*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

1

**TABLE OF CONTENTS**

**TABLE OF
CONTENTS\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....1**

**ORGANIZATION
CHART\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....3**

**OUR MISSION
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...4**

**BUDGET
HIGHLIGHTS\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....13**

**RESOURCES
SUMMARIES\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...27**

**BUDGET
CROSSWALK\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....39**

**GOALS AND RESOURCES
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....45**

GOAL 1: HELP SMALL BUSINESSES
SUCCEED\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....46

Objective 1: Act as a Voice for Americas Small
Businesses\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....47

Objective 2: Improve Access to Capital and Credit
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....48

Objective 3: Improve Access to Procurement Opportunities
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....56

Objective 4: Provide and Improve Access to Entrepreneurial Development
Assistance\...\...\...\...\...\....65

GOAL 2: HELP FAMILIES AND BUSINESSES RECOVER FROM DISASTERS
\...\...\...\...\...\...71

GOAL 3: IMPROVE SBA
MANAGEMENT\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...74

Objective 1: Manage for
Results\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....74

Objective 2: Transform the
Workforce\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...76

Objective 3: Modernize Information
Systems\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...78

Objective 4: Improve Financial Management
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...82

Objective 5: Improve Credit Program Management
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....82

Objective 6: Create Electronic Government
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....85

**APPROPRIATIONS LANGUAGE AND DESCRIPTION
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....86**

Salaries and Expenses
Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...87

Business Loans
Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....92

Surety Bond Guaranty Revolving Fund
Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...104

Disaster Loans
Appropriation\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...107

**DATA VALIDATION AND
VERIFICATION\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....113**

**CHARTS OF HISTORICAL DATA
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....123**

**OFFICE OF THE INSPECTOR
GENERAL\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....124**

FY 2002 Budget Request And
Justification\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....124

Annual Performance
Plan\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...128

11 April, 2001

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

2

FY 2002 CB Narrative Revised Apr 10.doc

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

3

**ORGANIZATION CHART**

4

**OUR MISSION**

**HOW SBA MAKES A DIFFERENCE**

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

5

**OUR MISSION**

**SBAs Mission**

*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 natural*

*disasters.*

The Small Business Act defines SBAs mission as follows:

*It is the declared policy of the Congress that the Government should
aid, counsel,*

*assist, and protect, insofar as is possible, the interests of small
business concerns in*

*order to preserve free competitive enterprise, to ensure 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 ensure 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 success contributes to economic growth. Small business is a key
component of Americas

productive capacity and play a critical role in creating Americas
innovations and jobs. Small business is

responsible for 51 percent of private sector output, and has created 75
percent of the new jobs

between 1990  1997. SBA promotes a vibrant small business sector with
advocacy, capital access,

procurement opportunity, technical assistance and disaster relief. These
services provide small business

customers with the crucial assistance they need to be successful,
resulting in greater growth for existing

businesses and expanded opportunities for start-ups. Ultimately, SBA
programs create new jobs, and

provide greater opportunities for all Americans.

**Goals and Objectives**

SBA, as part of the Bush Administration, will carry out its mission by
focusing on the following goals

and objectives:

1\. Help Small Businesses Succeed

Objective 1: Act as a Voice for Americas Small Businesses

Objective 2: Improve Access to Capital and Credit

Objective 3: Improve Access to Procurement Opportunities

Objective 4: Provide and Improve Access to Entrepreneurial Development
Assistance

2\. Help Families and Businesses Recover from Disasters

3\. Improve SBA Management

Objective 1: Manage for Results

Objective 2: Transform the Workforce

Objective 3: Modernize Information Systems

Objective 4: Improve Financial Management

Objective 5: Improve Credit Program Management

Objective 6: Create Electronic Government

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

6

**OUR MISSION**

**SBA Results**

SBA contributes to the success of small business in two ways. First, it
provides direct assistance to

companies in the form of access to capital, procurement opportunities,
and technical assistance.

Second, SBA contributes to an improved small business climate by serving
as a voice for small business

in the regulatory and legislative process. The diagram below illustrates
the logic flow between our

resources and our customers, and their related impact on the small
business sector and the economy as

a whole.

**HOW SBA PRODUCES RESULTS**

**OUR OUTPUTS PRODUCE THESE OUTCOMES**

**BUSINESS**

***Voice for Small Businesses***

Impact Analysis ***SBA Customer Outcomes***

Research Number of start-ups

Hearings Firm growth in jobs and sales

Advocacy Firm survival rate

Firm growth in export sales

***Access to Capital and Credit ***Customer satisfaction

Business loans

Equity financings ***Small Business Sector Outcomes***

Surety bond guarantees Regulatory savings

Increase in number of small businesses

***Access to Procurement Opportunities ***Increase in small business
jobs

Certification of SDB and 8(a) Increase in small business ownership
diversity

8(a) firms success rate Small business growth in HUBZones, LMI,

SBIR grants rural, and tribal areas

Increase in small business export sales

***Entrepreneurial Development Assistance ***Increase in share of
Federal procurement

Clients assisted to different small business groups

Clients counseled

Clients trained

**DISASTER**

***Disaster Loans to Families and Outcomes in Areas Stricken by***

***Businesses Disaster***

Loans to families Restored housing

Loans to businesses Jobs retained

Increased survival of businesses

Stabilized local economy and community

Customer satisfaction

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

7

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

8

**OUR MISSION**

The FY 2002 Budget Request and Performance Plan enhances accountability
by describing goals and

requested resources in a single, integrated document. The Performance
Scorecard shown below

summarizes our progress and reported success for each goal.

**PERFORMANCE INDICATORS**

**FY 2000 FY 2001 FY 2002**

**Description Actual Estimate Planned**

**Goal 1: Help Small Businesses Succeed**

1\. Regulatory cost savings to small businesses \$3.6B TBD TBD

2\. Jobs created by SBA borrowers 541,539 542,000 542,000

3\. Improved access to capital and credit: 7(a), 504,

Microloan and SBIC programs \$13.1B \$17.6 B \$17.6 B

4\. Increase diversity:

Number of loans to Women-owned firms

Number of loans to Minority-owned firms

Number of loans to Veteran-owned firms

9,921

12,120

5,215

10,000

12,300

5,300

10,500

12,500

5,300

5\. Number of Start-up firms financed by 7(a), 504 and

SBIC program 16,600 16,700 17,000

6\. Export Sales assisted by SBA \$675M \$537 M \$537 M

7\. Mandated Fair Share of Federal prime contract

dollars:

§ To small businesses N/A 23% 23%

§ To SDBs (including 8(a)) N/A 5% 5%

§ To Women-owned firms N/A 5% 5%

§ To service disabled Veteran-owned firms N/A 2.9% 3%

§ To small businesses in HUBZones 1.5% 2% 2.5%

8\. 8(a) client success rate 3 yrs after graduation N/A 68% 70%

9\. Customer satisfaction rate with ED programs as

determined through surveys N/A 80% 80%

10\. Number of clients trained and counseled 1.3M 1.3M 1.4M

**Goal 2: Help Families and Businesses Recover from Disasters**

11\. Field presence within 3 days of a disaster 100% 98% 98%

12\. Customer satisfaction rate 81% 80% 80%

13\. Applications processed within 21 days 91% 80% 85%

**Goal 3: Improve SBA Management**

14\. Manage for Results

15\. Transform the Workforce

16\. Modernize Our Information Systems

17\. Improve Financial Management

18\. Improve Credit Program Management

19\. Create Electronic Government

**These initiatives will be**

**published after a review by**

**the incoming**

**Administrator.**

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

9

**OUR MISSION**

**SBA and Americas Small Businesses**

SBA will focus on the small business owner and continue to help small
businesses succeed. Through

access to capital, procurement opportunity, management and technical
assistance, and regulatory

advocacy, over a million small businesses benefit annually from SBA and
its resource partner programs.

Developing precise estimates of our contribution to the overall small
business sector of the economy is a

challenge. It is difficult to quantify the causal relationship between
our outputs and measurable changes

in the growth of the small business sector. However, general analysis of
small business provides

important contextual information for evaluating SBAs contribution to the
American people.

We measure the growth of the small business sector in a number of ways.
One measure is the aggregate

number of small businesses, which can be defined as: (1) the number of
small businesses with

employees, using statistics from the U.S. Bureau of Labor Statistics;
and (2) small businesses filing tax

returns, using data from the Internal Revenue Service (IRS). Other
measures of small business sector

growth include the number of jobs, sales revenues, and business assets
in small firms. These measures

have varied substantially during the last decade, demonstrating how
sensitive the small business sector is

to external factors such as the overall state of the economy.

*Number of Small Businesses With Employees*

In 1998, 24.8 million small businesses filed tax returns

with the IRS1. SBA projects that 25.2 million small

businesses will file tax returns in FY 2000 and 26.2

million2 in FY 2001. The graph shows a steady growth

since 1988, with a slight downturn during the 1990-

1991 downturn. Firms with employees represent about

half the growth rate of all firms that file tax returns.

Source: US Dept of Treasury, IRS, Statistics of Income

Bulletin (Fall 1998) Table 21

**Growth of the Number of Small Businesses**

0

5

10

15

20

25

30

**1982 1984 1986 1988 1990 1992 1994 1996 1998**

**(millions)**

All firms filing

tax returns

Firms with

Employees

1 This number includes all firms with and without employees, and firms
where the owner is working part-time. Since only

15,000 firms of the 24.8 million firms have more than 500 employees, the
IRS data is a very close approximation to the actual

number of small firms (24,800,000-15,000/ 24 .8 million = 99.9%).

2 Projection based on a linear regression of values from 1988 through
1999.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

10

**OUR MISSION**

*Small Business Jobs*

The number of jobs in small businesses has varied

significantly since 1988. In FY 1997, small businesses

provided 55.0 million jobs. SBA estimates that small

businesses will provide 56.3 and 57.0 million jobs in FY

2000 and FY 2001, respectively. A SBA/Census Bureau

database indicates that between 1990 and 1995, 76.5

percent of all new jobs came from small firms with less

than 500 employees, and about 49 percent came from

firms with less than 20 employees. Start-up firms

provided about a third of the total new jobs.

Source: SBA, Office of Advocacy, From data provided by Census

Bureau, Department of Commerce

.

**Number of Jobs in Small Businesses**

47

48

49

50

51

52

53

54

55

56

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

**(millions)**

In keeping with President Bushs policy of inclusion, SBA will focus on
diversity of small business

ownership. We create opportunities for all entrepreneurs, regardless of
race or gender, to become

successful business owners. SBA levels the playing field for all
entrepreneurs to ensure equity and

fairness for all small businesses in dealing with the Federal
government.

*Diversity Of Small Business Ownership*

Over the last decade, business ownership has grown rapidly

for Hispanics, African-Americans, Asians, and for women.

The number of companies owned by women has almost

doubled to an estimated 9.1 million in the last 10 years.

Women entrepreneurs now own about 40 percent of all firms

and employ 27.5 million people.

Between 1987 and 1997, businesses owned by Hispanics

have increased 232 percent, businesses owned by African-

Americans by 108 percent, and businesses owned by Asian

American and Pacific Islanders by 180 percent.

Source: SBA, Office of Advocacy, SBA. From data provided by

Census Bureau, Department of Commerce

.

**Women and Minority Owned Businesses**

**0.00**

**1.00**

**2.00**

**3.00**

**4.00**

**5.00**

**6.00**

**7.00**

**8.00**

**9.00**

**1982 1984 1986 1988 1990 1992 1994 1996 1998**

**(m**

**illi**

**on**

**s)**

Women

Owned

Businesses

Minority Owned

Businesses

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

11

**OUR MISSION**

**How We Work  Our Core Values**

Successful businesses must put their customers first, achieve results
through partnerships and strategic

alliances, invest in their people, and use technology more effectively.
SBA **e**xercise**s **an active, but

limited role  one that empowers citizens and states to make decisions,
ensures results though

accountability, and promotes innovation through competition**.**

SBA is committed to the following principles in dealing with a more
diverse, global, and technologically

advanced world.

· **Citizen Centered ** SBA is driven by customer demands and needs. We
offer tailored assistance

including access to capital and credit, contracting help, regulatory
help, counseling and training, and

access to procurement markets.

· **Results Oriented**. We are performance-based, and measure success
through results that small

businesses seek, expect, and care about most. We hold ourselves
accountable to the Congress and

to the public.

· **Market Based ** SBA promotes innovation and competition. We depend
on partnerships for our

success. We deliver products and services by using an extensive
grassroots network of business

resource partners positioned to provide small businesses with the help
they need. The more we can

leverage these partnerships, along with interagency working
relationships, and technology tools, the

more successful we will be in achieving our mission. SBAs outreach and
support network consists

of:

· Approximately 5,000 lenders

· 300 Certified Development Companies

· 185 Microloan Program intermediaries

· Nearly 1,000 Small Business Development Centers

· 70 Business Information Centers

· 22 One Stop Capital Shops

· 17 Tribal Business Information Centers

· 19 United States Export Assistance Centers

· 4 Veterans Business Outreach Centers

· 70 Womens Business Centers

· 389 SCORE chapters

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

12

**OUR MISSION**

· **Invest in our employees**. Our workforce is our most important
asset. Our employees must

adapt to the challenges of the new economy and provide guidance to the
small business community.

