formal mitigation program
to protect property from future disaster damage. The legislation
authorizes SBA to use up to \$15 million of loan authority in each
fiscal year. The Military Reservist Economic Injury Loan Program
provides financial and other assistance to small businesses that are
economically impacted because its owner(s) or employee(s) are called up
for active duty in response to a military conflict.

Results and Resources

*(Dollars in Thousands)*

+----------------------------+------+-----+-----+-----+------+------+
|                            | **FY | *   | *   | *   | **FY | **FY |
|                            | 19   | *FY | *FY | *FY | 20   | 20   |
|                            | 98** | 199 | 200 | 200 | 02** | 03** |
|                            |      | 9** | 0** | 1** |      |      |
+----------------------------+------+-----+-----+-----+------+------+
|                            | **   | *   | *   | *   | **   | **   |
|                            | Actu | *Ac | *Ac | *Ac | Targ | Targ |
|                            | al** | tua | tua | tua | et** | et** |
|                            |      | l** | l** | l** |      |      |
+----------------------------+------+-----+-----+-----+------+------+
| ######## ***Results:***    |      |     |     |     |      |      |
+----------------------------+------+-----+-----+-----+------+------+
| > Homes restored to        | 24   | 28, | 23, | 43, | 31   | 30   |
| > pre-disaster conditions  | ,374 | 811 | 070 | 519 | ,853 | ,618 |
+----------------------------+------+-----+-----+-----+------+------+
| > Businesses restored to   | 5    | 7,  | 5,  | 5,  | 7    | 6    |
| > pre-disaster conditions  | ,780 | 365 | 148 | 275 | ,011 | ,116 |
+----------------------------+------+-----+-----+-----+------+------+
| > SBA field presence       | N/A  | 1   | 1   | 1   | 98%  | 100% |
| > established within 3     |      | 00% | 00% | 00% |      |      |
| > days                     |      |     |     |     |      |      |
+----------------------------+------+-----+-----+-----+------+------+
| > Applications processed   | 77%  | 60% | 9   | 94% | 80%  | 85%  |
| > within 21 days           |      |     | 1%[ |     |      |      |
|                            |      |     | ^8] |     |      |      |
+----------------------------+------+-----+-----+-----+------+------+
| > Customer satisfaction    | N/A  | N/A | 81% | TBD | 80%  | 80%  |
| > rate                     |      |     |     |     |      |      |
+----------------------------+------+-----+-----+-----+------+------+
|                            |      |     |     |     |      |      |
+----------------------------+------+-----+-----+-----+------+------+
| ***Resources (\$000):***   |      |     |     |     |      |      |
+----------------------------+------+-----+-----+-----+------+------+
| > *Disaster Assistance     |      |     |     |     |      |      |
| > Operating Expenses:*     |      |     |     |     |      |      |
+----------------------------+------+-----+-----+-----+------+------+
| > Disaster Loan Making     | \$79 | \$  | \$  | \$  | \    | \$81 |
|                            | ,116 | 85, | 83, | 88, | $124 | ,093 |
|                            |      | 926 | 929 | 190 | ,933 |      |
+----------------------------+------+-----+-----+-----+------+------+
| > Disaster Loan Servicing  | 25   | 30, | 29, | 29, | 30   | 30   |
|                            | ,012 | 808 | 523 | 019 | ,056 | ,694 |
+----------------------------+------+-----+-----+-----+------+------+
| > Loan Program Subsidy     | 149  | 1   | 1   | 1   | 237  | 111  |
|                            | ,953 | 70, | 73, | 52, | ,963 | ,140 |
|                            |      | 427 | 908 | 613 |      |      |
+----------------------------+------+-----+-----+-----+------+------+
| > Agency Support Cost      | N/A  | N/A | 18, | 25, | 26   | 30   |
| > Estimates:               |      |     | 631 | 533 | ,299 | ,875 |
+----------------------------+------+-----+-----+-----+------+------+
|                            |      |     |     |     |      |      |
+----------------------------+------+-----+-----+-----+------+------+
| **Total**                  | *    | *   | *   | *   | *    | *    |
|                            | *\$2 | *\$ | *\$ | *\$ | *\$4 | *\$2 |
|                            | 54,0 | 287 | 305 | 295 | 19,2 | 53,8 |
|                            | 81** | ,16 | ,99 | ,35 | 51** | 02** |
|                            |      | 1** | 1** | 5** |      |      |
+----------------------------+------+-----+-----+-----+------+------+

# 

#### Major Accomplishments in FY 2001:

-   [Disaster Lending]{.underline}. Approved 48,852 disaster loans
    totaling \$1.0 billion.

-   [Disaster Response]{.underline}. Processed 115,243---or 94
    percent---applications within 21 days.

#### Major Activity for FY 2003:

-   [Continue development and implementation of the Disaster Assistance
    Credit Management Modernization (DCMM)]{.underline}
    [Initiative]{.underline}: SBA will acquire the system in increments,
    with functional capabilities available to the office. SBA will join
    FEMA and the Department of Education in developing an integrated
    *disaster.gov* electronic gateway to help disaster victims access
    help in the most cost effective way possible.

#### Human Capital:

The agency will continue to coordinate staffing needs with FEMA and
other Federal, state and local officials to establish field presence
within three days of a declaration. The Agency will also continue the
Disaster Personnel Reserve Corps to allow SBA to recruit, train, and
have available personnel to assist the Agency in responding to
disasters. SBA will continue to provide standardized loan-officer
training. Increased use of technology for the disaster loan application
process will facilitate operations at disaster regional centers.

### 

#### Evaluation, Analyses and Surveys:

SBA will continue to conduct quality reviews of its disaster loan
underwriting and documentation process. Customer surveys will also be
conducted to measure the effectiveness and delivery of disaster
assistance.

#### Cross-Cutting Issues:

Systematic coordination among Federal, state and local agencies is
necessary before and during a disaster to ensure effective, efficient
delivery of the array of recovery programs. The Federal Response Plan
(FRP) describes the initiation, coordination and implementation of the
wide array of Federal disaster programs that provide assistance directly
to individuals and families and business owners attempting to recover
from the effects of a presidential-declared major disaster. The Stafford
Act assigns FEMA the coordination role, in which multiple Federal
assistance programs are reviewed, initiated, implemented, and delivered
to address the unique needs of a particular disaster area. Interagency
coordination is critical to promote efficient, consistent Federal
action. It also helps avoid *ad hoc* decision making, funding
initiatives at cross-purposes, replicating efforts (e.g. multiple damage
assessments, inspections, environ­men­tal reviews), and duplicating
benefits.

Disaster assistance programs for individuals, families, and businesses
often overlap in their coverage and purposes. Section 312 of the
Stafford Act requires that no person, business concern, or other entity
receive Federal disaster assistance for any part of a loss that has been
covered by any other program, insurance, or any other source. FEMA has
established a policy and procedure that outlines when duplication can
occur, and describes procedures for preventing and rectifying
duplication.

The following delivery sequence establishes the order for providing the
major forms of assistance:

1.  Voluntary organizations' emergency assistance and insurance
    proceeds, including additional living-expense benefits;

2.  Disaster temporary housing assistance, including rental assistance,
    funds for minimal repairs, and provision for housing units;

3.  SBA and United States Department of Agriculture disaster loans;

4.  Individual and family grant awards; and

5.  Additional assistance from voluntary organizations.

Regarding Disaster Assistance Loans for Reservists and National Guard
members, SBA will coordinate with DOD and States Adjutant Generals and
the National Veterans Business Development Corporation.

#### Critical External Factors:

The single most important external factor is the unpredictability of
disasters. Helping businesses and families recover from disasters
requires SBA to work closely with FEMA as well as other Federal, state
and local agencies. SBA must coordinate closely with FEMA to establish
disaster-assistance centers when physical disasters strike, provide
expedited responses, reduce paperwork, and create ongoing partnerships
with voluntary agencies, businesses, and industries in the disaster
area.

# 

# 

# 

# 

# 

# 

# 

# 

# 

# SBA's CORPORATE MANAGEMENT STRATEGIES 

#### SBA's CORPORATE MANAGEMENT STRATEGIES

Similar to the private sector, SBA needs to increase the pace of change
and reform. To reform and modernize the Agency, SBA has developed a set
of corporate management strategies that are aligned with the
Administration's Management Agenda. Its management strategies include
improving credit program management because SBA is one of the five
largest Federal credit program agencies, and improving IT capital
management because the use of technology is an important factor in
making the Agency more effective. These strategies are:

1\. Integrate Performance with the Budget (link resources to results)

2\. Manage Human Capital More Strategically (restructure the workforce)

3\. Improve Financial Management Information

4\. Increase Competitive Sourcing

5\. Expand E-Government

6\. Improve Credit Program Management

7\. Improve IT Capital Management

## Strategy #1: Integrate Performance with the Budget

The Results Act requires Federal agencies to institute behavior changes,
measure and declare the value of public sector programs, and improve
internal management and decision-making. The core of the Results Act is
the ability of a Federal agency to be transparent (i.e., define its
work, its success, and its costs) and to be accountable (i.e., measure
and report on progress). To manage for results, SBA must ensure that
performance information is available, valid and verifiable, and that it
has a cost allocation system that links resources to results achieved.

**Major Accomplishments in FY 2001:**

-   Developed guidance on the preparation of outcome-based performance
    indicators and the improvement of data quality.

-   Developed an activity based budgeting process to link resources to
    strategic goals.

-   Produced SBA's first Integrated Performance and Accountability
    Report in March 2001.

-   Integrated FY 2002 annual performance plan with the budget request.

-   Carried out customer satisfaction surveys (SCORE and WBC clients).

-   Evaluated the Small Business Development Center Program.

-   Conducted a preliminary study of how to develop an econometric
    approach to estimate the demand for 7(a) loans.

**Major Activities for FY 2003:**

-   Use outside contractors to evaluate programs.

-   Link individual success to organizational achievement through
    performance standards.

-   Improve process and procedures for data validation and verification.

-   Develop client surveys to determine impact of counseling and
    training.

-   Improve activity-based budgeting and monitoring.

-   Institute a Balanced Scorecard approach to performance management.

-   

-   

-   

## 

## Strategy #2: Manage Human Capital More Strategically 

An organization's workforce represents the single largest resource in
most agencies and, therefore, needs to be managed strategically. This
means assessing the current capabilities and skills of the workforce,
developing employee performance plans, recruiting and developing new
employees, creating viable succession and retention plans, modernizing
the HR office with electronic processing, and reducing the number of
organizational layers and moving more personnel into front line
positions.

Human capital planning is more important than ever because technology,
an increasing demand for small business information and training, and
loan processing simplification will likely require significant changes
in SBA personnel needs. SBA will have fewer employees involved in loan
processing, more employees focused on providing small business technical
assistance, and more Agency personnel proficient in using and applying
new technologies.

Through interest-based discussions with union partners, SBA will
restructure its workforce with the guidance of the President\'s vision
for a government that is citizen-centered and results-oriented.
Accordingly, it will reduce the distance between citizens and
decision-makers through staff redistributions, contracting of loan
servicing and processing, and centralizing other core functions. SBA
will reduce the number of managers and organizational levels, increase
the span of control of remaining managers, and strengthen the ability of
the front-line employees to provide high-quality service. Through this
restructuring, SBA seeks to emulate the small businesses it serves by
creating an efficient and flexible workforce that provides a level of
high-quality service that Americans have come to expect from their
Government.

-   
-   
-   
-   

1.  
2.  
3.  

#### Major Accomplishments in FY 2001:

-   Completed workload and staffing analysis of Headquarters.

-   Provided 1,087 instances of training (i.e., one person taking one
    course).

-   Completed competency models for the Agency's business development
    function and the lender oversight function.

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-   Continued with the leadership development curriculum by training 106
    senior managers and supervisors.

-   Drafted a plan to have a portion of its workforce involved in some
    form of telecommuting.

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-   Conducted the first National Conference for District Office Veterans
    Affairs Officers.

#### Major Activities for FY 2003:

-   Hire, develop and retain a diverse workforce with skills for mission
    accomplishment through recruitment flexibility, e.g., student loan
    repayment, tuition assistance, and expanded outreach to occupation
    specialty areas in targeted colleges and universities.

-   Train and re-train our workforce in skills that best support our
    small business customers.

-   Develop innovative training delivery methods through use of
    technology to ensure that training is cost effective, efficient and
    available on demand.

-   Train managers and senior staff on leadership skills.

-   Relocate employees to locations where they can best serve small
    business customers.

-   Maximize SBA's family friendly programs through expanded transit
    benefits, telecommuting and comprehensive work-life wellness
    programs.

-   Begin implementing 5-year Workforce Restructuring Plan.

-   Continue workforce succession planning to close the gap between
    available candidates and potential and actual retirements in our
    management cadre through the Agency's candidate development programs
    including use of the new career intern program.

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-   Implement the results of the FY 2002 pilot projects. Specifically,
    during FY 2002, the Agency is testing various alternate District
    Office operating models and organizational schemes to determine
    those which are the most supportive of the President\'s goal of more
    direct governmental support of citizenry.

-   Reduce the number of organizational layers in Headquarters.

## 

## 

## 

## Strategy #3: Improve Financial Management Information

Timeliness and accuracy of financial management information is essential
for SBA. The Agency has a loan portfolio of approximately \$53 billion.
The General Accounting Office has recognized SBA for its analytical work
on loan subsidy rates, its work on establishing a comprehensive cost
allocation system, its integration of the budget and planning processes,
and its implementation of internal controls.

#### Major Accomplishments in FY 2001:

-   Received its fifth consecutive unqualified audit opinion on its FY
    2000 financial statements.

-   Improved internal control framework through computer-based training
    and management assessments of all higher risk areas.

-   

-   Continued to develop and enhance subsidy rate analyses, including
    completing limited econometric analysis and developing a more robust
    asset sales valuation model.

-   Implemented a web-based cost allocation survey and system to tie
    resources to activities and results. Began integration of cost
    accounting with the budget planning and execution processes.

-   Completed implementation of a modern, integrated financial
    management system to serve as SBA's core financial management system

-   Increased the use of e-commerce for financial transactions with SBA
    employees and the public. Entered into an agreement with the
    Department of Treasury to be an initial pilot agency for the
    implementation of *pay.gov*.

#### Major Activities for FY 2003:

-   Accelerate the timeliness and usefulness of financial information,
    including producing quarterly financial statements, monthly
    budget/cost/performance reporting and analysis, and annual financial
    statements.

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-   Reconstitute the Loan Monitoring System (LMS) within the context of
    existing financial management infrastructure to obtain better lender
    oversight and risk management.

-   Increase the use of e-commerce to move all financial transactions to
    web-based electronic payments and collections.

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-   Continue to oversee and monitor the level of erroneous/improper
    payments.

-   Begin use of CCR vendor database for all SBA procurement actions.

[]{#__RefHeading___Toc3175945 .anchor}Strategy #4: Increase Competitive
Sourcing

Under the Federal Activities Inventory Reform (FAIR) Act, all Federal
agencies must identify opportunities for competitive sourcing by
determining the activities they perform and the associated Full-Time
Equivalent staffing, by distinguishing between those that are inherently
governmental and those of a commercial nature, and by analyzing the
costs of different sources doing the activity. In accordance with The
President's Management Agenda, 5 percent of the FTE's associated with
the commercial activities is to be subjected to sourcing analysis during
FY 2002, with 15 percent reviewed by the end of FY 2003. The analysis
follows OMB's circular A-76 guidance, and is to determine if it is more
efficient and cost-effective to retain the work within the government or
contract it out to the private sector.

SBA has been a leader in sourcing major parts of its activities to the
private sector. Banks make, service and liquidate a major part of SBA's
loans (except disaster loans) while counseling and training is done
through SBDCs, SCORE and Women's Business Centers.

#### Major Accomplishments in FY 2001:

-   

-   Completed the FAIR Act inventory that identified 66 percent of SBA's
    activities as commercial in nature.

#### Major Activities for FY 2003:

-   Increase IT outsourcing. As SBA staff becomes more dependent on
    technology to do its work, telecommuting expands, and the workforce
    becomes more mobile, demands for \"always-on\" operations and
    customer service will likely increase. SBA will assess opportunities
    to outsource the operations of critical computer platforms to
    commercial hosting and application service provider firms under
    performance-based contracts.

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-   Increase competitive sourcing for not less than 15 percent of the
    commercial activities listed on the FAIR Act inventory.

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-   
-   
-   

[]{#__RefHeading___Toc3175946 .anchor}Strategy #5: Expand E-Government

The Internet has become an important channel for outreach to small
businesses. Most businesses are on-line. According to a study conducted
for SBA in early 2001 by Access Markets International, about 5 million
of the 7.5 million small businesses with employees (67 percent) are
online. The Internet is rapidly becoming an important delivery channel
for SBA. The average number of weekly "hits" at SBA's web sites have
grown exponentially from less than 1 million in 1995 to 10 million in
2001.

#### Means and Strategies

SBA's electronic Government (E-gov) vision revolves around:

-   Improving service to customers;

-   Making SBA's products more tailored and more accessible to its
    customers;

-   

-   

-   Expanding the quality and quantity of information and training;

-   Reaching more customers more effectively;

-   Connecting, leveraging and sharing agency resources across programs;
    and

-   Increasing effectiveness and efficiency.

    SBA's e-government strategies include the following functions:

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-   [Conduct Transactions]{.underline}. At the core of SBA's Internet
    strategy is to the ability to conduct its business online: approving
    loan guaranties, providing eligibility and certifying minority
    businesses and applying for HUBZone preferences, providing answers
    online, and processing paperless disaster loans.

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-   [Monitor Loans and Lenders]{.underline}. Substantively complete a
    systematic framework for lender oversight and risk management of
    SBA's lenders. The immediate benefits of the lender oversight and
    risk management components of LMS are two-fold. First, it will
    enhance lender oversight activities through strategic segmentation
    of SBA lenders by assigning each SBA lender into a risk category
    (low, moderate, and high) depending upon the individual risk
    assessment identified within LMS. Then, it will allow SBA to focus
    oversight resources on those lenders representing the highest risk
    to the Agency.

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-   

-   [Provide]{.underline} [Access to Information]{.underline}. SBA is
    providing anytime, anyplace access to Government information and
    services through its own web site, the *U.S. Business Advisor*, and
    program specific gateways, e.g., Women's Online Business Center,
    SCORE online, and *BusinessLaw.gov*, which is being developed as a
    first intergovernmental legal and regulatory site for businesses.

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-   [Access to Education and Counseling]{.underline}. SBA offers
    businesses online counseling, distance learning, online classrooms,
    and web-based tutorials to provide management assistance and
    solutions to business questions.

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-   [Participate in the Administration's Quicksilver
    Initiative]{.underline}. SBA is managing partner for the Business
    Compliance Assistance initiative. The initiative includes as
    participating partners the Departments of Interior, Transportation,
    Energy, and Labor; EPA, OSHA, IRS, and INS. SBA is also
    participating in six other Quicksilver initiatives:

> \- E-loans

-   Eligibility assistance on-line

-   Federal asset sales

-   International trade process streamlining

-   Disaster assistance and crises response

-   Integrated acquisition portal

#### Major Accomplishments in FY 2001:

-   SBA developed the *BusinessLaw.gov* website. The law affects every
    business from licensing requirements to product liability. Many
    small businesses fail because they do not seek legal help at
    critical development stages. Determining which laws and regulations
    apply, understanding what they require and complying with them are
    ominous tasks. These tasks are further complicated by the fact that
    the rules are imposed by numerous different agencies at all levels
    of government: Federal, state and local.

The primary goal in developing *BusinessLaw.gov* is to ease the burden
of laws and regulations on small businesses by collecting Federal, state
and local legal information and providing a central location where it
can be accessed. In addition, the web site offers access to compliance
assistance tools and electronic licenses and permits in selected
locations. By providing greater access to important legal and regulatory
topics in plain English, SBA will be helping small businesses identify
potential problems early and take preventative action.

#### Major Activities for FY 2003:

-   Implement performance-based service contracting techniques for
    contracts over \$25,000, using Performance-Based Service Contracting
    (PBSC) techniques for not less than 20 percent of total eligible
    service contracting dollars.

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-   Manage and Implement the Business Compliance Assistance Portal - a
    Quicksilver Initiative.

> Complying with laws and regulations is burdensome for American
> businesses. SBA's Office of Advocacy estimates that the regulatory
> burden on citizens is more than \$800 billion, with nearly \$500
> billion borne by small businesses in 2000. This translates to roughly
> \$7000 per employee in firms with less than 20 employees.

Businesses need a single point of access to all the laws and regulations
that affect them. They also need online tools that will help them know
if they are in compliance, as well as tools that will offer them
compliance solutions. Because of the growing number of businesses with
Internet access (67 percent of all firms with employees in early 2001),
the Web is currently the most viable delivery channel for these
services. A one-stop compliance site will significantly reduce the time
(and cost) needed to find information.

> For these reasons, the Business Compliance assistance site was
> selected as one of 23 OMB-approved E-Government ("Quicksilver")
> projects for the Administration's E-Gov platform.

The initiative will incorporate best practices from the private sector
to build this tool; namely, SBA will build upon the experience gained in
the construction of the gateway and transaction engine in the United
Kingdom (e.g., cross-agency permitting). The Agency will also use
private sector best practices for knowledge management \-- (i.e.,
individualized packaging of information to offer quick access to the
right information for appropriate solutions). SBA will focus on improved
navigation, personalization, expert tools, and interactive problem
solving.

While better portal capability and consolidation of information is
needed, the site will provide real solutions to business problems within
a local context in a minimal amount of time. Rules-based software, XML
and other Web-based technologies make it possible to create a site with
these core capabilities:

> 1\. *Online transactions*. Businesses will be able to apply online for
> selected licenses and permits at the Federal, state and local level.
>
> *2. Quick access to laws and regulations*. Site users can access
> appropriate laws and regulations in three clicks or less.
>
> *3. Compliance Assessment Aids*. Online tools can help businesses
> determine what laws and regulations apply to them and whether they are
> in compliance.

-   In conjunction with Federal Emergency Management Agency, develop a
    one-stop portal for Federal disaster assistance. There is currently
    no single place that disaster victims can turn for information on
    available disaster assistance at Federal, state and local levels and
    how to apply for it. It is also not possible to apply for SBA
    disaster loan on-line nor track whether a loan application is
    complete, if the property inspection is completed or being scheduled
    or if a decision has been made. Often the disaster victim must fill
    out multiple forms. With Internet expert help, victims will be able
    to apply for SBA disaster financial assistance on-line. (Funded from
    existing and future FedSim monies.)

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-   In conjunction In conjunction with Department of Education, develop
    and implement e-lending applications for Federal loans at SBA.

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-   

-   

-   Anticipate the development of an electronic certification
    process---with built-in decision logic for 8(a) businesses, as well
    as continue to improve the HUBZone Empowerment Contracting (HUBZone)
    Program certification process. By investing in program
    infrastructure, SBA will be able to operate a strong certification
    program more efficiently and effectively.

## Strategy #6: Improve Credit Program Management

SBA must maintain the financial safety and soundness of SBA's
approximately \$50 billion loan portfolio. As with financial
institutions in the private sector, SBA has the fiduciary responsibility
to make its loan guaranty decisions wisely and guard its current
investments carefully. Risk management issues have become more critical
as the business model has changed to partnering with banks, outsourcing
its core processes and selling its assets. In FY 2000, SBA placed
greater reliance on the credit decisions of its lending partners to
originate approximately 75 percent of all business loans. Congress has
required the Agency to test the feasibility of contracting with the
private sector for the servicing of 30 percent of our disaster home
loans through the end of FY 2002. In the past two years, the Agency
implemented a highly successful asset sale program and will continue to
strategically sell our loan portfolio.

As more of the loan-making, servicing and liquidation processes are
outsourced and centralized, SBA\'s exposure on the loan guaranties
becomes increasingly subject to the credit policies and actions of the
participating lenders. To protect the taxpayers' interests and to ensure
the long-term viability of our lending programs, the SBA has begun to
build a system to identify, understand, and respond appropriately to the
behavior of its lending partners in an effective and timely way. This is
the Loan Monitoring System (LMS).

Federal guidelines now require Federal credit agencies to include lender
oversight in their program management. OMB Circular No. A-129, "Policies
for Federal Credit Programs and Non-Tax Receivables," requires Federal
credit agencies to track and evaluate lender performance, including
delinquency, default and claim rates. The Joint Financial Management
Improvement Program (JFMIP) guidelines on Guaranteed Loan System
Requirements similarly requires Federal agencies to monitor lender and
servicer performance, identify lenders or servicers for regular or
special review based on performance characteristics and periodically
review lenders and servicers on-site.

#### Means and Strategies

SBA needs to ensure that its lender partners are good stewards of the
loans they fund that are guaranteed by the SBA. To achieve this goal,
the Agency must continue to improve its ability to assess and forecast
the credit risk in SBA's loan portfolios. A key component in SBA's
efforts to improve credit program management is the Office of Lender
Oversight (OLO). One of OLO's primary functions is to identify,
quantify, assess and evaluate the credit and program risk in SBA's loan
portfolio.

Key objectives in this area include:

-   Expanding existing portfolio analysis to provide more detailed and
    timely information and related analysis of performance trends.

-   Conducting loan and investment program analyses in order to
    understand the drivers of performance and to identify areas of
    program risk.

-   Analyzing, revising and, as appropriate, expanding upon existing
    credit program performance measures to ensure that performance
    measures utilized reflect the risk characteristics of SBA's loan
    portfolios.

-   Conducting institutional analysis of SBA's lenders to provide
    meaningful input into decisions regarding lender's participation in
    SBA programs.

-   Implementing an early warning system designed to identify lenders
    with high-risk characteristics and/or significant changes in
    performance indicators.

-   Implementing a stress test approach to forecast portfolio
    performance under a variety of economic scenarios.

-   Expanding safety and soundness examinations to include non-bank
    lenders in addition to Small Business Loan Companies (SBLCs).

-   Expanding the existing compliance review process to include
    operational reviews of a lender's SBA activity.

SBA will develop an econometric model to forecast the performance of the
Agency's loan programs under a variety of economic scenarios. This model
will mainly support subsidy rate analyses and stress testing of the loan
portfolio. Credit program management performance measures include
currency rates, default rates, purchase rates and recovery rates. These
are shown in the table below for our major loan programs.

**Credit Program** **Performance Measures**

+-----------------+------+------+------+------+------+------+------+
|                 | **FY | **FY | **FY | **FY | **FY | **FY | **FY |
|                 | 19   | 19   | 19   | 2    | 20   | 20   | 20   |
|                 | 97** | 98** | 99** | 000\ | 01** | 02** | 03** |
|                 |      |      |      | Actu |      |      |      |
|                 | **   | **   | **   | al** | **E  | **   | **   |
|                 | Actu | Actu | Actu |      | stim | Targ | Targ |
|                 | al** | al** | al** |      | ate* | et** | et** |
|                 |      |      |      |      | *^6^ |      |      |
+-----------------+------+------+------+------+------+------+------+
| **CURRENCY      |      |      |      |      |      |      |      |
| RATE**^1^       |      |      |      |      |      |      |      |
+-----------------+------+------+------+------+------+------+------+
| > 7(a)          | 7    | 8    | 8    | 9    | 9    | 9    | 9    |
|                 | 6.1% | 9.4% | 9.8% | 0.4% | 2.2% | 0.6% | 0.6% |
+-----------------+------+------+------+------+------+------+------+
| > 504           | 9    | 9    | 9    | 9    | 9    | 9    | 9    |
|                 | 7.5% | 8.0% | 8.0% | 8.4% | 9.6% | 8.5% | 5.5% |
+-----------------+------+------+------+------+------+------+------+
| > Disaster Home | 8    | 9    | 9    | 8    | 9    | 8    | 8    |
| > Loans         | 9.7% | 0.8% | 0.6% | 9.6% | 0.7% | 9.6% | 9.6% |
+-----------------+------+------+------+------+------+------+------+
| > Disaster Bus. | 8    | 8    | 8    | 8    | 8    | 8    | 8    |
| > Loans         | 0.9% | 2.9% | 5.0% | 5.1% | 9.4% | 5.2% | 5.2% |
+-----------------+------+------+------+------+------+------+------+
| **DEFAULT       |      |      |      |      |      |      |      |
| RATE**^2^       |      |      |      |      |      |      |      |
+-----------------+------+------+------+------+------+------+------+
| > Disaster Home | 7.0% | 5.9% | 6.5% | 7.4% | 5.7% | 7.2% | 7.2% |
| > Loans^5^      |      |      |      |      |      |      |      |
+-----------------+------+------+------+------+------+------+------+
| > Disaster      | 1    | 1    | 1    | 1    | 7.5% | 1    | 1    |
| > Business      | 4.7% | 4.3% | 2.1% | 1.5% |      | 1.4% | 1.4% |
| > Loans         |      |      |      |      |      |      |      |
+-----------------+------+------+------+------+------+------+------+
| **PURCHASE      |      |      |      |      |      |      |      |
| RATE**^3^*.*    |      |      |      |      |      |      |      |
+-----------------+------+------+------+------+------+------+------+
| > 7(a)          | 1    | 1    | 1    | 1    | 1    | 1    | 1    |
|                 | 7.3% | 6.0% | 5.1% | 4.4% | 4.3% | 3.9% | 2.7% |
+-----------------+------+------+------+------+------+------+------+
| > 504           | 1    | 1    | 1    | 1    | 1    | 8.4% | 8.3% |
|                 | 8.8% | 5.8% | 3.3% | 1.9% | 1.1% |      |      |
+-----------------+------+------+------+------+------+------+------+
| **RECOVERY      |      |      |      |      |      |      |      |
| RATE**^4^       |      |      |      |      |      |      |      |
+-----------------+------+------+------+------+------+------+------+
| > 7(a)          | 51%  | 5    | 6    | 6    | 6    | 6    | 5    |
|                 |      | 1.7% | 1.0% | 0.5% | 0.7% | 0.3% | 8.0% |
+-----------------+------+------+------+------+------+------+------+
| > 504           | 44%  | 3    | 3    | 2    | 3    | 2    | 2    |
|                 |      | 4.3% | 1.1% | 4.9% | 1.3% | 6.9% | 0.0% |
+-----------------+------+------+------+------+------+------+------+
| > Disaster Home | 4.6% | 4.6% | 4.6% | 4.6% | 5.0% | 4.5% | 3.9% |
| > Loans         |      |      |      |      |      |      |      |
+-----------------+------+------+------+------+------+------+------+
| > Disaster Bus. | 1    | 1    | 1    | 1    | 1    | 1    | 9.2% |
| > Loans         | 1.9% | 1.8% | 1.8% | 1.8% | 9.4% | 1.8% |      |
+-----------------+------+------+------+------+------+------+------+

^1^ The proportion of each year's disbursed dollars with on-time
payments.

^2^ The proportion of each year's disbursed dollars over 60 days
delinquent.

^3^ The proportion of each year's disbursed dollars purchased from
lenders due to borrower default.

^4^ The proportion of each year's purchased dollars recovered by SBA or
lenders, net of expenses.

^5^ Figures include ACS loan servicing.

^6^ The currency rate is substantially for the 100 percent guaranteed
504 debenture to the investor, not the 504 loan to the small business
concern. Currency is almost 100 percent because if the small business
does not make sufficient payments to meet the semi-annual payments to
the investor, SBA makes up the difference. The 504 loan currency rate is
not available from SBA's system.

#### Major Accomplishments in FY 2001

-   Developed and began testing a lender ranking model designed to
    identify lenders with high-risk financial condition characteristics.

-   Started initial planning of the lender oversight and risk management
    components of the Loan Monitoring System (LMS) that will provide OLO
    with the tools to achieve the analytical objectives described above.

-   Adopted a risk management approach to lender analysis. Conducted
    initial risk management analysis to identify those individual
    lenders representing the highest risk to the Agency in terms of loan
    volume and/or loan performance.

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-   Completed seven SBLC safety and soundness examinations during the
    third cycle of examinations. Utilized a risk-based approach to
    examinations by assigning levels of concern to each of the SBLCs.
    Based on the level of concern assigned, SBLCs are subject to
    examinations on a 12 to 24 month review cycle.

-   Completed the third cycle of PLP compliance reviews as mandated by
    Congress and began the fourth cycle with programmatic changes to
    ensure that results are more meaningful and are available to program
    officials in a timely manner to make decisions regarding a lender's
    continued program participation.

-   Provided lender oversight and lender review training for district
    office staff.

-   Coordinated collection action on delinquent accounts with Treasury
    pursuant to Debt Collection Improvement Act of 1996. (At the end of
    calendar year 2001, SBA had \$240 million of accounts in Treasury's
    administrative offset program, and \$950 million of accounts in
    cross-servicing. During calendar year 2001, Treasury administrative
    offset collections amounted to \$1.8 million and cross-servicing
    collections aggregated \$7.7 million).

#### Major Activities in FY 2003:

-   

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-   Substantively complete a systematic framework to provide a database
    of historical loan performance data for a 5-7 year period. This
    database will: allow SBA to conduct analysis of lender performance
    trends relative to SBA loans; obtain current information on a
    lender's SBA loan portfolio characteristics and status in a dynamic
    on-line system; and link SBA internal loan portfolio data with
    external financial data on SBA lenders.

-   Implement liquidation authority (provided by statute) for qualified
    certified development companies. Until now, only PCLP CDCs and those
    CDCs participating in the liquidation pilot could liquidate their
    loans. Under recent statutory authority (12/00), more CDCs will be
    able to liquidate their own loans, thereby taking some of the burden
    off SBA. Conduct stress testing of the SBA loan portfolio.

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-   Enhance lender oversight activities through off-site institutional
    analysis and on-site lender reviews.

-   Implement an off-site monitoring system for all non-bank lenders.

-   Implement a risk-based lender review process for all SBA lenders.

-   Provide lender oversight training for lender partners and field
    staff.

#### Erroneous Payments Discussion as required by OMB circular A-11, section 57

**1.** **Section 7(a) Loans**

The SBA's section 7(a) loan program guarantees up to approximately 85
percent on about \$9-\$10B in loans annually. If a borrower defaults,
the participating lender may request SBA to honor its guaranty. SBA
conducts a review of the purchase request, including reviewing the loan
origination, use of proceeds, and diligence by the participating lender
in servicing and liquidating the loan. If SBA determines that there has
been a breach in any of the terms of the loan, the guaranty agreement or
SBA regulations by the participating lender, SBA may modify the purchase
request through a "repair" (that is a payment less than the full
guaranteed amount), or may deny the purchase request in full.

The measurement of erroneous payments in this program logically rests
with the guaranty purchase process, since the government makes
"payments" only through this process.

A January 3, 2000 Office of Inspector General (OIG) report provided the
results of an audit of the 7(a) loan program that was conducted to
determine whether loans were processed, disbursed, and used in
accordance with SBA requirements. OIG concluded that 7(a) loans were not
always made in accordance with SBA requirements. Based on a statistical
projection of the limited sample results, OIG estimated that out of a
portfolio valued at \$10.3 Billion, loans valued at \$405 million may
have deficiencies that could result in some erroneous payments if SBA
honors its guaranty on the loans.

As a result of the audit, OIG initially recommended that SBA centralize
the guaranty purchase process for all loans. However, based on an
agreement among OIG, the Office of Field Operations, the Office of
General Counsel and the Office of Financial Assistance, program-wide
centralization did not occur. Instead SBA took two separate actions
designed to meet the spirit of the OIG recommendation. First, it
centralized purchasing for loans made under the SBA Express program,
which currently accounts for 28 percent of the number of 7(a) loans
approved so far for FY 2002. Second, with the OIG's concurrence as to
methodology, SBA established a process by which SBA centrally reviews a
random sample of about 300 loan purchase decisions annually.

The SBA guaranty purchase review program was initiated to further
strengthen the Agency's quality control and oversight of the 7(a) loan
program. The initial findings from the review process indicated a
"possible error" rate in recent guaranty purchases of 10.9 percent. This
is a preliminary estimate based upon the early results of a small
sample. SBA needs additional data from future reviews to validate this
finding since records related to the level of errors in purchase
disbursements have not existed prior to the newly initiated review
process. In the absence of other specific data, we propose that an
estimated error rate of 10.9 percent be established as SBA's baseline
rate for FY 2001, without reference to FY1999-FY2000.

We further propose the following target rates for erroneous payments for
FY2002-FY2003, based on our definition supplied above.

FY 2001 Baseline "error" rate 10.9% \$44.1 million

FY 2002 Target "error" rate 10.0% \$40.5 million

FY 2003 Target "error" rate 9.0% \$36.4 million

Assessment and Action Plan:

SBA will continue this review process to determine if there is a
reduction in the error rate. The review process includes examination of
a random sample of purchase decisions made by SBA field offices by teams
of financial and legal staff. The goal of the reviews is to identify
problem areas in policy and procedures that may require clarification,
revision or development of training in order to achieve consistency in
purchase decisions, as well as reduction of possible erroneous
disbursements. SBA plans to review approximately 300 guaranty purchases
each year. The first recommendations from this review process will be
issued during fiscal year 2002. Part of this process includes recovery
of funds that are identified as being paid erroneously.

In addition, through the conduct of regular reviews of lenders
participating with SBA, the Agency assures and measures compliance with
laws, regulations, and agency procedures. Lenders who fail to
appropriately follow these requirements will not be allowed to continue
to participate with SBA in the 7(a) program. Problems identified are
factored into SBA's future lender approval and review processes.

**2. Certified Development Company Program (504)**

This asset based debenture program guaranteed approximately \$2.2B in
loans in FY 2001. The participating Certified Development Company (CDC)
issues debentures to private investors to finance the transaction with
the small business borrower. SBA's guaranty covers no more than 40
percent of the project costs, with the primary lender covering a minimum
of 50 percent of the project costs and retaining a first lien position
on any real estate and collateral. Borrowers must contribute a minimum
of 10 percent, and this contribution increases to 15-20 percent for
start-up businesses and single purpose buildings. Upon default by the
borrower, SBA must honor its guaranty to the investor. This is done
through a single Central Servicing Agent (CSA) with a tightly controlled
procedure. Upon payment to the investor, the Agency attempts to collect
via a workout with the borrower or through the liquidation of
collateral.

The majority of 504 loans are reviewed by SBA loan specialists as part
of the approval process. Under the legislatively mandated 504 program
structure, CDCs have no liability for any 504 loan failure except for
loans processed through the Premier Certified Lenders Program (PCLP).
However, SBA counsel reviews 504 loans after closing and SBA provides
necessary training to a CDC to overcome any identified flaws in the
CDC's loan practices. Consequently, the potential for erroneous payments
is likely to be lower.

The measurement of erroneous payments in this program would be based on
a review of defaults. Defaults amount to about \$60-70M annually. During
FY 2002, the Agency will set up a procedure for measuring the amount of
erroneous payments for 504 loans, subject to the availability of funds.
This procedure will be similar to that used for the 7(a) program. A
group of Headquarters and field personnel will review a sample of
purchases made during FY 2001. The review will include an examination of
the loan file and discussions with the loan officer handling the
purchase if there are any discrepancies. Because the process is
centralized in the loan servicing centers, we would anticipate that the
performance is similar or slightly better than the 7(a) experience.
Based on this, we estimate that erroneous payments are no higher than
10% or \$7 million annually.

The goal for FY 2002 is to establish the baseline performance level.
Once this is established, the SBA will develop a plan for improving
performance.

3\. Small Business Investment Company (SBIC) Program

SBICs are privately owned and managed venture capital firms. SBA
guarantees approximately \$2.5 billion in debentures and participation
certificates (leverage) annually. The participating SBIC issues
debentures and/or participation certificates to private investors to
supplement the private capital raised by the fund. These funds are then
used to finance investments in small businesses. The private capital is
always at risk ahead of SBA. Upon default on payments by the SBIC for a
debenture or participation certificate, SBA must honor its guarantee to
the investor and attempt collection through working with the SBIC and
the small business financed by the SBIC for a workout or through
ultimate liquidation of collateral.

Unlike the 7(a) and 504 programs, the SBIC program has a very rigorous
licensing process prior to issuance of any form of SBA leverage. Also,
annual reviews of all leveraged SBIC participants are conducted to
assure full compliance with all applicable laws, regulations and agency
procedures. When a potential for default is identified, the SBIC is
placed on a watch list and monitored extremely closely by SBA personnel.
If a default does occur, the SBIC is reclassified into SBA's specific
SBIC liquidation unit where a comprehensive review and analysis is
undertaken to mitigate any ultimate loss to the government.

The SBA does not believe erroneous payments have been made to an SBIC.
The actual disbursement to an SBIC requires the cooperation of two
offices within the Investment Division and another independent party
plus the disbursing agent prior to a payment being made.

However, SBICs may make investments in portfolio concerns that are in
violation of the regulations governing their investments. SBICs are
routinely examined (approximately once per year for leveraged SBICs) and
potentially improper investments are reported by the examiners. These
investments are oftentimes later found to be appropriate but the raw
number is included below.

In the examination report the potential violations are referred to as
"Findings." The Findings are resolved in a number of ways. After review,
it is sometimes determined that no violation occurred. The terms and
conditions of the investment may be amended to conform to the
regulations. The terms may be approved by the Investment Division post
investment. Alternatively, the SBIC may divest.

Although the Findings may, in fact, not be a violation, they can serve
as a proxy for potential erroneous payments as the term is described in
the OMB instructions. We have attempted to isolate those findings that
potentially represent investments that should not have been made due to
eligibility requirements or where funds were improperly disbursed, and
not findings relating to purely structuring issues that are fairly
easily corrected. The specific Findings are identified below (all
references are to 13 CFR):

-   Prohibited Conflicts of Interest (107.730 and 107.885)

-   Relending, Foreign, Passive or Other Prohibited Investments,
    Including Prohibited Real Estate Financings (107.720)

-   Inappropriate Distributions, Including Improper Dividends and
    Excessive Expenditures (107.520; 107.585; 107.1520-1580; 107.50)

The reported number of findings on this basis, the percentage of total
investments and the estimated potential dollar amounts are as follows:

  ---------- -------------- ----------------------- ----------------------
  Fiscal     \# of          Percent of Total        Potential \$ Amounts
  Year       Investments    Investments             

  FY 99      32             1.03%                   \$19,200,000

  FY 00      35             0.75%                   \$21,000,000

  FY 01      28             0.65%                   \$16,800,000
  ---------- -------------- ----------------------- ----------------------

Our objective is to have these potential violations not exceed 1.0
percent of the total investments made by the SBICs. It is estimated that
the dollar amounts related to these investments do not exceed \$600,000
on average. The average may vary depending upon the average size of
investments made by SBICs.

## Strategy #7: Improve IT Management

#### Means and Strategies

SBA has undertaken a multi-year IT management improvement and systems
modernization effort that upgrades its infrastructure, offers electronic
access, and ensures timely and accurate information. In accordance with
Administration strategies and SBA strategic goals, the Agency's future
technology environment must be able to support:

-   "Anytime, Anywhere" access to SBA services, products and
    information.

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-   Increased face-to-face communications, internally within the SBA and
    externally with resource partners and small businesses through use
    of electronic interactive communications.

-   Enterprise-wide databases that transcend separate systems and office
    boundaries.

-   A reliable, expandable, high-capacity and cost-efficient information
    technology and communications infrastructure based on acknowledged
    technical standards, to support the SBA\'s work processes, as well
    as public access to its products and services.

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-   Timely and relevant information made available to all employees.

-   An empowered workforce that can realize the productivity gains made
    possible by well-designed information technology.

-   Improved delivery of services, products and information to small
    businesses.

Modernization efforts include:

-   Implementing Enterprise architecture which is a blueprint for
    systematically and completely defining the organization's current
    (baseline) and desired (target) technology environment in support of
    its business goals.

-   Developing an IT investment management guide as the Agency blueprint
    for selecting, controlling and evaluating IT projects within the
    Agency's IT projects portfolio.

-   Implementing a formal investment process including an active
    investment review council, investment guidance, and the ITIPS
    automated reporting system.

-   Improving systems security through institutionalizing its security
    program management procedures, developing an organizational
    framework for identifying and assessing risks and deciding what mix
    of policies and controls are needed, and regularly evaluating the
    effectiveness of IT security policies and controls, and act to
    address any identified weaknesses.

This performance goal is specified in terms of milestones. Goal
achievement will be judged in terms of reaching these milestones.

### 

#### Major Accomplishments in FY 2001:

#### 

-   Implemented a pilot of electronic loan applications for loans
    processed through the PLP Center for a small set of test lenders.

-   Implemented a new lender information system in the LMS: Partner
    Identification and Management Systems (PIMS).

-   Continued implementation of Clinger-Cohen Act with implementation of
    new procedures such as the Information Technology Investment Manual
    (ITIM) and the development of other draft procedures such as IT
    Architecture maintenance, project management, and software
    acquisition.

-   Completed SBA\'s Government Paperwork Elimination Act (GPEA)
    implementation plan.

#### Major Activities for FY 2003:

-   

-   Modernize systems, including (1) loan monitoring system, (2)
    financial management, and (3) disaster assistance.

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-   Continue infrastructure improvements (broadband, workstations,
    software licensing, and server architecture).

-   Continue development and implementation of systems development and
    acquisition policies and procedures.

-   Complete and maintain a survey of IT skills inventory and IT skills
    requirements.

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-   Acquire, configure and install the Disaster\'s DCMM systems for loss
    verification and disaster loan origination.

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-   IT security and maintenance program: IT services and components to
    enable security and privacy-protection to SBA employees, resource
    partners, and customers, and to enable the Agency to meet GPEA and
    E-Sign requirements. Budget allows for completion of the Agency's
    PKI infrastructure, rollout of PKI services to remaining resource
    partners, acquisition and distribution of digital certificates and
    maintenance of PKI infrastructure.

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-   E-documentation and records management (\$750,000): Electronic
    records & selected electronic document management tools (ERM-EDMS)
    to support E-Gov applications IT Outsourcing (Potential candidates
    are e-mail, web production, web design and production, and
    client-server computers): Logical candidates for outsourcing
    selected IT operations. E-government infrastructure: There is a
    two-fold focus for this initiative. First, SBA must acquire (through
    outsourcing, if possible) a reliable e-commerce infrastructure that
    supports 24 hours access by the public. It includes the CRM and KM
    tools for SBA to obtain maximum benefit from available data and
    information. Second, SBA, like all Federal agencies, is in the
    process of improving IT management through architecture development
    and management, investment management processes, and modernizing
    policy and procedures.

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```
-   System Security and Infrastructure: SBA is requesting \$2.8 million
    to continue its security upgrades in order to comply with IT
    security laws and regulations.

# 

# 

# 

# 

# 

# SUMMARY OF RESOURCES

# 

# 

# Budget Crosswalk

The budget crosswalk table that follows illustrates the estimated
resources to be devoted to achieving each of SBA's strategic goals in FY
2003. The table shows how the goals relate to specific and general
program areas. Activities performed by an office often support the
achievement of more than one goal. This is particularly true for support
organizations such as executive direction and administrative offices. To
present the full cost of achieving a particular goal, the costs of
support offices are allocated to each goal. This crosswalk summarizes
the results of an activity-based costing model as the basis for these
cost allocations.

#### Explanation of Budget Crosswalk

The first column of the crosswalk details SBA's offices and programs
categorized by the goal that best relates to that office or program's
mission. The offices and programs listed in this column devote the vast
majority of their effort toward the goal under which they are listed.
The non-credit program column shows resources specifically appropriated
to SBA for these activities. The loan subsidy column shows the amount of
budget authority used to subsidize loans. The Agency support column
reflects the operating funds estimated to be used in support of these
activities.

#### 

#### Cost Allocation Methodology

The estimated allocation of FY 2003 resources presented in the crosswalk
is based on the results of the SBA's FY 2001 cost allocation study. The
SBA's cost allocation model provides an estimate of the resources
consumed to produce key outputs. The first step in developing a cost
allocation model is to identify the Agency's key activities. Through the
budget formulation process, each office identifies the key activities
that they perform to produce outputs. An activity is a process that
converts resources (materials, labor, and technology) into outputs.
Agency Support costs such as rent and telecommunications are allocated
to activities based upon "drivers" such as the square feet of space
occupied by program offices.

Personnel costs are assigned to specific activities through the use of a
detailed survey instrument. SBA employees are asked in an online survey
to estimate the amount of time that they spend on SBA's key activities,
including those outside of their particular organization. This data is
used to compute an estimate of the personnel costs for each activity.
The FY 2001 survey was conducted at two distinct points in time---at the
6-month or mid-year point, and at the fiscal yearend. The combined
results of these two surveys were used in the FY 2001 cost model.

+------------------------------+-------+-------+-------+-------+-------+
| **BUDGET CROSSWALK**         |       |       |       |       |       |
|                              |       |       |       |       |       |
| (***FY 2003 dollars in       |       |       |       |       |       |
| Thousands)***                |       |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
|                              |       |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
|                              | **To  | **    | **L   | **Age | **I   |
|                              | tal** | Non-c | oan** | ncy** | nspec |
|                              |       | redit |       |       | tor** |
|                              |       | progr | *     | *     |       |
|                              |       | ams** | *Subs | *Supp | *     |
|                              |       |       | idy** | ort** | *Gene |
|                              |       |       |       |       | ral** |
+------------------------------+-------+-------+-------+-------+-------+
| **[Goal 1: Champion Small    |       |       |       |       |       |
| Business                     |       |       |       |       |       |
| Interests]{.underline}**     |       |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Advocacy                     | **7,  | 0     | 0     | 7,685 | 0     |
|                              | 685** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Advocacy Database            | **1,  | 1,100 | 0     | 0     | 0     |
|                              | 100** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Ombudsman                    | **1,  | 500   | 0     | 1,352 | 0     |
|                              | 852** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| White House and State        | **1,  | 1,500 | 0     | 0     | 0     |
| Conferences                  | 500** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| **Subtotal**                 | **12, | **3,  | **0** | **9,  | **0** |
|                              | 137** | 100** |       | 037** |       |
+------------------------------+-------+-------+-------+-------+-------+
|                              |       |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| **[Goal 2: Empower           |       |       |       |       |       |
| Entrepreneurs]{.underline}** |       |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Loan Making/Servicing        | *     | 0     | 8     | 16    | 0     |
|                              | *252, |       | 9,317 | 3,344 |       |
|                              | 661** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Lender Oversight/Risk        | **11, | 0     | 0     | 1     | 0     |
| Management                   | 154** |       |       | 1,154 |       |
+------------------------------+-------+-------+-------+-------+-------+
| Asset Sales Support          | **6,  | 0     | 0     | 6,642 | 0     |
|                              | 642** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Surety Bond Guarantees       | **4,  | 0     | 0     | 4,959 | 0     |
|                              | 959** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| International Trade          | **3,  | 3,100 | 0     | 742   | 0     |
| Program/USEAC                | 842** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| SBIC Debentures              | **5,  | 0     | 0     | 5,406 | 0     |
|                              | 406** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| SBIC Participating           | **10, | 0     | 0     | 1     | 0     |
| Securities                   | 021** |       |       | 0,021 |       |
+------------------------------+-------+-------+-------+-------+-------+
| Microloan Technical          | **23, | 1     | 0     | 5,823 | 0     |
| Assistance                   | 323** | 7,500 |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Rural Pilot Program          | **1,  | 0     | 0     | 1,012 | 0     |
|                              | 012** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| PRONet Program               | **    | 500   | 0     | 266   | 0     |
|                              | 766** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Section 8(a) Program         | **38, | 0     | 0     | 3     | 0     |
|                              | 347** |       |       | 8,347 |       |
+------------------------------+-------+-------+-------+-------+-------+
| Section 7(j) Program         | **8,  | 3,600 | 0     | 4,888 | 0     |
|                              | 488** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| HUBZone Program              | **3,  | 2,000 | 0     | 1,387 | 0     |
|                              | 387** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| SBIR                         | **2,  | 500   | 0     | 1,680 | 0     |
|                              | 180** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| FAST Program                 | **3,  | 3,000 | 0     | 261   | 0     |
|                              | 261** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Rural Outreach Program       | **    | 0     | 0     | 293   | 0     |
|                              | 293** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Government                   | **31, | 0     | 0     | 3     | 0     |
| Contracting/Business         | 035** |       |       | 1,035 |       |
| Development                  |       |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Veterans Outreach            | **3,  | 750   | 0     | 3,040 | 0     |
|                              | 790** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| SCORE                        | **7,  | 5,000 | 0     | 2,077 | 0     |
|                              | 077** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Women\'s Business Ownership  | **23, | 1     | 0     | 1     | 0     |
|                              | 067** | 2,000 |       | 1,067 |       |
+------------------------------+-------+-------+-------+-------+-------+
| Small Business Development   | *     | 8     | 0     | 2     | 0     |
| Centers                      | *116, | 8,000 |       | 8,057 |       |
|                              | 057** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Drug-Free Workplace          | **3,  | 3,000 | 0     | 0     | 0     |
|                              | 000** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Business Information Centers | **13, | 475   | 0     | 1     | 0     |
|                              | 023** |       |       | 2,548 |       |
+------------------------------+-------+-------+-------+-------+-------+
| Native American Outreach     | **2,  | 1,000 | 0     | 1,394 | 0     |
|                              | 394** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| National Women\'s Business   | **    | 750   | 0     | 120   | 0     |
| Council                      | 870** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
|                              |       |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| **Subtotal**                 | *     | *     | **89, | *     | **0** |
|                              | *576, | *141, | 317** | *345, |       |
|                              | 055** | 175** |       | 563** |       |
+------------------------------+-------+-------+-------+-------+-------+
|                              |       |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| **[Goal 3: Streamline        |       |       |       |       |       |
| Disaster                     |       |       |       |       |       |
| Lending]{.underline}**       |       |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
|                              |       |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Disaster Assistance Programs | 23    | 0     | 11    | 12    | 500   |
|                              | 3,281 |       | 1,140 | 1,641 |       |
+------------------------------+-------+-------+-------+-------+-------+
|                              |       |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| **Subtotal**                 | *     | **0** | *     | *     | **    |
|                              | *233, |       | *111, | *121, | 500** |
|                              | 281** |       | 140** | 641** |       |
+------------------------------+-------+-------+-------+-------+-------+
|                              |       |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| Inspector General            | **15, | 0     | 0     | 0     | 1     |
|                              | 011** |       |       |       | 5,011 |
+------------------------------+-------+-------+-------+-------+-------+
| Reimbursable Programs        | **4,  | 4,761 | 0     | 0     | 0     |
|                              | 761** |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
|                              |       |       |       |       |       |
+------------------------------+-------+-------+-------+-------+-------+
| **Total Obligations**        | *     | **\   | **\   | **\   | **    |
|                              | *841, | $149, | $200, | $476, | \$15, |
|                              | 245** | 036** | 457** | 241** | 511** |
+------------------------------+-------+-------+-------+-------+-------+

[]{#__RefHeading___Toc3175951 .anchor}Summary of Budget Authority

(Dollars in Thousands)

  --------------------------------- ------------ -------------- ------------- ---------------
                                                                              **Inc/(Dec)**

                                    **FY 2001**  **FY 2002**    **FY 2003**   **vs FY 2002**

                                    **Actual**   **Estimate**   **Request**   **Estimate**

  Salaries and Expenses                                                       

  Administrative Operating Expenses \$ 154,541   \$ 161,482     \$ 217,831    \$ 56,349

  Non-Credit Programs and           256,094      176,994        144,275       (32,719)
  Initiatives                                                                 

                                                                              

  Subtotal                          \$ 410,635   \$ 338,476     \$ 362,106    \$ 23,630

                                                                              

  Business Loans Program Account                                              

  Direct Loans New Budget Authority \$ 2,250     \$ 1,860       \$ 3,726      \$ 1,866

  Guaranteed Loans Budget Authority 163,160      78,000         85,360        7,360

  Supplementals, Contingencies      0            75,000         0             (75,000)

  Administrative Expense            129,000      129,000        133,769       4,769

                                                                              

  Subtotal                          \$ 294,410   \$ 283,860     \$ 222,855    \$ (61,005)

                                                                              

  Disaster Loans Program Account                                              

  Direct Loans                                                                

  New Budget Authority              \$ 76,140    \$ 87,360      \$ 76,140     \$ (11,220)

  Supplementals, Contengencies      60,000       75,000         0             (75,000)

  Administrative Expense                                                      

  New Budget Authority              108,354      122,354        122,141       \(213\)

  Supplemental Appropriation        40,000       0              0             0

                                                                              

  Subtotal                          \$ 284,494   \$ 284,714     \$ 198,281    \$ (86,433)

                                                                              

                                                                              

  Surety Bond Guarantee Fund        \$ 0         \$ 0           \$ 0          \$ 0

                                                                              

  Office of Inspector General       \$ 11,953    \$ 11,464      \$ 15,011     \$ 3,547

                                                                              

                                                                              

  Appropriated Funds Rescinded      \$ (1,983)   \$ 0           \$ 0          \$ 0

                                                                              

  **Total Budget Authority**        **\$         **\$ 918,514** **\$          **\$
                                    999,509**                   798,253**     (120,261)**

  Regular Appropriated Funds        \$ 899,509   \$ 768,514     \$ 798,253    \$ 29,739

  Supplemental/Emergency Funds      \$ 100,000   \$ 150,000     0             \$ (150,000)
  --------------------------------- ------------ -------------- ------------- ---------------

## Summary of Positions and Full Time Equivalents

  ------------------------------- ------------ -------------- ------------- ---------------
  **ON BOARD POSITIONS**                                                    

                                                                            

                                                                            **Inc/(Dec)**

                                  **FY 2001**  **FY 2002**    **FY 2003**   **vs FY 2002**

                                  **Actual**   **Estimate**   **Request**   **Estimate**

                                                                            

  Salaries and Expenses --        2,736        2,610          2,610         0
  Regular Funds                                                             

  Non Credit Programs and         77           42             42            0
  Initiatives                                                               

  Subtotal                        2,813        2,652          2,652         0

                                                                            

  Disaster                        1,328        2,084          1,300         \(784\)

  Inspector General               108          124            144           20

                                                                            

  Total                           4,249        4,860          4,096         \(764\)

                                                                            

                                                                            

  **FULL TIME EQUIVALENTS (FTE)**                                           

                                                                            

                                                                            **Inc/(Dec)**

                                  **FY 2001**  **FY 2002**    **FY 2003**   **vs FY 2002**

                                  **Actual**   **Estimate**   **Request**   **Estimate**

                                                                            

  Salaries and Expenses --        2,793        2,709          2,618         \(91\)
  Regular Funds                                                             

  Non Credit Programs and         70           36             42            6
  Initiatives                                                               

  Subtotal                        2,863        2,745          2,660         \(85\)

                                                                            

  Disaster                        1,085        1,652          1,060         \(592\)

  Inspector General               108          120            130           10

                                                                            

  Total                           4,056        4,517          3,850         \(667\)

                                                                            
  ------------------------------- ------------ -------------- ------------- ---------------

## Summary of Non Credit Programs & Special Initiatives

*(Dollars in Thousands)*

+---------------------------------+--------+--------+--------+--------+
|                                 |        |        |        | *      |
|                                 |        |        |        | *Inc/( |
|                                 |        |        |        | Dec)** |
+---------------------------------+--------+--------+--------+--------+
|                                 | **FY   | **FY   | **FY   | **vs   |
|                                 | 2001** | 2002** | 2003** | FY     |
|                                 |        |        |        | 2002** |
+---------------------------------+--------+--------+--------+--------+
|                                 | **Ac   | **Es   | **Req  | **Esti |
|                                 | tual** | timate | uest** | mate** |
|                                 |        | **[^9] |        |        |
+---------------------------------+--------+--------+--------+--------+
| ######### Executive Direction   |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| > Advocacy Database and         | \      | \      | \      | \$ 0   |
| > Research                      | $1,297 | $1,100 | $1,100 |        |
+---------------------------------+--------+--------+--------+--------+
| > National Ombudsman (inc.      | 554    | 500    | 500    | 0      |
| > operations)                   |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| > Veteran's Outreach            | 0      | 750    | 750    | 0      |
+---------------------------------+--------+--------+--------+--------+
| > Veteran's Business            | 4,000  | 0      | 0      | 0      |
| > Development Corporation       |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| > State Conferences             | 0      | 0      | 1,500  | 1,500  |
+---------------------------------+--------+--------+--------+--------+
| ######                          |        |        |        |        |
| ### Management & Administration |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| > Loan Monitoring System (LMS)  | 7,889  | 0      | 0      | 0      |
+---------------------------------+--------+--------+--------+--------+
| **Government                    |        |        |        |        |
| Contracting/Business** **Dev.   |        |        |        |        |
| DdevelopmentDevelopment**       |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| > 7(j) Technical Assistance     | 3,241  | 3,600  | 3,600  | 0      |
+---------------------------------+--------+--------+--------+--------+
| > BusinessLINC                  | 6,919  | 2,000  | 0      | (      |
|                                 |        |        |        | 2,000) |
+---------------------------------+--------+--------+--------+--------+
| > PRO-Net                       | 450    | \*     | 500    | 500    |
+---------------------------------+--------+--------+--------+--------+
| > SBIR-Rural Outreach           | 1,500  | 500    | 500    | 0      |
+---------------------------------+--------+--------+--------+--------+
| > SBIR -- FAST                  | 3,500  | 3,000  | 3,000  | 0      |
+---------------------------------+--------+--------+--------+--------+
| > HUBZones Program (inc.        | 1,791  | \*     | 2,000  | 2,000  |
| > operations)                   |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| **Entrepreneurial Development** |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| > Small Business Development    | 85,993 | 90,010 | 88,000 | (      |
| > Centers (SBDC)                |        |        |        | 2,010) |
+---------------------------------+--------+--------+--------+--------+
| > Drug-Free Workplace           | 3,498  | 3,000  | 3,000  | 0      |
+---------------------------------+--------+--------+--------+--------+
| > Service Corps of Retires      | 3,750  | 5,000  | 5,000  | 0      |
| > Executives (SCORE)            |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| > Business Information Centers  | 499    | 500    | 475    | \(25\) |
+---------------------------------+--------+--------+--------+--------+
| > Women\'s Business Centers     | 11,989 | 12,000 | 12,000 | 0      |
+---------------------------------+--------+--------+--------+--------+
| > Census Reimbursement-SWOBE    | 691    | 694    | 0      | \      |
|                                 |        |        |        | (694\) |
+---------------------------------+--------+--------+--------+--------+
| > Women's Business Council      | 714    | 750    | 750    | 0      |
| > (inc. operations)             |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| > Native American Outreach      | 0      | 0      | 1,000  | 1,000  |
+---------------------------------+--------+--------+--------+--------+
| **Capital Access**              |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| > US Export Assistance Centers  | 2,579  | 3,100  | 3,100  | 0      |
| > operations                    |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| > Microloan Technical           | 18,385 | 17,754 | 17,500 | \      |
| > Assistance                    |        |        |        | (254\) |
+---------------------------------+--------+--------+--------+--------+
| > PRIME                         | 15,000 | 5,000  | 0      | (      |
|                                 |        |        |        | 5,000) |
+---------------------------------+--------+--------+--------+--------+
| > New Market Venture Capital    | 120    | 29,880 | 0      | (2     |
| > Tech Assistance               |        |        |        | 9,880) |
+---------------------------------+--------+--------+--------+--------+
| #####                           | 4,604  | 5,529  | 4,761  | \      |
| #### Reimbursable Programs[^10] |        |        |        | (768\) |
+---------------------------------+--------+--------+--------+--------+
| **Congressional Initiatives**   | 41,291 | 30,000 | 0      | (3     |
|                                 |        |        |        | 0,000) |
+---------------------------------+--------+--------+--------+--------+
|                                 |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| Total                           | \$2    | \$2    | \$1    | (\$6   |
|                                 | 23,176 | 14,667 | 49,036 | 5,631) |
+---------------------------------+--------+--------+--------+--------+
|                                 |        |        |        |        |
+---------------------------------+--------+--------+--------+--------+
| **Newly Appropriated Funds**    | *      | *      | *      | **     |
|                                 | *\$255 | *\$176 | *\$144 | (\$32, |
|                                 | ,191** | ,994** | ,275** | 719)** |
+---------------------------------+--------+--------+--------+--------+

## Summary of Congressional Initiatives

*(Dollars in Thousands)*

  --------------------------------- ------------ -------------- ------------- ---------------
                                                                              **Inc/(Dec)**

                                    **FY 2001**  **FY 2002**    **FY 2003**   **vs FY 2002**

                                    **Actual**   **Estimate**   **Request**   **Estimate**

  AZ Dept. of Public Safety         \$ 850       \$ 0           \$ 0          \$ 0

  Bronx Child Study Center          0            1,000          0             (1,000)

  Brotherhood Bus. Dev. & Cap. Fund 983          0              0             0

  Buckhorn Children's Foundation    590          0              0             0

  Catskill Mountain Foundation      0            350            0             \(350\)

  Chippewa Falls, Wisconsin         0            500            0             \(500\)

  City of Chesapeake, VA            0            300            0             \(300\)

  Durant, OK Rural Enterprises      197          200            0             \(200\)

  East LA Community Union           983          500            0             \(500\)

  Electronic Commerce Center,       983          0              0             0
  Scranton, PA                                                                

  Gadsden State College, Ctr. For   246          0              0             0
  Econ. Dev.                                                                  

  George Mason University           0            1,000          0             (1,000)

  Greenpoint Mfg. & Design Ctr.     983          500            0             \(500\)

  Green Thumb, Inc.                 0            1,000          0             (1,000)

  Hamilton County, TN               0            1,000          0             (1,000)

  Illinois Coalition                0            2,000          0             (2,000)

  Infotonics Ctr. Of Excellence,    0            400            0             \(400\)
  Rochester, NY                                                               

  James Madison University          0            1,000          0             (1,000)

  Johnstown, PA Regional Industries 246          500            0             \(500\)
  Ctr.                                                                        

  Johnstown, PA Regional Industries 246          0              0             0
  Ctr.                                                                        

  Lewis and Clark College           0            300            0             \(300\)

  Long Island Bay Shore Aquarium    983          150            0             \(150\)

  Los Angeles Conservancy           0            2,000          0             (2,000)

  Mont. Cty. KY Ed. & Train.        344          0              0             0
  Facility                                                                    

  MountainMade Foundation           0            1,100          0             (1,100)

  Morehead State U Science Res. &   1,966        0              0             0
  Tech Ctr.                                                                   

  Moundsville, WV Economic Dev.     492          0              0             0
  Council                                                                     

  Museum of Science & Industry      786          0              0             0

  N.VA Business Asst. Dev. Group    246          0              0             0

  National Center for e-Commerce,   0            400            0             \(400\)
  Pol. Univ.                                                                  

  National Corr. And Law Enf. Trng. 0            400            0             \(400\)
  & Tech. Ctr.                                                                

  National Museum of Jazz, New      983          0              0             0
  York, NY                                                                    

  New York Bronx Museum             2,458        0              0             0

  New York Small Business Devel.    0            500            0             \(500\)
  Center                                                                      

  Nicholas Cty, KY Indust. Auth     344          0              0             0

  NTTC @ Wheeling Jesuit University 2,458        500            0             \(500\)

  NY City Parks & Rec., Bronx, NY   492          0              0             0

  NY Public Library, Bronx, NY      492          0              0             0

  Oakridge, TN Tech & Econ. Dev.    983          0              0             0

  OK Dept. of Career & Tech. Ed.    492          500            0             \(500\)

  OK State University               0            100            0             \(100\)

  Old Sturbridge Village Arts &     197          0              0             0
  Tourism                                                                     

  Paintsville, KY Regional Arts &   1,966        0              0             0
  Tourism                                                                     

  Pike Cty, KY Interpretive Dev,    492          0              0             0
  Init.                                                                       

  Portage County, Wisconsin         0            150            0             \(150\)

  Promesa Enterprises, Bronx, NY    1,966        0              0             0

  Pulaski Cty, KY Emergency         1,278        0              0             0
  Training Ctr                                                                
  --------------------------------- ------------ -------------- ------------- ---------------

**Summary** **of Congressional Initiatives**

*(Dollars in Thousands)*

  --------------------------------- ------------ -------------- ------------- ---------------
                                                                              **Inc/(Dec)**

                                    **FY 2001**  **FY 2002**    **FY 2003**   **vs FY 2002**

                                    **Actual**   **Estimate**   **Request**   **Estimate**

  Safer Foundation                  983          0              0             0

  Shenandoah University             0            1,500          0             (1,500)

  Social Compact, Realizing the     0            700            0             \(700\)
  Dream                                                                       

  Software Productivity Consortium  0            1,000          0             (1,000)

  Somerset, KY Center for Rural Dev 4,915        0              0             0

  Soundview Comm. Action, Bronx, NY 983          1,000          0             (1,000)

  Southern KY, Economic Development 4,915        1,500          0             (1,500)
  Corp.                                                                       

  Southern KY, Rehabilitation       0            450            0             \(450\)
  Industries                                                                  

  Southern KY, Tourism Development  0            1,000          0             (1,000)
  Assoc.                                                                      

  State University of NY, Inst. Of  1,475        0              0             0
  Entrep.                                                                     

  Union College, KY, Tech. & Media  1,473        0              0             0
  Ctr.                                                                        

  University of Montana             0            300            0             \(300\)

  University of W. Florida          0            1,000          0             (1,000)

  Upper Manhattan Empowerment Zone  0            1,000          0             (1,000)

  Urban Justice Center, NYC         0            500            0             \(500\)

  Vandalia Heritage Foundation      197          0              0             0

  Western Carolina University       590          0              0             0

  West Virginia High Tech           0            500            0             \(500\)
  Consortium                                                                  

  Yonkers, NY, Nepperhan Valley     0            500            0             \(500\)
  Tech Ctr                                                                    

  **Total Congressional             \$ 41,291    \$ 30,000      \$ 0          (\$30,000)
  Initiatives**                                                               
  --------------------------------- ------------ -------------- ------------- ---------------