We will streamline operations and ensure that our staff is well trained,
motivated, and positioned to

help small businesses.

· **Move aggressively to embrace the Digital Age**. We are committed to
offering all of our

products and services via the Internet and creating an electronic SBA as
part of the

Administrations vision to use the Internet to create a citizen-centered
government. We will continue

to assist the entrepreneur in taking advantage of the Internet to
compete locally, nationally, and

worldwide.

13

**BUDGET HIGHLIGHTS**

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

14

**BUDGET HIGHLIGHTS**

The FY 2002 Budget request for the Small Business Administration (SBA)
meets the Presidents goal

of encouraging entrepreneurial activity and growth while providing more
efficient services and savings to

the taxpayer. With a budget of \$539 million and an additional carryover
balance of \$37.9 million in the

Disaster Loan Programs account, SBA will be able to offer record levels
of capital and credit assistance

in excess of \$17.6 billion to Americas 25 million small businesses. In
addition, the budget provides

adequate funds to provide the same level of managerial and technical
assistance as was provided in FY

2001\.

SBAs budget is complimented by the Presidents overall budget agenda
which includes tax relief for

small businesses. At least 17.4 million small business owners and
entrepreneurs stand to benefit from

President Bushs tax relief plan. Small businesses will grow as a result
of lower marginal tax rates, which

will give them more resources to expand.

The SBAs budget request supports President Bushs key budget goals: broad
tax relief, the greatest

debt reduction in history, protecting Social Security, and bolstering
long term economic growth. SBAs

budget also reflects key management challenges which will also be
addressed by each agency in FY

2002, including: streamlining programs to better serve small business,
moving the agency toward

performance-based contracting, making full use of the Federal Activities
Inventory Reform Act,

identifying and correcting erroneous payments, and modernizing
government.

The Administrations economic plan will benefit Americas small businesses
and compliment recent

monetary action. President Bushs tax relief program, including an across
the board reduction in the

marginal rates, will serve as a long-term catalyst of economic growth.
Since most small businesses do

not pay corporate taxes, as sole proprietors or Subchapter Ss, they are
subject to personal income tax

rates. Within SBAs account, savings from the elimination of redundant
federal subsidies will make it

possible to increase funding to some key programs as reflected in our
overall increased levels of

assistance to small business. Additional savings will be passed on to
the taxpayer.

**Presidential Initiatives:**

SBAs FY 2002 Budget Request contains two specific program initiatives
that are part of the

Presidents agenda for America. First, under the New Freedom Initiative,
SBA requests \$5 million to

provide technical assistance to help small businesses comply with the
Americans with Disabilities Act

(ADA), and hire more people with disabilities. This funding will also
help SBA increase awareness and

promote use of the Disabled Access Credit, which provides a 50 percent
tax credit on up to \$5,000 of

eligible expenses annually to help small businesses make their
facilities ADA compliant. Secondly, to

meet the Bush Administrations goal of a drug free workplace, SBA
requests \$5 million to assist small

businesses in developing policies and programs to address drug use in
the workplace. Both of these

initiatives would be funded at the level of \$5 million per year over 5
years.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

15

**BUDGET HIGHLIGHTS**

**FY 2002 Policy Proposals:**

The following key policy proposals are included in this Budget Request.
Our legislative package will

include the changes required by the Small Business Act and the Small
Business Investment Act.

· **Save taxpayers \$114.5 million **by increasing the tax deductible
user fee paid by businesses on

Section 7(a) loans *over *\$150,000. Loans smaller than this amount
account for almost 60% of all

7(a) loans and will have **no increase**. This will support a record
\$10.7 billion loan program with a

zero subsidy rate.

· **Save taxpayers \$26 million in the SBIC program **through a nominal
increase of 37.6 basis

points on the fee for investors. This reform will support a record \$3.1
billion investment program

with a zero subsidy rate.

· **Save \$123 million from the SBA budget **by restructuring disaster
relief funding to draw on a

government-wide emergency account if funds are needed, and raising the
loan rate to businesses

with no-credit elsewhere to a modest 5.4 percent. SBAs budget includes
funding for a \$300 million

loan program level, including the use of a \$37.9 million carryover from
2001. The balance of

funds to support the Disaster program if the need arises would be drawn
from the \$5.6 billion reserve

account requested in the Presidents budget. SBA will continue to meet
the needs of small

businesses and homeowners when disaster strikes, and will do so with a
more efficient loan program.

· **Streamline our programs and provide more effective services **by
moving away from

redundant and duplicative programs. By removing the Program for
Investment in Microenterprise

(PRIME) and Business Learning-Innovation-Networking and Collaboration
(BusinessLINC)

programs and reviewing other SBA program areas, SBA can focus on
providing a greater level of

service through our proven core programs. Existing SBA services will be
improved through the

elimination of programs that duplicate other federal, state, local or
private-sector services to small

business. Also, current and proposed tax incentives will provide
additional economic stimulus.

Areas where duplication is likely to hamper SBAs services include:
PRIME, BusinessLINC, New

Markets Venture Capital program and technical assistance (NMVC), as well
as earmarked

Congressional initiatives which are not included in an agencys budget
request. These reforms will

result in a higher level of service and savings of \$116 million that
can be passed on to the taxpayer.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

16

**BUDGET HIGHLIGHTS**

· **Save taxpayers \$12 million in spending on Small Business
Development Centers (SBDC)**,

while providing free and low cost counseling to small business clients.
The small business clients

served by SBDCs will receive one hour of free counseling. If additional
counseling time is desired

by the client, the SBDCs may charge approximately \$10.75 per hour,
which is well below private

sector counseling rates. Most SBDC clients are generally in a more
mature stage of development

and are therefore able to easily pay the small fee for counseling
services.

**Management Reform:**

In addition to the small business programs and services to be provided
in FY 2002, SBA will improve

and streamline the management of all operations and activities. Specific
management initiatives include:

· Continue to develop and implement new program and financial management
systems under the

Systems Modernization Initiative (SMI). These new systems will greatly
improve SBAs

oversight of its \$50 billion loan portfolio by assisting with our risk
management measures,

integrating our financial management processes to improve financial
reporting and accountability,

providing for increased client tracking to measure performance, and
using information

technology to improve services to SBAs customers and resource partners.

SBA is moving ahead with a five year plan to implement SMI. Phase I is
focused on developing

a new Loan Monitoring System. Loan system prototypes are being tested in
Spring 2001.

Phase II includes implementation of a new financial management system.
From FY 1998 to FY

2000, SBA spent approximately \$18 million on SMI projects.
Approximately \$12 million of

these costs were for planning, personnel, and infrastructure, while the
balance of \$6 million has

been for systems acquisition and integration. SBA is currently reviewing
the status of the

project and is evaluating the most effective and cost efficient way to
proceed.

For FY 2002, SBAs budget requests \$8 million in new budget authority
for project

implementation. In addition, SBA projects that there will be
approximately \$8 million from prior

appropriations that have been obligated in the FEDSIM account (will be
held until the projects

are ready for acquisition). SBA will prioritize its resources in FY 2002
to support the most

critical LMS and SMI activities. SBA will need to review its plans and
report a revised

schedule to the Congress.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

17

**BUDGET HIGHLIGHTS**

· Continue to transform our organization and streamline operations to
match our changing

workloads. SBAs need for internal transformation is based on several
external factors

including an increased level of privatization that has emerged, the
changing demographics and

geographic locale of our customers, and expanded use of technology.

Internally, we are experiencing shrinking employment levels, and will
strive to efficiently use

available human capital. A 150 employee-reduction is planned in this
budget request through

normal attrition, resulting in an overall employment reduction from FY
1990 of more than 32

percent. This was done while the loan portfolio was increasing to its
current level of more than

\$50 billion. SBA will continue to use its best efforts to serve
Americas record 25 million small

businesses.

· Continue to increase efficiency and effectiveness of operations to
manage programs and

activities with a reallocation of resources. This includes conducting
studies to evaluate further

streamlining of operations, especially in the area of loan servicing
that has been impacted by loan

asset sales, and to reduce or eliminate duplicative operations.

· Continue to sell loan assets to private investors, thereby reducing
the direct loan portfolio that

will be serviced by SBA employees. Sales will continue to occur at
regular intervals as long as

the value to the government from these sales is greater than the cost to
SBA of retaining loan

servicing.

· Continue to enhance internal control efforts through the full
implementation of the Committee of

Sponsoring Organizations of the Treadway Commission (COSO) internal
control framework.

· Continue to produce unqualified audited financial statements that are
free of material

weaknesses and compliant with the Federal Financial Management
Improvement Act (FFMIA).

In summary, our request of \$539 million represents a responsible and
responsive funding level to

appropriately serve the needs of Americas small businesses in FY 2002.
Our budget provides

sufficient funding to administer record levels of capital, credit, and
entrepreneurial development

assistance to small businesses at an overall lower cost to the taxpayer
than in FY 2001. Our budget

builds on the Presidents tax proposal and other policies to revitalize
the economy, invest in human

capital, increase customer satisfaction, and increase government
accountability.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

18

**SUMMARY OF CHANGES FROM FY 2001 TO FY 2002**

*(Dollars in Thousands)*

**Non-Credit Programs/Special Initiatives**

**FY 2001**

**Estimate**

**FY 2002**

**Request Change**

*New Freedom Initiative*:

SBA will use intermediaries to provide technical

assistance to help small businesses comply with the

Americans with Disabilities Act (ADA), serve

customers with disabilities, and hire more people with

disabilities. Funding will be used to increase small

business awareness and promote use of the Disabled

Access Credit, which provides an annual 50 percent

tax credit up to \$5,000 of eligible expenses annually

to help small businesses make their facilities ADA

compliant. This level of funding represents the first

year of a 5-year \$25 million initiative.

\$ 0 \$5,000 +\$5,000

*Paul D. Coverdell Drug-Free Workplace*

*Program:*

SBA will use intermediaries to provide technical

assistance to help small businesses develop policies

and programs to address drugs in the workplace.

This is already an authorized program at SBA.

3,500 5,000 +1,500

*Procurement Assistance Programs:*

P.L. 106-554 requires SBA to implement a number

of additional procurement initiatives, including

contract bundling and a womens procurement

certification and goaling program. These statutory

requirements include conducting research, developing

a database, and monitoring these efforts.

0 500 +500

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

19

**SUMMARY OF CHANGES FROM FY 2001 TO FY 2002**

*(Dollars in Thousands)*

**Non-Credit Programs/Special Initiatives**

**FY 2001**

**Estimate**

**FY 2002**

**Request Change**

*Veterans Business Development Corporation:*

The Corporation was established by P.L. 106-50,

the Veterans Entrepreneurship and Small Business

Development Act of 1999. Funding for this

government-chartered corporation is not included in

SBAs budget request for FY 2002, but under

separate authority in the Commerce, Justice, State,

and Related Agencies Bill.

\$ 3,992 \$ 0 \$ (3,992)

*Veterans Business Development Assistance:*

In order to implement the provisions of P.L. 106-50

relating to SBAs direct role in supporting veteranowned

small businesses, and implement the

provisions of P.L. 105-135, the SBA Reauthorization

Act of 1997, we will continue to administer our

previously-funded outreach and assistance program

to support the creation, growth, and viability of small

businesses owned by eligible veterans.

0 750 +750

*Service Corps of Retired Executives (SCORE):*

Over 11,400 business men and women volunteer

their time and talents to provide assistance in the form

of training and counseling to prospective and current

small business owners. The Federal funding covers

the cost of the SCORE national office,

reimbursement for local travel expenses, and some

minimal operational expenses. This increase covers

more of the operational costs of SCORE program

volunteers, including postage, paper, and other

incidental supplies.

3,750 4,000 +250

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

20

**SUMMARY OF CHANGES FROM FY 2001 TO FY 2002**

*(Dollars in Thousands)*

**Non-Credit Programs/Special Initiatives**

**FY 2001**

**Estimate**

**FY 2002**

**Request Change**

30,000 0 (30,000) *New Markets Venture Capital Technical*

*Assistance:*

P.L. 106-554 authorized a number of Federal

programs and initiatives to spur economic

development in areas of high unemployment or low

income, called new markets. SBAs program

included in this law was a venture capital loan

program, modeled after our existing Small Business

Investment Company program (SBIC), but with

specific targets for investments in these areas. This

program included a grant component to provide

technical assistance to firms that received investments

from the New Markets Venture Capital firms. In FY

2001, the program received a lump sum funding

which will span 5 years. The Act also included a

substantial tax incentive for investments in these New

Markets areas, which makes SBAs technical

assistance program unnecessary. The 30 percent tax

credit will provide over \$15 billion in investment in

these areas. SBAs existing SBIC program will

continue to provide small businesses with equity

capital, including those located in low and moderate

income areas.