<table style="width:100%;">
<colgroup>
<col style="width: 18%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 0%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 0%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 0%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="16"><h2 id="summary-of-credit-programs">Summary of Credit
Programs</h2></td>
</tr>
<tr class="even">
<td colspan="16"><em>(Dollars in Thousands)</em></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="4"><strong>Program Level</strong></td>
<td></td>
<td colspan="4"><strong>Budget Authority</strong><a href="#fn1"
class="footnote-ref" id="fnref1"
role="doc-noteref"><sup>1</sup></a></td>
<td></td>
<td colspan="4"><strong>Subsidy Rate</strong></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td><strong>Inc/(Dec)</strong></td>
<td></td>
<td rowspan="2"></td>
<td></td>
<td></td>
<td><strong>Inc/(Dec)</strong></td>
<td></td>
<td></td>
<td rowspan="2"></td>
<td></td>
<td><strong>Inc/(Dec)</strong></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td><strong>FY 2001</strong></td>
<td><strong>FY 2002</strong></td>
<td><strong>FY 2003</strong></td>
<td colspan="2"><strong>vs FY 2002</strong></td>
<td><strong>FY 2001</strong></td>
<td><strong>FY 2002</strong></td>
<td><strong>FY 2003</strong></td>
<td colspan="2"><strong>vs FY 2002</strong></td>
<td><strong>FY 2001</strong></td>
<td><strong>FY 2002</strong></td>
<td><strong>FY 2003</strong></td>
</tr>
<tr class="even">
<td></td>
<td><strong>Actual</strong></td>
<td><strong>Estimate</strong></td>
<td><strong>Request</strong></td>
<td><strong>Estimate</strong></td>
<td></td>
<td><strong>Actual</strong></td>
<td><strong>Estimate</strong></td>
<td><strong>Request</strong></td>
<td><strong>Estimate</strong></td>
<td></td>
<td><strong>Actual</strong></td>
<td><strong>Estimate</strong></td>
<td><strong>Request</strong></td>
<td><strong>Estimate</strong></td>
<td></td>
</tr>
<tr class="odd">
<td>Microloan Direct</td>
<td>$29,810</td>
<td>$25,513</td>
<td>$26,553</td>
<td>$1,040</td>
<td></td>
<td>$2,668</td>
<td>$1,730</td>
<td>$3,465</td>
<td>$1,735</td>
<td></td>
<td>8.95%</td>
<td>6.78%</td>
<td>13.05%</td>
<td>6.27%</td>
<td></td>
</tr>
<tr class="even">
<td>Total Direct</td>
<td>$29,810</td>
<td>$25,513</td>
<td>$26,553</td>
<td>$1,040</td>
<td></td>
<td>$2,668</td>
<td>$1,730</td>
<td>$3,465</td>
<td>$1,735</td>
<td></td>
<td>8.95%</td>
<td>6.78%</td>
<td>13.05%</td>
<td>6.27%</td>
<td></td>
</tr>
<tr class="odd">
<td>Guaranty</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Section 7(a) Guaranty</td>
<td>$9,121,709</td>
<td>$9,352,804</td>
<td>$4,850,000</td>
<td>($4,502,804)</td>
<td></td>
<td>$106,724</td>
<td>$100,075</td>
<td>$85,360</td>
<td>(14,715)</td>
<td></td>
<td>1.17%</td>
<td>1.07%</td>
<td>1.76%<a href="#fn2" class="footnote-ref" id="fnref2"
role="doc-noteref"><sup>2</sup></a></td>
<td>0.69%</td>
<td></td>
</tr>
<tr class="odd">
<td>Section 7(a) “Emergency”</td>
<td>0</td>
<td>4,491,018</td>
<td>0</td>
<td>(4,491,018)</td>
<td></td>
<td>0</td>
<td>75,000</td>
<td>0</td>
<td>(75,000)</td>
<td></td>
<td>N/A</td>
<td>1.67%<a href="#fn3" class="footnote-ref" id="fnref3"
role="doc-noteref"><sup>3</sup></a></td>
<td>N/A</td>
<td>N/A</td>
<td></td>
</tr>
<tr class="even">
<td>Section 7(a) Guaranty – DELTA</td>
<td>1,711</td>
<td>20,000</td>
<td>20,000</td>
<td>0</td>
<td></td>
<td>32</td>
<td>346</td>
<td>302</td>
<td>(44)</td>
<td></td>
<td>1.87%</td>
<td>1.73%</td>
<td>1.51%</td>
<td>(0.22%)</td>
<td></td>
</tr>
<tr class="odd">
<td>Section 7(a) Y2K Loans</td>
<td>25</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td></td>
<td>1</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td></td>
<td>4.04%</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td></td>
</tr>
<tr class="even">
<td>Section 504 CDC Guaranty</td>
<td>2,268,758</td>
<td>4,500,000</td>
<td>4,500,000</td>
<td>0</td>
<td></td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td></td>
<td>0.00%</td>
<td>0.00%</td>
<td>0.00%<sup>4</sup></td>
<td>0.00%</td>
<td></td>
</tr>
<tr class="odd">
<td>Section 504 CDC Guaranty - DELTA</td>
<td>0</td>
<td>2,500</td>
<td>2,500</td>
<td>0</td>
<td></td>
<td>0</td>
<td>21</td>
<td>22</td>
<td>1</td>
<td></td>
<td>0.89%</td>
<td>0.84%</td>
<td>0.88%</td>
<td>0.04%</td>
<td></td>
</tr>
<tr class="even">
<td>Microloan – Guaranty</td>
<td>2,000</td>
<td>2,000</td>
<td>2,000</td>
<td>0</td>
<td></td>
<td>159</td>
<td>163</td>
<td>168</td>
<td>5</td>
<td></td>
<td>7.95%</td>
<td>8.17%</td>
<td>8.42%</td>
<td>0.25%</td>
<td></td>
</tr>
<tr class="odd">
<td>New Market Venture Capital</td>
<td>0</td>
<td>151,707</td>
<td>0</td>
<td>(151,707)</td>
<td></td>
<td>0</td>
<td>21,952</td>
<td>0</td>
<td>(21,952)</td>
<td></td>
<td>14.44%</td>
<td>14.47%</td>
<td>N/A</td>
<td>N/A</td>
<td></td>
</tr>
<tr class="even">
<td>SBIC – Participating Securities</td>
<td>2,108,702</td>
<td>3,500,000</td>
<td>4,000,000</td>
<td>500,000</td>
<td></td>
<td>27,624</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td></td>
<td>1.31%</td>
<td>0.00%</td>
<td>0.00%<sup>5</sup></td>
<td>0.00%</td>
<td></td>
</tr>
<tr class="odd">
<td>SBIC – Debentures</td>
<td>486,714</td>
<td>2,500,000</td>
<td>3,000,000</td>
<td>500,000</td>
<td></td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td></td>
<td>0.00%</td>
<td>0.00%</td>
<td>0.00%<sup>6</sup></td>
<td>0.00%</td>
<td></td>
</tr>
<tr class="even">
<td>Total – Guaranty</td>
<td>$13,989,620</td>
<td>$24,520,029</td>
<td>$16,374,500</td>
<td>($8,145,529)</td>
<td></td>
<td>$134,540</td>
<td>$197,557</td>
<td>$85,852</td>
<td>($111,705)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Total Business</td>
<td>$14,019,430</td>
<td>$24,545,542</td>
<td>$16,401,053</td>
<td>($8,144,489)</td>
<td></td>
<td>$137,208</td>
<td>$199,287</td>
<td>$89,317</td>
<td>($109,970)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Regular Disaster</td>
<td>$874,074</td>
<td>$742,761</td>
<td>$795,000</td>
<td>$52,239</td>
<td></td>
<td>$152,613</td>
<td>$108,963</td>
<td>$111,140</td>
<td>2,177</td>
<td></td>
<td>17.46%</td>
<td>14.67%<sup>7</sup></td>
<td>13.98%</td>
<td>(0.69%)</td>
<td></td>
</tr>
<tr class="odd">
<td>“Emergency” Disaster</td>
<td>0</td>
<td>556,995</td>
<td>0</td>
<td>(556,995)</td>
<td></td>
<td>0</td>
<td>129,000</td>
<td>0</td>
<td>(129,000)</td>
<td></td>
<td>0</td>
<td>23.16%</td>
<td>0</td>
<td>(23.16%)</td>
<td></td>
</tr>
<tr class="even">
<td>Disaster </td>
<td>$874,074 </td>
<td>1,299,756 </td>
<td>$795,000 </td>
<td>(504,756) </td>
<td></td>
<td>$152,613 </td>
<td>237,963 </td>
<td>$111,140 </td>
<td>(126,823) </td>
<td></td>
<td>N/A </td>
<td>N/A </td>
<td>N/A </td>
<td>N/A </td>
<td></td>
</tr>
<tr class="odd">
<td>Surety Bond Guarantee</td>
<td>$261,411</td>
<td>$ 1,672,000</td>
<td>$1,672,000</td>
<td>$ 0</td>
<td></td>
<td>$ 0</td>
<td>$ 0</td>
<td>$ 0</td>
<td>$ 0</td>
<td></td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td></td>
</tr>
</tbody>
</table>
<aside id="footnotes" class="footnotes footnotes-end-of-document"
role="doc-endnotes">
<hr />
<ol>
<li id="fn1"><p><sup>1</sup> Includes use of carryover funds from prior
years.<a href="#fnref1" class="footnote-back"
role="doc-backlink">↩︎</a></p></li>
<li id="fn2"><p><sup>3</sup> Original current service rate of .88
percent is changed to a rate of 1.76 percent as a result of P.L.
107-100.</p>
<p><sup>4</sup> 0.00 percent is current services rate with fee from .410
to .425 percent.<a href="#fnref2" class="footnote-back"
role="doc-backlink">↩︎</a></p></li>
<li id="fn3"><p><sup>25</sup> Fee changes from 1.376 to 1.311 to
maintain 0 percent.</p>
<p><sup>6</sup> Fee changes from .866 to .887 to maintain 0 percent.</p>
<p><sup>7</sup> 14.67 percent is current services rate; Defense Bill
(P.L. 107-117)/Supplemental rate=23.16 percent.<a href="#fnref3"
class="footnote-back" role="doc-backlink">↩︎</a></p></li>
</ol>
</aside>

## Justification of Changes from FY 2002 to FY 2003

  -----------------------------------------------------------------------
  **(Excluding Disaster Assistance and Office of Inspector General)**

  *(Dollars in Thousands)*
  -----------------------------------------------------------------------

<table>
<colgroup>
<col style="width: 27%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td rowspan="2"></td>
<td></td>
<td></td>
<td></td>
<td rowspan="2"></td>
<td></td>
<td></td>
<td colspan="2"><strong>Increase/(Decrease)</strong></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"><strong>FY 2001 Actual</strong></td>
<td></td>
<td colspan="2"><strong>FY 2002 Estimate</strong></td>
<td></td>
<td colspan="2"><strong>FY 2003 Request</strong></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td><strong>Positions</strong></td>
<td><strong>Amount</strong></td>
<td></td>
<td><strong>Positions</strong></td>
<td><strong>Amount</strong></td>
<td></td>
<td><strong>Positions</strong></td>
<td><strong>Amount</strong></td>
<td></td>
<td><strong>Positions</strong></td>
<td><strong>Amount</strong></td>
</tr>
<tr class="even">
<td><strong>Salaries and Expenses:</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Compensation &amp; Benefits</p>
</blockquote></td>
<td>2,736</td>
<td>$ 223,078</td>
<td></td>
<td>2,610</td>
<td>$ 233,993</td>
<td></td>
<td>2,610</td>
<td>$ 260,744</td>
<td></td>
<td>0</td>
<td>$ 26,751</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Travel and Transportation of Employees</p>
</blockquote></td>
<td>0</td>
<td>5,043</td>
<td></td>
<td>0</td>
<td>3,835</td>
<td></td>
<td>0</td>
<td>7,939</td>
<td></td>
<td>0</td>
<td>4,104</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Rents &amp; Communication</p>
</blockquote></td>
<td>0</td>
<td>33,414</td>
<td></td>
<td>0</td>
<td>34,432</td>
<td></td>
<td>0</td>
<td>36,185</td>
<td></td>
<td>0</td>
<td>1,753</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Postage and Printing</p>
</blockquote></td>
<td>0</td>
<td>2,958</td>
<td></td>
<td>0</td>
<td>2,549</td>
<td></td>
<td>0</td>
<td>2,755</td>
<td></td>
<td>0</td>
<td>206</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>All Other</p>
</blockquote></td>
<td>0</td>
<td>40,511</td>
<td></td>
<td>0</td>
<td>28,527</td>
<td></td>
<td>0</td>
<td>56,831</td>
<td></td>
<td>0</td>
<td>28,304</td>
</tr>
<tr class="even">
<td rowspan="2">Subtotal</td>
<td>2,736</td>
<td>$ 305,004</td>
<td rowspan="2"></td>
<td>2,610</td>
<td>$ 303,336</td>
<td rowspan="2"></td>
<td>2,610</td>
<td>$ 364,454</td>
<td rowspan="2"></td>
<td>0</td>
<td>$ 61,118</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Non-Credit Programs &amp; Special Initiatives</td>
<td>77</td>
<td>218,572</td>
<td></td>
<td>42</td>
<td>176,994</td>
<td></td>
<td>42</td>
<td>144,275</td>
<td></td>
<td>0</td>
<td>(32,719)</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td rowspan="2">Subtotal</td>
<td>2,813</td>
<td>$ 523,576</td>
<td rowspan="2"></td>
<td>2,652</td>
<td>$ 480,330</td>
<td rowspan="2"></td>
<td>2,652</td>
<td>$ 508,729</td>
<td rowspan="2"></td>
<td>0</td>
<td>$ 28,399</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td rowspan="2">Reimbursement and Carryover Funds</td>
<td>0</td>
<td>4,604</td>
<td rowspan="2"></td>
<td>0</td>
<td>37,673</td>
<td rowspan="2"></td>
<td>0</td>
<td>4,761</td>
<td rowspan="2"></td>
<td>0</td>
<td>(32,912)</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td rowspan="2">Total</td>
<td>2,813</td>
<td>$ 528,180</td>
<td rowspan="2"></td>
<td>2,652</td>
<td>$ 518,003</td>
<td rowspan="2"></td>
<td>2,652</td>
<td>$ 513,490</td>
<td rowspan="2"></td>
<td>0</td>
<td>$ (4,513)</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>

**[FY 2003 Increase/(Decrease) vs FY 2002 Estimate]{.underline}**

Compensation & Benefits To maintain the FY 2002 EOY of 2,652 employees;
a 3.6% general pay increase in 1/03; annualization of the FY02 pay
raise; normal within grade increases and promotions; and \$13,907 for
pension costs normally paid by OPM.

Travel & Transportation Includes a small increase to restore these funds
back to a more normal operating level, plus costs of proposed employee
relocations.

Rents and Communication Includes a General Services Administration
estimated rent increase.

Postage and Printing Includes a small inflationary increase.

Other Services Reflects a minimal increase to cover anticipated
inflationary increases in all areas of operations; and additional funds
for new initiatives as defined elsewhere in this document.

Reimb. & Carryover Funds Reflects changes in carryover balances from FY
2001 into FY 2002, principally from NMVC and SBDC.

  -----------------------------------------------------------------------
  **SUMMARY OF** **POSITIONS AND** **AMOUNT**

  *(Dollars in thousands)*
  -----------------------------------------------------------------------

<table>
<colgroup>
<col style="width: 26%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2">Increase (Decrease)</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">FY 2001 Actual</td>
<td></td>
<td colspan="2">FY 2002 Estimate</td>
<td></td>
<td colspan="2">FY 2003 Request</td>
<td></td>
<td colspan="2">vs. FY 2002 Estimate</td>
</tr>
<tr class="odd">
<td></td>
<td>Positions</td>
<td>Amount</td>
<td></td>
<td>Positions</td>
<td>Amount</td>
<td></td>
<td>Positions</td>
<td>Amount</td>
<td></td>
<td>Positions</td>
<td>Amount</td>
</tr>
<tr class="even">
<td>Executive Direction</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Administrator</p>
</blockquote></td>
<td>22</td>
<td>$ 3,241</td>
<td></td>
<td>23</td>
<td>$ 2,837</td>
<td></td>
<td>23</td>
<td>$ 2,920</td>
<td></td>
<td>0</td>
<td>$ 83</td>
</tr>
<tr class="even">
<td><blockquote>
<p>General Counsel</p>
</blockquote></td>
<td>70</td>
<td>7,852</td>
<td></td>
<td>70</td>
<td>8,171</td>
<td></td>
<td>70</td>
<td>8,438</td>
<td></td>
<td>0</td>
<td>267</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Congressional and Legislative Affairs</p>
</blockquote></td>
<td>10</td>
<td>951</td>
<td></td>
<td>10</td>
<td>983</td>
<td></td>
<td>10</td>
<td>1,011</td>
<td></td>
<td>0</td>
<td>28</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Hearings and Appeals</p>
</blockquote></td>
<td>11</td>
<td>1,074</td>
<td></td>
<td>11</td>
<td>1,162</td>
<td></td>
<td>11</td>
<td>1,196</td>
<td></td>
<td>0</td>
<td>34</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Communications and Public Liaison</p>
</blockquote></td>
<td>26</td>
<td>2,395</td>
<td></td>
<td>26</td>
<td>2,429</td>
<td></td>
<td>26</td>
<td>2,513</td>
<td></td>
<td>0</td>
<td>84</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Field Operations</p>
</blockquote></td>
<td>8</td>
<td>1,490</td>
<td></td>
<td>8</td>
<td>1,376</td>
<td></td>
<td>8</td>
<td>1,438</td>
<td></td>
<td>0</td>
<td>62</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>EEO and Civil Rights Compliance</p>
</blockquote></td>
<td>19</td>
<td>1,809</td>
<td></td>
<td>19</td>
<td>1,844</td>
<td></td>
<td>19</td>
<td>1,907</td>
<td></td>
<td>0</td>
<td>63</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Advocacy</p>
</blockquote></td>
<td>35</td>
<td>4,146</td>
<td></td>
<td>45</td>
<td>4,920</td>
<td></td>
<td>45</td>
<td>5,642</td>
<td></td>
<td>0</td>
<td>722</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Veterans Business Development</p>
</blockquote></td>
<td>5</td>
<td>819</td>
<td></td>
<td>5</td>
<td>577</td>
<td></td>
<td>5</td>
<td>592</td>
<td></td>
<td>0</td>
<td>15</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Chief Financial Officer</p>
</blockquote></td>
<td>79</td>
<td>8,066</td>
<td></td>
<td>81</td>
<td>8,443</td>
<td></td>
<td>81</td>
<td>8,768</td>
<td></td>
<td>0</td>
<td>325</td>
</tr>
<tr class="odd">
<td>Subtotal</td>
<td>285</td>
<td>$ 31,843</td>
<td></td>
<td>298</td>
<td>$ 32,742</td>
<td></td>
<td>298</td>
<td>$ 34,425</td>
<td></td>
<td>0</td>
<td>$ 1,683</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>Management and Administration</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><blockquote>
<p>Immediate Office</p>
</blockquote></td>
<td>7</td>
<td>$ 695</td>
<td></td>
<td>7</td>
<td>$ 577</td>
<td></td>
<td>7</td>
<td>$ 594</td>
<td></td>
<td>0</td>
<td>$ 17</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Human Resources</p>
</blockquote></td>
<td>54</td>
<td>5,066</td>
<td></td>
<td>54</td>
<td>5,231</td>
<td></td>
<td>54</td>
<td>5,427</td>
<td></td>
<td>0</td>
<td>196</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Administration</p>
</blockquote></td>
<td>47</td>
<td>8,133</td>
<td></td>
<td>47</td>
<td>7,375</td>
<td></td>
<td>47</td>
<td>7,867</td>
<td></td>
<td>0</td>
<td>492</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Chief Information Officer</p>
</blockquote></td>
<td>55</td>
<td>26,190</td>
<td></td>
<td>62</td>
<td>22,637</td>
<td></td>
<td>62</td>
<td>24,472</td>
<td></td>
<td>0</td>
<td>1,835</td>
</tr>
<tr class="even">
<td>Subtotal</td>
<td>163</td>
<td>$ 40,084</td>
<td></td>
<td>170</td>
<td>$ 35,820</td>
<td></td>
<td>170</td>
<td>$ 38,360</td>
<td></td>
<td>0</td>
<td>$ 2,540</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td rowspan="2"></td>
<td rowspan="2"></td>
<td rowspan="2"></td>
<td rowspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="5">Gov Contr and Min Enterprise Development</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Immediate Office</p>
</blockquote></td>
<td>4</td>
<td>$ 905</td>
<td></td>
<td>4</td>
<td>$ 444</td>
<td></td>
<td>4</td>
<td>$ 457</td>
<td></td>
<td>0</td>
<td>$ 13</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Operations &amp; Program Support</p>
</blockquote></td>
<td>13</td>
<td>985</td>
<td></td>
<td>13</td>
<td>1,046</td>
<td></td>
<td>13</td>
<td>1,077</td>
<td></td>
<td>0</td>
<td>31</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Planning&amp; Policy Liaison</p>
</blockquote></td>
<td>16</td>
<td>1,686</td>
<td></td>
<td>16</td>
<td>1,757</td>
<td></td>
<td>16</td>
<td>1,809</td>
<td></td>
<td>0</td>
<td>52</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Business Development</p>
</blockquote></td>
<td>53</td>
<td>3,678</td>
<td></td>
<td>53</td>
<td>3,707</td>
<td></td>
<td>53</td>
<td>3,815</td>
<td></td>
<td>0</td>
<td>108</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Government Contracting</p>
</blockquote></td>
<td>149</td>
<td>13,275</td>
<td></td>
<td>149</td>
<td>14,332</td>
<td></td>
<td>149</td>
<td>14,749</td>
<td></td>
<td>0</td>
<td>417</td>
</tr>
<tr class="even">
<td>Subtotal</td>
<td>235</td>
<td>$ 20,529</td>
<td></td>
<td>235</td>
<td>$ 21,286</td>
<td></td>
<td>235</td>
<td>$ 21,907</td>
<td></td>
<td>0</td>
<td>$ 621</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>

<table>
<colgroup>
<col style="width: 27%" />
<col style="width: 0%" />
<col style="width: 8%" />
<col style="width: 0%" />
<col style="width: 8%" />
<col style="width: 0%" />
<col style="width: 1%" />
<col style="width: 0%" />
<col style="width: 8%" />
<col style="width: 0%" />
<col style="width: 6%" />
<col style="width: 1%" />
<col style="width: 0%" />
<col style="width: 1%" />
<col style="width: 8%" />
<col style="width: 0%" />
<col style="width: 6%" />
<col style="width: 2%" />
<col style="width: 0%" />
<col style="width: 0%" />
<col style="width: 8%" />
<col style="width: 0%" />
<col style="width: 6%" />
<col style="width: 1%" />
<col style="width: 0%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="23"><strong>SUMMARY BY ACTIVITY</strong></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="23"><em>(Dollars in thousands)</em></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="3"></td>
<td colspan="3"></td>
<td colspan="3"></td>
<td></td>
<td colspan="5"></td>
<td colspan="2"></td>
<td colspan="4">Increase (Decrease)</td>
<td colspan="2" rowspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="3">FY 2001 Actual</td>
<td colspan="3"></td>
<td colspan="3">FY 2002 Estimate</td>
<td></td>
<td colspan="5">FY 2003 Request</td>
<td colspan="2"></td>
<td colspan="4">vs. FY 2002 Estimate</td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2">Positions</td>
<td>Amount</td>
<td colspan="3"></td>
<td>Positions</td>
<td colspan="2">Amount</td>
<td></td>
<td colspan="3">Positions</td>
<td colspan="2">Amount</td>
<td colspan="2"></td>
<td colspan="3">Positions</td>
<td colspan="3">Amount</td>
</tr>
<tr class="even">
<td>Capital Access</td>
<td colspan="2"></td>
<td colspan="3"></td>
<td></td>
<td colspan="3"></td>
<td colspan="3"></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td colspan="4"></td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Immediate Office</p>
</blockquote></td>
<td colspan="2">5</td>
<td colspan="3">$ 717</td>
<td></td>
<td colspan="3">5</td>
<td colspan="3">$ 635</td>
<td></td>
<td colspan="2">5</td>
<td colspan="2">$ 654</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">$ 19</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Lender Oversight</p>
</blockquote></td>
<td colspan="2">6</td>
<td colspan="3">2,659</td>
<td></td>
<td colspan="3">6</td>
<td colspan="3">1,265</td>
<td></td>
<td colspan="2">6</td>
<td colspan="2">2,317</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">1,052</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Financial Assistance-HQ</p>
</blockquote></td>
<td colspan="2">44</td>
<td colspan="3">3,401</td>
<td></td>
<td colspan="3">53</td>
<td colspan="3">4,370</td>
<td></td>
<td colspan="2">53</td>
<td colspan="2">4,511</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">141</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Financial Assistance-Servicing Centers</p>
</blockquote></td>
<td colspan="2">105</td>
<td colspan="3">7,724</td>
<td></td>
<td colspan="3">105</td>
<td colspan="3">7,468</td>
<td></td>
<td colspan="2">105</td>
<td colspan="2">7,712</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">244</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Investment Division</p>
</blockquote></td>
<td colspan="2">92</td>
<td colspan="3">8,771</td>
<td></td>
<td colspan="3">92</td>
<td colspan="3">9,393</td>
<td></td>
<td colspan="2">92</td>
<td colspan="2">9,696</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">303</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Surety Guarantees</p>
</blockquote></td>
<td colspan="2">13</td>
<td colspan="3">1,134</td>
<td></td>
<td colspan="3">13</td>
<td colspan="3">1,182</td>
<td></td>
<td colspan="2">13</td>
<td colspan="2">1,222</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">40</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>International Trade</p>
</blockquote></td>
<td colspan="2">14</td>
<td colspan="3">989</td>
<td></td>
<td colspan="3">14</td>
<td colspan="3">963</td>
<td></td>
<td colspan="2">14</td>
<td colspan="2">992</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">29</td>
</tr>
<tr class="even">
<td>Subtotal</td>
<td colspan="2">279</td>
<td colspan="3">$ 25,395</td>
<td></td>
<td colspan="3">288</td>
<td colspan="3">$ 25,276</td>
<td></td>
<td colspan="2">288</td>
<td colspan="2">$ 27,104</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">$ 1,828</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td></td>
<td colspan="3"></td>
<td colspan="3"></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td colspan="4"></td>
</tr>
<tr class="even">
<td>Entrepreneurial Development</td>
<td colspan="2"></td>
<td colspan="3"></td>
<td></td>
<td colspan="3"></td>
<td colspan="3"></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td colspan="4"></td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Immediate Office</p>
</blockquote></td>
<td colspan="2">6</td>
<td colspan="3">$ 864</td>
<td></td>
<td colspan="3">6</td>
<td colspan="3">$ 870</td>
<td></td>
<td colspan="2">6</td>
<td colspan="2">$ 896</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">$ 26</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Small Business Development Centers</p>
</blockquote></td>
<td colspan="2">17</td>
<td colspan="3">1,640</td>
<td></td>
<td colspan="3">17</td>
<td colspan="3">1,751</td>
<td></td>
<td colspan="2">17</td>
<td colspan="2">1,802</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">51</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Business Initiatives</p>
</blockquote></td>
<td colspan="2">13</td>
<td colspan="3">1,855</td>
<td></td>
<td colspan="3">15</td>
<td colspan="3">1,342</td>
<td></td>
<td colspan="2">15</td>
<td colspan="2">1,381</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">39</td>
</tr>
<tr class="even">
<td><blockquote>
<p>Native American Affairs</p>
</blockquote></td>
<td colspan="2">1</td>
<td colspan="3">263</td>
<td></td>
<td colspan="3">1</td>
<td colspan="3">271</td>
<td></td>
<td colspan="2">1</td>
<td colspan="2">279</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">8</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Women's Business Ownership</p>
</blockquote></td>
<td colspan="2">11</td>
<td colspan="3">890</td>
<td></td>
<td colspan="3">11</td>
<td colspan="3">858</td>
<td></td>
<td colspan="2">11</td>
<td colspan="2">878</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">20</td>
</tr>
<tr class="even">
<td>Subtotal</td>
<td colspan="2">48</td>
<td colspan="3">$ 5,512</td>
<td></td>
<td colspan="3">50</td>
<td colspan="3">$ 5,092</td>
<td></td>
<td colspan="2">50</td>
<td colspan="2">$ 5,236</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">$ 144</td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td></td>
<td colspan="3"></td>
<td colspan="3"></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td colspan="4"></td>
</tr>
<tr class="even">
<td>Regional and District Offices</td>
<td colspan="2">1,726</td>
<td colspan="3">$ 136,281</td>
<td></td>
<td colspan="3">1,569</td>
<td colspan="3">$ 141,801</td>
<td></td>
<td colspan="2">1,569</td>
<td colspan="2">$ 150,384</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">$ 8,583</td>
</tr>
<tr class="odd">
<td>Agency-wide (not distributed)</td>
<td colspan="2"></td>
<td colspan="3">45,360</td>
<td></td>
<td colspan="3"></td>
<td colspan="3">41,319</td>
<td></td>
<td colspan="2"></td>
<td colspan="2">87,038</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">45,719</td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td></td>
<td colspan="3"></td>
<td colspan="3"></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td colspan="4"></td>
</tr>
<tr class="odd">
<td><strong>Subtotal - Operating Budget</strong></td>
<td colspan="2"><strong>2,736</strong></td>
<td colspan="3"><strong>$ 305,004</strong></td>
<td></td>
<td colspan="3"><strong>2,610</strong></td>
<td colspan="3"><strong>$ 303,336</strong></td>
<td></td>
<td colspan="2"><strong>2,610</strong></td>
<td colspan="2"><strong>$ 364,454</strong></td>
<td colspan="2"></td>
<td><strong>0</strong></td>
<td colspan="4"><strong>$ 61,118</strong></td>
</tr>
<tr class="even">
<td><strong>Non-Credit Programs &amp; Special Initiatives</strong></td>
<td colspan="2"><strong>77</strong></td>
<td colspan="3"><strong>223,176</strong></td>
<td></td>
<td colspan="3"><strong>42</strong></td>
<td colspan="3"><strong>214,667</strong></td>
<td></td>
<td colspan="2"><strong>42</strong></td>
<td colspan="2"><strong>149,036</strong></td>
<td colspan="2"></td>
<td><strong>0</strong></td>
<td colspan="4"><strong>(65,631)</strong></td>
</tr>
<tr class="odd">
<td><strong>Total Salaries and Expenses</strong></td>
<td colspan="2"><strong>2,813</strong></td>
<td colspan="3"><strong>$ 528,180</strong></td>
<td></td>
<td colspan="3"><strong>2,652</strong></td>
<td colspan="3"><strong>$ 518,003</strong></td>
<td></td>
<td colspan="2"><strong>2,652</strong></td>
<td colspan="2"><strong>$ 513,490</strong></td>
<td colspan="2"></td>
<td><strong>0</strong></td>
<td colspan="4"><strong>$ (4,513)</strong></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td></td>
<td colspan="3"></td>
<td colspan="3"></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td colspan="4"></td>
</tr>
<tr class="odd">
<td><strong>Disaster Direct Program</strong></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td></td>
<td colspan="3"></td>
<td colspan="3"></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td colspan="4"></td>
</tr>
<tr class="even">
<td><blockquote>
<p>Loan Making</p>
</blockquote></td>
<td colspan="2">1,106</td>
<td colspan="3">$ 88,190</td>
<td></td>
<td colspan="3">1,862</td>
<td colspan="3">$ 124,933</td>
<td></td>
<td colspan="2">1,078</td>
<td colspan="2">$ 81,093</td>
<td colspan="2"></td>
<td>(784)</td>
<td colspan="4">$ (43,840)</td>
</tr>
<tr class="odd">
<td><blockquote>
<p>Loan Servicing</p>
</blockquote></td>
<td colspan="2">222</td>
<td colspan="3">29,019</td>
<td></td>
<td colspan="3">222</td>
<td colspan="3">30,056</td>
<td></td>
<td colspan="2">222</td>
<td colspan="2">30,694</td>
<td colspan="2"></td>
<td>0</td>
<td colspan="4">638</td>
</tr>
<tr class="even">
<td><strong>Total Disaster Direct Program</strong></td>
<td colspan="2"><strong>1,328</strong></td>
<td colspan="3"><strong>$ 117,209</strong></td>
<td></td>
<td colspan="3"><strong>2,084</strong></td>
<td colspan="3"><strong>$ 154,989</strong></td>
<td></td>
<td colspan="2"><strong>1,300</strong></td>
<td colspan="2"><strong>$ 111,787</strong></td>
<td colspan="2"></td>
<td><strong>(784)</strong></td>
<td colspan="4"><strong>$ (43,202)</strong></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td></td>
<td colspan="3"></td>
<td colspan="3"></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td colspan="4"></td>
</tr>
<tr class="even">
<td><strong>Inspector General</strong></td>
<td colspan="2"><strong>108</strong></td>
<td colspan="3"><strong>$ 12,367</strong></td>
<td></td>
<td colspan="3"><strong>124</strong></td>
<td colspan="3"><strong>$ 12,458</strong></td>
<td></td>
<td colspan="2"><strong>144</strong></td>
<td colspan="2"><strong>$ 15,511</strong></td>
<td colspan="2"></td>
<td><strong>20</strong></td>
<td colspan="4"><strong>$ 3,053</strong></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td></td>
<td colspan="3"></td>
<td colspan="3"></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td colspan="4"></td>
</tr>
<tr class="even">
<td><strong>Grand Total</strong></td>
<td colspan="2"><strong>4,249</strong></td>
<td colspan="3"><strong>$ 657,756</strong></td>
<td></td>
<td colspan="3"><strong>4,860</strong></td>
<td colspan="3"><strong>$ 685,450</strong></td>
<td></td>
<td colspan="2"><strong>4,096</strong></td>
<td colspan="2"><strong>$ 640,788</strong></td>
<td colspan="2"></td>
<td><strong>(764)</strong></td>
<td colspan="4"><strong>$ (44,662)</strong></td>
</tr>
</tbody>
</table>

  ------------------ -- ---- -- ---- -- -- -- ---- -- ---- -- -- -- ---- -- ---- -- -- -- ---- -- ------ --
                                                                                                         

                                                                                                         

                                                                                                         

                                                                                                         

                                                                                                         

                                                                                                         

                                                                                                         

                                                                                                         

                                                                                                         

                                                                                                         

                                                                                                         

                                                                                                         

                                                                                                         

                                                                                                         

                                                                                                         

                                                                                                         
  ------------------ -- ---- -- ---- -- -- -- ---- -- ---- -- -- -- ---- -- ---- -- -- -- ---- -- ------ --

Justification of Changes from FY 2002 to FY 2003

(Dollars in Thousands)

+-------------------------------------+----------+----------+----------+
|                                     | FY 2002  | **FY     | Change   |
|                                     |          | 2003**   |          |
|                                     | **Es     |          |          |
|                                     | timate** | **R      |          |
|                                     |          | equest** |          |
+-------------------------------------+----------+----------+----------+
| **NON-CREDIT                        |          |          |          |
| PROGRAMS/INITIATIVES:**             |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[White House and State             | \$0      | \$1,500  | \$1,500  |
| Conferences]{.underline}*:          |          |          |          |
|                                     |          |          |          |
| SBA proposes a series of            |          |          |          |
| conferences to celebrate the        |          |          |          |
| success of small business over the  |          |          |          |
| past 50 years. Moreover, these      |          |          |          |
| activities will highlight emerging  |          |          |          |
| issues that face the Nation's 25    |          |          |          |
| million small businesses.           |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| > *[Program for Investment in       | 5,000    | 0        | (5,000)  |
| > Microenterprises                  |          |          |          |
| > (PRIME)]{.underline}:*            |          |          |          |
|                                     |          |          |          |
| PRIME was authorized in 1999 to     |          |          |          |
| provide technical assistance to     |          |          |          |
| small businesses and to the         |          |          |          |
| organizations that support them.    |          |          |          |
| Similar assistance is already       |          |          |          |
| provided through existing Federal,  |          |          |          |
| State, local, and private-sector    |          |          |          |
| programs, including SBA's Microloan |          |          |          |
| program and Small Business          |          |          |          |
| Development Centers. PRIME          |          |          |          |
| duplicates existing programs and no |          |          |          |
| funding is requested FY 2003.       |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+

####  Justification of Changes from FY 2002 to FY 2003

*(Dollars in Thousands)*

+-------------------------------------+----------+----------+----------+
|                                     | FY 2002  | **FY     | Change   |
|                                     |          | 2003**   |          |
|                                     | **Es     |          |          |
|                                     | timate** | **R      |          |
|                                     |          | equest** |          |
+-------------------------------------+----------+----------+----------+
| > **NON-CREDIT                      |          |          |          |
| > PROGRAMS/INITIATIVES:**           |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[Business, Learning -- Investment  | \$2,000  | \$0      | (        |
| --]{.underline}*                    |          |          | \$2,000) |
| *[Networking]{.underline}* *[and    |          |          |          |
| Collaboration                       |          |          |          |
| (BusinessLINC)]{.underline}:*       |          |          |          |
|                                     |          |          |          |
| The BusinessLINC program was        |          |          |          |
| established to facilitate the       |          |          |          |
| establishment of mentor-protégé     |          |          |          |
| relationships between large and     |          |          |          |
| small businesses. These             |          |          |          |
| relationships are already           |          |          |          |
| facilitated through existing        |          |          |          |
| Federal and private-sector          |          |          |          |
| programs, such as the Department of |          |          |          |
| Defense mentoring program, National |          |          |          |
| Aeronautics & Space                 |          |          |          |
| Administration's mentoring program, |          |          |          |
| the Women's Network, and the 8(a)   |          |          |          |
| program. The 7(j) management and    |          |          |          |
| technical assistance program also   |          |          |          |
| provides similar services as the    |          |          |          |
| BusinessLINC program. BusinessLINC  |          |          |          |
| duplicates existing programs and    |          |          |          |
| SBA proposes not to fund it in FY   |          |          |          |
| 2003.                               |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[Survey of Women-Owned             | 694      | 0        | \$ (694) |
| Businesses]{.underline}:*           |          |          |          |
|                                     |          |          |          |
| SBA works closely with the Census   |          |          |          |
| Bureau to obtain information on     |          |          |          |
| women-owned business, gathered from |          |          |          |
| the 5-year census process. In order |          |          |          |
| to support this information         |          |          |          |
| gathering, SBA has been required to |          |          |          |
| contribute annual funding to the    |          |          |          |
| Census Bureau to offset the costs   |          |          |          |
| of this element of the census       |          |          |          |
| survey. The Congress annually       |          |          |          |
| appropriates this amount, which is  |          |          |          |
| passed-through directly to the      |          |          |          |
| Census Bureau. For FY 2003, the     |          |          |          |
| Census Bureau estimated the SBA's   |          |          |          |
| contribution to be \$1,057,484. The |          |          |          |
| Administration has not included     |          |          |          |
| this request in SBA's budget, and   |          |          |          |
| proposes that it be funded directly |          |          |          |
| in the budget for the Census        |          |          |          |
| Bureau.                             |          |          |          |
+-------------------------------------+----------+----------+----------+

Justification of Changes from FY 2002 to FY 2003

(Dollars in Thousands)

+-------------------------------------+----------+----------+----------+
|                                     | FY 2002  | **FY     | Change   |
|                                     |          | 2003**   |          |
|                                     | **Es     |          |          |
|                                     | timate** | **R      |          |
|                                     |          | equest** |          |
+-------------------------------------+----------+----------+----------+
| NON-CREDIT PROGRAMS/INITIATIVES:    |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[Native American                   | \$0      | \$1,000  | \$1,000  |
| Outreach]{.underline}:*             |          |          |          |
|                                     |          |          |          |
| According to the 2000 Census, there |          |          |          |
| are 2.5 million American Indians    |          |          |          |
| and Alaskan Natives. The average    |          |          |          |
| unemployment rate on reservations   |          |          |          |
| in 1999 was 43 percent. The SBA     |          |          |          |
| Office of Native American Affairs   |          |          |          |
| is dedicated to ensuring that all   |          |          |          |
| American Indians, and Native        |          |          |          |
| Alaskans and Hawaiians seeking to   |          |          |          |
| create, develop, and expand small   |          |          |          |
| businesses have full access to the  |          |          |          |
| necessary business development and  |          |          |          |
| expansion tools available through   |          |          |          |
| Agency programs. The current        |          |          |          |
| technical assistance programs       |          |          |          |
| operate in only six states. The SBA |          |          |          |
| 2003 Native American Economic       |          |          |          |
| Development Program is a            |          |          |          |
| comprehensive initiative designed   |          |          |          |
| to meet the specific cultural needs |          |          |          |
| and result in small business        |          |          |          |
| creation. This initiative will make |          |          |          |
| funding directly available to       |          |          |          |
| tribes to assist in economic        |          |          |          |
| development and job creation.       |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[Congressional                     | 30,000   | 0        | (30,000) |
| Initiatives]{.underline}:*          |          |          |          |
|                                     |          |          |          |
| Each year as part of the            |          |          |          |
| congressional budget process, there |          |          |          |
| are a number of program initiatives |          |          |          |
| that are included in SBA's final    |          |          |          |
| appropriation. These initiatives    |          |          |          |
| are not authorized in the Small     |          |          |          |
| Business Act and, therefore, are    |          |          |          |
| not requested as part of the        |          |          |          |
| President's annual budget.          |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[Other Non-Credit Programs and     | 139,300  | 141,775  | 2,475    |
| Initiatives]{.underline}:*          |          |          |          |
|                                     |          |          |          |
| The remaining programs and          |          |          |          |
| initiatives for small business      |          |          |          |
| assistance are proposed to be       |          |          |          |
| funded at the same level as FY      |          |          |          |
| 2002. The difference is \$2 million |          |          |          |
| is funded for HubZones and          |          |          |          |
| \$500,000 for ProNet and a \$25,000 |          |          |          |
| reduction in BICs.                  |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| **Summary of Non-Credit             | **\$1    | **\$1    | **(\$3   |
| Programs/Initiatives:**             | 76,994** | 44,275** | 2,719)** |
|                                     |          |          |          |
| -   **Direct Appropriation to S&E** | 1,516    | 1,500    | \(16\)   |
|                                     |          |          |          |
| -   Not Appropriated                | 2,404    | 3,000    | 596      |
|                                     |          |          |          |
| > \- SDB Certifications             | [33,     | [        | [(33,4   |
| >                                   | 753]{.un | 261]{.un | 92)]{.un |
| > \- Gainsharing                    | derline} | derline} | derline} |
| >                                   |          |          |          |
| > \- Other reimbursables &          |          |          |          |
| > carryovers                        |          |          |          |
+-------------------------------------+----------+----------+----------+
| Summary of Non-Credit Prog/Init     | \        | \        | (\       |
| Availability                        | $214,667 | $149,036 | $65,631) |
+-------------------------------------+----------+----------+----------+

Justification of Changes from FY 2002 to FY 2003

(Dollars in Thousands)

+-------------------------------------+----------+----------+----------+
|                                     | FY 2002  | **FY     | Change   |
|                                     |          | 2003**   |          |
|                                     | **Es     |          |          |
|                                     | timate** | **R      |          |
|                                     |          | equest** |          |
+-------------------------------------+----------+----------+----------+
| **OPERATING BUDGET:**               |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[Restructuring and workforce       | \$ 0     | \$       | \$15,000 |
| transformation]{.underline}:*       |          | 15,000   |          |
|                                     |          |          |          |
| SBA will implement the results of   |          |          |          |
| its FY 2002 pilot efforts. This     |          |          |          |
| effort will require an increased    |          |          |          |
| use of technology (\$2 million);    |          |          |          |
| the reconfiguration and movement of |          |          |          |
| office locations (\$2.5 million),   |          |          |          |
| files (\$1 million) and personnel   |          |          |          |
| (\$5 million), enhanced skills      |          |          |          |
| training of our staff to meet the   |          |          |          |
| challenges of the new SBA (\$2      |          |          |          |
| million), and additional            |          |          |          |
| contracting-out of commercial       |          |          |          |
| activities (\$2.5 million). These   |          |          |          |
| expenditures will result in         |          |          |          |
| long-term savings.                  |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[E-Government Portal Business      | \$ 0     | \$ 5,000 | \$5,000  |
| Compliance One-Stop]{.underline}:*  |          |          |          |
|                                     |          |          |          |
| The Administration's initiative to  |          |          |          |
| be more citizen-centered and        |          |          |          |
| accessible to the public 24/7,      |          |          |          |
| includes SBA's selection to be the  |          |          |          |
| lead Agency to develop and          |          |          |          |
| implement a one-stop portal to      |          |          |          |
| provide small business information  |          |          |          |
| regarding laws and regulations.     |          |          |          |
| This website is called Business     |          |          |          |
| Compliance One-Stop.                |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[IT Security, Infrastructure, and  | \$ 0     | \$ 3,550 | \$3,550  |
| other e-Government                  |          |          |          |
| initiatives]{.underline}:*          |          |          |          |
|                                     |          |          |          |
| In order to ensure sufficient       |          |          |          |
| security of its computer systems    |          |          |          |
| and to provide small businesses     |          |          |          |
| increased access to all of SBA's    |          |          |          |
| services 24/7, SBA needs to         |          |          |          |
| continue to support the upgrading   |          |          |          |
| of its information technology       |          |          |          |
| infrastructure (\$2.8 million). In  |          |          |          |
| addition, SBA will begin            |          |          |          |
| implementation of an e-documents    |          |          |          |
| management system to assist with    |          |          |          |
| the retention and administration of |          |          |          |
| SBA's electronic records            |          |          |          |
| (\$750,000).                        |          |          |          |
+-------------------------------------+----------+----------+----------+

Justification of Changes from FY 2002 to FY 2003

(Dollars in Thousands)

+-------------------------------------+----------+----------+----------+
|                                     | FY 2002  | **FY     | Change   |
|                                     |          | 2003**   |          |
|                                     | **Es     |          |          |
|                                     | timate** | **R      |          |
|                                     |          | equest** |          |
+-------------------------------------+----------+----------+----------+
| **OPERATING BUDGET:**               |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[Program                           | 0        | 850      | 850      |
| Evaluations]{.underline}:*          |          |          |          |
|                                     |          |          |          |
| SBA will initiate selected          |          |          |          |
| evaluations and studies of key      |          |          |          |
| programs, especially those using    |          |          |          |
| private-sector partnerships, to     |          |          |          |
| ensure taxpayer funds are creating  |          |          |          |
| value and that appropriate results  |          |          |          |
| are being achieved consistent with  |          |          |          |
| SBA's mission and Administration    |          |          |          |
| objectives.                         |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[Asset Sales Program Financial     | \$ 0     | \$ 1,500 | \$ 1,500 |
| Advisor]{.underline}:*              |          |          |          |
|                                     |          |          |          |
| To support SBA's continued efforts  |          |          |          |
| to sell loan assets, we contract    |          |          |          |
| with an expert program financial    |          |          |          |
| advisor.                            |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[Pension Costs]{.underline}:*      | \$0      | \$13,907 | \$13,907 |
|                                     |          |          |          |
| SBA's estimate of pension costs     |          |          |          |
| previously paid by OPB. Legislation |          |          |          |
| is requested to authorize this      |          |          |          |
| budgetary change governmentwide to  |          |          |          |
| reflect full costs of salaries and  |          |          |          |
| benefits.                           |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+

Justification of Changes from FY 2002 to FY 2003

(Dollars in Thousands)

+-------------------------------------+----------+----------+----------+
| *[Other Operating Budget            | \$ 0     | \$       | \$21,311 |
| Changes]{.underline}*:              |          | 21,311   |          |
|                                     |          |          |          |
| In FY 2003, SBA will maintain its   |          |          |          |
| FY 2002 end-of-year staffing level. |          |          |          |
| The annualization of the FY 2002    |          |          |          |
| pay raise and normal inflationary   |          |          |          |
| increases in areas such as employee |          |          |          |
| pay, travel, rents, printing, and   |          |          |          |
| contracts will be funded within     |          |          |          |
| this level. This increase will      |          |          |          |
| re-establish an appropriate         |          |          |          |
| "current services" level of         |          |          |          |
| operations.                         |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| **Summary of Operating Budget       | **\$1    | **\$2    | **\$     |
| Funding:**                          | 61,482** | 17,831** | 56,349** |
|                                     |          |          |          |
| \- **Direct Appropriation to S&E**  | 129,000  | 133,769  | 4,769    |
|                                     |          |          |          |
| \- Transfer from Business Loans     | 9,854    | 9,854    | 0        |
|                                     |          |          |          |
| \- Transfer from Disaster Loans     | 3,000    | 3,000    | 0        |
|                                     |          |          |          |
| \- Fee Income                       |          |          |          |
+-------------------------------------+----------+----------+----------+
| Summary of Operating Budget         | **\$3    | **\$3    | **\$     |
| Availability                        | 03,336** | 64,454** | 61,118** |
+-------------------------------------+----------+----------+----------+

**Justification of Changes from FY 2002 to FY 2003**

(Dollars in Thousands)

+-------------------------------------+----------+----------+----------+
|                                     | FY 2002  | **FY     | Change   |
|                                     |          | 2003**   |          |
|                                     | **Es     |          |          |
|                                     | timate** | **R      |          |
|                                     |          | equest** |          |
+-------------------------------------+----------+----------+----------+
| > **LOAN PROGRAMS:**                |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[Section 7(a) General Business     | \        | \$85,360 | (\       |
| Loans]{.underline}:*                | $100,075 |          | $14,715) |
|                                     |          |          |          |
| SBA's largest lending program       |          |          |          |
| provides government guarantees for  |          |          |          |
| loans made by participating         |          |          |          |
| lenders. In FY 2003, the request of |          |          |          |
| \$85.36 million will be executed at |          |          |          |
| a subsidy rate of 1.76 percent to   |          |          |          |
| provide a program level of \$4.85   |          |          |          |
| billion.                            |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[Section 7(a)]{.underline}*        | \$75,000 | 0        | (\       |
| *["Disaster"]{.underline}*          |          |          | $75,000) |
| *[Loans]{.underline}:*              |          |          |          |
|                                     |          |          |          |
| In FY 2002, SBA received an         |          |          |          |
| appropriations of \$75 million to   |          |          |          |
| help respond to the needs of small  |          |          |          |
| businesses following the September  |          |          |          |
| 11^th^ attacks. This one-time       |          |          |          |
| appropriation, executed at a        |          |          |          |
| subsidy rate of 1.67, funds a       |          |          |          |
| program level of \$4.491 billion.   |          |          |          |
| Between the regular 7(a) program    |          |          |          |
| and this program, \$13.8 billion    |          |          |          |
| was provided in FY 2002.            |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[Microloans---Direct Loan          | 1,730    | 3,726    | 1,735    |
| Program]{.underline}:*              |          |          |          |
|                                     |          |          |          |
| The Microloan program provides      |          |          |          |
| access to very small loans (up to   |          |          |          |
| \$35,000) to help meet the needs of |          |          |          |
| small businesses through            |          |          |          |
| partnerships with microloan         |          |          |          |
| intermediaries. For FY 2003, we     |          |          |          |
| request a direct program level of   |          |          |          |
| \$26.6 million, with an increased   |          |          |          |
| subsidy rate from 6.78 percent to   |          |          |          |
| 13.05 percent, due to changes in    |          |          |          |
| the discount rate and average loan  |          |          |          |
| size resulting in an increased need |          |          |          |
| for new appropriations. In          |          |          |          |
| addition, 7 percent of              |          |          |          |
| appropriation is transferred to S&E |          |          |          |
| for microloan intermediary          |          |          |          |
| training.                           |          |          |          |
+-------------------------------------+----------+----------+----------+

Justification of Changes from FY 2002 to FY 2003

(Dollars in Thousands)

+-------------------------------------+----------+----------+----------+
|                                     | FY 2002  | **FY     | Change   |
|                                     |          | 2003**   |          |
|                                     | **Es     |          |          |
|                                     | timate** | **R      |          |
|                                     |          | equest** |          |
+-------------------------------------+----------+----------+----------+
| > **LOAN PROGRAMS:**                |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| *[Disaster Loans]{.underline}:*     | \        | \        | (\$      |
|                                     | $237,963 | $111,140 | 126,823) |
| SBA's Disaster Loan Program         |          |          |          |
| provides long-term loans at         |          |          |          |
| subsidized interest rates to        |          |          |          |
| victims of natural disasters and    |          |          |          |
| loans to mitigate disaster damages. |          |          |          |
| For FY 2002, SBA received two       |          |          |          |
| appropriations to this account:     |          |          |          |
| \$87.3 million with the initial     |          |          |          |
| annual appropriation, combined with |          |          |          |
| carryover balances and recoveries   |          |          |          |
| of \$15.6 million (plus \$6 million |          |          |          |
| of the emergency money) to fund a   |          |          |          |
| program level of \$743 million in   |          |          |          |
| lending at a 14.67 percent subsidy  |          |          |          |
| rate; and \$54 million carried over |          |          |          |
| from FY 2001 (plus \$75 million as  |          |          |          |
| part of the FY 2002 emergency       |          |          |          |
| supplemental) to fund \$557 million |          |          |          |
| in lending in response to the       |          |          |          |
| September 11 events at a 23.16      |          |          |          |
| percent subsidy rate.               |          |          |          |
|                                     |          |          |          |
| For FY 2003, we request funding at  |          |          |          |
| a level of \$76.1 million, combined |          |          |          |
| with a projected carryover from FY  |          |          |          |
| 2002 of \$25 million and \$10       |          |          |          |
| million in recoveries, to fund a    |          |          |          |
| program level of \$795 million (the |          |          |          |
| five-year average) at a 13.98       |          |          |          |
| percent subsidy rate.               |          |          |          |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| **Summary of Loan Programs:**       | \        | \$89,086 | (\       |
|                                     | $154,860 |          | $65,774) |
| \- Appropriation for business loans |          | 133,769  |          |
|                                     | 129,000  |          | 4,769    |
| \- Appropriation for business       |          | 76,140   |          |
| admin.                              | 162,360  |          | (86,220) |
|                                     |          | 122,141  |          |
| \- Appropriation for disaster loans | 122,354  |          | \(213\)  |
|                                     |          |          |          |
| \- Appropriation for disaster       |          |          |          |
| admin.                              |          |          |          |
+-------------------------------------+----------+----------+----------+
| Summary of Loan Program             | **\$5    | **\$4    | **(\$14  |
| Appropriations                      | 68,574** | 21,136** | 7,438)** |
+-------------------------------------+----------+----------+----------+
| Summary of Loan Program             | \        | \        | (\$      |
| Availability                        | $592,239 | $312,244 | 279,995) |
+-------------------------------------+----------+----------+----------+
|                                     |          |          |          |
+-------------------------------------+----------+----------+----------+
| Inspector General-Appropriation     | **       | **       | *        |
|                                     | 11,464** | 15,011** | *3,547** |
+-------------------------------------+----------+----------+----------+
| Inspector General Availability      | **       | **       | *        |
|                                     | 12,458** | 15,511** | *3,053** |
+-------------------------------------+----------+----------+----------+
| Total SBA Appropriations            | **\$     | **\$7    | **(\$12  |
|                                     | 9        | 98,253** | 0,261)** |
|                                     | 18,514** |          |          |
+-------------------------------------+----------+----------+----------+
| Total SBA Availability              | **\$1,1  | **\$8    | **(\$28  |
|                                     | 22,700** | 41,245** | 1,455)** |
+-------------------------------------+----------+----------+----------+

# APPROPRIATIONS LANGUAGE AND DESCRIPTION

# 

# 

**SALARIES AND EXPENSES**

For necessary expenses, not otherwise provided for, of the Small
Business Administration as authorized by Public Law 106--554, including
hire of passenger motor vehicles as authorized by 31 U.S.C. 1343 and
1344, and not to exceed \$3,500 for official reception and
representation expenses,\$362,106,000: Provided, That the Administrator
is authorized to charge fees to cover the cost of publications developed
by the Small Business Administration, and certain loan servicing
activities: Provided further, That, notwithstanding 31 U.S.C. 3302,
revenues received from all such activities shall be credited to this
account, to be available for carrying out these purposes without further
appropriations: Provided further, That \$88,000,000 shall be available
to fund grants for performance in fiscal year 2003 or fiscal year 2004
as authorized by section 21 of the Small Business Act, as amended. In
addition to amounts otherwise available from collections, 5 percent of
such collections, not to exceed \$3,000,000, for qualified expenses of
delinquent non-tax debt collection. (Departments of Commerce, Justice,
and State, the Judiciary, and Related Agencies Appropriations Act,
2002); additional authorizing legislation required.

#### Salaries and Expenses Appropriation:

The Salaries and Expenses (S&E) appropriation provides funding for
non-credit programs and initiatives and for costs incurred by
Headquarters and field staff in the administration and operation of SBA
programs. Non-credit programs and initiatives include all SBA business
assistance programs not related to loans, such as procurement assistance
and business development assistance for women, minorities, and veterans
and service-disabled veterans. They also include management and
information technology initiatives that improve SBA's operations.
Funding for administration and operation (hereafter referred to as the
operating budget) pays for on-going personnel and support costs,
including costs to support the administration and management of the
non-credit programs. As such, the S&E account is instrumental in the
achievement of SBA's performance goals to help small businesses succeed,
assist disaster victims, and improve overall SBA management.

The FY 2003 President's Budget requests \$362.1 million in new budget
authority for the S&E appropriation, an increase of \$23.6 million from
the FY 2002 appropriated level. Of this amount, \$144.3 million is for
non-credit programs (a reduction of \$32.7 million from the FY 2002
appropriation). For the operating budget, including fee income and
transfers from the Business Loan appropriation and the Disaster
Assistance appropriation for administrative expenses pursuant to the
Federal Credit Reform Act of 1990, the request will provide \$364.5
million in total resources (an increase of \$61.1 million over FY 2002).
A summary of the President's Request for Salaries and Expenses follows:

+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        | *      |
|                                |        |        |        | *Inc/( |
|                                |        |        |        | Dec)** |
+--------------------------------+--------+--------+--------+--------+
|                                | **FY   | **FY   | **FY   | **vs   |
|                                | 2001** | 2002** | 2003** | FY     |
|                                |        |        |        | 2002** |
+--------------------------------+--------+--------+--------+--------+
|                                | **Ac   | **Esti | **Req  | **Esti |
|                                | tual** | mate** | uest** | mate** |
+--------------------------------+--------+--------+--------+--------+
| **Salaries and Expenses:**     |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| > New Budget Authority         | \$4    | \$3    | \$3    | \$     |
|                                | 40,635 | 38,476 | 62,106 | 23,630 |
+--------------------------------+--------+--------+--------+--------+
| > Transfer from Business Loans | 1      | 1      | 1      | 4,900  |
| > Program                      | 29,216 | 29,130 | 34,030 |        |
+--------------------------------+--------+--------+--------+--------+
| > Transfer from Disaster Loans | 14,754 | 9,854  | 9,854  | 0      |
| > Program                      |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| > Transfers from Other         | 3,737  | 899    | 1,500  | 601    |
| > Agencies                     |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| > Offsetting Collections --    | 3,348  | 3,000  | 3,000  | 0      |
| > Fees                         |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| > Estimated Gainsharing        | 3,000  | 0      | 3,000  | 3,000  |
+--------------------------------+--------+--------+--------+--------+
| > Carryover from Prior Fiscal  | 2,791  | 36,644 | 0      | (3     |
| > Year                         |        |        |        | 6,644) |
+--------------------------------+--------+--------+--------+--------+
| > Recoveries                   | 1,563  | 0      | 0      | 0      |
+--------------------------------+--------+--------+--------+--------+
| > Returned to Treasury         | \      | 0      | 0      | 0      |
|                                | (608\) |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| > Transfer to Other Accounts   | \      | 0      | 0      | 0      |
|                                | (309\) |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| > Carryover into Next Fiscal   | (3     | 0      | 0      | 0      |
| > Year                         | 6,644) |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| > Rescinded Funds              | (3     | 0      | 0      | 0      |
|                                | 0,895) |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| > Balance Expired              | (      | 0      | 0      | 0      |
|                                | 2,408) |        |        |        |
+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| **Total Salaries and           | *      | *      | *      | *      |
| Expenses**                     | *\$528 | *\$518 | *\$513 | *(\$4, |
|                                | ,180** | ,003** | ,490** | 513)** |
+--------------------------------+--------+--------+--------+--------+

*Non-Credit Programs and Initiatives (\$144.3 million)*

The FY 2003 request includes \$144.3 million for non-credit programs and
initiatives. Of this amount, \$88 million is for the Small Business
Development Centers to provide long-term counseling and training to
small businesses throughout the country. The remaining funds will allow
SBA to provide outreach and technical assistance to small businesses,
especially women, veterans, and minorities, through programs such as
7(j), Microloan technical assistance, Women's Business Centers, and
Veteran's Business Assistance. Other non-credit programs such as HUBZone
Empowerment Contracting provide an advocate for small businesses in the
government contracting area.

*Operating Budget (\$364.5 million)*

The total authority requested for SBA's operating budget is \$364.5
million, an increase of \$61.1 million from the FY 2002 enacted level.
The FY 2002 appropriation did not sufficiently fund SBA's current
services operating needs, causing employment levels to further decline
and significant reductions in on-going activities and support services.
The increase proposed will re-establish a sufficient level of resources
to support current operations, including the maintenance of the FY 2002
yearend staffing level. The increase is primarily for the pension cost
of SBA employees previously funded through OPM (\$13.9 million), the
general salary pay raises of 3.6 percent in January 2003 (\$12.8
million), and for mandatory rate increases in rents, and other services
that are passed directly to SBA by the General Services Administration,
United States Postal Service (USPS) (\$8.5 million). In addition to
funding on-going program administration and support, the operating
budget account funds management and information technology initiatives
to help transform SBA's workforce and modernize its infrastructure. The
\$23.6 million increase is requested to upgrade systems, implement risk
management techniques, improve internal controls, transition the
workforce, and update technology infrastructure to help meet SBA's
long-term goals; \$1.5 million is for the asset sales program financial
advisor; and \$850,000 is for program evaluations.

The operating budget portion of the S&E appropriation funds five major
types of costs: Program Support, Field Operations, Executive Direction,
Management and Administration, and Agency-wide Costs. It does not
include funding for disaster assistance direct expenses; these are
covered under the Disaster Loan Appropriation. Descriptions of these
major components of the operating budget follow.

*Program Support (\$54.2 million)*

Funding for program support activities covers the costs of providing
government contracting assistance, business development assistance,
training and outreach activities, and capital access programs. Most
administrative expenses for non-credit programs are included in this
group.

Funding requirements reflect the needs of Headquarters offices as well
as servicing centers that process loan guarantees and service SBA's
portfolio.

*Field Offices (\$150.4 million)*

Funding for field offices covers the cost of operating 10 regional, 70
district, and multiple branch offices throughout the United States and
Puerto Rico. The regional, district, and branch offices are the
locations where SBA personnel interact with customers and deliver SBA's
programs and activities to the Nation's 25 million small business
customers.

*Executive Direction (\$34.4 million)*

Executive Direction offices are responsible for administratively
supporting SBA's program offices. Requirements include policy analysis
and support, financial management, legal representation, hearings and
appeals, equal employment opportunity/civil rights compliance,
congressional and public interface, marketing to SBA's constituency, and
advocating the small business community within the governmental process.
An estimate of the cost of Executive Direction is provided in the
Performance Indicators and Resources Requested section of each goal.

*Management and Administration (\$38.4 million)*

Management and Administration offices are responsible for the
formulation and execution of policies and procedures that maximize the
utilization of SBA's primary internal resources, including human
resources, information technology, and administrative services. An
estimate of the cost of Management and Administration is provided in the
Performance Indicators and Resources Requested section of each goal.

*Agency-wide Costs (\$87.0 million)*

Agency-wide costs comprise fixed expenses that the Agency must incur to
support the annual level of program funding. These costs include
telecommunications, postage, rent, worker's compensation, centralized
training, in-house printing, transit benefits subsidy, and reasonable
accommodation expenses. Estimates for Agency-wide costs are provided in
the Performance Indicators and Resources Requested section of each goal.
This category also includes a majority of the IT and modernization
initiatives indicated above. This includes \$13.9 million for pension
costs previously funded by the Office of Personnel Management.

**BUSINESS LOANS PROGRAM ACCOUNT**

*For the cost of direct loans, **\$3,726,000** to be available until
expended; and for the cost of guaranteed loans, **\$85,360,000** as
authorized by 15 U.S.C. 631 note, of which \$45,000,000 shall remain
available until September 30, 2004: Provided, That such costs, including
the cost of modifying such loans, shall be as defined in section 502 of
the Congressional Budget Act of 1974, as amended: Provided further, That
during fiscal year 2003 commitments to guarantee loans under section 503
of the Small Business Investment Act of 1958, as amended, shall not
exceed \$4,500,000,000, as provided under section 20(h)(1)(B)(ii) of the
Small Business Act: Provided further, That during fiscal year 2003
commitments to guarantee loans for debentures and participating
securities under section 303(b) of the Small Business Investment Act of
1958, as amended, shall not exceed the levels established by section
20**(i)**(1)(C) of the Small Business Act.*

*In addition, for administrative expenses to carry out the direct and
guaranteed loan programs, \$133,769,000, which may be transferred to and
merged with the appropriations for Salaries and Expenses. (Departments
of Commerce, Justice, and State, the Judiciary, and Related Agencies
Appropriations Act, 2002); additional authorizing legislation required.*

#### Business Loan Program Appropriation

The Business Loan Program appropriation includes the funds to cover the
taxpayer's cost of providing direct and guaranteed loans to new and
existing small businesses throughout the United States. Financing to
small businesses is made either directly or in cooperation with banks or
other financial institutions through agreements to participate on a
deferred (guaranteed) basis, or through approved Microloan
intermediaries. Through its business loan programs, SBA provides
capital, credit and equity assistance to help develop and strengthen
America's small businesses and contribute to the country's economy.

As required by the Federal Credit Reform Act of 1990 (FCRA), the
Business Loans program account includes the subsidy costs associated
with direct loans obligated and loan guaranties committed in the fiscal
year in question.

The Business Loans program account also includes administrative expenses
associated with the delivery of business loan programs. Subsidy amounts
are estimated on a present value basis, and administrative expenses are
estimated on a cash basis. Funds for administrative expenses are
appropriated to this account and then transferred to the Salaries and
Expenses account to be obligated and outlayed in that account.

The FY 2003 budget requests \$3.7 million for the subsidy costs
associated with microloan direct loans, \$85.4 for the subsidy costs
associated with 7(a) guaranteed loans, supporting and a total program
level of \$16.4 billion in "net" loan approvals to small businesses
during FY 2003. These approvals include the effect of loan increases,
decreases, and cancellations. The balance of the programs within this
account do not require an appropriation due to the sufficiency of
various fees resulting in no subsidy cost to the government. In addition
to credit subsidy costs, the budget requests \$133.8 million for
administrative expenses to be transferred to the Salaries and Expenses
account. This amount includes \$4.8 million for pension costs previously
funded by the Office of Personnel Management.

Business Loans Program Appropriation

(Dollars in Thousands)

+----------------------------+---------+---------+---------+---------+
|                            |         |         |         | **Inc/  |
|                            |         |         |         | (Dec)** |
+----------------------------+---------+---------+---------+---------+
|                            | **FY    | **FY    | **FY    | **vs FY |
|                            | 2001**  | 2002**  | 2003**  | 2002**  |
+----------------------------+---------+---------+---------+---------+
|                            | **A     | **Est   | **Re    | **Est   |
|                            | ctual** | imate** | quest** | imate** |
+----------------------------+---------+---------+---------+---------+
| **New Budget Authority**   |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| > Section 7(a) Guaranty    | \$      | \$      | \       | (\$     |
|                            | 114,960 | 153,000 | $85,360 | 67,640) |
+----------------------------+---------+---------+---------+---------+
| > Section 7(a) Guaranty -  | 0       | 0       | 0       | 0       |
| > DELTA                    |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| > Y2K Loans[^11]           | 0       | 0       | 0       | 0       |
+----------------------------+---------+---------+---------+---------+
| > Section 504 CDC Guaranty | 0       | 0       | 0       | 0       |
+----------------------------+---------+---------+---------+---------+
| > Section 504 CDC          | 0       | 0       | 0       | 0       |
| > Guaranty - DELTA         |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| > Microloan - Direct       | 2,250   | 1,860   | 3,726   | 1,866   |
+----------------------------+---------+---------+---------+---------+
| > Microloan - Guaranty     | 0       | 0       | 0       | 0       |
+----------------------------+---------+---------+---------+---------+
| > New Market Venture       | 22,000  | 0       | 0       | 0       |
| > Capital                  |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| > SBIC - Participating     | 26,200  | 0       | 0       | 0       |
| > Securities               |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| > SBIC - Debentures        | 0       | 0       | 0       | 0       |
+----------------------------+---------+---------+---------+---------+
| > Rescinded Funds -        | \(364\) | 0       | 0       | 0       |
| > Appropriation            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| > Subtotal - Loan Programs | 165,046 | 154,860 | 89,086  | (       |
|                            |         |         |         | 65,774) |
+----------------------------+---------+---------+---------+---------+
|                            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| **Administrative Expense** |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| > New Budget Authority     | 129,000 | 129,000 | 133,769 | 4,769   |
+----------------------------+---------+---------+---------+---------+
| > Rescinded Funds -        | \(284\) | 0       | 0       | 0       |
| > Appropriation            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| > Subtotal --              | 128,716 | 129,000 | 133,769 | 4,769   |
| > Administrative Expense   |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
|                            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| > **Total New Budget       | **\$29  | **\$28  | **\$22  | **(\$61 |
| > Authority**              | 3,762** | 3,860** | 2,855** | ,005)** |
+----------------------------+---------+---------+---------+---------+
|                            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| **Business Loans -         |         |         |         |         |
| Summary**                  |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| > Program Level            | \$14,   | \$24,   | \$16,   | (\$8,1  |
|                            | 019,430 | 545,542 | 401,053 | 44,489) |
+----------------------------+---------+---------+---------+---------+
|                            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| > New Appropriation        | \$      | \$      | \$      | (\$     |
|                            | 294,410 | 283,860 | 222,855 | 61,005) |
+----------------------------+---------+---------+---------+---------+
| > Carryover from Prior     | 24,719  | 54,399  | 4,342   | (       |
| > Fiscal Year              |         |         |         | 50,057) |
+----------------------------+---------+---------+---------+---------+
| > Carryover into Next      | (       | (4,342) | (3,850) | 492     |
| > Fiscal Year              | 54,399) |         |         |         |
+----------------------------+---------+---------+---------+---------+
| > Transfer to Other        | (1      | (1      | (1      | (4,900) |
| > Accounts                 | 29,216) | 29,130) | 34,030) |         |
+----------------------------+---------+---------+---------+---------+
| > Recoveries               | 1,242   | 0       | 0       | 0       |
+----------------------------+---------+---------+---------+---------+
| > Balance Expired          | 0       | 0       | 0       | 0       |
+----------------------------+---------+---------+---------+---------+
| > Transfer from Other      | 1,100   | 0       | 0       | 0       |
| > Accounts                 |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| > Rescinded Funds -        | \(648\) | (5,500) | 0       | 5,500   |
| > Appropriation            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
|                            |         |         |         |         |
+----------------------------+---------+---------+---------+---------+
| Subsidy Budget Authority   | \$      | \$      | \       | (\$1    |
|                            | 137,208 | 199,287 | $89,317 | 09,970) |
+----------------------------+---------+---------+---------+---------+

Section 7(A) Loan Guaranty Program

(*Dollars in Thousands)*

  --------------------------- ------------- -------------- ------------- ---------------
                                                                         **Inc/(Dec)**

                              **FY 2001**   **FY 2002**    **FY 2003**   **vs FY 2002**

                              **Actual**    **Estimate**   **Request**   **Estimate**

                                                                         

  Regular Program Level       \$9,121,709   \$9,352,804    \$4,850,000   (\$8,993,822)

  Emergency Program Level     0             4,491,018      0             (4,491,018)

  New Subsidy Appropriation   114,960       153,000        85,360        (67,640)

  Carryover Balance -         12,924        22,075         0             (22,075)
  Beginning of Year                                                      

  Recoveries                  1,169         0              0             0

  Carryover Balance - End of  (22,075)      0              0             0
  Year                                                                   

  Transfer from Other         0             0              0             0
  Accounts                                                               

  Rescinded Funds -           \(253\)       0              0             0
  Appropriation                                                          

                                                                         

  Subsidy Budget Authority    \$106,724     \$175,075      \$85,360      (\$89,715)

  Subsidy Rate^1^             1.17%         1.07% & 1.67%  1.76%         .69%
  --------------------------- ------------- -------------- ------------- ---------------

1\. Subsidy rate for FY 2002 regular program = 1.07%; emergency program
rate = 1.67%.