*Program for Investment in Microenterprises*

*(PRIME):*

PRIME was authorized in 1999 to provide technical

assistance to small businesses and to the

organizations that support them. Funding was not

provided until FY 2001. Similar assistance is already

provided through existing Federal, State, local, and

private-sector programs, including SBAs Microloan

program, Small Business Development Centers, and

One-Stop Capital Shops. PRIME duplicates existing

programs and is not funded in FY 2002.

\$ 15,000 \$ 0 \$ (15,000)

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

21

**SUMMARY OF CHANGES FROM FY 2001 TO FY 2002**

*(Dollars in Thousands)*

**Non-Credit Programs/Special Initiatives**

**FY 2001**

**Estimate**

**FY 2002**

**Request Change**

*Business, Learning - Investment - Networking and*

*Collaboration (BusinesLINC):*

Also included in P.L. 106-554 was the establishment

of the BusinessLINC program, which would 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 programs also provide similar services as

the BusinessLINC program. BusinessLINC

duplicates existing programs and is not funded in FY

2002\.

7,000 0 (7,000)

*Small Business Development Centers (SBDCs):*

SBDCs provide training and counseling to small

businesses. Counseling is currently provided free-ofcharge;

however, the SBDC can charge a fee for

training. Statutory language prohibits the charging of

a fee for counseling. We propose to remove this

prohibition and encourage the SBDCs to charge a

nominal fee for counseling to those who benefit from

the program and reduce taxpayer burden. SBAs

proposed funding option will allow for an initial 1

hour of counseling to remain free-of-charge.

However, if additional counseling is needed, the client

will be charged \$10.75 per hour. The average cost

per client is estimated at approximately \$50, for an

estimated 262,000 clients annually. This fee would

reduce Federal funding for SBDCs by \$12 million

per year.

87,806 75,806 (12,000)

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

22

**SUMMARY OF CHANGES FROM FY 2001 TO FY 2002**

*(Dollars in Thousands)*

**Non-Credit Programs/Special Initiatives**

**FY 2001**

**Estimate**

**FY 2002**

**Request Change**

*Congressional Initiatives:*

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.

\$ 41,291 \$ 0 \$ (41,291)

*Other Non-Credit Programs and Initiatives:*

The remaining programs and initiatives for small

business assistance are proposed to be funded at the

same level as FY 2001.

62,844 62,844 0

**Total Non-Credit Programs/Initiatives \$255,183 \$153,900 \$
(101,283)**

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

23

**SUMMARY OF CHANGES FROM FY 2001 TO FY 2002**

*(Dollars in Thousands)*

**Operating Budget**

**FY 2001**

**Estimate**

**FY 2002**

**Request Change**

Direct Appropriation to Salaries & Expenses \$154,549 \$167,319 \$
12,770

Transfer from Business Loans1 128,716 129,000 284

Transfer from Disaster Loans2 9,854 9,854 0

Fee Income (Not Appropriation Item) 3,000 3,000 0

**Total Operating Budget \$296,119 \$309,173 \$ 13,054**

SBAs operating budget includes funds directly

appropriated to its Salaries and Expenses account,

plus transfers from the Business and Disaster Loans

Program accounts for administrative expenses. This

budget covers the cost of compensation and benefits

of our employees, excluding direct Disaster and

Inspector General staff. Costs of fixed items such as

rents, telephones, computers, postage, unemployment

compensation, and financial systems such as payroll

and accounting are included. Costs of normal

operations to support and deliver services to small

business, such as travel, supplies, and General

Services Administration (GSA) rental cars are

included.

The President requested a 3.6 percent general pay

raise in January 2002, which would increase our

compensation and benefits expense by about \$8

million in FY 2002. SBA expects to end FY 2001

with 2,860 full time employees (FTE). The estimate

for the end of FY 2002 is 2,710 FTE, as SBA plans

a staffing reduction of 150 through normal attrition.

We are also experiencing increases in other operating

costs, especially in the area of rents. The small

increase in the operating budget is needed to cover

these expected increased costs.

**Total Salaries And Expenses \$ 409,732 \$ 321,219 \$ (88,513)**

1 Included in Business Loans Total

2 Included in Disaster Loans Total

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

24

**SUMMARY OF CHANGES FROM FY 2001 TO FY 2002**

*(Dollars in Thousands)*

**Business Loans Program**

**FY 2001**

**Estimate**

**FY 2002**

**Request Change**

*Section 7(a) General Business Loans:*

SBAs largest lending program provides government

guaranties for loans made by participating lenders.

For FY 2002, we request a program level of \$10.7

billion and propose that the fees on larger loans be

increased to result in a zero subsidy rate for these

loans, requiring no new appropriations. This will shift

the cost from the general taxpayer to those who

benefit directly from the program, and decrease

SBAs dependence on Congressional funding. Fee

changes for FY 2002 would be as follows: For loans

with a term of more than 1 year in an amount less

than or equal to \$150,000, there is no change in the

current fee schedule (except for loans that mature

within one year); for loans greater than \$150,000 and

less than or equal to \$700,000, the upfront fee

increases from 3 percent to 3.5 percent and the

ongoing fee increases from .50 percent to no more

than 1 percent (SBA estimates .8875 percent); for

loans greater than \$700,000, the upfront fee

increases from 3.5 percent to 4.0 percent and the

ongoing fee increases from .50 percent to no more

than 1 percent (SBA estimates .8875 percent); for

loans with a maturity of less than 1 year, the upfront

fee increases from .25 percent to 1.0 percent.

\$ 114,707 \$ 0 \$ (114,707)

*Small Business Investment Company (SBIC)*

*Participating Securities:*

The SBIC program meets small business needs for

equity capital through partnerships with licensed

investment companies. For FY 2002, we request a

program level of \$2.5 billion and propose that the

pass-through fees from SBICs be increased from 1.0

percent to no more than 1.5% percent, to result in a

zero subsidy rate for these loans (SBA estimates

1.376 percent for FY 2002), requiring no new

appropriations.

26,142 0 (26,142)

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

25

**SUMMARY OF CHANGES FROM FY 2001 TO FY 2002**

*(Dollars in Thousands)*

**Business Loans Program**

**FY 2001**

**Estimate**

**FY 2002**

**Request Change**

*Microloans:*

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 2002, we request a direct

program level of \$20.6 million, with a reduced subsidy

rate from 8.95 percent to 6.78 percent, resulting in a

decreased need for new appropriations.

\$ 2,245 \$ 1,500 \$ (745)

*New Markets Venture Capital Debentures:*

As indicated above, P.L. 106-554 authorized a

number of Federal programs and initiatives to spur

economic development in areas of low income or

employment - new markets. In FY 2001, the

Program received lump sum funding for debentures,

which will span over 10 years. The tax incentives

provided in this law make the New Market Venture

Capital Debentures unnecessary. Therefore, no

funding is requested for FY 2002.

21,952 0 (21,952)

*Administrative Expenses *128,716 129,000 +284

**Total Business Loans Program \$293,762 \$130,500 (\$163,262)**

**Disaster Loans Program**

SBAs Disaster Loan Program provides long-term

loans at subsidized interest rates to victims of natural

disasters to enable them to recover or prevent

disaster conditions. SBAs loans cover the uninsured

losses from the disaster damage. SBAs loans are

available to homeowners, renters and businesses

affected by natural disaster.

\$ 75,972 \$ 0 \$ (75,972)

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

26

**SUMMARY OF CHANGES FROM FY 2001 TO FY 2002**

*(Dollars in Thousands)*

**Business Loans Program**

**FY 2001**

**Estimate**

**FY 2002**

**Request Change**

**Disaster Loans Program (Contd)**

For FY 2002, the Administration proposes to

establish a government-wide emergency reserve of

\$5.6 billion to cover the cost of Federal disaster

assistance. SBA would utilize this reserve fund to

cover the cost of its disaster loan program and

related administrative costs to the extent they exceed

the amount of direct appropriations to SBA. SBA

proposes a \$300 million loan program that is funded

from anticipated carryover balances from FY 2001 in

this program, and requests related administrative

costs as a direct appropriation.

In addition, we propose to increase the interest rate

for business loans to borrowers who do not have

credit available elsewhere. Presently, these loans are

capped at a 4 percent interest rate. SBAs proposal

would increase this rate to the Treasury cost of funds,

which is projected at 5.4 percent next year. A

maximum of 8 percent is also proposed to parallel the

rate of disaster business loans with credit elsewhere.

This proposal has the effect of reducing the subsidy

rate on the disaster loan program from 14.67 percent

to 10.95 percent.

*Disaster Administrative Expenses*: 108,116 75,354 (32,762)

**Total Disaster Loan Program 184,088 75,354 (108,734)**

**11,927 11,927 0 Office of the Inspector General**

**Total SBA Request \$899,5091 \$539,000 (\$360,509)**

1 Amounts in this column are net of the rescission.

27

**RESOURCES SUMMARIES**

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

28

**SUMMARY OF BUDGET AUTHORITY**

*(Dollars in Thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

Salaries and Expenses

Administrative Operating Expenses \$ 133,695 \$ 154,541 \$ 167,319 \$
12,778

Non-Credit Programs and Special Initiatives 189,105 256,094 153,900
(102,194)

Subtotal 322,800 410,635 321,219 (89,416)

Business Loans Program Account

Direct Loans New Budget Authority 0 2,250 1,500 (750)

Guaranteed Loans Budget Authority 137,800 163,160 0 (163,160)

Administrative Expense 129,000 129,000 129,000 0

Subtotal 266,800 294,410 130,500 (163,910)

Disaster Loans Program Account

Direct Loans

New Budget Authority 140,400 76,140 0 (76,140)

Supplementals, Contingencies 15,500 0 0 0

Administrative Expense

New Budget Authority 136,000 108,354 75,354 (33,000)

Supplemental Appropriation 25,400 0 0 0

Subtotal 317,300 184,494 75,354 (109,140)

Surety Bond Guarantee Fund 0 0 0 0

Office of the Inspector General 11,000 11,953 11,927 (26)

Appropriated Funds Rescinded (3,280) (1,983) 0 1,983

**Total Budget Authority \$ 914,620 \$ 899,509 \$ 539,000 \$ (360,509)**

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

29

**SUMMARY OF FINANCING**

*(Dollars in Thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

**Salaries and Expenses:**

New Budget Authority \$ 322,800 \$ 410,635 \$ 321,219 \$ (89,416)

Transfer from Business Loans Program 129,000 129,374 129,105 (269)

Transfer from Disaster Loans Program 20,000 9,854 9,854 0

Transfers from Other Agencies 11,654 5,000 1,800 (3,200)

Offsetting Collections - Fees 3,331 3,000 3,000 0

Estimated Gainsharing 0 3,000 3,000 0

Carryover from Prior Fiscal Year 4,089 2,791 0 (2,791)

Recoveries 10 0 0 0

Returned to Treasury (10,500) 0 0 0

Transfer to Other Accounts (4,248) (1,898) 0 1,898

Carryover into Next Fiscal Year (2,791) 0 0 0

Rescinded Funds Appropriated (3,185) (903) 0 903

Balance Expired (674) 0 0 0

**Total Salaries and Expenses 469,486 560,853 467,978 (92,875)**

**Business Loans Program**

New Budget Authority - Administration 129,000 129,000 129,000 0

New Budget Authority - Loan Programs 137,800 165,410 1,500 (163,910)

Transfer from Other Accounts 9,500 500 0 (500)

Carryover from Prior Fiscal Year 30,100 24,719 9,114 (15,605)

Recoveries 4,211 1,169 0 (1,169)

Transfer to Other Accounts (135,000) (129,874) (129,105) 769

Carryover into Next Fiscal Year (24,719) (9,114) (8,798) 316

Rescinded Funds Appropriated 0 (648) 0 648

Balance Expired (13,100) 0 0 0

**Total Business Loans 137,792 181,162 1,711 (179,451)**

**Disaster Loans Program**

New Budget Authority 140,400 76,140 0 (76,140)

Supplemental, Contingencies 15,500 0 0 0

Carryover from Prior Fiscal Year 81,004 96,231 37,850 (58,381)

Recoveries 33,235 10,000 0 (10,000)

Carryover into Next Fiscal Year (96,231) (37,850) 0 37,850

Transfer to Administrative Expense 0 0 (5,000) (5,000)

Rescinded Funds Appropriated 0 (168) 0 168

Subtotal - Disaster Loans Program 173,908 144,353 32,850 (111,503)

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

30

**SUMMARY OF FINANCING**

*(Dollars in Thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

**Disaster Loans Program - Administration**

New Budget Authority \$ 136,000 \$ 108,354 \$ 75,354 \$ (33,000)

Supplemental, Contingencies 25,400 0 0 0

Carryover from Prior Fiscal Year 779 27,307 0 (27,307)

Transfer from Loan Subsidy 0 0 5,000 5,000

Recoveries 1,128 0 0 0

Carryover into Next Fiscal Year (27,307) 0 0 0

Transfer to Salaries and Expenses (20,000) (9,854) (9,854) 0

Transfer to Inspector General (500) (500) (500) 0

Rescinded Funds Appropriated (2,048) (238) 0 238

Subtotal - Disaster Administration 113,452 125,069 70,000 (55,069)

**Total - Disaster Assistance Program 287,360 269,422 102,850
(166,572)**

**Surety Bond Guarantee Fund 0 0 0 0**

**Office of the Inspector General**

New Budget Authority 11,000 11,953 11,927 (26)

Carryover from Prior Fiscal Year 482 515 0 (515)

Transfer from Disaster 500 500 500 0

Recoveries 96 0 0 0

Balance Expired (130) 0 0 0

Carryover into Next Fiscal Year (515) 0 0 0

Rescinded Funds Appropriated (95) (26) 0 26

**Total Inspector General 11,338 12,942 12,427 (515)**

**Total Financing \$ 905,976 \$ 1,024,379 \$ 584,966 \$ (439,413)**

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

31

**SUMMARY OF POSTIONS AND FULL TIME EQUIVALENTS**

*(Dollars in Thousands)*

**ON BOARD POSITIONS**

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

Salaries and Expenses - Regular Funds 2,807 2,760 2,610 (150)

Non Credit Programs and Initiatives 134 100 100 0

Subtotal 2,941 2,860 2,710 (150)

Disaster 1,168 1,164 9321 (232)

Inspector General 112 125 125 0

Total 4,221 4,149 3,767 (382)

**FULL TIME EQUIVALENTS (FTE)**

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

Salaries and Expenses - Regular Funds 2,869 2,788 2,688 (100)

Non Credit Programs and Initiatives 141 94 100 6

Subtotal 3,010 2,882 2,788 (94)

Disaster 1,137 1,137 1,0481 (89)

Inspector General 115 119 119 0

Total 4,262 4,138 3,955 (183)

1 For FY 2002, this assumes additional funding from the government-wide
Disaster Reserve to maintain approximately the same level

of staffing throughout the year.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

32

**SUMMARY OF NON CREDIT PROGRAMS & SPECIAL INITIATIVES1**

*(Dollars in Thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

**Executive Direction**

Advocacy Database and Analysis \$ 1,140 \$ 1,300 \$ 1,100 \$ (200)

National Ombudsman 514 500 500 0

New Freedom Initiative 0 0 5,000 5,000

Veterans Business Development Assistance 615 0 750 750

Veterans Business Development 0 3,992 0 (3,992)

National Women\'s Business Council 600 750 750 0

**Management & Administration**

Systems Modernization 10,067 8,000 8,000 0

Workforce Transformation 0 2,000 2,000 0

**Government Contracting/Business Development**

7(j) Technical Assistance 3,950 3,600 3,600 0

BusinessLINC 0 7,000 0 (7,000)

PRO-Net 454 500 500 0

Small Disadvantaged Businesses 8,643 1,800 1,800 0

SBIR Technical Assistance 496 1,500 1,500 0

SBIR  FAST 0 3,500 3,500 0

HUBZones Program 1,978 2,000 2,000 0

Procurement Assistance Programs 0 0 500 500

**Entrepreneurial Development**

Small Business Development Centers (SBDC) 84,074 88,013 75,806 (12,207)

Drug-Free Workplace 3,469 3,500 5,000 1,500

Service Corps of Retires Executives (SCORE) 3,471 3,750 4,000 250

Business Information Centers 495 500 500 0

Women\'s Business Centers 8,926 12,000 12,000 0

Survey of Women-Owned Businesses 783 694 694 0

One Stop Capital Shops 3,206 3,100 3,100 0

**Capital Access**

US Export Assistance Centers 3,065 3,100 3,100 0

Microloan Technical Assistance 19,243 20,260 20,000 (260)

PRIME Technical Assistance 0 15,000 0 (15,000)

New Market Venture Capital Tech Assistance 0 30,000 0 (30,000)

Gainsharing Improvements 0 3,000 3,000 0

**Reimbursable Programs **2,722 3,668 105 (3,563)

**Congressional Initiatives **27,749 41,291 0 (41,291)

Total **\$ 185,660 \$ 264,318 \$ 158,805 \$ (105,513)**

1 Includes amounts carried forward from the prior fiscal year.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

33

**SUMMARY OF CONGRESSIONAL INITIATIVES**

*(Dollars in Thousands)*

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

**Congressional Initiatives:**

NTTC @ Wheeling Jesuit University \$ 2,312 \$ 2,458 \$ 0 \$ (2,458)

Western Carolina University 1,850 590 0 (590)

State University of NY-Inst of Entrep 925 1,475 0 (1,475)

New York-Bronx Museum 2,775 2,458 0 (2,458)

Long Island Bay Shore Aquarium 185 983 0 (983)

Promesa Enterprises-Bronx, NY 0 1,966 0 (1,966)

NY City Parks & Rec.-Bronx, NY 0 492 0 (492)

NY Public Library-Bronx, NY 0 492 0 (492)

Hazard, KY-Center for Rural Law Enf 2,312 0 0 0

Pike Cty, KY Interpretive Dev, Init 0 492 0 (492)

Somerset, KY-Center for Rural Dev 0 4,915 0 (4,915)

Paintsville, KY-Regional Arts & Tourism 0 1,966 0 (1,966)

Prestonburg, KY-Regional Arts and Tourism 1,758 0 0 0

South KY-Economic Development Corp. 925 4,915 0 (4,915)

Pikeville College, KY-Telemed Lrn & Res 925 0 0 0

Union College, KY-Tech. & Media Center 0 1,473 0 (1,473)

Pulaski Cty, KY-Emergency Training Center 0 1,278 0 (1,278)

Nicholas Cty, KY-Industrial. Authority 0 344 0 (344)

Mont. Cty, KY-Ed & Train Facility 0 344 0 (344)

Oakridge, TN-Tech & Econ Dev 0 983 0 (983)

Safer Foundation 0 983 0 (983)

Somerset Community College 7,909 0 0 0

Vandalia Heritage Foundation 185 197 0 (197)

Museum of Science & Industry 0 786 0 (786)

Moundsville, WV-Economic Dev Council 462 492 0 (492)

Johnstown, PA-Regional Industries Ctr. 0 246 0 (246)

Johnstown, PA-Regional Industries Ctr. 231 246 0 (246)

Buckhorn Childrens\' Foundation 0 590 0 (590)

Miami-Dade Community College 139 0 0 0

Soundview Comm Action-Bronx, NY 694 983 0 (983)

East LA Community Union 0 983 0 (983)

Maywood, CA-Operation Hope 925 0 0 0

Illinois Coalition 1,850 0 0 0

Illinois Dept. of Commerce 462 0 0 0

Durant, OK.-Rural Enterprises 185 197 0 (197)

OK-Dept. of Career & Technical Education 0 492 0 (492)

City of Chicago-Tech Based Bus Growth 462 0 0 0

Greenpoint Mfg & Design Center 0 983 0 (983)

Old Sturbridge Village-Arts & Tourism 0 197 0 (197)

N.VA-Business Asst. Dev. Group 0 246 0 (246)

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

AZ-Dept. of Public Safety 0 885 0 (885)

Gadsden State College-Ctr for Econ Dev 0 246 0 (246)

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

Electronic Commerce Center, Scranton, PA 0 983 0 (983)

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

Western, MA.-Enterprsie Fund 278 0 0 0

Total Congressional Initiatives \$ 27,749 \$ 41,291 \$ 0 \$ (41,291)

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

34

**SUMMARY OF CREDIT PROGRAMS**

*(Dollars in Thousands)*

**Program Level Budget Authority1 Subsidy Rate**

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

**FY 2000 FY 2001 FY 2002 vs FY 2001 FY 2000 FY 2001 FY 2002 vs FY 2001
FY 2000 FY 2001 FY 2002 vs FY 2001**

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

Microloan Direct \$ 27,204 \$ 25,531 \$ 20,575 \$

(4,956)

\$ 2,323 \$ 2,285 \$ 1,395 \$ (890) 8.54% 8.95% 6.78% (2.17)%

Total Direct 27,204 25,531 20,575 (4,956) 2,323 2,285 1,395 (890) 8.54%
8.95% 6.78% (2.17)%

Guaranty

Section 7(a) Guaranty \$ 9,679,569 \$11,008,547 \$10,700,000 \$

(308,547)

\$112,283 \$128,800 \$ 0

\$(128,800)

1.16% 1.17%2 0.00% (1.17)%

Section 7(a) Guaranty - DELTA 15,552 20,000 20,000 0 285 374 132 (242)
1.83% 1.87% 0.66% (1.21)%

Section 7(a) Y2K Loans 2,704 0 0 0 110 0 0 0 4.07% N/A N/A 0.00%

Section 504 CDC Guaranty 1,808,649 3,750,000 3,750,000 0 0 0 0 0 0.00%
0.00% 0.00% 0.00%

Section 504 CDC Guaranty -

DELTA

257 2,472 2,500 28 3 22 21 (1) 1.13% 0.89% 0.84% (0.05)%

Microloan - Guaranty 1,150 2,000 2,000 0 96 159 163 4 8.32% 7.95% 8.17%
0.22%

New Market Venture Capital 0 152,022 0 (152,022) 0 21,952 0 (21,952)
15.00% 14.44% 14.47% 0.03%

SBIC  Participating Securities 1,260,630 2,104,580 2,500,000 395,420
22,692 27,570 0 (27,570) 1.80% 1.31% 0.00% (1.31)%

SBIC - Debentures 384,955 500,000 600,000 100,000 0 0 0 0 0.00% 0.00%
0.00% 0.00%

Total - Guaranty \$13,153,466 \$17,539,621 \$17,574,500 \$

34,879

\$ 135,469 \$ 178,877 \$ 316

\$(178,561)

Total Business \$13,180,670 \$17,565,152 \$17,595,075 \$ 29,923 \$
137,792 \$ 181,162 \$ 1,711

\$(179,451)

Disaster \$ 783,369 \$ 826,764 \$ 300,000 \$

(526,764)

\$ 173,908 \$ 144,353 \$ 32,850

\$(111,503)

22.20% 17.46% 10.95% (6.51)%

Surety Bond Guarantee \$ 1,672,000 \$ 1,672,000 \$

1,672,000

\$

0

\$ 0 \$

0

\$ 0 \$ 0 N/A N/A N/A N/A

1 Includes effects of carryover balances, transfers, recoveries, and
rescissions.

2 Reflects a blended rate; 1.24% from 10/1-12/21, 1.16 from 12/21 to
9/30.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

35

**JUSTIFICATION OF CHANGES FROM FY 2001 TO FY 2002 BY OBJECT CLASS**

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

*(Dollars in Thousands)*

**Increase/(Decrease)**

**FY 2000 Actual FY 2001 Estimate FY 2002 Request vs FY 2001 Estimate**

**Positions Amount Positions Amount Positions Amount Positions Amount**

**Salaries and Expenses1**

Compensation & Benefits 2,807 \$ 217,423 2,760 \$ 226,633 2,610 \$
234,452 (150) \$ 7,819

Travel 0 5,964 0 6,960 0 6,960 0 0

Rents & Communication 0 31,869 0 31,660 0 33,911 0 2,251

Postage and Printing 0 1,519 0 3,125 0 3,125 0 0

Other Services 0 27,050 0 28,157 0 30,725 0 2,568

Subtotal 2,807 283,826 2,760 296,535 2,610 309,173 (150) 12,638

**Non-Credit Programs & Special Initiatives **134 185,660 100 264,318
100 158,805 0 (105,513)

Total 2,941 \$ 469,486 2,860 \$ 560,853 2,710 \$ 467,978 (150) \$
(92,875)

**FY 2002 Increase/(Decrease) vs FY 2001 Estimate**

Compensation & Benefits: Includes a 3.6 percent general pay increase in
January 2002 and annualization impact of the FY 2001 general pay
increase, and

the pay increases from within grades and promotions, offset by
decreasing on board positions by 150 personnel throughout

the year.

Rents and Communication Includes a General Services Administration
estimated rent increase - \$2.251 million.

Other Services Reflects a minimal increase to cover anticipated
inflationary increases in all areas of operations not specifically
defined at this

time, such as travel, printing, transit benefits, etc. Also includes
\$1.5 million for the Asset Sales Program Financial Advisor.