Section 7(A) Loan Guaranty Program (DELTA)

*(Dollars in Thousands)*

  ------------------------ ------------ -------------- ------------- ---------------
                                                                     **Inc/(Dec)**

                           **FY 2001**  **FY 2002**    **FY 2003**   **vs FY 2002**

                           **Actual**   **Estimate**   **Request**   **Estimate**

                                                                     

  Program Level            \$1,711      \$20,000       \$20,000      \$0

                                                                     

  New Subsidy              0            0              0             0
  Appropriation                                                      

  Carryover Balance --     4,511        4,479          2,133         (2,346)
  Beginning of Year                                                  

  Carryover Balance - End  (4,479)      (2,133)        (1,831)       302
  of Year                                                            

  Rescinded Funds-Non      0            (2,000)        0             2,000
  Appropriated                                                       

                                                                     

  Subsidy Budget Authority \$32         \$346          \$302         (\$44)

  Subsidy Rate             1.87%        1.73%          1.51%         (.22%)
  ------------------------ ------------ -------------- ------------- ---------------

Section 504 Development Company Loan Program

(Dollars in Thousands)

  ------------------------- ------------- -------------- -- ------------- -- --------------- --
                                                                             **Inc/(Dec)**   

                            **FY 2001**   **FY 2002**       **FY 2003**      **vs FY 2002**  

                            **Actual**    **Estimate**      **Request**      **Estimate**    

                                                                                             

  **Section 504/CDC                                                                          
  Guarantees**                                                                               

  Program Level             \$2,268,758   \$4,500,000       \$4,500,000      \$0             

                                                                                             

  New Subsidy Appropriation 0             0                 0                0               

  Carryover Balance -       0             0                 0                0               
  Beginning of Year                                                                          

  Recoveries                0             0                 0                0               

  Carryover Balance - End   0             0                 0                0               
  of Year                                                                                    

  Transfer to Salaries and  0             0                 0                0               
  Expenses                                                                                   

                                                                                             

  Subsidy Budget Authority  0             0                 0                0               

  Subsidy Rate[^12]         0.00%         0.00%             0.00%            0               

                                                                                             

  **Section 504/CDC                                                                          
  Guarantees (DELTA)**                                                                       

                                                                                             

  Program Level             \$0           \$2,500           \$2,500          \$0             

                                                                                             

  New Subsidy Appropriation 0             0                 0                0               

  Carryover Balance -       1,028         1,047             526              \(521\)         
  Beginning of Year                                                                          

  Recoveries                0             0                 0                0               

  Carryover Balance - End   (1,037)       \(526\)           \(504\)          22              
  of Year                                                                                    

  Rescinded Funds-Not       0             \(500\)           0                500             
  Appropriated                                                                               

                                                                                             

  Subsidy Budget Authority  \$0           \$21              \$22             \$ 1            

  Subsidy Rate              .89%          .84%              .88%             .04%            
  ------------------------- ------------- -------------- -- ------------- -- --------------- --

**Microloan Program**

*(Dollars in Thousands)*

+--------------------------+----------+----------+----------+----------+
|                          |          |          |          | **Inc    |
|                          |          |          |          | /(Dec)** |
+--------------------------+----------+----------+----------+----------+
|                          | **FY     | **FY     | **FY     | **vs FY  |
|                          | 2001**   | 2002**   | 2003**   | 2002**   |
+--------------------------+----------+----------+----------+----------+
|                          | **       | **Es     | **R      | **Es     |
|                          | Actual** | timate** | equest** | timate** |
+--------------------------+----------+----------+----------+----------+
| #########                |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| #                        |          |          |          |          |
| ######## Miroloan Direct |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > Program Level          | \$29,810 | \$25,513 | \$26,553 | \$1,040  |
+--------------------------+----------+----------+----------+----------+
|                          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > New Subsidy            | 2,250    | 1,860    | 3,726    | 1,866    |
| > Appropriation          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > Carryover from Prior   | 198      | 0        | 0        | 0        |
| > Year                   |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > Recoveries             | 0        | 0        | 0        | 0        |
+--------------------------+----------+----------+----------+----------+
| > Carryover into Next    | 0        | 0        | 0        | 0        |
| > Year                   |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > Transfer to Salaries   | 0        | \(130\)  | \(261\)  | \(131\)  |
| > and Expenses[^13]      |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > Transfer from Other    | 225      | 0        | 0        | 0        |
| > Accounts               |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > Rescinded Funds -      | \(5\)    | 0        | 0        | 0        |
| > Appropriation          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
|                          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > Subsidy Budget         | 2,668    | 1,730    | 3,465    | 1,735    |
| > Authority              |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > Subsidy Rate           | 8.95%    | 6.78%    | 13.05%   | 6.27%    |
+--------------------------+----------+----------+----------+----------+
|                          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| **Microloan Guaranty     |          |          |          |          |
| Loans**                  |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > Program Level          | \$2,000  | \$2,000  | \$2,000  | \$0      |
+--------------------------+----------+----------+----------+----------+
|                          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > New Subsidy            | 0        | 0        | 0        | 0        |
| > Appropriation          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > Carryover from Prior   | 2,604    | 2,445    | 782      | (1,663)  |
+--------------------------+----------+----------+----------+----------+
| > Recoveries             | 0        | 0        | 0        | 0        |
+--------------------------+----------+----------+----------+----------+
| > Carryover into Next    | (2,445)  | \(782\)  | \(614\)  | 168      |
| > Year                   |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > Rescinded Funds-Not    | 0        | (1,500)  | 0        | 1,500    |
| > Appropriated           |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
|                          |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > Subsidy Budget         | \$159    | \$163    | \$168    | \$5      |
| > Authority              |          |          |          |          |
+--------------------------+----------+----------+----------+----------+
| > Subsidy Rate           | 7.95%    | 8.17%    | 8.42%    | .25%     |
+--------------------------+----------+----------+----------+----------+

**Small Business Investment Company Programs**

*(Dollars in Thousands)*

+------------------------+----------+----------+----------+----------+
|                        |          |          |          | **Inc    |
|                        |          |          |          | /(Dec)** |
+------------------------+----------+----------+----------+----------+
|                        | **FY     | **FY     | **FY     | **vs FY  |
|                        | 2001**   | 2002**   | 2003**   | 2002**   |
+------------------------+----------+----------+----------+----------+
|                        | **       | **Es     | **R      | **Es     |
|                        | Actual** | timate** | equest** | timate** |
+------------------------+----------+----------+----------+----------+
| ######### Pa           |          |          |          |          |
| rticipating Securities |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| Program Level          | \$2      | \$3      | \$4      | \        |
|                        | ,108,702 | ,500,000 | ,000,000 | $500,000 |
+------------------------+----------+----------+----------+----------+
|                        |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| New Subsidy            | 26,200   | 0        | 0        | 0        |
| Appropriation          |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| Carryover Balance -    | 1,928    | 0        | 0        | 0        |
| Beginning of Year      |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| Recoveries             | 54       | 0        | 0        | 0        |
+------------------------+----------+----------+----------+----------+
| Carryover Balance -    | 0        | 0        | 0        | 0        |
| End of Year            |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| Transfer from Others   | 0        | 0        | 0        | 0        |
+------------------------+----------+----------+----------+----------+
| Rescinded Funds --     | \(58\)   | 0        | 0        | 0        |
| Appropriation          |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| Transfer to Others     | \(500\)  | 0        | 0        | 0        |
+------------------------+----------+----------+----------+----------+
|                        |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| Subsidy Budget         | 27,624   | 0        | 0        | 0        |
| Authority              |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| Subsidy Rate[^14]      | 1.31%    | 0.00%    | 0.00%    | 0        |
+------------------------+----------+----------+----------+----------+
|                        |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| ######                 |          |          |          |          |
| ### SBIC -- Debentures |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| Program Level          | \        | \$2      | \$3      | \        |
|                        | $486,714 | ,500,000 | ,000,000 | $500,000 |
+------------------------+----------+----------+----------+----------+
|                        |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| New Subsidy            | 0        | 0        | 0        | 0        |
| Appropriation          |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| Carryover Balance -    | 1,526    | 2,401    | 901      | (1,500)  |
| Beginning of Year      |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| Recoveries             | 0        | 0        | 0        | 0        |
+------------------------+----------+----------+----------+----------+
| Carryover Balance -    | (2,401)  | \(901\)  | 0        | 901      |
| End of Year            |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| Transferred from       | 875      | 0        | 0        | 0        |
| Others                 |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| Balance Expiring       | 0        | 0        | 0        | 0        |
+------------------------+----------+----------+----------+----------+
| Rescinded-Not          | 0        | (1,500)  | 0        | 1,500    |
| Appropriated           |          |          |          |          |
+------------------------+----------+----------+----------+----------+
|                        |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| Subsidy Budget         | \$ 0     | \$ 0     | \$ 0     | \$ 0     |
| Authority              |          |          |          |          |
+------------------------+----------+----------+----------+----------+
| Subsidy Rate[^15]      | 0.00%    | 0.00%    | 0.00%    | 0.00%    |
+------------------------+----------+----------+----------+----------+

**New Markets Venture Capital Program**

*(Dollars in Thousands)*

  ------------------------- ------------ -------------- ------------- ---------------
                                                                      **Inc/(Dec)**

                            **FY 2001**  **FY 2002**    **FY 2003**   **vs FY 2002**

                            **Actual**   **Estimate**   **Request**   **Estimate**

                                                                      

  Program Level             \$0          \$151,707      \$0           (\$151,707)

                                                                      

  New Subsidy Appropriation 22,000       0              0             0

  Carryover Balance -       0            21,952         0             (21,952)
  Beginning of Year                                                   

  Recoveries                0            0              0             0

  Carryover Balance - End   (21,952)     0              0             0
  of Year                                                             

  Transfer to Other         0            0              0             0
  Accounts                                                            

  Rescinded Funds -         \(48\)       0              0             0
  Appropriation                                                       

  Transfer to Salaries and  0            0              0             0
  Expenses                                                            

                                                                      

  Subsidy Budget Authority  \$ 0         \$ 21,952      \$ 0          (\$21,952)

  Subsidy Rate              14.44%       14.47%         15.46%        
  ------------------------- ------------ -------------- ------------- ---------------

**SURETY BOND GUARANTEES REVOLVING FUND**

*No appropriation language is requested for FY 2003*

## 

Surety Bond Guaranty Revolving Fund Appropriation

*(Dollars in thousands)*

  ---------------------------- ------------ -------------- ------------- ---------------
                                                                         **Inc/(Dec)**

                               **FY 2001**  **FY 2002**    **FY 2003**   **vs FY 2002**

                               **Actual**   **Estimate**   **Request**   **Estimate**

                                                                         

  Surety Guarantees            \$248,902    \$1,672,000    \$1,672,000   \$0

                                                                         

  Total Budget Authority       \$ 0         \$ 0           \$ 0          \$ 0

                                                                         

  Total Obligation                                                       

  Adjustments to Obligations                                             

  Offsetting collections                                                 

                                                                         

  Appropriation                \$ 0         \$ 0           \$ 0          \$ 0
  ---------------------------- ------------ -------------- ------------- ---------------

**DISASTER LOANS PROGRAM ACCOUNT**

# 

*For the cost of direct loans authorized by section 7(b) of the Small
Business Act, as amended, \$87,360,000, **\$76,140,000** to remain
available until expended: Provided, That such costs, including the cost
of modifying such loans, shall be as defined in section 502 of the
Congressional Budget Act of 1974, as amended.*

*For administrative expenses to carry out the direct loan
program,**\$122,141,000** which may be transferred to and merged with
appropriations for Salaries and Expenses, of which \$500,000 is for the
Office of Inspector General of the Small Business Administration for
audits and reviews of disaster loans and the disaster loan program and
shall be transferred to and merged with appropriations for the Office of
Inspector General; of which* ***\$111,787,000** is for direct
administrative expenses of loan making and servicing to carry out the
direct loan program; and of which \$9,854,000 is for indirect
administrative expenses.* *(Departments of Commerce, Justice, and State,
the Judiciary, and Related Agencies Appropriations Act, 2002.)*

The FY 2003 budget requests \$76.1 million in appropriations, coupled
with \$25.0 million carried-forward from FY 2002, plus \$10.0 million in
new recoveries to support \$795 million in loans (the five-year
average). In addition, an administrative appropriation of \$122.1
million is requested to support direct and indirect loan making and
direct loan servicing expenses. This amount includes \$3.8 million for
pension costs previously funded through OPM.

Disaster Loan Program

(Dollars in Thousands)

+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        | *      |
|                                |        |        |        | *Inc/( |
|                                |        |        |        | Dec)** |
+--------------------------------+--------+--------+--------+--------+
|                                | **FY   | **FY   | **FY   | **vs   |
|                                | 2001** | 2002** | 2003** | FY     |
|                                |        |        |        | 2002** |
+--------------------------------+--------+--------+--------+--------+
|                                | **Ac   | **Esti | **Req  | **Esti |
|                                | tual** | mate** | uest** | mate** |
+--------------------------------+--------+--------+--------+--------+
| Disaster Loans Program         |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Direct Loan Subsidy            | \$     | \$     | \$     | (\$1   |
|                                | 76,140 | 87,360 | 76,140 | 1,220) |
+--------------------------------+--------+--------+--------+--------+
| Supplemental, Contingencies    | 60,000 | 75,000 | 0      | (7     |
|                                |        |        |        | 5,000) |
+--------------------------------+--------+--------+--------+--------+
| Total Budget Authority         | \$1    | \$1    | \$     | (\$8   |
|                                | 36,140 | 62,360 | 76,140 | 6,220) |
+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Loan Program Budget Authority  |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| New Budget Authority           | \$     | \$     | \$     | (\$1   |
|                                | 76,140 | 87,360 | 76,140 | 1,220) |
+--------------------------------+--------+--------+--------+--------+
| > Supplemental, Contingencies  | 60,000 | 75,000 | 0      | (7     |
|                                |        |        |        | 5,000) |
+--------------------------------+--------+--------+--------+--------+
| > Carryover from Prior Fiscal  | 96,231 | 90,603 | 25,000 | (6     |
| > Year                         |        |        |        | 5,607) |
+--------------------------------+--------+--------+--------+--------+
| > Recoveries                   | 11,013 | 10,000 | 10,000 | 0      |
+--------------------------------+--------+--------+--------+--------+
| > Carryover into Next Fiscal   | (9     | (2     | 0      | 25,000 |
| > Year                         | 0,603) | 5,000) |        |        |
+--------------------------------+--------+--------+--------+--------+
| > Transfer to Administrative   | 0      | 0      | 0      | 0      |
| > Expense                      |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| > Rescinded Funds Appropriated | \      | 0      | 0      | 0      |
|                                | (168\) |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Subtotal - Disaster Loans      | \$1    | \$2    | \$1    | (\$12  |
| Program                        | 52,613 | 37,963 | 11,140 | 6,827) |
+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Subsidy Rate                   | 14.46% | 14.67  | 13.98% | (.69%) |
|                                |        | %[^16] |        |        |
+--------------------------------+--------+--------+--------+--------+
| Program Level                  | \$8    | \$1,   | \$7    | (\$31  |
|                                | 74,074 | 299,75 | 94,993 | 4,053) |
|                                |        | 6[^17] |        |        |
+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Disaster Loans Program --      |        |        |        |        |
| Administration                 |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| New Budget Authority           | \$1    | \$1    | \$1    | (      |
|                                | 08,354 | 22,354 | 22,141 | \$213) |
+--------------------------------+--------+--------+--------+--------+
| Supplemental, Contingencies    | 40,000 | 0      | 0      | 0      |
+--------------------------------+--------+--------+--------+--------+
| Carryover from Prior Fiscal    | 27,307 | 42,989 | 0      | (4     |
| Year                           |        |        |        | 2,989) |
+--------------------------------+--------+--------+--------+--------+
| Transfer from Loan Subsidy &   | 387    | 0      | 0      | 0      |
| others                         |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Recoveries                     | 0      | 0      | 0      | 0      |
+--------------------------------+--------+--------+--------+--------+
| Carryover into Next Fiscal     | (4     | 0      | 0      | 0      |
| Year                           | 2,989) |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Transfer to Salaries and       | (1     | (      | (      | 0      |
| Expenses                       | 4,754) | 9,854) | 9,854) |        |
+--------------------------------+--------+--------+--------+--------+
| Transfer to Inspector General  | \      | \      | \      | 0      |
|                                | (500\) | (500\) | (500\) |        |
+--------------------------------+--------+--------+--------+--------+
| Rescinded Funds Appropriated   | \      | 0      | 0      | 0      |
|                                | (596\) |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Total - Disaster               | \$1    | \$1    | \$1    | (\$4   |
| Administration                 | 17,209 | 54,989 | 11,787 | 3,202) |
+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| Disaster Loan Making           | \$     | \$1    | \$     | (\$4   |
|                                | 88,190 | 24,933 | 81,093 | 3,840) |
+--------------------------------+--------+--------+--------+--------+
| Disaster Loan Servicing        | 29,019 | 30,056 | 30,694 | 638    |
+--------------------------------+--------+--------+--------+--------+
| Total                          | \$1    | \$1    | \$1    | (\$4   |
|                                | 17,209 | 54,989 | 11,787 | 3,202) |
+--------------------------------+--------+--------+--------+--------+

Disaster Loan Making

**Summary of Requirements By Object Class**

*(Dollars in Thousands)*

  ----------------------- -------------- --------------- -------------- ----------------
                                                                        **Inc/(Dec)**

                          **FY 2001**    **FY 2002**     **FY 2003**    **vs FY 2002**

                          **Actual**     **Estimate**    **Request**    **Estimate**

                                                                        

  Personnel Compensation  \$37,135       \$64,852        \$38,785       (\$26,067)

  Overtime and Awards     9,811          10,179          6,355          (3,824)

  Civilian Personnel      9,245          16,145          12,749         (3,396)
  Benefits                                                              

  Workers/Unempl          1,432          1,853           1,157          \(696\)
  Compensation                                                          

  Travel                  16,241         16,728          12,241         (4,488)

  Transportation of       47             67              42             \(25\)
  Things                                                                

  Rental Payments to GSA  4,295          4,497           4,632          135

  Rental Payments to      82             116             72             \(44\)
  Others                                                                

  Communications,         1,432          1,475           1,253          \(222\)
  Utilities                                                             

  Postage                 644            913             570            \(343\)

  Printing and            33             47              35             \(12\)
  Reproduction                                                          

  Other Services          6,254          6,474           2,212          (4,263)

  Supplies and Materials  4              6               4              \(2\)

  Equipment               1,529          1,575           984            \(592\)

  Penalties               5              6               4              \(2\)

                                                                        

  **Total Obligations**   **\$88,190**   **\$124,933**   **\$81,093**   **(\$43,840)**

                                                                        

  **Total Positions**     **1,106**      **1,862**       **1,078**      **(784)**
  ----------------------- -------------- --------------- -------------- ----------------

**Disaster Loan Servicing**

**Summary of Requirements by Object Class**

*(Dollars in Thousands)*

  ---------------------- -------------- -------------- -------------- ---------------
                                                                      **Inc/(Dec)**

                         **FY 2001**    **FY 2002**    **FY 2003**    **vs FY 2002**

                         **Actual**     **Estimate**   **Request**    **Estimate**

                                                                      

  Personnel Compensation \$10,594       \$10,992       \$11,363       (\$371)

  Overtime and Awards    273            283            292            10

  Civilian Personnel     3,145          3,263          4,067          804
  Benefits                                                            

  Workers/Unempl         36             188            194            6
  Compensation                                                        

  Travel                 34             35             36             1

  Transportation of      16             17             17             0
  Things                                                              

  Rental Payments to GSA 2,860          2,991          3,081          90

  Rental Payments to     0              0              0              0
  Others                                                              

  Communications and     421            434            447            13
  Utilities                                                           

  Postage                1,621          1,670          1,720          50

  Printing and           0              0              0              0
  Reproduction                                                        

  Other Services         9,885          10,046         9,336          \(711\)

  Supplies and Materials 15             16             16             0

  Equipment              111            114            117            3

  Penalties              8              8              8              0

                                                                      

  **Total Obligations**  **\$29,019**   **\$30,056**   **\$30,694**   **\$638**

                                                                      

  **Total Positions**    **222**        **222**        **222**        **0**
  ---------------------- -------------- -------------- -------------- ---------------

**Office of the Inspector General**

For necessary expenses of the Office of Inspector General in carrying
out the provisions of the Inspector General Act of 1978, as amended
(5U.S.C. App.), \$15,011,000. (Departments of Commerce, Justice, and
State, the Judiciary, and Related Agencies Appropriations Act, 2002;)
additional authorizing legislation required.

#### Office of Inspector General Appropriation:

The Office of Inspector General (OIG) appropriation provides funding for
costs incurred by Headquarters and field staff in the administration and
operation of their programs. The FY 2003 President's Budget requests
\$15.0 million in new budget authority for OIG appropriation, an
increase of \$3.5 million from the FY 2002 appropriated level. \$500,000
of this increase is for employee pension costs previously paid by the
Office of Personnel Management. Additional justification for the
remaining increase is contained in the section on the Office of
Inspector General. A summary of the President's Request for the OIG is
as follows:

+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        | *      |
|                                |        |        |        | *Inc/( |
|                                |        |        |        | Dec)** |
+--------------------------------+--------+--------+--------+--------+
|                                | **FY   | **FY   | **FY   | **vs   |
|                                | 2001** | 2002** | 2003** | FY     |
|                                |        |        |        | 2002** |
+--------------------------------+--------+--------+--------+--------+
|                                | **Ac   | **Esti | **Req  | **Esti |
|                                | tual** | mate** | uest** | mate** |
+--------------------------------+--------+--------+--------+--------+
| **Salaries and Expenses:**     |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| > New Budget Authority         | \$     | \$     | \$     | \$     |
|                                | 11,953 | 11,464 | 15,011 | 3,547  |
+--------------------------------+--------+--------+--------+--------+
| > Transfer from Disaster Loans | 500    | 500    | 500    | 0      |
| > Program                      |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| > Carryover from Prior Fiscal  | 515    | 494    | 0      | \      |
| > Year                         |        |        |        | (494\) |
+--------------------------------+--------+--------+--------+--------+
| > Recoveries                   | 2      | 0      | 0      | 0      |
+--------------------------------+--------+--------+--------+--------+
| > Carryover into Next Fiscal   | \      | 0      | 0      | 0      |
| > Year                         | (494\) |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| > Rescinded Funds              | \(26\) | 0      | 0      | 0      |
+--------------------------------+--------+--------+--------+--------+
| > Balance Expired              | \(82\) | 0      | 0      | 0      |
+--------------------------------+--------+--------+--------+--------+
|                                |        |        |        |        |
+--------------------------------+--------+--------+--------+--------+
| **Total IG**                   | **\$12 | **\$12 | **\$15 | **\$3  |
|                                | ,368** | ,458** | ,511** | ,053** |
+--------------------------------+--------+--------+--------+--------+

#### 

#  

# 

# 

# 

# 

# 

# 

# APPENDICES

#  

# 

# 

# 

# 

# 

# 

#### OFFICE OF INSPECTOR GENERAL MANAGEMENT CHALLENGES 

## 

## Office of Inspector General Management Challenges

The OIG report discusses a total of 83 actions to address the ten
management challenges in the Agency. These actions are categorized as
(1) implemented, (2) progress being made, and (3) not implemented/no
substantial progress. This section includes the OIG's summary of the
management challenges and actions taken. Under each challenge, SBA
identifies proposed actions to address the OIG's actions categorized as
(3) not implemented/no substantial progress.

For more information see Office of Inspector General report, FY 2002
[Agency]{.underline} [Management]{.underline} [Challenges]{.underline}
(No. 2-02).

**Challenge 1. SBA needs to improve its managing for results processes
and performance data.**

**Summary** SBA needs to develop effective outcome measures, ensure that
its performance data are accurate and reliable, and establish systems to
manage for results. The Agency has taken steps to identify additional
program outcomes, improve performance measures, and increase the
accuracy of its data. SBA still needs to secure Agency support for
guidance issued in July 2001 for preparing more effective performance
goals and indicators, and ensuring that standards and procedures for
data verification, validation, client surveys, and other methods to
obtain outcome information are fully implemented.

**Action Taken**

-   The Agency published Guidelines for Performance Indicators and Data
    Quality on July 20, 2001. The guidance provides SBA program managers
    with a context and logical framework for developing useful
    performance goals and measures. The guidance discusses the balanced
    score card and the importance of addressing the cost of delivering
    services.

-   

-   SBA has issued the final guidance on how to count clients served and
    client counseling and training sessions. In another effort, the
    University of Michigan surveyed clients of the Service Corps of
    Retired Executives, and Women's Business Centers, while Business
    Information Centers have conducted their own annual client survey.

-   The Office of Disaster Assistance has developed a standard
    definition of effective field presence and issued this guidance to
    field staff to ensure consistent application.

-   SBA has indicated it has conducted risk assessment sessions using
    the COSO internal control framework throughout SBA and that all
    offices have completed the internal control checklist and other
    assessment efforts.

######### Actions to be Taken

-   Produce Strategic Plan in FY 2002 for the FY 2003- FY 2007 period.

-   Conduct training on performance measurement, development of
    indicators, and data quality to middle and senior personnel to be
    completed during FY 2002.

**Challenge 2. SBA faces significant challenges in modernizing its major
loan monitoring and financial management systems.**

Summary SBA implemented the Joint Accounting and Administrative
Management System (JAAMS) on October 9, 2001. JAAMS is a software
acquisition project intended to improve SBA's financial management
systems. The previous accounting and financial management system used by
SBA was becoming obsolete, and the service provider was planning to shut
down the system. SBA had plans to modernize and update its loan
information system--Loan Monitoring System (LMS). LMS was initially
planned to include a new loan financial tracking system as a replacement
to SBA's Loan Accounting System, as well as a loan monitoring, portfolio
analysis, and lender oversight system. LMS is on hold awaiting decisions
on its future. SBA has made some progress, but needs to formulate and
implement sound procedures for system development and software
acquisition for all its systems under development.

# 

######### Action Taken

######### 

#########  

-   SBA has taken steps to strengthen and institutionalize its
    "Information Technology (IT) Planning and Investment Control
    Process," to improve selection and control of IT projects in a
    portfolio environment, and to improve formulation of the IT budget.
    This should help the Agency meet the requirements of the
    Clinger-Cohen Information Technology Management Reform Act.

-   To address past criticisms and help support its strategic goals,
    OCIO recently developed and has started implementing SDM. SDM is a
    set of procedures and quality controls intended to reduce risks in
    the development of new information systems and ensure that new
    systems function as intended by owners and stakeholders. SDM needs
    to be codified in an SBA SOP.

-   The Agency has completed an IT architecture document and established
    procedures for its maintenance. The IT architecture document needs
    to be codified in an SBA SOP.

-   SBA has developed configuration management procedures. However,
    these procedures need to be codified in an SBA SOP.

######### Actions to be Taken

-   Institutionalize and enforce agency-wide use of SBA's Systems
    Development Methodology (SDM) implemented by end of FY 2003.

-   Define procedures for proper evaluation of prototype software and
    documentation before the prototypes will be implemented by end of FY
    2003.

-   **Challenge 3. Information systems security needs improvement.**

**Summary** SBA operations depend heavily on the Agency's information
systems, and the security of those systems is critical. The Agency has
made a substantial commitment of resources for enhancing computer
security, providing technical staff support, and developing security
training. SBA needs to fully implement its Agencywide systems security
program to include assessing risks, establishing and updating policies
and controls, promoting awareness, and evaluating security
effectiveness.

**Action Taken**

-   Eliminated the "Material Weakness" finding in computer security in
    FY 2001.

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-   Committed over \$1.2 million in personnel and contract support to
    enhance the Agency's computer security program.

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-   Issued an updated computer security policy document that
    incorporated security policies covering the latest Agency
    technology, including client servers, e-mail, and the Internet.

```{=html}
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```
-   Documented the computer security program and produced guidance
    documents and templates for the performance of computer security
    functions within the Agency.

```{=html}
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```
-   Completed Certification and Accreditation reviews for 38 of the most
    sensitive systems.

-   

-   Developed a security training program.

```{=html}
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```
-   Continued work on developing critical infrastructure protection and
    security plans required by PDDs 63 and 67.

######### Actions to be Taken

-   The CIO will complete a formalized management control process to act
    on risks identified from risk assessments including a schedule to
    correct identified deficiencies, dates for completion, and funding
    requirements by end of FY 2002.

-   The CIO will develop a program to perform Security Test & Evaluation
    (ST&E) reviews on all of SBA's high-priority computer systems by end
    of FY 2002.

Challenge 4. Maximizing program performance requires that SBA fully
develop and implement its human capital management strategies.

Summary The nature and scope of SBA\'s work has changed significantly,
requiring a different set of skills in the Agency\'s workforce. SBA has
begun to take the steps necessary to better manage its human capital
activities, but needs to do more. The Agency must define what the future
SBA will look like. The Office of Human Resources, in partnership with
the program and district offices, should then develop a comprehensive
human capital strategy that will identify SBA's current and future human
capital needs, including the size of the workforce and skill gaps; its
deployment across the organization; the knowledge, skills, and abilities
needed for the Agency to pursue its missions; and an effective
succession planning process.

**Action Taken**

-   SBA has indicated that it will establish a steering committee "to
    reposition the Agency to allow it to be more responsive to its
    target market."

-   Completed a workload and staffing analysis of Headquarters.

-   Developed competency models for Marketing & Outreach Specialists,
    Public Information Officers, Lender Oversight and Business
    Development, and adopted a leadership competency model. With the
    exception of Business Development, training has begun with the other
    competencies. A draft program for procurement occupations has been
    developed.

-   To estimate the number of employees in need of skills training, and
    based on projections that shifts in SBA's human capital needs will
    likely result in a need for fewer employees, but more personnel with
    new technology skills, SBA is using: (a) "gap analysis" to compare
    the skill sets that SBA employees currently possess to the
    competency models developed; (b) interviews with Associate Deputy
    Administrators regarding their vision for the future of their
    organizations; and (c) surveys such as the FY 2000 Agencywide
    training assessment survey.

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-   Initiated two developmental programs for succession planning: the
    Senior Executive Service Candidate Development Program (SESCDP) and
    the District Director Candidate Development Program.

-   Continued to monitor the developmental progress of the 1998
    Presidential Management Interns (PMI), most of whom have graduated,
    and hired a PMI for the Office of Capital Access.

-   Shifted the training focus slightly from emerging functions to
    fundamental skills training, such as the core skills for carrying
    out the Agency's mission---business basics and leadership.

```{=html}
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```
-   More than 135 senior managers and 165 mid-level managers have
    received leadership training thus far.

-   SBA offers courses in Practical Personnel Solutions for managing
    human resources; business basics courses in Commercial Credit
    Analysis, Advanced Commercial Credit Analysis, Resolution of Problem
    Commercial Credits, Advanced Resolution of Problem Commercial
    Credits, Train the Trainer, and Marketing and Outreach; and courses
    for SBDC Project Officers and Contracting Officers Technical
    Representatives.

-   In the area of personnel and administrative basics, training is
    being offered for Administrative Officers and in retirement
    planning.

-   SBA is in the process of developing technology-based training
    systems to enhance the delivery of skills training using
    "on-demand," web-based delivery. With sufficient funding, SBA plans
    to use distance learning techniques.

######### Actions to be Taken

-   Develop and implement a comprehensive human capital strategy that
    encompasses human capital policies, programs, and practices to guide
    the Agency and that is linked to SBA\'s strategic goals, includes
    major human capital objectives, identifies the milestones and
    resources needed to implement the strategy, and establishes
    results-oriented performance measures for human capital objectives
    in FY 2002.

-   

-   Develop a comprehensive succession planning process and plan in FY
    2002.

-   Develop a recruitment, retention, and development plan for lower and
    middle levels which has explicit links to skill needs identified by
    the Agency in FY 2002.

Challenge 5. SBA needs better controls over the business loan purchase
process.

Summary OIG audits have shown that SBA field offices do not consistently
follow Agency requirements when purchasing guarantees from lenders after
loan defaults, resulting in purchases that may not be justified and
unnecessary expenditures for the Agency. In response to this concern,
SBA reports that it has instituted a guaranty purchase review (GPR)
process, implemented a guaranty repair tracking system, established an
early warning system, and is in the process of improving procedures and
training. The Agency needs to ensure that the guaranty is denied or
reduced when a lender fails to comply with SBA requirements by
continuing to update and implement changes to improve the guaranty
purchase process based on the results of the guaranty purchase reviews.
Responsibility for taking actions to improve the purchase process is
shared by the Office of Financial Assistance (OFA) and the Office of
Field Operations (OFO) with the assistance of the Office of General
Counsel.

Action Taken

-   The GPR was instituted in FY 2000 as a means to improve the guaranty
    purchase process. Since GPR's initiation, SBA has reviewed
    approximately 300 guaranty loan purchase decisions in FYs 2000
    and 2001. Of the 300 loans reviewed, 48 purchase decisions were
    questioned and forwarded to OFA for final determination on whether
    OFA agrees with the GPR teams or the field offices. While the GPR
    efforts should help improve the guaranty purchase process, a current
    OIG review has identified potential weaknesses in the areas of:
    training for individuals reviewing gauranty purchases; sample
    selection; flagging loans with potential problems in the Guaranty
    Repair Tracking System and the Delinquent Loan Collection System;
    distributing reports from the Guaranty Repair Tracking System;
    review limitations; Standard Operating Procedure guidance; and
    tracking GPR results.

######### Actions to be Taken

-   SBA is complying with OMB circular A-11, section 11. SBA has
    estimated the level of improper payments for the 7(a) loan portfolio
    and the SBIC program. SBA will develop estimates of improper
    payments for the 504 loan program by the Fall of FY 2002.

-   SBA will establish goals for reducing improper guaranty purchases by
    end of FY 2002.

-   SBA will improve guidance and provide training for documentation
    needed to make purchase decisions by end of FY 2002 including
    developing a system for sharing information among field offices.

### 

### 

**Challenge 6. SBA needs to continue improving lender oversight.**

**Summary** An effective lender oversight program is critical for
ensuring lender activities serve Agency objectives and comply with all
rules and procedures. The Agency established an Office of Lender
Oversight (OLO); completed the third-cycle Preferred Lender Program
(PLP) reviews; started the fourth-cycle of PLP reviews, initiated
reviews of selected non-PLP lenders; completed the third cycle of safety
and soundness examinations of the non-depository Small Business Lending
Companies (SBLC); and implemented a review process that ensures all
lenders are reviewed periodically and consistently. Congress stopped
additional funding and froze existing funds available for the
development of a loan monitoring system because of significant changes
in scope and dramatic cost increases in the systems modernization
initiative. To have an effective oversight program, the Agency needs to
develop and implement the loan monitoring system.

**Actions Taken**

-   The Agency has made some progress toward implementing an effective
    oversight program, and additional improvements are in process.
    However, significant improvements need to be made to ensure
    consistent and appropriate oversight of SBA's lending partners and
    to assess risk in SBA's portfolio. We used the Federal internal
    control model to assess the progress made and to determine whether
    additional improvements are needed for the three most significant
    credit programs. Our review showed progress in the areas of risk
    identification and communications, and mixed results in the areas of
    control environment, policies and procedures, and monitoring.

######### Actions to be Taken

-   Update and revise OLO Strategic Plan incorporating specific
    provisions and related implementation plans for issues raised by the
    IG in the area of 7(a) and 504 lenders and SBICs. Among other
    things, the plan will address risk identification, communications,
    the control environment, policies and procedures, and monitoring.
    (September 30, 2002)

-   Redesign, test and implement a lender review process for 7(a) and
    504 lenders that considers operational, financial and compliance
    risk. (September 30, 2003)

-   Conduct studies of SBA\'s loan programs to identify drivers of
    performance and other risk characteristics. (Timing dependent upon
    implementation of lender oversight/risk management characteristics
    of LMS.)

Challenge 7. More participating companies need access to business
development and contracts in the Section 8(a) Business Development
program.

**Summary** The Agency needs to give greater emphasis to business
development assistance and ensure a more equitable distribution of
contracting opportunities to program participants. The bulk of the
dollar value of Section 8(a) Business Development (BD) contracts goes to
a relatively small number of companies in the program.

**Action Taken**

-   Management has drafted a proposal to redesign the Section 8(a) BD
    Program. It is waiting the Administrator's review. According to
    program officials, it will refocus the Section 8(a) BD Program's
    efforts and resources on business development activities and will
    coordinate the delivery of other SBA counseling, training, and
    technical assistance services to Section 8(a) BD participants.

######### Actions to be Taken

-   Assign senior staff from the Offices of Business Development,
    Inspector General, General Counsel, and Advocacy to develop a plan
    to refocus the program by September 30, 2002.

-   The above plan will address criteria for "business success".

-   The above plan will address program graduation criteria.

-   The above plan will address the business development assistance
    provided to firms.

**Challenge 8. SBA needs clearer standards to determine economic
disadvantage.**

**Summary** New standards for determining economic disadvantage should
be established to effectively measure diminished capital and credit
opportunities--the definition included in the law. The Agency should (1)
redefine \"economic disadvantage\" using objective, quantitative,
qualitative, and other criteria that effectively measure capital and
credit opportunities; and (2) provide sufficient training to SBA staff
responsible for evaluating companies.

######### Action Taken

-   Management has agreed to develop appropriate guidance for SBA
    employees. This guidance will require a more in-depth review of
    economic disadvantage factors for Section 8(a) BD owners once
    certain conditions are met and detail what must be reviewed in these
    instances. In developing this guidance, Agency officials will
    determine whether SBA will need to seek statutory changes to ensure
    that SBA can effectively determine economic disadvantage. The Deputy
    Associate Deputy Administrator for Government Contracting/Business
    Development stated that by March 31, 2002, the guidance should be
    issued and the decision made whether to seek statutory changes that
    may be deemed to be required.

######### Actions to be Taken

-   Senior staff from the Offices of Business Development, Inspector
    General, General Counsel, and Advocacy will develop a plan to
    address economic disadvantage to be completed by March 31, 2002.

-   The above plan, which will address training, will be implemented by
    January 31, 2003.

**Challenge 9. SBA needs to clarify its rules intended to deter Section
8(a) Business Development participants from passing through procurement
activity to non-Section 8(a) Business Development firms.**

**Summary** SBA's rules, while restricting the amount of a contract that
a Section 8(a) Business Development (BD) firm may pass through to a
non-Section 8(a) firm, allow many non-participating companies to receive
substantial financial benefit. SBA intends to include value-added
resellers as a legitimate industry under the North American Industry
Classification System. SBA needs to tighten the definition of
"manufacturing" to preclude the pass-through practice of making only
minor modifications to the products of other manufacturers.

######### Actions Taken

-   The Office of Government Contracting/Business Development (GC/BD)
    has put into clearance a proposed rule to establish an industry
    category and size standard for Information Technology (IT) Value
    Added Resellers. This action will ensure that small businesses
    supplying IT products to the Federal Government as nonmanufacturers
    will perform significant value added services of at least 15 percent
    of total contract value or supply the product of a small
    manufacturer. Implementation of this rule will not tighten the
    definition of "manufacturing," but will allow nonmanufacturing
    companies to be classified as Value Added Resellers.

-   Additionally, GC/BD has agreed to review the existing regulations
    and minimize the subjectivity in the manufacturing criteria.

######### Action to be Taken

-   The Office of GC/BD has developed and will propose for comment a
    rule to establish a size standard for Information Technology Value
    Added Resellers. This will be published in the Federal Register by
    September 30, 2002.

**Challenge 10. Preventing loan fraud requires additional measures,
including new regulations and funding.**

**Summary** OIG studies have demonstrated that fraud in the business
loan program could be reduced by obtaining criminal background
information on prospective borrowers and on loan packagers and other
for-fee agents. Specific statutory authority exists to perform
background checks on prospective borrowers. OIG believes that the
statutory framework already exists for SBA to require background checks
of loan packagers and other for-fee agents.

######### Actions Taken

-   In FY 2001, SBA submitted a legislative proposal specifically to
    authorize criminal background checks of loan agents; require loan
    agents and prospective borrowers to provide personal identifiers
    (including Social Security Numbers) needed by the National Crime
    Information Center (NCIC) database operated by the FBI; and mandate
    the use of the NCIC. The Senate Small Business Committee voted to
    include the proposal in SBA's Reauthorization Bill for FY 2001. The
    conference committee, however, adopted the House version that did
    not contain the proposal.

-   SBA continues to work on establishing a loan agent tracking system
    that is tied to the development of a Partner Information Management
    System (PIMS). PIMS is to be incorporated into the Loan Monitoring
    System (LMS). The first phase of PIMS was completed on June
    30, 2000. SBA Form 159, which contains information on loan agents,
    was being revised to clarify the requirements for agents to notify
    SBA of their loan participation. In view of the need for new
    regulations, the form may need to be further revised to include
    additional loan agent identification data.

######### Actions to be Taken

######### 

######### 

######### 

######### 

######### 

-   SBA will implement tracking of loan agents within 6 months of
    receiving legally binding authority to collect SSNs on individual
    packagers and receipt of sufficient funds to cover computer system
    programming costs.

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-   In order to ensure that potential borrowers clearly understand that
    they are subject to a criminal investigation, OFA will include more
    specific language on its website wherever it references character
    requirements for borrowers.

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-   
-   

● OIG will perform periodic criminal background checks on a sample of
borrowers and, based on results, will determine whether wider effort is
warranted.

DATA VALIDATION AND VERIFICATION

[]{#__RefHeading___Toc3175960 .anchor}Data Validation and Verification

Managing for results and producing an annual performance plan and
performance report require valid, reliable and high-quality performance
measures and data. SBA faces many challenges in acquiring high-quality
data, both output and outcome. In addition to using output data
internally from its own systems, SBA relies on data from resource
partners (such as SBDCs, SCORE, WBCs) and other Federal and local
governments to assess its accomplishments and effectiveness. Limitations
such as the lack of relevant data for measures, the accuracy and
currency of data, the reporting capacity of quality data remain major
issues for the Agency. Improving data quality will continue to be a high
priority for SBA.

SBA vigorously pursues the following strategies to address the
shortcomings of its data quality:

-   **Ensuring the validity of performance measures and data.** SBA does
    this through assessing the relevancy of performance measures and
    data.

-   **Fostering organizational commitment and capacity for data
    quality**. Achieving data quality through (1) *training* our
    managers to make sure they understand the need for quality data, how
    to develop valid performance measures and how to ensure data
    quality, and (2) managers *attesting* to the quality of the data
    under their management.

-   **Assessing the quality of existing data**. Audits and reviews
    ensure the quality of our financial data systems. However, SBA must
    assess the quality of loan and program data provided by our resource
    partners. The Office of the Inspector General has carried out 5
    performance measure reviews---7(a), SBIC, Surety Bond Guarantee,
    8(a), and the Disaster Program. For example, an OIG report
    documented that SBDCs do not always use the same definitions for
    clients served, making it more difficult to get a valid picture of
    what has been done. SBA will include data verification in our lender
    and resource partner oversight.

-   **Responding to data limitations**. It is not enough to identify
    data quality problems. Where there are data limitations, SBA must
    improve quality. Managers will be asked to document how they intend
    to reduce these limitations.

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-   **Building quality into the development of performance data**. The
    design process for new IT systems will include the requirements for
    developing and maintaining performance data. The new systems and
    upgrades will make sure that only correct data is entered into the
    systems and that data is stored with stringent verification and
    change rules.

> In FY 1999, SBA tracked its performance goals monthly and verified the
> accuracy of the data on an *ad hoc* basis. As part of this internal
> performance monitoring, the agency tested the relevance of the
> indicators and identified problems of data completeness, timeliness,
> and accuracy.

In FY 2000, SBA began implementing a more formal quality process, which
included program manager self-assessment of performance indicator
quality, manager training in data quality control and improvement
methods, development of data quality improvement plans, and feedback to
program managers about data limitations determined through using the
data. SBA completed the program manager self-assessment step in December
1999. Program managers were asked to:

-   define the measure;

-   identify the data source;

-   discuss the validity of the measure;

-   list data limitations, particularly of resource partners, to include
    reporting cycles, incomplete source of data, double-counting,
    erroneous data, inconsistency in standards and definition of data,
    data that could not be collected (due to privacy or policy), and
    system capacity; and

-   document steps being taken to improve data collection, verification
    and reporting, and to reduce data limitations.

In FY 2001, SBA developed guidelines on developing program indicators
and ensuring data quality. SBA also developed better outcomes and
included them in the budget/annual plan document.

For FY 2002, SBA will continue to train its managers to improve data
quality, to ensure data quality through internal controls, and to
improve data quality. Managers will be asked to provide data
verification procedures and improvement plans, with milestones, after
completion of the course. Feedback will be provided to managers
regarding data limitations and data quality as part of SBA's use of the
data in analyzing Agency activities, outputs, and outcomes and as part
of the Inspector General's audits of data validity and verification.

In FY 2003, SBA will improve its data quality through increased use of
statistical data sets.

The following pages provide for each performance indicator a definition,
source, validity statement and discussion of limitations.

  --------------------- -------------------------------------------------
  **GOAL 1: CHAMPION    
  SMALL BUSINESS        
  INTERESTS**           

  **Measure**           **Regulatory Cost Savings to Small Businesses**

  Definition            Cost savings to Small Businesses because of
                        changes to proposed regulations as a consequence
                        of Office of Advocacy actions.

  Source                Office of Advocacy estimates

  Validation            Estimates of regulatory cost savings are
                        difficult to make and require a number of
                        assumptions. The Office of Advocacy believes
                        their estimates to be valid.

  Limitations           Estimates made using information gathered from
                        various sources including agency data,
                        Congressional Budget Office estimates, trade
                        association and industry data.

  Remedies for          Cross check against other regulatory savings
  Limitations           estimates.

  Verification          SBA has not independently verified this data.
  --------------------- -------------------------------------------------

  --------------------- -------------------------------------------------
                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        

                        
  --------------------- -------------------------------------------------

  --------------------- -------------------------------------------------
                        

                        

                        

                        

                        
  --------------------- -------------------------------------------------

+---------------------+------------------------------------------------+
| **Measure**         | **Share of Federal Procurement Prime Contract  |
|                     | Dollars to Small** **firms, to Women-owned,**  |
|                     | **Minority,** **Service** **Disabled           |
|                     | Veteran-owned** **firms, and                   |
|                     | HUBZones-certified firms.**                    |
+---------------------+------------------------------------------------+
| Definition          | This indicator measures the extent to which    |
|                     | these different categories of small business   |
|                     | ownership receive Federal Prime Contract       |
|                     | dollars to be compared with the mandated       |
|                     | share.                                         |
+---------------------+------------------------------------------------+
| Source              | The Federal Procurement Data System (FPDS)     |
|                     | which is the official source for data on       |
|                     | Federal procurements.                          |
+---------------------+------------------------------------------------+
| Validation          | Congress establishes targets for the share of  |
|                     | Federal procurement dollars that should reach  |
|                     | the small business sector as well as specified |
|                     | subpopulations. The Office of Federal          |
|                     | Procurement Policy (OFPP) in its policy letter |
|                     | 99-1 supports SBA's use of FPDS data to        |
|                     | measure Federal contract dollars received by   |
|                     | small businesses, women-owned, minority-owned, |
|                     | service disabled veteran-owned and HUBZone     |
|                     | certified firms, rather then requiring         |
|                     | agencies to provide this information on        |
|                     | separate reports.                              |
+---------------------+------------------------------------------------+
| Limitations         | Prime data are reported to the FPDS on a       |
|                     | quarterly basis. FPDS has been determined to   |
|                     | be the most accurate and verifiable reporting  |
|                     | system of contract awards under the            |
|                     | procurement preference goal program; however,  |
|                     | there are some minor problems with data that   |
|                     | are entered incorrectly into FPDS through the  |
|                     | SF-279 and SF-281. The final FPDS data are     |
|                     | available about a year after the end of the    |
|                     | fiscal year. The FPDS was not programmed to    |
|                     | identify HUBZone awards during FY 1999.        |
+---------------------+------------------------------------------------+
| Remedies for        | Through the electronic commerce committee PEC, |
| Limitations         | GSA is re-engineering the FPDS to improve the  |
|                     | accuracy and timeliness of information.        |
+---------------------+------------------------------------------------+
| Verification        | SBA does not separately verify the data        |
|                     | obtained form FPDS system. The General         |
|                     | Services Administration is responsible for     |
|                     | working with the Agencies on the accuracy of   |
|                     | the FPDS database. SBA has not independently   |
|                     | verified this data.                            |
+---------------------+------------------------------------------------+
|                     |                                                |
+---------------------+------------------------------------------------+
| **GOAL 2:**         |                                                |
| **EMPOWER           |                                                |
| ENTREPRENEURS**     |                                                |
+---------------------+------------------------------------------------+
| **Measure**         | **Number of Start-up Firms Financed by 7(a) &  |
|                     | 504**                                          |
+---------------------+------------------------------------------------+
| Definition          | Number of 7(a) & 504 approved loans to         |
|                     | start-up firms.                                |
+---------------------+------------------------------------------------+
| Source              | SBA Loan Approval Database (TTS001).           |
+---------------------+------------------------------------------------+
| Validation          | Start-up firms often have difficulty getting   |
|                     | access to capital. The measure shows to what   |
|                     | extent SBA is assisting start-up firms get     |
|                     | capital and thereby the potential for survival |
|                     | and growth.                                    |
+---------------------+------------------------------------------------+
| Limitations         | The measure is based on the number of approved |
|                     | loans. A somewhat better measure would be      |
|                     | disbursed loans.                               |
+---------------------+------------------------------------------------+
| Remedies for        | Use disbursed loans.                           |
| Limitations         |                                                |
+---------------------+------------------------------------------------+
| Verification        | The source of data is SBA's loan accounting    |
|                     | database. The borrower indicates on the loan   |
|                     | application forms if the firm is a start-up, a |
|                     | fact which is checked by the bank officer. SBA |
|                     | has not yet independently verified this data.  |
+---------------------+------------------------------------------------+
|                     |                                                |
+---------------------+------------------------------------------------+
| **Measure**         | **Start-ups viable three years after getting   |
|                     | loan**                                         |
+---------------------+------------------------------------------------+
| Definition          | Share of start-up firms receiving 7(a) loans   |
|                     | in one fiscal year where the loan was current  |
|                     | or paid in full at the end of the fiscal year  |
|                     | three years later., i.e. for borrowers in FY   |
|                     | 1995, the status at the end of FY 1998.        |
+---------------------+------------------------------------------------+
| Source              | SBA loan accounting database.                  |
+---------------------+------------------------------------------------+
| Validation          | The assumption is that firms with loans        |
|                     | current or paid in full may be considered      |
|                     | economically viable. The loan database         |
|                     | identifies loans to start-ups that are         |
|                     | current, paid in full, delinquent or in        |
|                     | default.                                       |
+---------------------+------------------------------------------------+
| Limitations         | The measure is an indirect measure based on    |
|                     | the firm's performance of repaying the loan    |
|                     | and does not measure actual performance.       |
+---------------------+------------------------------------------------+
| Remedies for        | Compare the loan performance data with actual  |
| Limitations         | viability as obtained through a random sample  |
|                     | of start-up borrowers.                         |
+---------------------+------------------------------------------------+
| Verification        | The data used are part of the loan accounting  |
|                     | database and subject to the accounting         |
|                     | verification procedures as to currency, paid   |
|                     | in full or default status.                     |
+---------------------+------------------------------------------------+
|                     |                                                |
+---------------------+------------------------------------------------+
| **Measure**         | **Export Sales**                               |
+---------------------+------------------------------------------------+
| Definition          | The total dollar volume of sales supported by  |
|                     | export loans, export counseling, training,     |
|                     | ETAP, trade mission and trade events.          |
+---------------------+------------------------------------------------+
| Source              | SBA's Office of International Trade records.   |
+---------------------+------------------------------------------------+
| Validation          | Export sales represent an economic stimulus to |
|                     | firms. The measure summarizes the increase in  |
|                     | export sales achieved by SBA clients getting   |
|                     | exporting assistance.                          |
+---------------------+------------------------------------------------+
| Limitations         | Trade missions take time and result in an      |
|                     | underestimate in sales.                        |
+---------------------+------------------------------------------------+
| Remedies for        | Improve reporting process to ensure that most  |
| Limitations         | export sale increases achieved by SBA export   |
|                     | assistance clients are captured.               |
+---------------------+------------------------------------------------+
| Verification        | A check is performed in Headquarters to ensure |
|                     | the identification and summation of export     |
|                     | sale numbers are correct. SBA has not yet      |
|                     | independently verified this data.              |
+---------------------+------------------------------------------------+
|                     |                                                |
+---------------------+------------------------------------------------+
| **Measure**         | **8(a) Firms Viable Years after Graduation**   |
+---------------------+------------------------------------------------+
| Definition          | The percentage of 8(a) firms three years after |
|                     | graduation that are independently operated --  |
|                     | that is not sold or have not gone out of       |
|                     | business.                                      |
+---------------------+------------------------------------------------+
| Source              | SBA surveys of all graduated firms and Dunn    |
|                     | and Bradstreet data on individual firms.       |
+---------------------+------------------------------------------------+
| Validation          | Survey results provide an estimate of the      |
|                     | share of viable graduated firms.               |
+---------------------+------------------------------------------------+
| Limitation          | The success rate is based on survey results    |
|                     | which depend on response rates. The response   |
|                     | rate varies from year to year.                 |
+---------------------+------------------------------------------------+
| Remedies for        | Ensure a high response rate and seek to use    |
| Limitations         | other sources such as the Bureau of Labor      |
|                     | Statistics data on number of employees.        |
+---------------------+------------------------------------------------+
| Verification        | The determination of independently operated    |
|                     | firms is checked against the Dun and           |
|                     | Bradstreet data base to ensure accuracy.       |
+---------------------+------------------------------------------------+
|                     |                                                |
+---------------------+------------------------------------------------+
| **Measure**         | **Jobs created by SBA borrowers, SBIC clients, |
|                     | and SBDCs**                                    |
+---------------------+------------------------------------------------+
| Definition          | Estimates of jobs created by SBA programs.     |
+---------------------+------------------------------------------------+
| Source              | Disbursed loans for 7(a) and 504 estimate from |
|                     | Loan Accounting data base.                     |
|                     |                                                |
|                     | SBIC dollar financings from program data base. |
|                     |                                                |
|                     | [7(a):]{.underline} Based on SBDC's annual     |
|                     | economic impact report to SBA. It includes     |
|                     | data on loan dollars obtained for clients and  |
|                     | jobs created. Job coefficient is \$32,382 that |
|                     | is an average of job coefficient numbers for   |
|                     | 1999 and 2000 for SBDC clients that were       |
|                     | assisted in getting loans.                     |
|                     |                                                |
|                     | [504:]{.underline} Based on SBA's 504 program  |
|                     | data on loan application of expected number of |
|                     | jobs created from disbursed loan funds. Job    |
|                     | creation constant is \$33,366 for loans made   |
|                     | 1998-2000. In addition to jobs created 504     |
|                     | program contributes to jobs retained.          |
|                     |                                                |
|                     | [SBIC:]{.underline} Based on the Arizona       |
|                     | Venture Capital Impact Study made by the       |
|                     | Zermatt Group (1999). Study estimates a job    |
|                     | creation constant of one job for \$35,000      |
|                     | invested in 1999.                              |
|                     |                                                |
|                     | [SBDC]{.underline}: Impact information         |
|                     | obtained on annual economic impact report      |
|                     | submitted by SBDCs to SBA.                     |
+---------------------+------------------------------------------------+
| Validation          | Capital infusion in a firm will most often     |
|                     | lead to growth in jobs, sales and revenue.     |
|                     | This measure focuses on the number of jobs     |
|                     | created. By multiplying the dollar volume of   |
|                     | loans by the job coefficient an estimate of    |
|                     | jobs created is made.                          |
+---------------------+------------------------------------------------+
| Limitations         | The SBDC data rely on data from a source not   |
|                     | controlled by SBA, and is based on a loan      |
|                     | portfolio where 30% of the loans are SBA       |
|                     | guaranteed loans.                              |
+---------------------+------------------------------------------------+
| Remedies for        | A project is under way with Bureau of Labor    |
| Limitations         | Statistics to obtain estimates of job creation |
|                     | by SBA loan recipients for firms that have EIN |
|                     | numbers.                                       |
+---------------------+------------------------------------------------+
| Verification        | Not possible until SBA has access to data from |
|                     | BLS or IRS.                                    |
+---------------------+------------------------------------------------+
|                     |                                                |
+---------------------+------------------------------------------------+

  --------------------- -------------------------------------------------
  **GOAL 3:**           
  **STREAMLINE DISASTER 
  LENDING**             

  **Measure**           **Homes restored to pre-disaster conditions**

  Definition            The home has been restored to pre-disaster
                        condition.

  Source                SBA inspection of home

  Validation            The indicator is measures if the purpose of the
                        financial assistance has been achieved.

  Limitation            Does not cover disaster home loans made to
                        replace, for example home furnishings.

  Remedies for          Does not include all benefits derived from
  Limitation            disaster home loan assistance.

  Verification          Based on SBA inspection of homes. No other
                        verification.

                        

  **Measure**           **Businesses restored to pre-disaster
                        conditions**

  Definition            Businesses that have received disaster loans and
                        have same number of jobs as before disaster two
                        years later.

  Source                SBA disaster program loan data base.

  Validation            Measures the extent to which firms receiving
                        disaster business loans recover to the same level
                        of economic activity as before the disaster in
                        terms of having the same number of employees.

  Limitation            The measure only looks at number of employees.

  Verification          No verification is done.

                        

  **Measure**           **Customer satisfaction**

  Definition            Satisfaction rate determined through SBA surveys
                        to disaster victims who have received loans.

  Source                SBA surveys.

  Validation            It is important that recipients of government
                        assistance feel that they have received fair,
                        courteous and helpful assistance. This can in
                        part be captured by determining how satisfied the
                        clients where with the service received.

  Limitation            The survey measures those who received disaster
                        loans but does not include those who did not
                        receive loans.

  Remedies for          The survey will be expanded to include all
  Limitations           applicants.

  Verification          No verification is done.
  --------------------- -------------------------------------------------

PROGRAM EVALUATION PLAN

## Program Evaluation Plan

For the next several years, SBA plans to systematically review those
programs that offer the most financial risk to the Government and also
review those programs that can offer tips on how to improve its efforts.

#### FY 2002 Evaluations:

-   [Disaster Servicing]{.underline}. Evaluate the cost benefit of
    private-sector servicing of disaster loans.

-   

-   

-   [Balanced Scorecard]{.underline}. Develop a balanced scorecard for
    SBA's district offices, to include customer and employee
    satisfaction, financial results, and mission achievement.

-   [Customer Satisfaction]{.underline}. Continue implementation of
    customer satisfaction surveys for Entrepreneurial Development
    programs.

-   

-   

-   [Job Creation]{.underline}. Working with the Bureau of Labor
    Statistics databases, determine the number of jobs created by
    recipients of SBA financing assistance.

-   [ED]{.underline} [Program Delivery Systems]{.underline}. Develop
    methodology for impact studies of the various distribution systems
    for management and technical assistance.

-   [Procurement Center Representatives]{.underline}. Evaluate the role
    of the PCRs and do a cost-benefit analysis of their contributions.

-   [Conduct and Evaluate District Office Pilots]{.underline}. These
    pilots will use the balanced scorecard approach to assess the value
    of such changes as changed goaling; waivers, such as where to locate
    offices and service centers; and improved IT support.

-   [Assess the Effectiveness of Government Contracting
    Programs]{.underline}.

#### FY 2003 Evaluations:

-   [Customer Satisfaction]{.underline}. Continue to measure customer
    satisfaction of Entrepreneurial Development programs.

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.

-   [Job Creation]{.underline}. Working with the Bureau of Labor
    Statistics databases, determine the number of jobs created by
    recipients of SBA ED and Procurement programs.

-   [SBA *LowDoc,* SBA*Express* and *Microloans*]{.underline}. Assess
    the impact of these smaller loans.

-   [SBIC]{.underline}. Analyze SBIC venture capital financing success,
    describing customers, products and services, and growth rate of
    firms receiving capital.

-   [HUBZone]{.underline}. Conduct a HUBZone study to assess the changes
    in employment and investment in distressed urban and rural
    communities.

-   [ED Program Delivery Systems]{.underline}. Conduct impact studies of
    the various distribution systems for management and technical
    assistance.

-   [U.S. Export Assistance Centers]{.underline}. Conduct a
    cost-effectiveness study of the USEACs.

-   [Evaluate the 8(a) Program]{.underline} [Results.]{.underline} Using
    BLS and Census databases, determine the number of jobs created and
    volume of sales of the 8(a) firms.

-   [Conduct and]{.underline} [Evaluate District Office]{.underline}
    [Pilots]{.underline}. These pilots will use the balanced scorecard
    approach to assess the value of such changes as changed goaling;
    waivers, such as where to locate offices, and service centers; and
    improved IT support.

# 

# 

# 

# 

# 

# 

**OFFICE OF THE INSPECTOR GENERAL**

# OFFICE OF INSPECTOR GENERAL

### 

### 

######### VISION

Our vision is to improve the SBA's programs by identifying key issues
facing the Agency, ensuring that corrective actions are taken, and
promoting a high level of integrity. We will focus on serving the needs
of our customers and stakeholders and on safeguarding SBA resources from
waste, fraud, and abuse. We will also provide a work environment in the
Office of Inspector General (OIG) that is conducive to excellent
performance by our employees.

To accomplish this vision, we will --

-   Focus on significant, systemic issues drawn from the cumulative
    results of our reviews and cases.

-   Enhance our expertise in SBA's major programs to help us identify
    priority issues and plan our reviews and casework.

-   Become more proficient in the use of information technology,
    research methods, data analysis, and investigative techniques.

-   Encourage creative thinking within our office and the development of
    synergistic teams that combine various disciplines.

-   Achieve superior results by emphasizing corrective actions that will
    improve SBA operations, combat fraud, and eliminate program
    vulnerabilities.

**OIG MISSION**

Under the authority and in fulfillment of the Inspector General Act of
1978, as amended (IG Act), the Inspector General is committed to
supporting SBA in its statutory mission to maintain and strengthen the
Nation\'s economy by aiding, counseling, assisting, and protecting the
interests of small businesses and by helping families and businesses
recover from disasters.

**ANNUAL PLAN ALIGNMENT**

[With the Inspector General Act.]{.underline} OIG is an independent and
objective oversight office created within the SBA by the IG Act of 1978.
Inspectors General (IG) are principally charged with detecting fraud,
waste, and mismanagement in agencies\' programs and operations;
conducting audits and investigations; and recommending policies to
promote economy, efficiency, and effectiveness. OIGs also review
existing and proposed legislation and regulations and make appropriate
recommendations, and keep the Agency head and Congress informed.

The goals and objectives of the Strategic and Annual Plans reflect the
IG\'s statutory mission. OIG implementation of the Government
Performance and Results Act (GPRA) extends our commitment to a
results-oriented Government. For many years, OIG has provided regular
and frequent updates to customers and stakeholders on the monetary and
non-monetary results of OIG reviews and investigations. OIG Annual Plans
and Performance Reports will strengthen our commitment to
performance-based management.

# 

In 1953, the Congress created SBA to aid, counsel, assist, and protect
the interests of small business concerns. The OIG\'s Strategic and
Annual Plans reflect the OIG commitment to supporting SBA\'s purpose.

This plan serves as a bridge from our traditional planning process. The
FY 2003 Annual Performance Plan continues to build on the three
strategic goals and related supporting objectives found in the OIG FY
2001-2006 Strategic Plan. In addition, OIG has identified five major
areas of emphasis in SBA --

-   Financial Assistance

-   Business Development

-   Management

-   Advocacy

-   Disaster Assistance

OIG believes these to be the key SBA program areas and will therefore
allocate OIG resources accordingly while taking into account OIG's five
strategic foci (financial management, information systems and computer
security, lender oversight, other select high-risk areas, and new Agency
initiatives). The plan also places a high priority on responding to
requests from SBA management and congressional committees and providing
consultative assistance where appropriate.

In FY 2003, OIG will seek to work more effectively by adopting a broader
multidisciplinary approach where appropriate, drawing on the expertise
of OIG audit, evaluation, investigation, and legal staff. This should
enable OIG to better assist SBA in identifying and mitigating emerging
vulnerabilities as SBA modernizes and changes its business practices,
work systems, and procedures.

#### Performance Measurement Limitations

OIG has developed a mix of output, intermediate outcome, and outcome
measures to assess the effectiveness, quality, relevance, and timeliness
of our work. Nevertheless, the OIG measures are subject to a number of
external factors. About 75 percent of our work is in response to
referrals of suspected fraud, complaints, and requests for auditing and
inspection services. Over a period of time, achievements can be
projected based on historical performance. During a specific year,
actual accomplishments may vary substantially from the norm.

In addition, the ultimate authority to implement OIG recommendations for
program improvements rests with the Agency. OIG also cannot control the
results of judicial or administrative proceedings. To mitigate these
factors, OIG produces quality products and works closely with SBA\'s
policy and program officials to stress the importance of OIG findings
and encourage the implementation of OIG recommendations. Likewise we
work closely with judicial and administrative officials. Within these
parameters, OIG strives to improve the performance of SBA programs and
operations and deter fraud and other forms of misconduct.

#### Data Collection and Validation

Quantitative data is collected and stored in OIG's management
information system (MIS). Much of the quantitative data proposed has
been collected for several years. For some of the measures, baselines
were established in FY 2000; the remainder will be developed in FY 2002.
Monetary results are reported at the time of management decision in
accordance with OIG legislative requirements. SBA\'s Office of the Chief
Financial Officer tracks actual collections. The management of each OIG
division is responsible for collecting, verifying, and validating all
data in the Annual Performance Report.

**[FY 2003 GOALS, OBJECTIVES, PERFORMANCE GOALS, AND
RESOURCES]{.underline}**

#### Goal 1: Improve the economy, efficiency, and effectiveness of programs and operations.

OIG audits, evaluates, and reviews all aspects of SBA's operations to
improve Agency efficiency and effectiveness. The subject areas reviewed
are determined either through responding to requests or inquiries from
sources outside OIG, or through OIG assessments of SBA's risks and
vulnerabilities. OIG activities in Goal 1 fall into one of five
categories. It is important to note that the first four categories are
comprised of statutorily mandated work or work over which OIG has little
control as to volume or timing. Although OIG recognizes the need to
respond to these requests, often their unpredictability impacts
resources and significantly reduces OIG's ability to provide adequate
oversight in category five, which is the heart of the office's mission
-- improving the efficiency and effectiveness of the Agency.

1.  Review proposed legislation, regulations, Agency procedures, and
    other issuances.

The IG Act requires that OIG review proposed legislation and regulations
relating to Agency programs and operations and make recommendations
concerning the impact of such proposals on program efficiency and
effectiveness. At SBA, OIG also reviews and comments on all Agency
procedures, as well as proposed issuances sent to us by the Office of
Management and Budget (OMB), the President's Council on Integrity and
Efficiency (PCIE), the General Accounting Office (GAO), and other
organizations. We analyze vulnerabilities and risks, evaluate proposed
procedures to determine whether they will provide reasonable assurance
that the intended outcomes will occur, and provide other ideas and
comments that may affect efficiency and effectiveness. The workload,
which is unpredictable, ranges from about 250 to 350 reviews a year. The
proposals reviewed varies from a few pages to several hundred pages.

> The output for each review is a document that reflects SBA's analysis,
> conclusions, and recommendations. The outcome is improved guidance to
> assure more efficient and effective Government operations.

2.  Respond to requests for information from the public, SBA officials,
    other agencies, and Congress, and respond to complaints from
    employees and the public.

> OIG receives complaints from employees, program participants, and the
> public concerning misconduct or program inefficiencies involving
> Agency officials or program participants. Members of Congress also
> refer constituent complaints to OIG for evaluation and response. OIG
> assesses the merits of each complaint and may conduct substantial
> analysis to determine the validity of each complaint. The output is a
> document to the complainant (if known -- some are anonymous); OIG may
> also issue a document to the appropriate Agency program
>
> office with recommendations for improvement. The outcome is a higher
> level of integrity in SBA programs.

3.  Conduct audits required by law, requested by OMB or Congress, or
    requested by SBA program managers.

> Annual audits are required by law for SBA's financial statements, for
> all ten preferred surety bond companies, and to comply with the
> Government Information System Reform Act (GISRA). Other audits are
> mandated by law on a more sporadic basis, such as audits of District
> of Columbia water bill payments. There are several bills pending in
> Congress, which, if enacted, would mandate OIG reviews by FY 2003
> (e.g., energy compliance). The financial statement audit is estimated
> by itself to cost \$800,000. The output is an audit report with
> recommendations. The outcome is assurance that SBA or its program
> participants are in compliance with various statutes or improvements
> in efficiencies in program administration.
>
> Both OMB and Congress periodically request that SBA OIG perform
> specific audits. For instance, Congress has requested audits of agency
> implementation of the Government Performance and Results Act (GPRA),
> collection of personal data ("cookies") about individuals who access
> Government internet web sites, and agency travel practices. OMB
> desires audits involving erroneous payments. We participate in PCIE
> audits and inspections on issues that affect SBA, such as the
> implementation of Presidential Decision Directive 63 (PDD 63), which
> calls for a national effort to assure the security of the United
> States' critical infrastructures. The output is usually a report with
> recommendations. The outcome is improved efficiency and effectiveness
> of SBA program operations.
>
> SBA program managers also request audits and inspections of program
> participants and SBA operations. In the past, we have been unable to
> fulfill all requests due to other priorities and workload scheduling.
> For FY 2003, we are requesting sufficient resources to be able to
> respond timely to substantive requests. The output for each requested
> review is a report with recommendations. The outcome is improved
> efficiency and effectiveness of SBA program operations.

4.  Develop Top Management Challenges and follow-up on corrective
    actions.

> Beginning in 1998, Congress has requested all OIGs to inform them of
> the top management challenges faced by their respective agencies. This
> request, now required by law, has become an effective vehicle both to
> highlight significant problems as well as to focus OIG resources on
> the most important activities of its agency. This process draws on the
> expertise and effort of all OIG divisions. OIG also assesses the
> progress of SBA's implementation of proposed corrective actions.
>
> The output is a document that identifies the top management challenges
> and identification of needed corrective actions. The outcome, when the
> Agency implements the recommended corrective actions, is improved
> efficiency and effectiveness of SBA program operations.

5\. Conduct Agency program oversight through audits and inspections.

> The IG Act requires the IG to keep the head of the establishment and
> Congress informed of problems and deficiencies in agency programs and
> operations. While some problems and deficiencies are discovered during
> the course of responding to external requests and complaints and in
> conducting mandated audits, there is no assurance that those
> activities will identify the major issues facing SBA. OIG therefore
> must focus its efforts on audits and inspections of those Agency
> operations that it has identified as presenting the most vulnerability
> and risk. The amount of OIG effort that can be devoted to such audits
> and inspections depends on staff availability after completion of the
> mandated and requested work.
>
> OIG's annual operating plan of audits and inspections of SBA programs
> and activities addresses areas of potential abuse or operations
> requiring improved efficiency and effectiveness. These reviews are
> allocated resources based on the five areas of OIG strategic foci
> (lender oversight, financial management, information systems,
> high-risk areas, and new programs). The OIG FY 2003 annual performance
> plan presents five areas of program emphasis, with specific issues
> listed for each one:

+----------------------+-------------+-------------+-------------------+
| > **Financial        | **Business  |             | **Management**    |
| > Assistance**       | De          |             |                   |
|                      | velopment** |             |                   |
+----------------------+-------------+-------------+-------------------+
| -   Lender Oversight | -           |             | -   Financial     |
|                      |    Economic |             |     Statement     |
| ```{=html}           |     Di      |             |     Audit         |
| <!-- -->             | sadvantaged |             |                   |
| ```                  |             |             | ```{=html}        |
| -   Asset Sales      |   Standards |             | <!-- -->          |
|                      |             |             | ```               |
| ```{=html}           | ```{=html}  |             | -   Human Capital |
| <!-- -->             | <!-- -->    |             |                   |
| ```                  | ```         |             | ```{=html}        |
| -   Guaranteed       | -   Entr    |             | <!-- -->          |
|     Purchases        | epreneurial |             | ```               |
|                      |             |             | -   E-commerce    |
| ```{=html}           | Development |             |                   |
| <!-- -->             |     Service |             | ```{=html}        |
| ```                  |             |             | <!-- -->          |
| -   Microloan        |   Providers |             | ```               |
|     Program          |             |             | -   GPRA          |
|                      | ```{=html}  |             |                   |
| ```{=html}           | <!-- -->    |             | ```{=html}        |
| <!-- -->             | ```         |             | <!-- -->          |
| ```                  | -   Small   |             | ```               |
| -   Equity Injection |             |             | -   GISRA         |
|                      |    Business |             |                   |
| ```{=html}           |             |             |                   |
| <!-- -->             |   Workforce |             |                   |
| ```                  |     Quality |             |                   |
| -   Early Defaulted  |             |             |                   |
|     Loans            |             |             |                   |
+----------------------+-------------+-------------+-------------------+
|                      |             |             |                   |
+----------------------+-------------+-------------+-------------------+
| **Disaster**         |             | *           |                   |
|                      |             | *Advocacy** |                   |
+----------------------+-------------+-------------+-------------------+
| -   Duplication of   |             | -   Ef      |                   |
|     Benefits         |             | fectiveness |                   |
|                      |             |     of      |                   |
| ```{=html}           |             |             |                   |
| <!-- -->             |             |   Ombudsman |                   |
| ```                  |             |             |                   |
| -   Loan Application |             | ```{=html}  |                   |
|     Modernization    |             | <!-- -->    |                   |
|                      |             | ```         |                   |
| ```{=html}           |             | -           |                   |
| <!-- -->             |             |  Regulatory |                   |
| ```                  |             |     Cost    |                   |
| -   Early Defaulted  |             |     Savings |                   |
|     Loans            |             |     to      |                   |
|                      |             |     Small   |                   |
|                      |             |             |                   |
|                      |             |    Business |                   |
|                      |             |             |                   |
|                      |             | ```{=html}  |                   |
|                      |             | <!-- -->    |                   |
|                      |             | ```         |                   |
|                      |             | -   Federal |                   |
|                      |             |             |                   |
|                      |             | Procurement |                   |
|                      |             |     Op      |                   |
|                      |             | portunities |                   |
|                      |             |     for     |                   |
|                      |             |     Small   |                   |
|                      |             |             |                   |
|                      |             |  Businesses |                   |
+----------------------+-------------+-------------+-------------------+

OIG has been able to provide only a minimal level of oversight to the
areas critical to achievement of SBA's mission. OIG's FY 2003 budget
request includes funding for six additional FTE's, which will be used
for the following increase in OIG workload:

-   Disaster Loans - The terrorist acts of September 11^th^ resulted in
    huge economic losses to small businesses. Many small businesses will
    receive SBA economic injury disaster loans to help them recover. OIG
    historical data indicates the defaults on these types of loans
    usually occur 12 to 24 months after disbursement. Two additional
    FTE's would be devoted to auditing defaulted loans to determine
    whether loans were based on faulty information presented to SBA.