1 Includes the effects of carryover balances, transfers, and
rescissions.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

36

**SUMMARY BY PROGRAM OFFICE**

*(Dollars in thousands)*

Increase (Decrease)

FY 2000 Actual1 FY 2001 Estimate2 FY 2002 Request vs. FY 2001 Estimate

Positions Amount Positions Amount Positions Amount Positions Amount

**Operating Budget (excluding**

Executive Direction

Administrator 28 \$ 3,003 18 \$ 3,462 18 \$ 3,573 0 \$ 111

Disability Initiative 0 0 2 425 2 431 0 6

General Counsel 71 6,632 74 7,958 74 8,238 0 280

Congressional and Legislative 11 963 9 1,042 9 1,081 0 39

Hearings and Appeals 11 1,058 11 1,078 11 1,117 0 39

Communications and Public 21 2,650 22 2,382 22 2,447 0 65

Field Operations 10 2,262 6 1,265 6 1,292 0 27

EEO and Civil Rights Compliance 19 1,941 19 1,682 19 1,739 0 57

Advocacy 43 4,480 41 4,393 41 4,547 0 154

Veterans Business Development 5 513 5 793 5 562 0 (231)

Chief Financial Officer 82 8,733 82 8,864 82 9,113 0 249

Subtotal 301 \$ 32,235 289 \$ 33,344 289 \$ 34,140 0 \$ 796

Management and Administration

Immediate Office 4 587 9 399 9 413 0 14

Human Resources 55 4,491 58 4,678 58 4,829 0 151

Administration 48 7,389 49 6,877 49 7,000 0 123

Chief Information Officer 54 17,149 56 17,224 56 17,411 0 187

Subtotal 161 \$ 29,616 172 \$ 29,178 172 \$ 29,653 0 \$ 475

Government Contracting/Business Development3

Immediate Office 4 389 5 390 5 401 0 11

Operations & Program Support 0 0 12 955 12 991 0 36

Planning & Policy Liaison 12 1,633 15 1,704 15 1,766 0 62

Business Development 28 3,260 57 3,396 57 3,522 0 126

1 FY 2000 represents actual obligations and on-board staff as of
9/30/00.

2 FY 2001 and FY 2002 represent estimated obligations. Staffing for FY
2001 and FY 2002 represent on-board count as of 1/31/01.

3 This office was re-organized effective October 1, 2000, which impacted
the alignment of staffing and distorts a comparison between FY 2000 and
FY 2001. In FY 2001, the 57 positions

shown for the Office of Business Development includes 14 Small
Disadvantaged Businesses (SDB) positions which are funded under the
Economy Act.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

37

Government Contracting 154 13,294 152 13,481 152 13,978 0 497

Subtotal 198 \$ 18,576 241 \$ 19,926 241 \$ 20,658 0 \$ 732

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

38

**SUMMARY BY PROGRAM OFFICE**

*(Dollars in thousands)*

Increase (Decrease)

FY 2000 Actual1 FY 2001 Estimate2 FY 2002 Request vs. FY 2001 Estimate

Positions Amount Positions Amount Positions Amount Positions Amount

Capital Access

Immediate Office 7 \$ 821 5 \$ 843 5 \$ 870 0 \$ 27

Lender Oversight 0 554 3 1,004 3 1,015 0 11

Financial Assistance 153 11,527 157 11,199 157 11,578 0 379

Asset Sales (Program Financial Advisor) 0 0 0 0 0 1,500 0 1,500

Investment Division 89 7,714 90 8,611 90 8,909 0 298

Surety Guarantees 14 1,177 13 1,221 13 1,261 0 40

International Trade 12 2,598 10 921 10 949 0 28

275 \$ 24,391 278 \$ 23,799 278 \$ 26,082 0 \$ 2,283

Entrepreneurial Development

Immediate Office 9 \$ 1,478 6 \$ 1,056 6 \$ 1,087 0 \$ 31

Small Business Development Centers 16 1,743 16 1,578 16 1,631 0 53

Business Initiatives 11 2,158 13 1,082 13 1,121 0 39

Native American Affairs 2 381 1 662 1 129 0 (533)

Women\'s Business Ownership 11 940 9 1,025 9 1,059 0 34

49 \$ 6,700 45 \$ 5,403 45 \$ 5,027 0 \$ (376)

Regional and District Offices 1,823 136,099 1,787 141,289 1,787 147,383
0 6,094

Agency-wide (not distributed)3 0 36,209 (47) 43,596 (197) 46,230 (150)
2,634

Subtotal - Operating Budget 2,807 \$ 283,826 2,760 \$ 296,535 2,610 \$
309,173 (150) \$ 12,638

Non-Credit Programs & Special Initiatives 134 185,660 100 264,318 100
158,805 0 (105,513)

**Total Salaries and Expenses 2,941 \$ 469,486 2,860 \$ 560,853 2,710 \$
467,978 (150) \$ (92,875)**

**Disaster Direct Program**

Loan Making 916 \$ 83,929 927 \$ 91,013 695 \$ 40,000 (232) \$ (51,013)

Loan Servicing 252 29,523 237 34,056 237 30,000 0 (4,056)

**Total Disaster Direct Program 1,168 \$ 1,164 \$ 932 \$ (232) \$**

**Inspector General 112 \$ 125 \$ 125 \$ 0 \$ (515)**

**Grand Total 4,221 \$ 4,149 \$ 3,767 \$ (382) \$**

1 FY 2000 represents actual obligations and on-board staff as of
9/30/00.

2 FY 2001 and FY 2002 represent estimated obligations. Staffing for FY
2001 and FY 2002 represent on-board count as of 1/31/01.

3 Agency-wide costs include staffing adjustments that have not yet been
determined.

39

**BUDGET CROSSWALK**

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

40

**BUDGET CROSSWALK**

The budget crosswalk table on Page 39 illustrates the estimated
resources that would be devoted to

achieving each of SBAs goals in FY 2002. The table shows the
relationship between an organizationbased

budget and cross-cutting goals. A budget structured around
organizational units ensures financial

and performance accountability which reflects the way we manage
ourselves. However, the 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 must be
allocated to each goal.

For example, the cost of providing access to capital includes the
funding for the Office of Capital

Access and a portion of all the support offices, such as Regional and
District Offices and General

Counsel. The crosswalk presented on Page 39 uses 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s 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 estimated resources that

will be consumed by these offices and programs are in the next three
columns. The loan subsidy column

shows the amount of budget authority used to subsidize loans.

The next four columns detail an estimate of the allocation of costs for
support offices. The column

entitled Field allocates the cost of SBAs Regional and District Offices.
The Executive Direction1

column includes the cost of offices such as the Administrators office,
the Office of General Counsel, the

EEO Office, the Office of Hearings and Appeals, and the Office of the
Chief Financial Officer. The

Management and Administration column includes the Office of
Administration, the Office of Human

Resources, and the Office of the Chief Information Officer. The
Agency-wide column includes rent,

telecommunications, relocation expenses, centralized training, credit
reports, and centralized printing.

**Cost Allocation Methodology**

The estimated allocation of FY 2002 resources presented in the crosswalk
is based on the results of the

SBAs FY 2000 cost allocation study. The SBAs cost allocation model
provides an estimate of the

resources required 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.

1 Executive Direction does not include offices that report directly to
the Administrator but provide direct services such as the Disability

Related Business Initiatives and the Office of Veterans Business
Development. These offices are listed under the appropriate goal

in the first column.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

41

**BUDGET CROSSWALK**

An activity is a process that converts resources (materials, labor, and
technology) into outputs. For FY

2000 the SBA identified over 520 key activities performed by program and
support offices. Agencywide

costs such as rent and telecommunications expenses are allocated to
activities based upon

formulas such as the cost of space occupied by program offices.

Personnel costs are assigned to specific activities through the use of a
survey. SBA employees are

asked in an online survey to estimate the amount of time that they spend
on over 520 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 2000 survey was completed in
October 2000. To improve

the accuracy of the estimate, the SBA will conduct two surveys in FY
2001.

The FY 2002 estimate assumes that the relative level of effort devoted
to each goal by supporting

offices in FY 2002 will be the same as that provided in FY 2000. For
example, if the Office of the

Chief Financial Officer (OCFO) devoted 1.45 percent of its effort toward
the microlender program in

FY 2000, it is assumed the OCFO will continue to devote 1.45 percent of
its effort toward that output

in FY 2002. For many offices the nature of the work performed dictates
that this assumption will hold

true over the years. However, we recognize that this assumption may
require adjustments as SBAs

priorities are redefined with the new Administration. Even taking into
consideration this assumption, the

crosswalk provides a useful benchmark for analysis of how the SBA
allocates its resources at the

present time.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

42

**BUDGET CROSSWALK**

***(Dollars in Thousands)***

**Operating Special Loan Exec Agency**

**Program Initiative Grants Subsidy M&A Field Dir Wide Total**

**1. Help Small Businesses Succeed**

Obj 1 Act as a Voice for Americas Small Businesses

Advocacy \$ 4,547 \$ 303 \$ 1 \$ 258 \$ 442 \$ 5,551

Advocacy Database 1,100 179 1 120 256 1,656

Ombudsman 500 234 63 430 255 1,482

Subtotal 4,547 1,600 0 0 716 65 808 953 8,689

Obj 2. Improve Access to Capital and Credit

Office of Capital Access

Loan Making: 7(a) and 504 2,131 211 4,669 48,986 3,806 10,703 70,506

Loan Servicing: 7(a) and 504 8,498 7,274 22,838 3,368 5,692 47,670

Lender Oversight 1,189 512 4,050 444 1,027 7,222

Asset Sales 601 606 2,629 722 679 5,237

Microloans: Direct and Guaranty 522 1,500 768 678 589 365 4,422

Microloan Technical Assistance 20,000 20,000

SBIC Participating and Debentures 9,083 1,403 36 1,866 1,354 13,742

Surety Bond Guarantees 1,435 861 1,326 392 719 4,733

US Export Assistance Centers 3,100 3,100

International Trade 1,123 387 1 316 219 2,046

Subtotal 24,582 3,100 20,000 1,711 16,480 80,544 11,503 20,758 178,678

Obj 3. Improve Access to Procurement Opportunities

Government Contracting/Business Development

Government Contracting 14,326 1,073 1,266 1,509 1,338 19,512

Women\'s Procurement Program 500 61 232 130 117 1,040

Procurement Policy 1,388 355 75 683 296 2,797

SBIR Technical Assistance 1,074 1,500 218 324 300 190 3,606

SBIR FAST 3,500 3,500

Pro-Net 500 239 1,654 318 439 3,150

8(a) Business Development Program 3,870 1,738 20,170 1,004 3,897 30,679

7(j) Technical Assistance 3,600 304 468 502 282 5,156

Small Disadvantaged Business 1,800 1,800

HUBZones Program 2,000 434 1,961 524 667 5,586

Subtotal 20,658 4,800 8,600 0 4,422 26,150 4,970 7,226 76,826

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

43

**BUDGET CROSSWALK**

***(Dollars in Thousands)***

**Operating Special Loan Exec Agency**

**Program Initiative Grants Subsidy M&A Field Dir Wide Total**

Obj 4. Provide and Improve Access to Entrepreneurial Development.
Assistance

Entrepreneurial Development

Small Business Development Centers 1,993 75,806 498 6,018 436 1,312
86,063

Drug Free Workplace 371 5,000 5,371

SCORE Programs 371 4,000 428 6,000 368 3,175 14,342

One Stop Capital Shops 371 3,100 365 5,159 346 1,038 10,379

Business Information Centers 371 500 479 7,706 419 2,089 11,564

Women\'s Business Centers 1,421 12,000 441 2,987 388 743 17,980

Native American Affairs 129 235 414 306 227 1,311

Small Business Classroom/Other 789 1,144 1,050 586 3,569

Commerce Reimbursement 694 694

National Women\'s Business Council 750 7 0 12 40 809

Office of Veteran\'s Business Development 562 750 193 1,072 310 303
3,190

Disability Initiative 431 87 0 114 56 688

New Freedom Initiative 5,000 5,000

Subtotal 6,020 10,044 97,556 0 3,522 30,500 3,749 9,569 160,960

**2. Help Families and Businesses Recover From Disasters**

Disaster Assistance Programs 70,000 32,850 0 10,094 5,419 5,294 123,657

Subtotal 70,000 0 0 32,850 0 10,094 5,419 5,294 123,657

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

44

**BUDGET CROSSWALK**

***(Dollars in Thousands)***

**Operating Special Loan Exec Agency**

**Program Initiative Grants Subsidy M&A Field Dir Wide Total**

**3. Improve SBA Management**

Obj 1. Manage For Results

Obj 2. Transform the Workforce

Workforce Transformation 2,000 2,000

Obj 3. Modernize Information Systems

Systems Modernization 8,000 3,862 28 1,804 688 14,382

Obj 4. Improve Financial Management

Obj 5. Improve Credit Program Management

Gainsharing Improvements 3,000 3,000

Financial Advisor Asset Sales 1,500 0 1,500

Obj 6. Create Electronic Government 0

Subtotal 1,500 13,000 0 0 3,862 28 1,804 688 20,882

Reimbursable Programs 105 105

Inspector General 12,427 651 2 347 1,742 15,169

**Total \$ 139,734 \$ 32,649 \$ 126,156 \$ 34,561 \$ 29,653 \$ 147,383
\$ 28,600 \$ 46,230 \$ 584,966**

45

**GOALS AND RESOURCES**

SBA is committed to performance management. SBA will conduct a major
review of the current

performance plan to ensure that it will promote President Bushs agenda.
After the SBA Administrator

is confirmed and has approved a new performance plan, SBA will submit it
to the Congress. The

revised performance plan will meet all requirements of the Government
Performance and Results Act.