-   Erroneous Payments - OMB Circular A-11, Section 57, requires
    agencies to submit erroneous payment data, assessments, and action
    plans with their budget submission. Two additional FTE's would be
    devoted to auditing the Agency's efforts to reduce the rate of
    erroneous payments and make recommendations for improvements.

-   Program Participants -- Reviews of program participants would
    provide OIG with important information on program efficiency and
    effectiveness and the level of abuse. OIG needs to conduct more
    program participant reviews, including audits of defaulted business
    loans, Small Business Development Centers, surety claims, Section
    8(a) eligibility, HUBZone Empowerment Contracting Program (HUBZone)
    eligibility, Small Business Investment Companies in liquidation, and
    selected grants and contracts. One FTE would be devoted to audits of
    program participants.

-   PDD 63 -- OIG participated in a PCIE Government-wide review of
    agency compliance with PDD 63, to determine SBA's ability to protect
    and recover from threats to its critical infrastructure. Work to
    date demonstrated that SBA needs to improve its compliance with
    PDD 63. In FY 2003, OIG would devote one additional FTE to assess
    PDD 63 implementation.

The outputs for these initiatives are reports with recommendations and
potential monetary recoveries. The outcome is improved efficiency and
effectiveness of SBA programs.

+-----------------------------+-------+------+--------+-------+-------+
| **Objective 1.1 *Conduct    |       |      |        |       |       |
| reviews of major program    |       |      |        |       |       |
| activities, with emphasis   |       |      |        |       |       |
| on high risk and high       |       |      |        |       |       |
| priority areas, and assess  |       |      |        |       |       |
| whether SBA can be          |       |      |        |       |       |
| reasonably assured that its |       |      |        |       |       |
| programs are meeting their  |       |      |        |       |       |
| goals in an economical,     |       |      |        |       |       |
| efficient, and effective    |       |      |        |       |       |
| manner .***                 |       |      |        |       |       |
+-----------------------------+-------+------+--------+-------+-------+
|                             | **FY  | **FY | **FY   | **FY  | **FY  |
|                             | 1     | 20   | 2001** | 2002  | 2     |
|                             | 999** | 00** |        | Estim | 003** |
|                             |       |      | #####  | ate** |       |
|                             | **Act | **   | **Esti |       | **    |
|                             | ual** | Actu | mate** |       | Estim |
|                             |       | al** |        |       | ate** |
+-----------------------------+-------+------+--------+-------+-------+
| Output Performance Goals    |       |      |        |       |       |
+-----------------------------+-------+------+--------+-------+-------+
| Percentage of all           | 91%   | 88%  | 90%    | 90%   | 92%   |
| recommendations on major    |       |      |        |       |       |
| program activities accepted |       |      |        |       |       |
| by management or otherwise  |       |      |        |       |       |
| resolved within 6 months of |       |      |        |       |       |
| report issuance             |       |      |        |       |       |
+-----------------------------+-------+------+--------+-------+-------+
| Narrative assessment of OIG |       |      |        |       |       |
| contribution to Agency task |       |      |        |       |       |
| forces                      |       |      |        |       |       |
+-----------------------------+-------+------+--------+-------+-------+
| Intermediate Outcome        |       |      |        |       |       |
+-----------------------------+-------+------+--------+-------+-------+
| Percentage of               | N/A   | 52%  | 60%    | 60%   | 62%   |
| recommendations from        | (\*)  |      |        |       |       |
| reviews of major program    |       |      |        |       |       |
| activities implemented or   |       |      |        |       |       |
| corrective actions taken by |       |      |        |       |       |
| management within the       |       |      |        |       |       |
| timeframe agreed by OIG and |       |      |        |       |       |
| management                  |       |      |        |       |       |
+-----------------------------+-------+------+--------+-------+-------+
| **Outcome**                 |       |      |        |       |       |
+-----------------------------+-------+------+--------+-------+-------+
| Identification and          |       |      |        |       |       |
| implementation of           |       |      |        |       |       |
| corrective actions by the   |       |      |        |       |       |
| Agency to address the major |       |      |        |       |       |
| management and operating    |       |      |        |       |       |
| problems in SBA (based on   |       |      |        |       |       |
| OIG reviews and             |       |      |        |       |       |
| recommendations made four   |       |      |        |       |       |
| years ago).                 |       |      |        |       |       |
+-----------------------------+-------+------+--------+-------+-------+

(\*) MIS system did not record this data in FY 1999

+------------------------------+------+------+-------+-------+-------+
| **Objective 1.2 *Audit       |      |      |       |       |       |
| contracts, grants, surety    |      |      |       |       |       |
| claims, and defaulted loans  |      |      |       |       |       |
| to determine whether the     |      |      |       |       |       |
| costs claimed are            |      |      |       |       |       |
| allowable*.**                |      |      |       |       |       |
+------------------------------+------+------+-------+-------+-------+
|                              | **FY | **FY | **FY  | **FY  | **FY  |
|                              | 19   | 20   | 2     | 2002  | 2     |
|                              | 99** | 00** | 001** | Estim | 003** |
|                              |      |      |       | ate** |       |
|                              | **   | **   | ###   |       | **    |
|                              | Actu | Actu | ## ** |       | Estim |
|                              | al** | al** | Estim |       | ate** |
|                              |      |      | ate** |       |       |
+------------------------------+------+------+-------+-------+-------+
| Output Performance Goals     |      |      |       |       |       |
+------------------------------+------+------+-------+-------+-------+
| Percentage of all            | 94%  | 96%  | 95%   | 95%   | 95%   |
| recommendations in audits of |      |      |       |       |       |
| contracts, grants, surety    |      |      |       |       |       |
| claims, and defaulted loans  |      |      |       |       |       |
| accepted by management or    |      |      |       |       |       |
| otherwise resolved within 6  |      |      |       |       |       |
| months of report issuance    |      |      |       |       |       |
+------------------------------+------+------+-------+-------+-------+
| Percentage of dollars in     | 97%  | 44%  | 60%   | 60%   | 60%   |
| questioned costs, funds to   |      |      |       |       |       |
| be put to better use,        |      |      |       |       |       |
| settlement recoveries, and   |      |      |       |       |       |
| cost corrective measures in  |      |      |       |       |       |
| audits of contracts, grants, |      |      |       |       |       |
| surety claims, and defaulted |      |      |       |       |       |
| loans accepted by management |      |      |       |       |       |
| or otherwise resolved within |      |      |       |       |       |
| 6 months of report issuance  |      |      |       |       |       |
+------------------------------+------+------+-------+-------+-------+
| Intermediate Outcome         |      |      |       |       |       |
+------------------------------+------+------+-------+-------+-------+
| Percentage of                | N/A  | 44%  | 60%   | 60%   | 62%   |
| recommendations from reviews |      |      |       |       |       |
| of contracts, grants, surety |      |      |       |       |       |
| claims, and defaulted loans  |      |      |       |       |       |
| implemented by management    |      |      |       |       |       |
| within the timeframe agreed  |      |      |       |       |       |
| by OIG and management        |      |      |       |       |       |
+------------------------------+------+------+-------+-------+-------+

+-----------------------------------------------------------------------+
| ##### **Outcome**                                                     |
|                                                                       |
| Identification and implementation of corrective actions by the Agency |
| to address the major management and operating systemic problems in    |
| SBA from OIG reviews conducted four years ago.                        |
+-----------------------------------------------------------------------+
| **Outcome/Impact for Goal 1:** Identification and implementation of   |
| corrective actions taken by the Agency of the major management and    |
| operating problems in SBA. OIG activities improve the economy,        |
| efficiency, and effectiveness of SBA programs.                        |
|                                                                       |
| **Methodology for Measuring Outcome:** Estimate the impact of         |
| implemented recommendations, e.g., what percentage of corrective      |
| actions taken in response to the OIG recommendations resolved the     |
| identified problems, and/or resulted in improved SBA programs or      |
| operations.                                                           |
|                                                                       |
| **Limitations:** Because OIG staff and resources are limited and      |
| intervening variables may also make it difficult to draw direct       |
| causal relationships, a pilot for estimating impact will be developed |
| in FY 2002. The pilot will assist us in determining the level of      |
| resources needed to evaluate impact. As SBA develops and verifies the |
| accuracy of its performance measurement system, it may also be        |
| possible to use some of that information to assess OIG effectiveness. |
+-----------------------------------------------------------------------+

Outputs and Resources

+----------------------+--------+--------+--------+--------+--------+
| ##### **Goal 1**     | **FY   | **FY   | **FY   | **FY   | **FY   |
|                      | 1999   | 2000   | 2001   | 2002   | 2003   |
|                      | (act   | (act   | (e     | (e     | (e     |
|                      | ual)** | ual)** | stimat | stimat | stimat |
|                      |        |        | e)\*** | e)\*** | e)\*** |
+----------------------+--------+--------+--------+--------+--------+
| ######               |        |        |        |        |        |
|                      |        |        |        |        |        |
| ###### In            |        |        |        |        |        |
| termediate Outcomes  |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| Disallowed costs     | 2,3    | \$1,2  | \$3,5  | \$3,5  | \$5,0  |
| agreed               | 22,780 | 63,126 | 73,440 | 00,000 | 00,000 |
|                      |        |        |        |        |        |
| to by management     |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| Recommendations that | \$8,9  | \$1,4  | \$1,4  | \$2,5  | \$4,0  |
|                      | 29,983 | 62,700 | 54,258 | 00,000 | 00,000 |
| funds be put to      |        |        |        |        |        |
| better use           |        |        |        |        |        |
|                      |        |        |        |        |        |
| agreed to by         |        |        |        |        |        |
| management           |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| ######               |        |        |        |        |        |
|                      |        |        |        |        |        |
| ###### Outputs       |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| Reports issued       | 26     | 33     | 28     | 35     | 50     |
+----------------------+--------+--------+--------+--------+--------+
| Number of            | 103    | 130    | 91     | 145    | 200    |
|                      |        |        |        |        |        |
| Recommendations made |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| Number of reviews of | 241    | 323    | 250    | 300    | 300    |
|                      |        |        |        |        |        |
| Proposed             |        |        |        |        |        |
| legislation,         |        |        |        |        |        |
|                      |        |        |        |        |        |
| Regulations,         |        |        |        |        |        |
| standard             |        |        |        |        |        |
|                      |        |        |        |        |        |
| Operating            |        |        |        |        |        |
| procedures,          |        |        |        |        |        |
|                      |        |        |        |        |        |
| and other SBA        |        |        |        |        |        |
| issuances            |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| ########             |        |        |        |        |        |
|                      |        |        |        |        |        |
| #                    |        |        |        |        |        |
| ####### *Resources*  |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| FTE                  | 42.4   | 42.4   | 39.4   | 39.4   | 61.5   |
+----------------------+--------+--------+--------+--------+--------+
| Reviews of proposed  | \$3    | \$3    | \$3    | \$4    | \$4    |
|                      | 25,700 | 72,650 | 84,740 | 18,575 | 53,500 |
| Legislation,         |        |        |        |        |        |
| regulations,         |        |        |        |        |        |
|                      |        |        |        |        |        |
| Agency, and other    |        |        |        |        |        |
| issu-                |        |        |        |        |        |
|                      |        |        |        |        |        |
| Ances                |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| Respond to requests  | \$1    | \$2    | \$2    | \$2    | \$2    |
| for                  | 79,300 | 01,300 | 19,550 | 25,620 | 27,000 |
|                      |        |        |        |        |        |
| Information and com- |        |        |        |        |        |
|                      |        |        |        |        |        |
| Plainants            |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| Mandated audits and  | \$8    | \$1,1  | \$1,4  | \$1,3  | \$1,9  |
|                      | 92,450 | 25,650 | 18,135 | 92,780 | 85,500 |
| Inspections (\*)     |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| Top 10 Management    | \$2    | \$2    | \$3    | \$3    | \$3    |
|                      | 74,550 | 76,685 | 01,250 | 37,700 | 58,100 |
| Challenges           |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| SBA Program Over-    | \$1,9  | \$2,0  | \$2,0  | \$2,1  | \$3,1  |
|                      | 88,535 | 03,800 | 24,325 | 56,450 | 50,400 |
| Sight Audits and     |        |        |        |        |        |
| Inspec-              |        |        |        |        |        |
|                      |        |        |        |        |        |
| tions                |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| Travel               | \$1    | \$1    | \$1    | \$1    | \$1    |
|                      | 80,000 | 38,000 | 50,000 | 50,000 | 50,000 |
+----------------------+--------+--------+--------+--------+--------+
| Training             | \$     | \$     | \$     | \$     | \$     |
|                      | 24,000 | 25,000 | 46,000 | 50,000 | 65,000 |
+----------------------+--------+--------+--------+--------+--------+
|                      |        |        |        |        |        |
+----------------------+--------+--------+--------+--------+--------+
| **SubTotal Goal 1**  | **\    | **\    | **\    | **\    | **\    |
|                      | $3,864 | $4,143 | $4,544 | $4,731 | $6,389 |
|                      | ,535** | ,085** | ,000** | ,125** | ,500** |
+----------------------+--------+--------+--------+--------+--------+

(\*) Includes FTE's and contracts costs for financial statement, surety
bond and GPRA audits.

(\*\*)OIG does not advocate or endorse predicting the monetary results
of its audits and reviews. These amounts represent an estimate based on
historical experience with a focus on those activities that are most
vulnerable to abuse and misuse of program funds.

#### Major Accomplishments for FY 2001

-   [Major audits and inspections]{.underline} included SBA\'s
    information systems and computer security controls, Agency GPRA
    performance measures, Small Business Lending Companies and Preferred
    Lender Programs lender oversight activities, loan monitoring system
    development activities, surety guaranty companies, and internal
    management issues.

-   [Issued 21 audit reports, 4 audit advisory memorandum reports, and 3
    inspection reports.]{.underline} Obtained management decisions on 91
    audit recommendations.

-   [Reviewed 250 proposed issuances]{.underline}, including
    legislation, regulations, and procedures.

#### Major Goals and Objectives for FY 2002

#### 

####  {#section-80 .unnumbered}

-   
-   

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-   

-   [Financial Assistance]{.underline}. Continue to address Congress'
    priority concerns about the Agency's planned Loan Monitoring/Risk
    Management System, review the guarantee purchase process, update the
    Section 7(a) best practices study, review SBA oversight of Section
    504 loan program, review SBA oversight of lenders/brokers and agents
    and defaulted loans, determine the effectiveness of SBA's microloan
    program, and analyze adequacy of credit analysis for loans to
    franchisees.

-   

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-   [Business Development]{.underline}. Conduct a review of the HUBZone
    program, selected program participants in the preferred guaranty
    surety program, Section 8(a) program, and SBA awarded contracts; and
    selected aspects of SBA's implementation of the Section 8(a)
    economically disadvantaged program.

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-   [Management]{.underline}. Conduct the mandatory financial statement
    and information systems technology audits, review the Agency's
    e-commerce activities to evaluate internal controls, review SBA's
    human capital initiatives, continue monitoring the Agency's
    implementation of the GPRA, and follow up on SBA action to address
    major management challenges.

-   [Disaster]{.underline}. Review the Economic Injury Disaster Loan
    program, and selected early defaulted disaster loans to determine
    the extent to which loans have been made in accordance with SBA
    requirements. Review the Disaster Assistance Program's system
    modernization efforts.

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-   [Advocacy]{.underline}. Conduct a survey of the various advocacy
    tools within the Agency to assess their effectiveness.

#### Justification for FY 2003 Budget Increase 

The requested budget increase for FY 2003 would allow OIG to fund its
authorized positions and increase staff by 6 positions to expand
coverage of SBA's programs and participants, including those areas that
have been identified as Congressional, OMB, or Agency priorities.

-   We are requesting two FTE's to review defaulted SBA economic injury
    disaster loans made as the result of the terrorist acts of September
    11^th^. This work should result in four audits with recommendations
    and monetary recoveries.

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-   Two additional FTE's are requested to review the Agency's efforts to
    reduce the rate of erroneous payments as required by OMB Circular
    A-11, Section 57. This effort would build on other OIG audits that
    identify erroneous payments and result in recommended improvements
    for ensuring the efficient operation of Agency programs.

-   One FTE is requested to review SBA program participants. This
    investment should produce audits of one preferred sureties and
    audits of two Section 7(a) business loan recipients. These projects
    would provide OIG with important information on program efficiency
    and effectiveness and result in reports with recommendations.

-   An additional one FTE is requested to review the Agency's compliance
    with PDD 63 and its ability to protect, and recover from threats to,
    its critical infrastructure and would result in one report with
    recommendations.

In FY 2001 with 40 FTE's, OIG issued 25 audit reports and 3 inspection
reports. In FY 2003, with full funding for our authorized ceiling and
the increase of six FTE's we expect to complete 50 reports with 200
recommendations.

#### 

#### Goal 2: Prevent and detect fraud and abuse, and foster integrity in programs and operations.

OIG directly supports the Agency's mission by detecting, investigating,
and deterring fraud in SBA programs and operations. OIG activities
conducted under Goal 2 help achieve a high level of integrity in SBA\'s
applicants, lenders, and employees, which is a critical factor in the
proper administration of SBA programs. This ensures that SBA resources
are utilized by those who deserve and need them the most. OIG activities
in Goal 2 fall into four categories.

1.  Responding to requests for information from the public, SBA
    officials, other agencies, and the Congress, and responding to
    complaints from employees and the public.

> OIG receives complaints from employees, program participants, and the
> public concerning program waste, fraud, and abuse. Members of Congress
> also refer constituent complaints to OIG for evaluation and response.
> OIG assesses each complaint, determines whether an investigation or
> other OIG action is warranted, and informs complainants of initial
> disposition. The output is appropriate disposition of complaints. The
> outcome is the initiation of investigations or other OIG actions that
> reduce fraud, waste, and abuse and strengthen program integrity.

2.  Conducting investigations.

> In accordance with the IG Act, OIG manages a nationwide program to
> detect, investigate, and prevent illegal and/or improper activities
> involving SBA programs, operations, and personnel. OIG's
> criminal-investigative staff conduct complex criminal investigations
> and carry out a full range of traditional law enforcement functions,
> including testifying before grand juries and in court, making arrests,
> executing search warrants, and conducting electronic monitoring. Over
> the past 5 years, SBA/OIG investigations have resulted in 325
> indictments, 278 convictions, \$70,890,921 in potential recoveries and
> fines, and \$42,337,852 in savings. The investigations were conducted
> in every section of the country and were worked by SBA/OIG special
> agents out of field offices in 14 cities. The outputs of these
> investigations are indictments, convictions, recoveries, fines, and
> savings. The outcomes are greater deterrence and a higher level of
> integrity in SBA programs.
>
> In the wake of the recent terrorist attacks, the SBA OIG expects a
> huge increase in SBA disaster loan applications. Based on our past
> experience in disasters, particularly the urban disasters in southern
> California in the early- to mid-1990s, we anticipate receiving
> disaster-fraud referrals that would more than double our disaster
> caseload over the next 2 years. Disaster assistance is one of SBA's
> most vital programs; consequently, maintaining the integrity of the
> program is crucial to ensure that benefits are not diverted from needy
> victims.

3.  Fraud awareness education and program vulnerability reviews.

> OIG conducts briefings for SBA's employees, lenders, and other
> resource partners as part of its mission to educate them on
> identifying and preventing fraud, waste, and abuse. These briefings
> have been effective, as over 50 percent of our investigations are
> based on referrals from SBA program heads or employees. Recently, we
> have modified our briefing strategy to include participating lenders
> and other interested parties. The outputs are fraud awareness
> briefings and referrals. The outcome is a higher level of integrity in
> SBA programs.
>
> In FY 2003, OIG will begin an initiative to evaluate fraud reduction
> opportunities by conducting an evaluation of the business loan program
> to identify systemic weaknesses that may make it vulnerable to fraud
> and abuse. OIG will accomplish this by identifying program and policy
> vulnerabilities and examining the adequacy of program controls.

4\. Name Check Program.

> Pursuant to provisions of the Small Business Act and the Small
> Business Investment Act, SBA requires applicants for assistance to
> meet certain character standards before participating in Agency
> programs. OIG processes name checks and, where appropriate,
> fingerprint checks on applicants. When program applicants appear to be
> ineligible for assistance based on character, OIG makes referrals to
> program officials for adjudication. OIG also performs background
> checks to comply with Federal regulations that require Agency
> employees to have security clearances appropriate for their positions.
> The outputs are character ineligibility referrals to SBA program
> officials for appropriate decisions, which result in denial of
> assistance or employment. The outcome is a higher level of integrity
> in SBA programs.
>
> In FY 2001, we project that we will have conducted name checks on
> approximately

1,500 loan applicants with projected denial of assistance of \$20
million. In FY 2003, SBA will inform all prospective borrowers that they
are subject to a possible criminal background check. OIG plans to
perform periodic criminal background checks on a significant sample of
borrowers and, based on the results, will determine whether a wider
effort is warranted. By conducting name checks on a significant sample
of loan applicants, we estimate that loans denied due to bad character
or otherwise not made as a result of this deterrence program will be
\$40 million. This estimate is based on OIG's Operation Cleansweep III,
which disclosed that 9.1 percent of Section 7(a) loans had borrowers who
failed to fully disclose their criminal records. Borrowers who failed to
disclose their criminal histories had higher rates of default on SBA
loans than those who disclose their records or had no criminal
histories. The outputs are reports with recommendations to deny
assistance or employment. The outcome is reduced vulnerability and
higher integrity in SBA's programs.

> The following chart divides the activities in Goal 2 among the five
> major areas in SBA.

+---------------------+---------------------------+-------------------+
| **Financial         | **Business Development**  | **Management**    |
| Assistance**        |                           |                   |
+---------------------+---------------------------+-------------------+
| -   Loan Fraud      | -   Abuses of Economic    | -   Computer      |
|     Investigations  |     Disadvantaged         |     Forensics     |
|                     |     Standards             |                   |
| ```{=html}          |                           | ```{=html}        |
| <!-- -->            | ```{=html}                | <!-- -->          |
| ```                 | <!-- -->                  | ```               |
| -   Asset Sales     | ```                       | -   Controls on   |
|                     | -   Fraud Identification  |     E-commerce    |
| ```{=html}          |     in Section 8 (a)      |                   |
| <!-- -->            |     Contracting           | ```{=html}        |
| ```                 |                           | <!-- -->          |
| -   Fraud           | ```{=html}                | ```               |
|     Identification  | <!-- -->                  | -   Employee      |
|     Educational     | ```                       |     Integrity     |
|     Briefings       | -   Fraud Detection in    |                   |
|                     |     Entrepreneurial       | ```{=html}        |
| ```{=html}          |     Development Programs  | <!-- -->          |
| <!-- -->            |                           | ```               |
| ```                 | ```{=html}                | -   Employee      |
| -   Loan Program    | <!-- -->                  |     Background    |
|     Participant     | ```                       |     Checks and    |
|     Name Check      | -   BD Program            |     Security      |
|                     |     Participant Name      |     Clearances    |
|                     |     Check                 |                   |
|                     |                           | ```{=html}        |
|                     |                           | <!-- -->          |
|                     |                           | ```               |
|                     |                           | -                 |
|                     |                           |    Administrative |
|                     |                           |     Violations    |
+---------------------+---------------------------+-------------------+

+------------------------------------+---------------------------------+
| **Disaster**                       | **Advocacy**                    |
+------------------------------------+---------------------------------+
| -   Duplication of Benefits        | -   Fraud Prevention Seminars   |
|                                    |                                 |
| ```{=html}                         | ```{=html}                      |
| <!-- -->                           | <!-- -->                        |
| ```                                | ```                             |
| -   Loan Fraud Investigations      | -   Vulnerability Assessments   |
|                                    |                                 |
| ```{=html}                         |                                 |
| <!-- -->                           |                                 |
| ```                                |                                 |
| -   Disaster Program Participant   |                                 |
|     Name Check                     |                                 |
+------------------------------------+---------------------------------+

+------------------------+---------+-------+---+------+--------+-------+
| > **Objective 2.1**    |         |       |   |      |        |       |
| > ***Detect/identify   |         |       |   |      |        |       |
| > waste, fraud and     |         |       |   |      |        |       |
| > abuse, and foster    |         |       |   |      |        |       |
| > integrity in SBA     |         |       |   |      |        |       |
| > programs and         |         |       |   |      |        |       |
| > operations and take  |         |       |   |      |        |       |
| > appropriate          |         |       |   |      |        |       |
| > actions*.**          |         |       |   |      |        |       |
+------------------------+---------+-------+---+------+--------+-------+
|                        | **FY    | **FY  | * |      | **FY   | **FY  |
|                        | 1999**  | 2     | * |      | 2002   | 2     |
|                        |         | 000** | F |      | Esti   | 003** |
|                        | **A     |       | Y |      | mate** |       |
|                        | ctual** | **Act | 2 |      |        | **    |
|                        |         | ual** | 0 |      |        | Estim |
|                        |         |       | 0 |      |        | ate** |
|                        |         |       | 1 |      |        |       |
|                        |         |       | E |      |        |       |
|                        |         |       | s |      |        |       |
|                        |         |       | t |      |        |       |
|                        |         |       | i |      |        |       |
|                        |         |       | m |      |        |       |
|                        |         |       | a |      |        |       |
|                        |         |       | t |      |        |       |
|                        |         |       | e |      |        |       |
|                        |         |       | * |      |        |       |
|                        |         |       | * |      |        |       |
+------------------------+---------+-------+---+------+--------+-------+
| Percentage of criminal | N/A\*   | NA\*  | 4 |      | 45%    | 50%   |
| cases referred that    |         |       | 0 |      |        |       |
| are accepted by U.S.   |         |       | % |      |        |       |
| Attorneys              |         |       |   |      |        |       |
+------------------------+---------+-------+---+------+--------+-------+
| Percentage of          | N/A\*   | NA\*  | N |      | 30%    | 35%   |
| Affirmative Civil      |         |       | A |      |        |       |
| Enforcement (ACE)      |         |       | \ |      |        |       |
| cases referred that    |         |       | * |      |        |       |
| are accepted by U.S.   |         |       |   |      |        |       |
| Attorneys              |         |       |   |      |        |       |
+------------------------+---------+-------+---+------+--------+-------+
| Intermediate Outcomes  |         |       |   |      |        |       |
+------------------------+---------+-------+---+------+--------+-------+
| Ratio of monetary      | 20%     | 17%   |   | 20%  | 20%    | 20%   |
| recoveries to losses   |         |       |   |      |        |       |
+------------------------+---------+-------+---+------+--------+-------+
| Percentage of closed   | 32%     | 23%   |   | 25%  | 25%    | 30%   |
| cases resulting in     |         |       |   |      |        |       |
| criminal, civil, or    |         |       |   |      |        |       |
| administrative actions |         |       |   |      |        |       |
+------------------------+---------+-------+---+------+--------+-------+

\* The Investigations Division's current MIS has just begun tracking
when a referral, whether criminal or ACE, is "accepted" by a Federal
prosecutor. When fully implemented in FY 2002, SBA's MIS should provide
that capacity.

+-----------------------+--------+---+--------+---------+--------+--------+
| **Objective 2.2       |        |   |        |         |        |        |
| *Prevent and deter    |        |   |        |         |        |        |
| fraud and abuse, and  |        |   |        |         |        |        |
| other misconduct      |        |   |        |         |        |        |
| through studies and   |        |   |        |         |        |        |
| education programs    |        |   |        |         |        |        |
| for employees and     |        |   |        |         |        |        |
| participants****.*    |        |   |        |         |        |        |
+-----------------------+--------+---+--------+---------+--------+--------+
|                       | **FY   | * |        | **FY    | **FY   | **FY   |
|                       | 1999** | * |        | 2001    | 2002   | 2003** |
|                       |        | F |        | Est     | Esti   |        |
|                       | **Ac   | Y |        | imate** | mate** | **Esti |
|                       | tual** | 2 |        |         |        | mate** |
|                       |        | 0 |        |         |        |        |
|                       |        | 0 |        |         |        |        |
|                       |        | 0 |        |         |        |        |
|                       |        | * |        |         |        |        |
|                       |        | * |        |         |        |        |
|                       |        |   |        |         |        |        |
|                       |        | * |        |         |        |        |
|                       |        | * |        |         |        |        |
|                       |        | A |        |         |        |        |
|                       |        | c |        |         |        |        |
|                       |        | t |        |         |        |        |
|                       |        | u |        |         |        |        |
|                       |        | a |        |         |        |        |
|                       |        | l |        |         |        |        |
|                       |        | * |        |         |        |        |
|                       |        | * |        |         |        |        |
+-----------------------+--------+---+--------+---------+--------+--------+
| Output Performance    |        |   |        |         |        |        |
| Goals                 |        |   |        |         |        |        |
+-----------------------+--------+---+--------+---------+--------+--------+
| Number of SBA         | 499    |   | 222    | 120     | 125    | 125    |
| employees attending   |        |   |        |         |        |        |
| integrity briefings   |        |   |        |         |        |        |
+-----------------------+--------+---+--------+---------+--------+--------+
| Number of private     | 170    |   | 282    | 491     | 500    | 500    |
| sector partners       |        |   |        |         |        |        |
| attending integrity   |        |   |        |         |        |        |
| briefings             |        |   |        |         |        |        |
+-----------------------+--------+---+--------+---------+--------+--------+

  -----------------------------------------------------------------------
  **Objective 2.3 Preclude persons not of good character from
  participating in SBA programs and employment.**

  Output Performance Goal

  Narrative assessment of the work of the Office of Security Operations
  in conducting criminal background checks of SBA program partners and
  participants, and administering SBA applicant/employee/contractor
  background investigations
  -----------------------------------------------------------------------

Outputs and Resources

+------------------+----------+---------+--------+---------+---------+
| ##### **Goal 2** | **FY     | **FY    | **     | *       | *       |
|                  | 1999**   | 2000**  | 2001** | *2002** | *2003** |
|                  |          |         |        |         |         |
|                  | **(a     | **(ac   | **     | **(esti | **      |
|                  | ctual)** | tual)** | (estim | mate)** | (estima |
|                  |          |         | ate)** |         | te)\*** |
+------------------+----------+---------+--------+---------+---------+
| ###### Interm    |          |         |        |         |         |
| ediate Outcomes  |          |         |        |         |         |
+------------------+----------+---------+--------+---------+---------+
| Indictments      | 44       | 74      | 52     | 52      | 56      |
+------------------+----------+---------+--------+---------+---------+
| Convictions      | 53       | 39      | 40     | 40      | 44      |
+------------------+----------+---------+--------+---------+---------+
| Potential        | \$10     | \$7,    | \$12.4 | \$12.4  | \$13.0  |
| Investigative    | ,434,102 | 590,827 | M      | M       | M       |
|                  |          |         |        |         |         |
| Recoveries and   |          |         |        |         |         |
| Fines            |          |         |        |         |         |
+------------------+----------+---------+--------+---------+---------+
| Loans Not Made   | \$28     | \$28,   | \$20.8 | \$20.6  | \$60.3  |
| As a             | ,677,286 | 741,121 | M      | M       | M       |
|                  |          |         |        |         |         |
| Result of:       |          |         |        |         |         |
+------------------+----------+---------+--------+---------+---------+
| -Investigations  | \        | \$1,    | \$1    | \$      | \$1.3 M |
|                  | $295,000 | 404,529 | 26,000 | 125,000 |         |
+------------------+----------+---------+--------+---------+---------+
| -Name Check      | \$28     | \$27,   | \$20.6 | \$20.5  | \$40 M  |
| Progr.           | ,382,286 | 336,592 | M      | M       |         |
+------------------+----------+---------+--------+---------+---------+
| *Outputs*        |          |         |        |         |         |
+------------------+----------+---------+--------+---------+---------+
| Number of Fraud- | 12       | 15      | 17     | 18      | 19      |
|                  |          |         |        |         |         |
| Awareness &      |          |         |        |         |         |
| Integrity        |          |         |        |         |         |
|                  |          |         |        |         |         |
| Briefings        |          |         |        |         |         |
+------------------+----------+---------+--------+---------+---------+
| Hotline          | 1,623    | 2,015   | 1,250  | 1,400   | 1,750   |
|                  |          |         |        |         |         |
| Calls/           |          |         |        |         |         |
| Letters/Walk-Ins |          |         |        |         |         |
+------------------+----------+---------+--------+---------+---------+
| Reports          |          |         | 1      |         | 2       |
+------------------+----------+---------+--------+---------+---------+
| Recommendations  |          |         | 3      |         | 6       |
+------------------+----------+---------+--------+---------+---------+
| ######           |          |         |        |         |         |
+------------------+----------+---------+--------+---------+---------+
| #                |          |         |        |         |         |
| ##### Resources  |          |         |        |         |         |
+------------------+----------+---------+--------+---------+---------+
| FTE              | 56.2     | 56.2    | 56.2   | 56.2    | 67.2    |
+------------------+----------+---------+--------+---------+---------+
| Respond to       | \        | \$      | \$4    | \$      | \$      |
| Requests         | $349,500 | 400,060 | 19,850 | 424,500 | 327,800 |
|                  |          |         |        |         |         |
| For Information  |          |         |        |         |         |
+------------------+----------+---------+--------+---------+---------+
| Criminal         | \$4      | \$4,    | \$4,9  | \$5,    | \$5,    |
| Investigations   | ,500,375 | 595,800 | 84,635 | 006,750 | 289,000 |
+------------------+----------+---------+--------+---------+---------+
| Fraud awareness  | \$41,705 | \       | \$     | \       | \$      |
|                  |          | $45,502 | 46,870 | $49,750 | 437,800 |
| Briefings &      |          |         |        |         |         |
| Program          |          |         |        |         |         |
|                  |          |         |        |         |         |
| Vulnerability    |          |         |        |         |         |
| Reviews          |          |         |        |         |         |
+------------------+----------+---------+--------+---------+---------+
| Name Check       | \        | \$      | \$4    | \$      | \$      |
| Program\*        | $418,125 | 424,500 | 48,575 | 487,500 | 815,000 |
+------------------+----------+---------+--------+---------+---------+
| Te               | \$50,000 | \       | \$     | \       | \       |
| lecommunications |          | $55,000 | 60,000 | $62,000 | $62,000 |
+------------------+----------+---------+--------+---------+---------+
| Training         | \$11,000 | \       | \$     | \       | \       |
|                  |          | $16,000 | 25,000 | $25,000 | $65,000 |
+------------------+----------+---------+--------+---------+---------+
| Travel           | \        | \$      | \$1    | \$      | \$      |
|                  | $251,000 | 162,000 | 79,000 | 200,000 | 200,000 |
+------------------+----------+---------+--------+---------+---------+
| GSA Leased       | \$45,000 | \       | \$     | \       | \       |
| Vehicles         |          | $45,000 | 53,000 | $61,000 | $65,000 |
+------------------+----------+---------+--------+---------+---------+
|                  |          |         |        |         |         |
+------------------+----------+---------+--------+---------+---------+
| **SubTotal Goal  | **\$5,5  | *       | **\    | *       | *       |
| 2**              | 66,705** | *\$5,74 | $6,216 | *\$6,31 | *\$7,26 |
|                  |          | 3,862** | ,930** | 6,500** | 1,600** |
+------------------+----------+---------+--------+---------+---------+

\* Includes FTE's and background investigation contract costs.