The data presented in the following section should be viewed as the
baseline from which the new

Administrator will start the review of the performance plan.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

46

**GOAL 1: HELP SMALL BUSINESSES SUCCEED**

SBA helps small businesses overcome critical challenges that lie in
their path to success. Small

businesses need technical assistance to develop business plans and
manage finances, access to capital to

finance their plans, fair opportunities for procurement in the Federal
marketplace, and a voice within the

Government to ensure that regulations do not overwhelm them. SBA
assistance is focused around four

primary objectives.

Objective 1: *Act as a Voice for Americas small businesses*. We achieve
this objective primarily

through the work of the Office of Advocacy and the National Ombudsman.
The

objective is also supported through Agency efforts to represent small
businesses at the

National Policy level and through cross agency Internet tools.

Objective 2: *Improve access to capital and credit. *We achieve this
objective through the

coordinated efforts of field offices, Office of Capital Access, and SBAs
lending

partners.

Objective 3: *Increase access to procurement opportunities*. We achieve
this objective by

working with Federal agencies to create innovative strategies and
programs that reach

the small business community, identify procurement opportunities, and
provide technical

assistance and training.

Objective 4: *Provide access to entrepreneurial development assistance*.
We achieve this

objective by managing a large network of business resource partners and
electronic

access points. Through our resource partners, we annually provide
substantial

assistance to more than 1 million small businesses.

Regional and District Offices play a key role in achieving SBA business
assistance objectives. These

offices coordinate the delivery of SBAs programs to the customer and
ensure that every customer has

access to the full range of SBA services. Aggressive marketing efforts
ensure that customers are aware

of the services offered. An estimate of the cost of Regional and
District office support for each

objective is listed in each objectives resource table.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

47

**Objective 1: Act as a Voice for Americas Small Businesses**

As a voice for small business, we function as a two-way information
conduit. We reach out to small

businesses to gauge their needs. We raise small business concerns to the
highest levels of this

Government, and act as an advocate in legislative and regulatory areas
to break down barriers to

success.

Congress established the Office of Advocacy to be an independent voice
for small business in the

formulation of public policy across the entire Federal Government. The
Office of Advocacy focuses on

research on small business trends, characteristics, and contributions to
the economy and monitors

compliance with the Regulatory Flexibility Act. The Office of the
National Ombudsman addresses

specific regulatory enforcement and compliance concerns identified by
small businesses in their

interactions with Federal agencies, with the goal of ensuring equity and
fairness. The National

Ombudsman and the 50 Regulatory Fairness Board Members reach out to
small businesses and listen

to and address their concerns in cooperation with more than 38 Federal
agencies.

Through its nationwide advisory committees, SBA has created a systematic
process for eliciting citizens

advice, ideas, and opinions on small business issues and SBA programs.
Additionally, the committees

serve as links to local business and can measure the effectiveness and
need for current and proposed

SBA programs. SBA recognizes that advisory committees represent a
valuable resource that improves

the Agencys decision-making process by broadening its base of knowledge
on small business issues.

**PERFORMANCE INDICATORS AND RESOURCES REQUESTED**

*(Dollars in Thousands)*

**FY 1998 FY 1999 FY 2000 FY 2001 FY 2002**

**Actual Actual Actual Estimate Projected**

**Performance Indicators**

Regulatory cost savings to small

businesses

\$ 1.5B \$ 4.3B \$ 3.6B TBD TBD

**Resources (\$000)**

Office of Advocacy \$ 4,079 \$ 4,334 \$ 4,480 \$ 4,393 \$ 4,547

Advocacy Database & Research 790 800 1,140 1,300 1,100

National Ombudsman 351 524 514 500 500

Subtotal 5,220 5,658 6,134 6,193 6,147

Agency Support Cost Estimates:

Regional & District Offices (Field N/A N/A 60 62 65

Executive Direction N/A N/A 769 783 808

Management & Admin Support N/A N/A 714 704 716

Agencywide Costs (Rent, Telecom, etc.) N/A N/A 746 899 953

Subtotal 2,289 2,448 2,542

Total \$ 8,423 \$ 8,641 \$ 8,689

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

48

**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 requires close
collaboration with major Federal

regulatory agencies. In all, the Office of Advocacy monitors the
regulatory proposals of approximately

20 regulatory agencies, as well as Administration and Congressional
initiatives.

The Office of Advocacy is unique within the Federal Government, in its
mandate is to speak up for small

business, conduct research and reduce the costs of regulation to small
business. Advocacy completed

work on five panels, three at the Environmental Protection Agency and
Occupational Safety and Health

Administration.

**External Factors**

A critical success factor for the Office of Advocacy is continued
Congressional and stakeholder support

and sufficient resources to carry out an appropriate research agenda. A
critical success factor for the

Office of the National Ombudsman is the continued support of small
business by participating in

hearings and providing documentation of Government enforcement
practices. Other critical success

factors include:

· Using technology to elicit and receive input from small businesses

· Establishing working relationships with Federal agencies to assist
small businesses

· Maintaining independence to ensure the ability to speak out

**Objective 2: Improve Access to Capital and Credit**

Small businesses cite inadequate access to capital and credit on
reasonable terms as a serious

impediment to start-up and growth. SBA improves access to capital for
entrepreneurs who cannot

obtain it from conventional lenders and in this sense is a gap lender.
Our job then is to facilitate - not to

compete with - conventional lenders and traditional providers of equity
capital to help meet the needs of

entrepreneurs. As the nations preeminent gap lender for small business,
SBA identifies and helps to fill

the credit gap in the commercial marketplace.

SBA measures its performance by the amount of credit and capital
provided by the loan and equity

programs and by the diversity of the clients served. Success in meeting
the measures identified below

helps to ensure that credit and capital are available to all small
businesses.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

49

**PERFORMANCE INDICATORS AND RESOURCES REQUESTED**

*(Dollars in Thousands)*

**FY 1998 FY 1999 FY 2000 FY 2001 FY 2002**

**Actual Actual Actual Estimated Projected**

**Performance Indicators**

Jobs created by SBA borrowers 422,997 494,822 541,539 542,000 542,000

7(a), 504, Microloans and SBIC programs \$14.0B \$16.4B \$18.0B \$19.7B
\$20.4B

Number of 7(a) and 504 loans

To Women-owned firms

To Minority-owned firms

To Veteran-owned firms

11,084

10,897

5,915

10,244

12,127

5,477

9,921

12,120

5,215

10,000

12,300

5,300

10,500

12,000

5,300

Number of Start-up firms financed by 7(a), 17,344 16,600 16,600 16,700
17,000

Export Sales assisted by SBA \$413M \$349M \$675M \$537 M \$537 M

**Resources (\$000)**

Capital Access Operating Expenses \$ 19,002 \$ 20,943 \$ 24,391 \$
23,799 \$ 26,082

Special Initiatives

USEAC 2,831 3,100 3,065 3,100 3,100

Microloan Technical Assistance 14,094 19,148 19,243 20,260 20,000

PRIME Technical Assistance 0 0 0 15,000 0

New Market Venture Capital 0 0 0 30,000 0

Loan Subsidies

7(a) General Business 182,435 131,648 112,283 128,800 0

New Market Venture Capital 0 0 0 21,952 0

SBIC Participating Securities 15,471 22,232 22,692 28,070 0

SBIC Debentures 8,955 4,858 0 0 0

Microloan Guaranty 298 92 96 159 163

Microloan Direct 1,111 1,369 2,323 2,285 1,395

Subtotal 244,197 203,390 184,093 273,425 50,740

Agency Support Cost Estimates

Regional & District Offices (Field Support) N/A N/A 74,378 77,214 80,544

Executive Direction Support N/A N/A 10,956 11,155 11,503

Management & Admin Support N/A N/A 16,460 16,218 16,480

Agencywide Costs (Rent, Telecom, etc.) N/A N/A 16,262 19,576 20,758

Subtotal 118,056 124,163 129,285

Total \$ 302,149 \$ 397,588 \$ 180,025

**Programs**

SBA offers general business loan guaranties, equity financing, and
surety bond guarantees through five

umbrella programs.

· General Business Guaranty Loan Program 7(a), including export loans
and trade finance

· Certified Development Company (CDC) or 504 Program

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

50

· Microloan Program

· Small Business Investment Company (SBIC) Program

· Surety Bond Guarantee Program

SBA delivers financial assistance programs through a network of field
offices and lending partners.

These partners provide direct service and 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. The Office of Financial Assistance,
located in Washington, DC, is

responsible for providing overall direction for the administration of
these programs.

The 7(a) Loan Guaranty Program is SBAs primary business loan program.
SBA guarantees up to \$1

million of a \$2 million maximum private-sector loan to small businesses
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 guaranty cap of \$1
million. The only exceptions to

these limits are for loans approved under the Export Working Capital
Program loans (which receive a

guaranty of up to 90 percent), and the Defense Loan and Technical
Assistance (DELTA) Loan

program. SBA has a number of options under the 7(a) Program to help fill
the special needs of small

businesses. Some of these specialized 7(a) loans include: LowDoc, SBA
Express, CAPLines,

Community Express, the Prequalification Loan Program, Community
Adjustment and Investment

Program (CAIP), and the International Trade Loan Program. These
specialized programs provide

streamlined processes and special products tailored to fit the specific
needs of a diverse array of small

businesses and lenders.

The 504 Certified Development Company (CDC) Program provides small
businesses with long-term,

fixed-rate financing for the purchase of land, buildings and long-life
capital equipment. The program is

designed to enable small businesses to create and retain jobs in their
areas and to meet other legislatively

mandated public policy purposes.

A CDC is generally a nonprofit corporation that is set up to contribute
to the economic development of

its community or region. SBA fully guarantees (100 percent) debentures
issued by the CDC for up to

40 percent of the project cost up to \$1.0 million or \$1.3 million for
projects that meet specific public

policy purposes.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

51

The Office of Lender Oversight (OLO) was created within the Office of
Capital Access in FY 2000 to

ensure consistent and appropriate supervision of SBAs lending partners.
The responsibilities of the

OLO includes evaluating existing oversight regulations, policies and
procedures, monitoring changes in

accounting, banking and financial industries, and recommending
appropriate modification of SBA

oversight policy. The OLO is also responsible for coordinating all
Headquarters and Field office

activities with respect to lender reviews; evaluating new programs, and
recommending changes to

existing programs to assess risk potential.

The Microloan program provides capital to very small businesses that
traditional lenders are often

unable to serve. 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 largely due to

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 to

enhance their chances for success.

The United States Export Assistance Centers (USEAC) program promotes
small businesses ability to

succeed in the global economy. The USEAC program promotes globalization
and increased export

sales through funding of SBA personnel at 19 USEAC centers nationwide.
At the USEAC sites, SBA

personnel work with the Department of Commerce and the Export-Import
Bank to deliver technical

assistance and finance programs that help U.S. businesses finance and
export their products or services.

SBA personnel at the USEACs work closely with appropriate Small Business
Development Centers

(SBDCs) and members of the Service Corps of Retired Executives (SCORE).

The Small Business Investment Company Program (SBIC) helps qualified
small enterprises secure the

equity to start, maintain or grow a business. The SBIC program
facilitates the formation of privatelyowned

and operated investment companies to serve as a source of equity capital
and long-term loans 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 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 always at risk

ahead of the funding guaranteed by the SBA.

The Surety Bond Guarantee 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 the incentive necessary for sureties to issue bonds
to small contractors who could

not otherwise compete in the contracting industry.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

52

As a gap lender, SBA expands the parameters within which a conventional
lender can make a small

business loan. SBAs guaranties allow funding for longer terms, for new
start-up businesses in emerging

industries, for businesses with lower levels of collateral and for
businesses with limited track records.

**Human Resources**

Small business practices, products, and needs have transformed over the
past several years. The

greatest change in job tasks that SBA employees have experienced and
will continue to experience is

from transaction processing to analysis. Automation and asset sales will
allow staff to shift their attention

from the processing of transactions to using information to analyze
programs, activities, and performance

of SBAs partners.

This transformation requires proper training of employees to provide
them with the skills needed to

operate in the new business environment, to provide small business
customers with first-class service,

and to ensure that the SBAs portfolio is managed to limit risk to the
taxpayer.

The Office of Capital Access will continue to work with SBAs Office of
Human Resources to develop

and deliver SBA sponsored training for its employees in marketing and
outreach, commercial credit

analysis, lender oversight, lender relations, and basic and advanced
liquidation. We will encourage

training in leadership and management courses for our middle management
employees and will also

promote technology and computer skill enhancement as we continue our
systems modernization efforts.

**Evaluations, Analyses and Surveys**

We are investigating the feasibility of developing an econometric demand
model for the 7(a) loan

program. 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 completed the final report in March 2001 and it is being
evaluated to determine how a

phase II should be carried out.

Additionally, a study of job creation in the 7(a) and 504 programs was
initiated. This study planned to

use the Census Office of Advocacy BITS file containing longitudinal data
on small businesses for the

years 1989 through 1996. A research design was approved by the Census
Bureau in FY 2000.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

53

Before the data collection could commence, the Internal Revenue Service
(IRS) decided that it had to

review all research proposals using the BITS data base. A decision is
still pending. To move forward,

SBA has asked the Bureau of Labor Statistics if it would give SBA access
to job data for small

businesses that have received 7(a), 504 or SBIC financing, with strict
procedures to ensure privacy.

Discussions are still ongoing as of March 2001.

**Office of the Inspector General (OIG) Management Challenges**

The management challenges that apply to this functional area were
identified by the OIG for the

Congress in December 2000. The current status of the specific action
steps and milestones agreed upon

by the OIG and each program offices response to the OIGs specific
recommendations are discussed

below.

The December 2000 management challenges for the Capital Access programs
differ from those of

December 1999. The OIG no longer considers the oversight of the Small
Business Lending Companies

(SBLC) to be a major challenge on its own, as SBA has complied with
nearly all the recommendations

made in the Farm Credit Administration examination reports. Because the
Agency has not yet

implemented the recommended actions, the OIG has included SBLCs in the
challenge on improving

lender oversight.

OIGs two December 2000 challenges on guaranty purchases and lender
oversight are essentially the

same as those from the previous year. OIG feels that the SBA is making
progress on both challenges,

but much of the implementation is still pending.

**Challenge: Field offices do not consistently apply guaranty purchase
requirements.**

*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 taken steps to establish a
purchase review and follow-up*

*process mechanism, a guaranty repair tracking system, an early warning
system, and improved*

*procedures and training.*

Goals:

· Ensure that the Agency denies liability or reduces its payment on the
guaranty when a lender has

failed to comply with SBA requirements.

· Implement an automated system for tracking circumstances where the
field office records of

guarantees have been repaired and lenders have released SBA from
guaranty liability on

questionable lender practices.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

54

Action Taken: SBA has implemented procedures to improve the guaranty
purchase process for the

Section 7(a) program and has taken the following actions:

1\. Implemented procedures to review, on a sample basis, 10 percent of
all guaranty loan

purchases.

2\. Established a tracking system to follow up on purchase reviews.

3\. Initiated development of a Guaranty Repair Tracking System.

4\. Initiated revision of its Standard Operating Procedures and the
development of a training

course.

5\. Modified the Delinquent Loan Collection System to identify loans
where an audit or other

review has shown that a lender has an origination or servicing
deficiency significant enough to

affect the guaranty purchase.

**Challenge: Preventing loan fraud requires additional measures,
including the necessary**

**legislative authority and funding.**

*Summary: Fraud in the business loan program can be reduced by obtaining
criminal background*

*information on prospective borrowers and on loan packagers and other
for-fee agents.*

*SBA submitted a proposal for the legislation necessary to conduct the
background checks, but it*

*was not included in the reauthorization bill by the Congressional
Conference Committee. The*

*Agency needs to resubmit the legislative proposal, establish a loan
agent registration process,*

*and track loan agent association with individual loans.*

Goals:

· Submit a legislative proposal that: (1) requires all loan agents to
provide SBA with the information

necessary to conduct criminal background checks, including social
security numbers; and (2)

authorizes SBA to conduct criminal background checks on loan agents.

· Identify all loan agents through a registration process and track
their association with individual

loans. Registration includes maintaining identifying data and background
information on loan agents.

However, registration does not imply Agency endorsement.

· Submit legislation authorizing SBA to conduct criminal background
checks on all business loan

applicants.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

55

· Ensure sufficient funding to permit OIG to perform background checks
on all business loan

applicants in a timely manner.

Action Taken:

· SBA submitted a legislative proposal which the Senate Small Business
Committee voted to include

in the SBA reauthorization bill for FY 2001. The Conference Committee,
however, voted out the

House version that did not contain the proposal. The proposal is being
resubmitted for the FY 2002

legislative cycle.

· The establishment of a loan agent tracking system is tied to the
development of a Partner

Information Management System (PIMS). PIMS is to be incorporated into
the loan monitoring

system. The first phase of PIMS was completed on June 30, 2000. SBA Form
159, which contains

information on loan agents, is being revised to clarify the requirements
for agents to notify SBA of

their loan participation. If the necessary legislation is enacted, the
form will be further revised to

include additional loan agent identification data.

· SBA expects the loan agent criminal background check system to be
operational 6 months after the

passage of the proposed legislation, assuming adequate staff resources
are available.

**Cross-Cutting Issues**

Key to SBAs success in providing access to capital and credit is a
cooperative working relationship

with the various stakeholders, most notably the National Association of
Government Guaranteed

Lenders (NAGGL), the National Association of Development Companies
(NADCO), and the National

Association of Small Business Investment Companies (NASBIC).

SBA has executed agreements with both NADCO and NAGGL to support the
Agencys initiatives.

With the Community Development Financial Institutions Fund (CDFI),
Department of Treasury, SBA

has co-chaired the Interagency Work Group on Microenterprise
Development.

SBA is expanding formal relationships with a number of entities
including agencies such as the United

States Department of Agriculture, the National Federation of Community
Development Credit Unions,

and the Association for Enterprise Opportunity and state and local
development agencies. Also

important is the partnership with the Small Business Development Centers
that assist a large number of

small companies in obtaining loans.

In the international marketplace, 19 agencies, under the direction of
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.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

56

**External Factors**

Although the demographics, terms and conditions, and purpose of the
7(a), 504, Microloan, and SBIC

programs vary significantly, economic conditions strongly affect the
demand for these products. If

interest rates rise, a credit crunch often occurs. Supply of resources
for technical assistance and the

aggressiveness of the intermediaries will determine whether we reach our
Microloan targets. We will

work closely with our intermediaries to ensure a successful expansion of
the program.

If the economy remains strong, surety bond guarantees will remain
constant or decrease, but if the

economy deteriorates, demand will increase. Congressional support of the
programs, particularly those

elements that require legislative changes, is a critical success factor.
Finally, the continuing uncertainty in

overseas markets, the overall strength of our own domestic economy, lack
of finance, and lack of

export promotion information are four impediments to small companies
entering the export market. Our

success in stimulating more small exporters is dependent on our ability
to develop and make available

the appropriate export finance and information tools to overcome these
impediments to export growth.

**Objective 3: Improve Access to Procurement Opportunities**

SBA is responsible for promoting the use of small businesses in the
nearly \$190 billion Federal

procurement market. Our efforts help to ensure that Federal agencies
comply with statutory

requirements to buy a portion of their goods and services from small
businesses. SBA helps small

businesses participate in the Federal marketplace by working with
departments and agencies to

establish procurement goals, monitor performance, advocating the use of
small business sources, and

providing procurement training and technical assistance to small firms.
Through these activities, agencies

procured \$43 billion from small businesses in FY 1999 or 23.1 percent
of Federal prime contract

dollars.

SBA works with Federal agencies to identify suitable procurement
opportunities for small businesses,

and plan innovative procurement strategies and outreach programs to
reach the small business

community. We provide hands-on technical assistance and training to
small firms so that they can fill

Federal requirements efficiently and cost-effectively, serve as a source
of innovation, and contribute to

our Nations economic health and vitality. In a dynamic procurement
environment, we are educating

small businesses on how to transition from paper-based business
transactions into the expanding

electronic commerce marketplace. We are also educating Federal agencies
on how to use our small

business programs to their best advantage.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

57

**PERFORMANCE INDICATORS AND RESOURCES REQUESTED**

*(Dollars in Thousands)*

**FY 1998 FY 1999 FY 2000 FY 2001 FY 2002**

**Actual Actual Actual Estimate Projected**

**Performance Indicators**

Achieve mandated shares of Federal Prime contract dollars:

· to small businesses 23.4% 23.1% N/A 23% 23%

· to women-owned businesses 2.2% 2.5% N/A 5% 5%

· to small and disadvantaged businesses (incl

8(a))

6.5% 6.6% N/A 5% 5%

· to service disabled veteran-owned businesses N/A N/A N/A 2.9% 3%

· to small businesses in HUBZones N/A N/A N/A 2.0% 2.5%

8(a) program client success rate 3 yrs after

graduation

N/A N/A 65% 68% 70%

**Resources (\$000):**

Gov Contracting /Business Development Operating

Expenses

\$16,601 \$18,300 \$18,576 \$19,926 \$20,658

Non-Credit Initiatives

7(j) Technical Assistance 2,850 2,600 3,950 3,600 3,600

BusinessLINC 0 0 0 7,000 0

Pro-Net 232 363 454 500 500

Small Disadvantaged Business 10,409 9,750 8,643 1,800 1,800

SBIR Technical Assistance 0 0 496 1,500 1,500

SBIR FAST 0 0 0 3,500 3,500

HUBZones Program 2,000 2,000 1,978 2,000 2,000

Procurement Programs 0 0 0 0 500

Subtotal 32,092 33,013 34,097 39,826 34,058

Agency Support Cost Estimates

Regional & District Offices (Field Support) N/A N/A 24,148 25,070 26,150

Executive Direction Support N/A N/A 4.734 4,820 4,970

Management & Admin Support N/A N/A 4,416 4,348 4,422

Agency-wide (Rent, Telecom, etc.) N/A N/A 5,659 6,813 7,226

Subtotal 34,228 41,051 42,768

Total \$68,325 \$80,877 \$76,826

**Programs**

Our Procurement Access Strategy to improve access to procurement
opportunities has four key

elements:

1\. Increase the number of opportunities for small businesses to perform
Federal contracts at the

prime and subcontract levels.

2\. Increase the economic viability of small and small disadvantaged
businesses by providing

contract opportunities and other business development assistance to
those firms who qualify.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

58

3\. Increase the economic viability of small disadvantaged and small
businesses in Historically

Underutilized Business Zones (HUBZones) by providing contract
opportunities and other

business development assistance to those firms who qualify.

4\. Facilitate the commercialization of Federal research by providing
access to capital.

SBAs primary objective is to increase Federal prime contract and
subcontract dollars to small

businesses. As agencies use larger consolidated contracts that are often
not suitable for small

businesses to perform as prime contractors, we must ensure that efforts
are made to increase

subcontracting opportunities for these companies. SBA negotiates with
each Federal department and

agency to establish annual prime contracting goals and subcontracting
goals for their large prime

contractors. Based on FY 1999 data, agencies are awarding about 38
percent of Federal procurement

prime and subcontract dollars to small businesses. We believe our goals
should remain constant through

FY 2002. However, SBA will continue to work with the agencies to ensure
that small businesses

participate in Federal contracting to the maximum extent possible.

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.

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. The 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.

For example, the Federal Contract Assistance for Women\'s Business
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. The Office is also

developing regulations to implement the women-owned small business
set-aside program authorized by

the SBA reauthorization bill of FY 2000. This program authorizes
set-asides in industries determined

by SBA, whose women-owned businesses are under-represented.

Through the Natural Resources Sales Program, SBA ensures that small
businesses obtain a fair share of

Federal real and personal property authorized for sale or other
competitive disposition.

Through the Certificate of Competency Program, SBA helps small
businesses that are apparent

successful low-bidders on government requirements, but whose ability to
perform is questioned by

contracting officers.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

59

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. PRO-Net is the

Federal Government\'s officially established and recognized database of
small businesses seeking to do

business with the Government. It holds records of more than 200,000
small businesses, including small

disadvantaged businesses, veteran-owned, Native American-owned, and
women-owned small

businesses. Per statutory/regulatory requirements, PRO-Net is the
authoritative database of firms

certified under the 8(a) Business Development and HUBZone Empowerment
Contracting Programs,

and as certified small disadvantaged businesses. The Federal acquisition
community, state and local

governments, and prime contractors use PRO-Net in identifying small
business vendors.

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 for HUBZone small

businesses. The government-wide statutory goal for this program is to
award of 2.5 percent of the total

Federal procurements to such firms in FY 2002. 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 utilizes its
procurement assistance professionals to

assist these firms in marketing Federal contract opportunities.