######### Major Accomplishments for FY 2001

-   Projections based on our actual 10-month results indicate that,
    during FY 2001, SBA OIG will have had an investigative workload of
    430 of its own cases (with estimated SBA-related losses/subjects'
    illegal gains of \$165 million) as well as 105 cases (estimated
    SBA-related losses/subjects' illegal gains of \$22 million) that had
    been referred to other law enforcement agencies for investigation.
    OIG's own cases generally cover complex financial transactions and
    multiple investigative subjects, in a few cases numbering more
    than 100. The

> 105 referrals involve allegations which we had jurisdiction to
> investigate but where limited resources would not allow us to
> investigate before expiration of the statute of limitations.
> Traditionally, results of those referrals produce smaller benefits for
> SBA, due in large measure to the other agencies' lack of specialized
> knowledge of SBA programs and local personnel.

-   Based on actual 10-month results, we project that during FY 2001 SBA
    OIG will have made final disposition of 59 (estimated SBA-related
    losses/subjects' illegal gains of \$14.2 million) of those 430 of
    its own cases.

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```
-   Based on actual 10-month results, we project that during FY 2001 SBA
    OIG investigative efforts will have generated 52 indictments, 40
    convictions, and financial accomplishments of more than \$12.5
    million in potential recoveries, fines, and savings from criminal
    investigations, and \$20.6 million in savings from loan-applicant
    name checks.

Major Goals and Objectives for FY 2002

-   OIG will investigate those cases with the highest impact and
    potential for successful prosecution and other cases that maintain
    program and employee integrity. In addition, OIG will pursue civil
    fraud under the False Claims Act and the Financial Institution
    Reform, Recovery, and Enforcement Act of 1989.

```{=html}
<!-- -->
```
-   OIG will continue its programs to educate SBA employees and the
    lending community concerning their responsibilities to report
    allegations of wrongdoing. Outreach will include attending and/or
    participating in lender-related conferences and other activities.

```{=html}
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```
-   OIG will continue its name and fingerprint checks for SBA program
    participants, and assist the Agency in its pre-employment screening
    program by conducting background checks for potential key employees.
    OIG will explore the use of other information sources to identify
    persons of bad character and preclude their participation in SBA
    programs.

**Justification for FY 2003 Budget Increase**

We are requesting 12 additional FTE's for FY 2003 to combat fraud and
improve the integrity of SBA programs. We are requesting four additional
FTE's for our background character and security check program to
increase the level of name checks, which should greatly reduce the
Government's financial risk from SBA loans. SBA will inform all
prospective borrowers that they are subject to a possible criminal
background check. OIG plans to perform periodic criminal background
checks on a significant sample of business loan applicants, and, based
on the results, will determine whether a wider effort is warranted. In
FY 2001, we project that OIG's name check program will have prevented
the Agency from making more than \$20 million in loans to individuals
who were not of good character. We estimate that the four additional
FTE's would result in an additional \$20 million in loans denied due to
bad character or otherwise not made as a result of this deterrence
program.

We are requesting two FTE's so that we can reduce the caseload per
criminal investigator and complete cases more timely and effectively. In
FY 2000, OIG generated investigations on 40 percent of the referrals it
received concerning SBA-related allegations; OIG achieved 39
convictions, 74 indictments, and \$8,995,356 in dollar accomplishments
as a result of its investigations. An increase of two FTE's on the
criminal-investigative staff would increase the number of referrals that
we can investigate and is expected to increase investigative
accomplishments in FY 2003 by approximately four indictments, three
convictions, and \$1.2 million in potential recoveries, fines, and
savings. This would enhance deterrence and strengthen the integrity of
SBA's important programs.

We are requesting another four FTE's dedicated to disaster-fraud
investigative assignments based on expected doubling of this workload
emanating from recent terrorist activities. We estimate that by FY 2008,
these four FTE's would generate approximately 36 disaster-fraud
indictments, 32 convictions, and \$11.6 million in potential recoveries,
fines, and savings.

We are requesting two FTE's to conduct fraud reduction evaluations of
SBA programs, beginning with an evaluation of fraud reduction in the
business loan programs.

#### Goal 3: Ensure the economical, efficient, and effective operation of OIG.

OIG recognizes that its operations are only as good as its people,
communications, and planning and control processes. Therefore, OIG will
continue to emphasize these functions and strive to improve them. OIG
activities will fall into seven main categories.

1.  Human Capital.

OIG has independent personnel authority and administers a comprehensive

> nationwide personnel management program that includes position
> classification, recruitment and staffing. OIG utilizes various
> strategies available in current law to recruit, hire, and retain a
> diverse and high performing workforce. OIG manages a comprehensive
> career development program assessing skill levels and identifying
> appropriate training to promote professional growth for its employees.
> The outputs are personnel actions executed (e.g., new hires,
> promotions, training courses approved). The outcome is a highly
> trained, diverse, and knowledgeable staff.

2.  Budget.

> OIG is appropriated a separate budget and has independent
> responsibility for budget formulation, execution, and reconciliation.
> As a result of OIG's personnel authority, OIG also manages the
> compensation and benefits associated with its employees. OIG designs
> and implements a financial management system to align with OIG
> strategic goals and objectives to ensure the most efficient and
> effective results. The outputs are budget documents, and allocations.
> The outcome is OIG strategic objectives are supported with appropriate
> resources.

3.  Information technology.

> OIG provides up-to-date and secure computer technology and information
> systems for OIG staff. OIG continually evaluates new software and
> hardware to improve the productivity of its employees. OIG designs
> automated information systems. Many OIG employees are armed with
> laptops and remote dial in capabilities to facilitate a mobile
> workforce and take advantage of telecommuting opportunities. OIG has
> established an intranet site which houses internal guidance and
> procedures and a web page for the public to learn about our
> organization and have immediate access to our published products. The
> outputs are software and hardware purchases, MIS applications, and
> automated tools. The outcome is a workforce that has the skills and
> tools to maximize technology to be more effective and efficient in
> their work.

4.  Administrative and procurement services.

> OIG independently manages a variety of administrative and procurement
> services in direct support of its mission. OIG utilizes the
> streamlined Government credit card program to ensure employees are
> equipped with the necessary supplies, and coordinates interagency
> agreements for services and partners with the SBA's Office of
> Procurement and Grants Management to execute large contracts. OIG
> averages over 400 procurement actions annually in support of the
> mission of the office. OIG's manages an extensive administrative
> support program procuring adequate and appropriate telecommunications,
> office space, paperwork and records management system for its 14 field
> offices and Headquarters staff. The outputs are contract and purchase
> orders executed and well coordinated leased space assignments. The
> outcome is a workforce with professional space and adequate tools to
> do their job in a timely fashion.

5.  Support services.

> OIG has a cross-trained staff to provide timely support to OIG staff
> members. The support services group provides a variety of services,
> including time and attendance record keeping, data processing, filing,
> and routine clerical support. The use of automation has allowed the
> support services group to do more with less in support of the three
> OIG operating units to aid in carrying out the OIG mandated functions.
> Developing automated tracking systems and spreadsheets for routine
> procedures is increasing the office's efficiency. The outputs are
> completed administrative tasks. The outcome is a workforce with
> professional space and adequate tools to do their job in a timely
> fashion.

6.  Communications.

> An ongoing major initiative of OIG is to strive to improve
> communication with Agency officials and stakeholders. OIG issues a
> number of products designed to meet the needs of our customers. We use
> the OIG website to post our various publications making them easily
> accessible to the public. OIG serves on various SBA working groups
> providing timely advice and guidance and on the PCIE taskforces
> sharing the knowledge/experience of individual OIG's. OIG hosts
> regular briefings for Hill staffers to better educate them on our
> organization and recently completed or ongoing projects. The outputs
> are newsletters, semiannual reports, and briefings. The outcome is a
> strong alliance with informed customers and stakeholders.

7.  Planning process.

> OIG works with SBA officials and major stakeholders developing
> strategic and annual operating plans. OIG's planned activities are
> targeted to be more proactive in evaluating SBA\'s programs,
> management structure, and administrative systems, and develop work
> products that provide input or feedback to SBA management on an
> expedited basis. Maintaining ongoing liaison with Agency officials
> (both headquarters and field), key congressional committees, the OMB,
> PCIE, and others as appropriate is key to effectively accomplishing
> the OIG mission. The outputs are strategic plans and annual plans. The
> outcome is an OIG that operates efficiently and effectively.

+------------------------+--------+--------+--------+--------+--------+
| **Objective 3.1        |        |        |        |        |        |
| *Provide the tools,    |        |        |        |        |        |
| services, and          |        |        |        |        |        |
| supportive work        |        |        |        |        |        |
| environment necessary  |        |        |        |        |        |
| to improve employee    |        |        |        |        |        |
| productivity.***       |        |        |        |        |        |
+------------------------+--------+--------+--------+--------+--------+
|                        | **FY   | **FY   | **FY   | **FY   | **FY   |
|                        | 1999** | 2000** | 2001** | 2002   | 2003   |
|                        |        |        |        | Esti   | Esti   |
|                        | **Ac   | **Ac   | **Esti | mate** | mate** |
|                        | tual** | tual** | mate** |        |        |
+------------------------+--------+--------+--------+--------+--------+
| Output Performance     |        |        |        |        |        |
| Goals                  |        |        |        |        |        |
+------------------------+--------+--------+--------+--------+--------+
| Percentage of staff    | N/A\*  | 84%    | 100%   | 100%   | 100%   |
| that received the      |        |        |        |        |        |
| training established   |        |        |        |        |        |
| by OIG for their       |        |        |        |        |        |
| career needs           |        |        |        |        |        |
+------------------------+--------+--------+--------+--------+--------+
| Percentage of          | N/A\*  | 100%   | 100%   | 100%   | 100%   |
| employees provided the |        |        |        |        |        |
| IT products necessary  |        |        |        |        |        |
| to do their jobs, as   |        |        |        |        |        |
| established by the OIG |        |        |        |        |        |
+------------------------+--------+--------+--------+--------+--------+
| Intermediate Outcomes  |        |        |        |        |        |
+------------------------+--------+--------+--------+--------+--------+
| Percentage of          | N/A\*  | 62%    | 65%    | 65%    | 65%    |
| employees satisfied or |        | \*\*\* |        |        |        |
| very satisfied in      |        |        |        |        |        |
| annual employee        |        |        |        |        |        |
| surveys                |        |        |        |        |        |
+------------------------+--------+--------+--------+--------+--------+
| No material weaknesses | N      | N      | None   | N      | N      |
| identified in audit    | /A\*\* | /A\*\* |        | /A\*\* | /A\*\* |
| quality controls by    |        |        |        |        |        |
| external peer reviews  |        |        |        |        |        |
+------------------------+--------+--------+--------+--------+--------+

\*Standards for measuring this goal and the survey instrument were
developed in FY 2000

\*\*Peer reviews are conducted every three years. The last one was
conducted in FY 2001.

\*\*\*Based on responses to an OIG Organization Assessment Survey
distributed September 2000: "Considering everything, how satisfied are
you with your job?"

  -----------------------------------------------------------------------
  **Objective 3.2** ***Communicate and foster cooperation with all
  stakeholders, customers, and interested parties.***

  Output Performance Goals/Intermediate Outcome

  Narrative assessment that may include anecdotal results of ongoing
  contacts with customers and stakeholders, OIG work on PCIE and
  interagency projects, and/or customer satisfaction surveys
  -----------------------------------------------------------------------

+-----------------------------------------------------------------------+
| **Outcome/Impact for Goal 3:** An OIG staff that is fully supported   |
| with the tools, services, and direction necessary to be economical,   |
| efficient, and effective, and works cooperatively and in a timely     |
| manner with customers and stakeholders.                               |
|                                                                       |
| Methodology                                                           |
|                                                                       |
| An analysis of the performance goal results in each Annual            |
| Performance Report (beginning with the FY 2001 report) should         |
| indicate if OIG is operating economically, efficiently, and           |
| effectively.                                                          |
+-----------------------------------------------------------------------+

Outputs and Resources

+-----------------------+---------+--------+--------+--------+--------+
| ##### **Goal 3**      | **FY    | **FY   | **FY   | **FY   | **FY   |
|                       | 1999**  | 2000** | 2001   | 2002   | 2003   |
|                       |         |        | (estim | (estim | (estim |
|                       | **(ac   | **(act | ate)** | ate)** | ate)** |
|                       | tual)** | ual)** |        |        |        |
+-----------------------+---------+--------+--------+--------+--------+
| ###### I              |         |        |        |        |        |
| ntermediate Outcomes  |         |        |        |        |        |
+-----------------------+---------+--------+--------+--------+--------+
| An OIG staff that is  | N/A     | 100%   | 100%   | 100%   | 100%   |
| fully supported with  |         |        |        |        |        |
| the tools, services,  |         |        |        |        |        |
| and direction         |         |        |        |        |        |
| necessary to be       |         |        |        |        |        |
| economical,           |         |        |        |        |        |
| efficient, and        |         |        |        |        |        |
| effective, and works  |         |        |        |        |        |
| cooperatively and in  |         |        |        |        |        |
| a timely manner with  |         |        |        |        |        |
| customers and         |         |        |        |        |        |
| stakeholders          |         |        |        |        |        |
+-----------------------+---------+--------+--------+--------+--------+
| Percentage of         | N/A     | 62%    | 65%    | 70%    | 75%    |
| employees satisfied   |         |        |        |        |        |
| or very satisfied in  |         |        |        |        |        |
| annual employee       |         |        |        |        |        |
| surveys               |         |        |        |        |        |
+-----------------------+---------+--------+--------+--------+--------+
| ###### Outputs        |         |        |        |        |        |
+-----------------------+---------+--------+--------+--------+--------+
| Percentage of staff   | N/A     | 85%    | 90%    | 90%    | 90%    |
| that received the     |         |        |        |        |        |
| training established  |         |        |        |        |        |
| by OIG for their      |         |        |        |        |        |
| career needs          |         |        |        |        |        |
+-----------------------+---------+--------+--------+--------+--------+
| Percentage of         | N/A     | 100%   | 100%   | 100%   | 100%   |
| employees provided    |         |        |        |        |        |
| the IT products       |         |        |        |        |        |
| necessary to do their |         |        |        |        |        |
| jobs, as established  |         |        |        |        |        |
| by the OIG            |         |        |        |        |        |
+-----------------------+---------+--------+--------+--------+--------+
| Number of Hits to OIG | 80,000  | 1      | 5      | 1      | 1.5    |
| Homepage              |         | 60,000 | 25,000 | m      | m      |
|                       |         |        |        | illion | illion |
+-----------------------+---------+--------+--------+--------+--------+
| Number of External    | 19      | 14     | 19     | 19     | 19     |
| Reports Issued        |         |        |        |        |        |
+-----------------------+---------+--------+--------+--------+--------+
| Number of Employees   | 114     | 94     | 102    | 124    | 150    |
| Trained               |         |        |        |        |        |
+-----------------------+---------+--------+--------+--------+--------+
| FTE                   | 12.4    | 12.4   | 12.4   | 12.4   | 13.3   |
+-----------------------+---------+--------+--------+--------+--------+
| *Resources*           |         |        |        |        |        |
+-----------------------+---------+--------+--------+--------+--------+
| Human Capital         | \$      | \$1    | \$1    | \$1    | \$1    |
|                       | 140,850 | 68,600 | 84,550 | 92,450 | 95,900 |
+-----------------------+---------+--------+--------+--------+--------+
| Budget                | \       | \$1    | \$1    | \$1    | \$1    |
|                       | $82,245 | 01,200 | 08,750 | 09,375 | 10,400 |
+-----------------------+---------+--------+--------+--------+--------+
| Information           | \$      | \$2    | \$2    | \$1    | \$1    |
| Technology\*          | 297,435 | 32,300 | 40,887 | 80,607 | 71,300 |
+-----------------------+---------+--------+--------+--------+--------+
| Administrative and    | \$      | \$5    | \$4    | \$2    | \$2    |
|                       | 746,223 | 07,257 | 90,679 | 85,799 | 56,950 |
| Procurement Support   |         |        |        |        |        |
| \*\*                  |         |        |        |        |        |
+-----------------------+---------+--------+--------+--------+--------+
| Support               | \$      | \$3    | \$3    | \$2    | \$2    |
| Services\*\*\*        | 332,732 | 04,771 | 25,177 | 82,967 | 81,550 |
+-----------------------+---------+--------+--------+--------+--------+
| Communication         | \       | \$1    | \$2    | \$2    | \$2    |
|                       | $91,450 | 14,450 | 08,500 | 11,450 | 12,100 |
+-----------------------+---------+--------+--------+--------+--------+
| Planning              | \       | \$     | \$     | \$     | \$1    |
|                       | $70,325 | 81,475 | 96,750 | 98,450 | 00,700 |
+-----------------------+---------+--------+--------+--------+--------+
| Travel                | \$3,000 | \      | \      | \$     | \$     |
|                       |         | $3,500 | $5,500 | 10,000 | 10,000 |
+-----------------------+---------+--------+--------+--------+--------+
| Training              | \$4,500 | \      | \      | \      | \$     |
|                       |         | $4,500 | $5,000 | $8,000 | 10,000 |
+-----------------------+---------+--------+--------+--------+--------+
|                       |         |        |        |        |        |
+-----------------------+---------+--------+--------+--------+--------+
| **SubTotal -- Goal    | *       | **\    | **\    | **\    | **\    |
| 3**                   | *\$1,76 | $1,518 | $1,665 | $1,379 | $1,348 |
|                       | 8,760** | ,053** | ,793** | ,098** | ,900** |
+-----------------------+---------+--------+--------+--------+--------+

# 

# 

\*Includes FTE and IT equipment

\*\*Includes FTE and other contractual services in support of the entire
OIG

\*\*\*Includes FTE and supplies for entire OIG

**Major Accomplishments for FY 2001**

-   [Human Capital]{.underline} -- During the first 10 ½ months of FY
    2001, OIG executed 94 personnel actions, issued 14 job
    announcements, coordinated 3 retirements, hired 1 Presidential
    Management Intern (PMI), facilitated 155 training opportunities, and
    participated in 1 college job fair.

-   [Budget]{.underline} -- effectively managed OIG's FY 2001 budget of
    \$11.9 million (less a .22% rescission of \$26,297), and \$500,000
    transfer for disaster assistance.

-   [Information Technology]{.underline} - During the first 10 ½ months
    of FY 2001, OIG implemented Teammate, an automated
    workpaper/workflow software; upgraded 19 computers, 4 printers, and
    the FBI's NCIC software; established
    [oig@sba.gov](mailto:oig@sba.gove) e-mail account to receive
    complaints

> and referrals; posted 10 audit reports, 8 OIG Monthly Updates and one
> Semiannual Report to the President to OIG's website; and received
> 500,000 hits on OIG's website.

-   [Administrative and Procurement Services]{.underline} - During the
    first 10 ½ months of FY 2001, OIG executed 382 procurement actions.

-   [Support Services]{.underline} -- During the first 10 ½ months of FY
    2001, completed 612 requests for services from OIG staff, 90 percent
    of which were completed on or before the due date.

-   [Communications]{.underline} - OIG responds to numerous inquiries
    from OMB, GAO, the press, the public, program participants, and
    others. This category includes Freedom of Information/Privacy Act
    (FOIA/PA) requests, as well as discovery requests involving OIG
    audits, inspections, investigations, and other activities that may
    be the subject of criminal, civil, or administrative litigation. The
    output for each request is a response to an outside party. The
    outcome is a better-informed public, compliance with laws, and more
    informed decision-making. During the first 10 ½ months of FY 2001,
    OIG held 1 congressional staff briefing, issued 8 OIG Monthly
    Updates and 1 Semiannual Report to the President, responded to 84
    inquiries to the new OIG e-mail address, and received 35 FOIA/PA
    requests.

-   [Planning]{.underline} - During the first 10 ½ months of FY 2001,
    OIG issued its FY 2000 Annual Performance Report and held three
    strategic planning meetings.

    **Major Goals and Objectives for FY 2002**

-   [Human Capital]{.underline} -- Continue efforts to recruit and
    retain valuable employees for OIG, implement Individual Development
    Plans for all employees, and develop a comprehensive workforce
    restructuring plan.

-   [Budget]{.underline} -- Effectively manage OIG's FY 2002 budget,
    aligning resources with office goals and implement the Agency's new
    financial system.

-   [Information Technology]{.underline} -- Continue the computer
    hardware upgrade plan (30% in FY 2002), enhance the MIS including
    evaluating a new system for the Investigations Division,
    aggressively implement the requirements of the Government Paperwork
    Elimination Act, evaluate the potential of other software to
    increase worker productivity, and work with the National Archives
    and Records Administration to address the issues of electronic
    records.

-   [Administrative and Procurement Services]{.underline} -- Procure
    necessary supplies, materials, and office space for OIG employees in
    a timely fashion.

-   [Support Services]{.underline} -- Provide fast and accurate support
    to OIG employees and customers.

-   [Communications]{.underline} -- Continue to dialogue with SBA
    managers, congressional members, and staff and issue products that
    educate and inform our stakeholders.

-   [Planning]{.underline} -- Continue to evaluate and modify, where
    appropriate, the OIG strategic plan, monitor progress on the annual
    plan, and communicate performance plan progress to our stakeholders.

**Justification for FY 2003 Budget Increase**

A nominal increase is requested to purchase necessary equipment and
supplies and to cover estimated cost increases.

> **TABLE 1**

+--------------------------+----------+---------+----------+----------+
|                          | **FY     | **FY    | **FY2003 | **Inc    |
|                          | 2001**   | 2002**  | Pr       | (Dec)**  |
|                          |          |         | oposed** |          |
|                          | **Es     | **Re    |          | **vs FY  |
|                          | timate** | quest** |          | 2002     |
|                          |          |         |          | R        |
|                          |          |         |          | equest** |
+--------------------------+----------+---------+----------+----------+
| Obligations:             |          |         |          |          |
+--------------------------+----------+---------+----------+----------+
| > Personnel Compensation | \$ 8,500 | \$      | \$       | \$ 1,970 |
|                          |          | 8,750   | 10,720   |          |
+--------------------------+----------+---------+----------+----------+
| > Civilian Personnel     | 2,125    | 2,180   | 3,191    | 1,011    |
| > Benefits               |          |         |          |          |
+--------------------------+----------+---------+----------+----------+
| > Travel and             | 486      | 480     | 370      | \(110\)  |
| > Transportation of      |          |         |          |          |
| > Persons                |          |         |          |          |
+--------------------------+----------+---------+----------+----------+
| > Transportation of      | 0        | 0       | 0        | 0        |
| > Things                 |          |         |          |          |
+--------------------------+----------+---------+----------+----------+
| > Communications,        | 1        | 1       | 65       | 64       |
| > Utilities & Misc.      |          |         |          |          |
+--------------------------+----------+---------+----------+----------+
| > Printing and           | 1        | 1       | 1        | 0        |
| > Reproduction           |          |         |          |          |
+--------------------------+----------+---------+----------+----------+
| > Supplies and Materials | 40       | 40      | 70       | 30       |
+--------------------------+----------+---------+----------+----------+
| > Equipment              | 38       | 50      | 150      | 100      |
+--------------------------+----------+---------+----------+----------+
| > Other Services         | 736      | 425     | 944      | 519      |
+--------------------------+----------+---------+----------+----------+
|                          |          |         |          |          |
+--------------------------+----------+---------+----------+----------+
| Subtotal Prior to        | \$       | \$      | \$       | \$ 3,584 |
| Rescinded Funding        | 11,953   | 11,927  | 15,511   |          |
+--------------------------+----------+---------+----------+----------+
| Rescinded Funding        | \$ (26)  | 0       | 0        | 0        |
+--------------------------+----------+---------+----------+----------+
| Subtotal Including       | \$       | \$      | \$       | \$ 3,584 |
| Rescinded Funding        | 11,927   | 11,927  | 15,511   |          |
+--------------------------+----------+---------+----------+----------+
|                          |          |         |          |          |
+--------------------------+----------+---------+----------+----------+
| Transfer from Disaster   | \$ 500   |         |          |          |
+--------------------------+----------+---------+----------+----------+
| Rescinded Funding        | 0        |         |          |          |
+--------------------------+----------+---------+----------+----------+
| Subtotal                 | \$ 500   |         |          |          |
+--------------------------+----------+---------+----------+----------+
|                          |          |         |          |          |
+--------------------------+----------+---------+----------+----------+
| Total Financing          | \$       | \$      | \$       | \$ 3,584 |
|                          | 12,427   | 11,927  | 15,511   |          |
+--------------------------+----------+---------+----------+----------+
| Authorized Positions     | 125      | 124     | 142      |          |
+--------------------------+----------+---------+----------+----------+
| On Board Strength        | 108      |         |          |          |
+--------------------------+----------+---------+----------+----------+

> **TABLE 2** FTE Allocation by Organization FY 00 -- 03

+------------------------+-----------+----------+---------+----------+
| **Component**          | **FY      | **FY     | **FY    | **FY     |
|                        | 2000**    | 2001**   | 2002    | 2003     |
|                        |           |          | Requ    | Req      |
|                        | **Aut     | **Auth   | ested** | uested** |
|                        | horized** | orized** |         |          |
+------------------------+-----------+----------+---------+----------+
| Immediate Office       | 3         | 3        | 3       | 3        |
|                        |           |          |         |          |
| Auditing               | 45        | 45       | 45      | 51       |
|                        |           |          |         |          |
| Investigations         | 52        | 52       | 52      | 62       |
|                        |           |          |         |          |
| Inspection and         | 8         | 8        | 8       | 10       |
| Evaluation             |           |          |         |          |
|                        | 12        | 12       | 12      | 12       |
| Management and Policy  |           |          |         |          |
|                        | 4         | 5        | 4       | 4        |
| Counsel                |           |          |         |          |
+------------------------+-----------+----------+---------+----------+
| Authorized Ceiling     | 124       | 125      | 124     | 142      |
| Total                  |           |          |         |          |
+------------------------+-----------+----------+---------+----------+
| On Board Strength      | 111       | 108      |         |          |
+------------------------+-----------+----------+---------+----------+

##### **[Explanation of Budget Object Class Increase/Decrease]{.underline}**

**1100/1200** **Compensation and Benefits:**

FY 2003 Compensation and Benefits request is for an additional \$3.0
million. This increase funds 18 additional FTE's and those positions
which are authorized but not funded. The additional 20 positions include
6 auditors, 6 investigators, 4 security specialists for the Name Check
Program, and 2 program analysts. An increase of \$511,000 is identified
to provide pension liabilities and expenses previously paid by OPM, and
will be immediately transferred to OPM upon receipt.

**2100 Travel:**

OIG is planning to utilize its professional staff more effectively to
conduct joint investigations and audits.

2300. **Communications:**

The increase in OIG's request for FY 2003 reflects more of an accounting
change than an increase. The requested amount properly portrays the true
cost of communication expenses for our field personnel, who make up over
50 percent of OIG staff. In previous years this expense was identified
under "Other Services."

2400. **Printing:**

OIG does not request additional funds in this category.

**2500 Other Services:**

OIG will fund the costs of SBA's financial statement audit, estimated at
close to \$690k for FY2001. In addition to the financial statement
audit, this category includes all other expenses associated with core
mission requirements, e.g., vehicle expenses for all field personnel to
include, vehicle rental, parking fees, and maintenance; metro subsidy
for all eligible personnel; professional liability insurance; ammunition
and firing range expenses; and fees associated with performing
background checks and investigations.

###### **2600 Supplies and Materials:**

Increase of \$30K for supplies and materials to support the requested
additional FTE's

**3100 Equipment:**

Increase for equipment, desks, and computers to support additional FTE
to meet increase in core mission requirements.

[Workforce Restructuring Plan]{.underline}

***Overview***

OIG is an independent office created within SBA by law to conduct and
supervise audits, inspections, and investigations relating to SBA
programs and supporting operations; to detect and prevent waste, fraud,
and abuse; and to promote economy, efficiency, and effectiveness in the
administration and management of SBA programs.

OIG keeps the SBA Administrator and the Congress fully informed of any
problems, recommends corrective actions, and monitors progress in the
implementation of such actions.

The three operating components of OIG are the Auditing Division, the
Investigations Division, and the Inspection and Evaluation Division.
They operate within professional standards set by General Accounting
Office and the President's Council on Integrity and Efficiency and are
subject, in part, to stringent peer review. The Auditing and
Investigations Divisions each administer their respective activities
through field offices around the country. The Management and Policy and
Counsel Divisions support both the IG and the operating divisions by
providing policy, planning, administrative, and legal services
respectively.

[OIG's Restructuring Plan]{.underline}

During FY 2002, OIG will develop a comprehensive workforce analysis to
determine the best approaches to achieve the Administration's goals of:

-   reducing the number of managers;

-   reducing layers;

-   reducing the time it takes to make decisions;

-   increasing the span of control; and

-   redirecting positions within the agency to ensure that the largest
    number of employees possible are in direct service delivery
    positions that interact with citizens and retrain and/or re-deploy
    employees as part of restructuring efforts.

Based on a preliminary analysis of workforce restructuring, OIG needs to
re-assess its strategic plan, workload, and resource allocation among
the operating Divisions. OIG will complete these tasks and develop a
formal 5-year workforce restructuring plan by June 30, 2002.

Our preliminary analysis of OIG staffing compared to the
Administration's goals follows:

-   

-   

-   OIG's Plan to Reduce the Number of Managers: OIG's current
    supervisory ratio is 1 to 4. Supervision is one factor in
    determining the need for managers. Managers are responsible for
    managing a function within an area of responsibility, such as
    directing all auditing activity for an SBA program or directing all
    criminal investigations within a geographical area. These activities
    include coordinating OIG programs with numerous SBA executives, over
    seeing work performed by contractors, and coordinating activities
    with other investigative agencies and numerous United States
    Attorneys. The OIG workload restructuring plan will address how OIG
    will increase the ratio of employees to managers, while providing
    quality services with the least number of managers. We anticipate
    being able to increase the ratio of employees to managers.

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-   OIG's Plan to Reduce the Number of Organizational Layers:
    Organizationally, OIG is structured with only two to four
    organizational layers, depending on the operation. There may be some
    opportunity to reduce one layer, but this needs to be weighed
    against any impact on work effectiveness. Our workload analysis will
    include an assessment of whether there are any opportunities to
    increase efficiency and effectiveness by reducing organizational
    layers.

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-   OIG's Plan to Reduce the Time it Takes to Make Decisions: The nature
    of OIG's work allows employees to act independently and make many
    decisions at the employee level as long as they work within the
    professional guidelines and legal authorities established for each
    profession. Our analysis and plan, however, will examine the
    appropriate levels at which decisions should be made to determine
    whether there are opportunities to reduce the time it takes to make
    decisions.

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-   OIG's Plan to Increase the Span of Control: As stated above, we will
    conduct an assessment of our work to determine the appropriate level
    of supervision and span of control.

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-   OIG's plan to redirect positions within the agency to ensure that
    the largest number of employees possible are in direct service
    delivery positions that interact with citizens and retrain and/or
    re-deploy employees as part of restructuring efforts:

> Our focus must be in situating our investigators, auditors, and
> evaluators in locations where they can provide maximum oversight of
> SBA programs and program participants. Our goal is to place as many
> employees as possible in direct service delivery. Currently our
> first-line managers spend much of their efforts in direct service
> delivery. We will, however, determine whether there is additional
> opportunity to redirect positions within OIG.

As a result of our planned review of the OIG strategic plan, workload
and staffing over the next year, we will be in a better position to
assess and project:

-   costs and/or savings that will result from implementing
    organizational changes at the account and/or program level as
    appropriate;

-   the human resources management tools and flexibilities needed to
    implement the plan;

-   the specific actions to be taken, with a timetable; and

-   the anticipated impact that these changes will have by fiscal year
    and the agency's plan for measuring progress.

[^1]: The decline in savings suggests success on the part of the Office
    of Advocacy because it is operating on a smaller and smaller
    regulatory universe.

[^2]: Year-end data for FY 2001 are not yet available. Actual figures
    are estimates.

[^3]: Each year approximately 10 percent of the loan dollars approved
    are canceled prior to disbursement, freeing the funds for another
    borrowers. Therefore, net loan approvals are approximately 10
    percent lower than gross approvals.

[^4]: ^2^ Measure defined as the percentage of disbursed loans to
    startups that are current or paid in full at the end of three fiscal
    years later.

[^5]: Not reflected here is an additional \$904 million in export sales
    supported through SBA's non-finance programs.

[^6]: Job creation figures for 7(a) and 504 loans are based on the SBDC
    annual economic impact study, which revealed that 30 percent of
    loans that SBDC clients obtain made in FY 1999 and FY 200 are SBA
    general business loans. The job coefficient for the 7(a) loans was
    \$32,382, meaning that this amount in lending leads to one job, on
    average. The job coefficient for the 504 loans was \$33,366 (based
    on 1998-2000 data). Job estimates were obtained by dividing gross
    original loan dollars by the coefficient. Job creation figures for
    SBIC are based on the Arizona Venture Capital Impact Study made by
    the Zermatt Group (1999), which estimates a job creation constant of
    one job for every \$35,000 invested in 1999.

    ^5^ This figure includes an estimated 43,000 loan approvals from the
    regular 7(a) program and an additional 4,500 from the temporary
    authority provided by P.L. 107-117 to help small businesses
    following the September 11^th^ attacks. The total is based on an
    estimate of \$10.5B in lending and the FY 2001 average loan level of
    \$242,000.

    ^6^ This figure is based on the requested lending level of \$4.85B
    plus an expected carryover of budget authority that could provide
    \$2 billion in additional lending. The carryover is likely due to
    our aggressive FY 2002 projection of \$10.5 billion in lending
    falling short of a total available program level of \$13.8 billion.
    This figure also assumes an average loan size of \$172,000, which we
    will attain through proposed smaller loan size initiatives.

[^7]: Customer satisfaction results are based on an independent biennial
    study conducted by the Association of Small Business Development
    Centers: "Economic Impact of Small Business Development Counseling
    Activities in the United States," James Chrisman, Ph.D.

[^8]: In FY 2000, the bulk of the loan activity occurred during the
    first three months of the fiscal year, enabling the program to
    exceed the loan processing goal due to low levels of activity in the
    remaining months.

[^9]: \* To be funded in FY 2002, but source not identified.

    ^?^ Includes use of carryover funds from FY 2001.

[^10]: Not appropriated funds but reimbursements under the Economy Act,
    other agreements, and other sources of funds.

[^11]: Program authority expired 12/31/00.

[^12]: No appropriation is required due to the annual adjustment of fees
    to maintain a 0 percent subsidy rate. For FY 2002, the fee will be
    lowered from 0.472 percent to 0.410 percent. For FY 2003, the
    current services rate is 0 percent with a fee increase from .410
    percent to .425 percent. However, with the passage of P.L. 107-100,
    the fees would be lowered thereby increasing the subsidy rate to
    3.72%.

[^13]: By SBA statute, 7 percent of the annual appropriation may be
    transferred to Salaries and Expenses to provide training to
    Microloan intermediaries.

[^14]: ^1^ FY 2002 assumes proposed fee change from 1.0 percent to 1.376
    percent resulting in a 0 percent subsidy rate. FY 2003 lowers fee to
    1.311 percent to retain 0 percent subsidy.

[^15]: ^2^ No appropriation is required due to the annual adjustment of
    fees to maintain a 0 percent subsidy rate. For FY 2002, the fee will
    be lowered from 0.88 percent to 0.866. For FY 2003, the fee will be
    raised from .866 percent to .887 percent.

[^16]: FY 2002 Current services rate is 14.67 percent. With passage of
    Defense Bill and supplemental, rate increases to 23.16 percent for
    impacted loans.

[^17]: Program level for regular disaster program is \$742.8 million;
    for the "emergency" disaster program, it is \$557 million.