The 8(a) Business Development Program assists firms owned and controlled
by economically and

socially 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.

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.

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.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

60

SBA encourages small business innovation by establishing government-wide
policy for the Small

Business Innovation and Research (SBIR) and Small Business Technology
Transfer (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 Federal and State Technology Partnership (FAST) Program, SBA
will make matching fund

grants to state organizations to strengthen the technological
competitiveness of small businesses. The

Rural Outreach Program provides grants to approximately 25 states to
increase participation in the

Small Business Innovation Research Program.

SBA develops small business size standards for Federal programs so that
small business assistance is

provided to its intended beneficiaries.

**Human Resources**

We will provide training for our procurement specialists mandated by the
Defense Acquisition

Workforce Improvement Act (DAWIA) of 1991 and subsequent legislation
applicable to the civilian

workforce. This training is especially important as the pace of efforts
to reform the acquisition process is

challenging SBAs acquisition and contracts specialists as never before.
To meet these challenges,

acquisition personnel must perform at higher standards, be flexible, and
keep pace with professional

development trends, especially contracting certification in accordance
with DAWIA.

We also plan to provide professional development training to Business
Opportunity Specialists in our

district offices that service portfolios of 8(a) Business Development
program participants. This training

will address changes taking place in the Federal marketplace,
streamlining of 8(a) Program operations,

improved business counseling techniques, and leveraging resources to
provide enhanced management

and technical assistance. As part of this training, we will provide
guidance to staff in the determination of

initial and continuing eligibility, especially that of economic
disadvantage.

We plan to hold the second annual district office liaison training
conference for the HUBZone

Empowerment Contracting Program. All district office liaisons and
Government Contracting Area

Directors will attend. Training will cover the use of geocoding
software, newly deployed electronic

applications, database reporting systems, and statutory and regulatory
updates.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

61

**Evaluations, Analyses, and Surveys**

SBA began a HUBZone benchmarking study to help assess changes in
employment opportunity and

investment in distressed urban and rural communities as a result of the
HUBZone program. A report is

due in late FY 2001. This information will be used to develop our report
to Congress on the program in

FY 2002.

**Office of the Inspector General**

**OIG Management Issues**

The management challenges were identified by the OIG for the Congress in
December 2000. The

current status of the specific action steps and milestones agreed upon
by the OIG and each program

office in response to the OIGs specific recommendations are discussed
below.

**Challenge: More participating companies need access to business
development and contracts**

**in the 8(a) Business Development program.**

*Summary: The bulk of the dollar value of 8(a) Business Development (BD)
contracts go to a*

*relatively small number of companies in the program. SBA is
participating in a recently formed*

*interagency task force designed to, among other things, improve
business development*

*initiatives, including access to contracts. The Agency needs to give
greater emphasis to business*

*development assistance and encourage a more equitable distribution of
contracting opportunities*

*to program participants.*

Goals:

· Refocus the 8(a) BD program to emphasize business development, develop
criteria defining

business success, and graduate participants once they reach those
levels.

· Develop a mechanism that ensures contracting opportunities are more
equitably distributed to 8(a)

BD program participants.

Actions Taken or Planned:

· SBA plans to refocus the role of the District Office staff where their
highest priority will be helping

inform small businesses about the Federal procurement process, Federal
and non-Federal

contracting opportunities, and best practices in procurement
opportunities. SBA is planning to send

out a new 8(a) BD Standard Operating Procedure to the field during
calendar year 2001.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

62

· To address needed reform and achieve major improvement in the results
of the 8(a) BD program,

the Department of Defense Change Management Center, SBA, and the Office
of Management and

Budget, jointly sponsored the formation of a Rapid Improvement Team
(RIT). The RIT, comprised

of key stakeholders and interested staff from SBA, was asked to identify
breakthrough

opportunities and recommend actions for Federal government-wide 8(a) BD
program

improvements. The process began November 1, 2000.

· SBA plans to propose several significant changes that it believes will
make the 8(a) BD program

more acceptable to procuring agencies and less cumbersome to administer,
including:

· Reduce cumbersome regulations and administration and streamline 8(a)
processes.

· Reduce or eliminate some unrealistic expectations held by
participants, and focus on facilitating

business development initiatives, including access to Federal agency
contracts.

· Reduce or eliminate SBAs role of having sole responsibility for
developing firms, and create a

Federal government-wide program coordinated by SBA that leverages all
agencies resources

to promote growth of Section 8(a) firms.

**Challenge: 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. SBA anticipates issuing procedural guidance on the definition of
economic disadvantage*

*based on revisions to be made by a new interagency task force. 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.*

Goals:

· Redefine economic disadvantage using objective quantitative and
qualitative criteria that

effectively measure capital and credit opportunities.

· Provide sufficient financial and analytical training to Business
Opportunity Specialists to enable them

to more accurately evaluate a companys business profile and competitive
potential.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

63

Action Taken or Planned:

· SBA added provisions to the regulations to prevent 8(a) BD applicants
and participants from

transferring assets to family members.

· Annual review procedures, designed to access continuing program
eligibility, were modified and

training was provided to SBA field staff.

· SBA will work with RIT team to develop recommendations to define
economic disadvantage.

Based on the results from the RIT, SBA officials plan to issue draft
procedural guidance by

September 30, 2001, to ensure an objective and comprehensive review of
Section 8(a) applicant

and/or participants economic status.

**Challenge: SBA needs to clarify its rules intended to deter 8(a)
Business Development**

**participants from passing through procurement activity to non-8(a)
Business Development**

**firms.**

*Summary: SBAs rules, while restricting the amount of a contract that a
Section 8(a) 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 Code. 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.*

Goals:

· Tighten the definition of manufacturing to preclude the pass-through
practice of making only minor

modifications to the products of other manufacturers.

Action Taken or Planned:

· SBA proposes to define value-added resellers (VARs) as legitimate
categories of business. SBA

has already published a notice in the Federal Register seeking comment
on VARs. The 8(a) BD

program will use this information and work with the Office of Size
Standards to develop an

appropriate size and category for VARs.

**Cross-Cutting Issues**

SBA is charged with providing business development assistance to firms
owned by socially and

economically disadvantaged individuals through Federal contract program
grants, and cooperative

agreements with service providers for management and technical
assistance. SBA accomplishes this

through partnerships with other Federal, state and local agencies and
the private sector.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

64

For example, SBA participates in monthly meetings with the agencies
directors of the Offices of Small

and Disadvantaged Business Utilization to discuss our small business
program and strategies to increase

small business participation in Federal contracts. We also plan to
partner with the Department of

Defense to offer assistance to small businesses through Electronic
Commerce Resource Centers and

Procurement Technical Assistance Centers. We will develop additional
partnerships with other

agencies. Additionally, we plan to:

· Work with private organizations to develop special electronic malls to
facilitate the participation of

small and small disadvantaged businesses in Federal purchases made
electronically.

· Explore the increased use of the Internet to increase the coverage of
Federal buying activities by our

Procurement Center Representatives.

· Maintain a proactive stance on combating contract bundling by
aggressively identifying bundled

procurements for small business participants.

· Encourage increased partnering of small and large businesses to
enhance the capacity and

competitiveness of small contractors.

· Work with the Office of Federal Procurement Policy and the Procurement
Executives Council to

enhance the efficiency with which Federal buyers can utilize 8(a) and
women-owned small

businesses.

· Increase efforts to secure procurement opportunities for small
businesses in designated HUBZones

to build on the success of the certification effort.

**External Factors**

Acquisition reform has changed the way agencies buy goods and services.
SBA must continue to work

with Federal agencies to develop alternative procurement strategies that
will maximize small business

participation in this changing environment, while at the same time
ensuring efficient and cost-effective

procurement reform. It is also critical for SBA to develop positive
cooperative working relationships

with the major procurement agencies in the Federal Government, resource
partners, and major prime

contractors to improve access and opportunities for small businesses in
Federal procurement.

SBA published final regulations in FY 2000 to implement the contract
bundling provisions set forth in

the SBA Reauthorization Act of 1997. The regulations establish
guidelines to assist agencies in

determining whether planned acquisitions that consolidate requirements
are necessary and justified.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

65

SBA has trained its Procurement Center Representatives (PCRs) on the new
regulations, will work

aggressively to educate the Federal acquisition work force about the new
procedures, and will take the

steps necessary to ensure that these procedures are enforced. These
efforts will both further

procurement reform and continue to ensure our Nations small businesses
play a significant role in

Federal acquisitions.

SBA is charged with implementing the small business procurement
objective of 3 percent of prime and

subcontracts to service-disabled veteran-owned small businesses
established by the Veterans

Entrepreneurship and Small Business Development Act of 1999. On October
11, 2000, the Federal

Acquisition Regulatory Council published an interim procurement
regulation that requires servicedisabled

veteran-owned small businesses to represent their small business status.
The agencies must also

include a provision in their contracts that requires prime contractors
to use their best efforts and

establish goals for subcontracting with both veteran and
service-disabled veteran-owned small

businesses.

During FY 2002, SBA will continue to educate Federal contracting
officials, small business officials, and

prime contractors about this new small business objective. SBA will also
work with the Office of

Federal Procurement Policy to change its policy directives to
incorporate this new procurement

preference objective.

**Objective 4: Provide and Improve Access to Entrepreneurial Development
Assistance**

Lack of management and technical assistance is an impediment to small
business success. With this in

mind, providing access to entrepreneurial development assistance is one
of SBAs four principal

objectives as the Agency helps more businesses get started and stay in
business.

SBA annually assists more than 1 million small businesses through a vest
network of resource partners

and electronic access points. Business development information,
education and training are offered at

more than 1,100 locations nationwide. These include the Online Womens
Business Center, SCORE

Online, nearly 1,000 Small Business Development Centers (SBDC), 11,400
Service Corps of Retired

Executive (SCORE) volunteers, 70 Business Information Centers (BIC), 17
Tribal Business Information

Centers (TBIC), 22 One Stop Capital Shops (OSCS), 19 US Export
Assistance Centers (USEAC), 4

Veterans Business Outreach Centers, and 70 Womens Business Centers
(WBC).1 The Agency is also

continuing to create customer-centered Internet applications that
empower entrepreneurs to easily

access government information.

1 There are currently 67 Womens Business Center grantees representing 70
centers. Some of the grantees fund multiple locations.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

66

**Performance Indicators and Resources Requested**

*(Dollars in Thousands)*

**FY 1998 FY 1999 FY 2000 FY 2001 FY 2002**

**Actual Actual Actual Estimated Projected**

**Performance Indicators**

Achieve high customer satisfaction rate:

Womens Business Centers 76% N/A N/A 80% 80%

BICs N/A N/A 93% 93% 93%

OSCS N/A N/A 89%1 80% 80%

SBDC2 85% N/A N/A 80% 80%

Veterans Business Opportunity Centers N/A N/A N/A N/A 85%

SCORE N/A N/A N/A 80% 80%

**Resources (\$000)**

Office of Veterans Business Development

Veterans Business Development Assistance \$ 371 \$ 733 \$ 615 \$ 0 \$
750

Veterans Business Development Corporation N/A N/A N/A 3,992 0

Disability Related Business Initiatives

New Freedom Initiative N/A N/A N/A N/A 5,000

National Women\'s Business Council 473 600 600 750 750

Office of Entrepreneurial Development (ED) 4,543 5,296 6,700 5,403 5,027

ED Programs & Special Initiatives

SBDC 71,561 89,817 84,074 88,013 75,806

Drug Free Workplace 0 0 3,469 3,500 5,000

SCORE 3,937 3,660 3,471 3,750 4,000

Business Information Centers 499 700 495 500 500

Women\'s Business Centers 4,292 8,000 8,926 12,000 12,000

Commerce Reimbursement - SWOBE 992 750 783 694 694

One Stop Capital Shops 3,100 3,100 3,206 3,100 3,100

Native American Outreach 607 0 0 0 0

Subtotal 90,375 112,656 112,339 121,702 112,627

Agency Support Cost Estimates:

Regional & District Offices (Field) N/A N/A 28,165 29,238 30,500

Executive Direction Support N/A N/A 3,571 3,635 3,749

Management & Administrative Support N/A N/A 3,517 3,463 3,522

Agencywide (Rent, Telecom, etc.) N/A N/A 7,494 9,026 9,569

Subtotal 42,747 45,362 47,340

Total \$ 155,086 \$ 167,064 \$ 159,967

1 89% is based on a pilot of the Boston, MA One Stop Capital Shop. A
full survey will be conducted in FY 2001.

2 Customer satisfaction results are based on a biannual study conducted
by the Association of Small Business Development Centers.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

67

**Programs & Special Initiatives**

SBA provides business assistance programs through the Office of
Entrepreneurial Development, the

National Womens Business Council, the Office of Veterans Business
Development, and Disability

Related Business Initiatives. The Office of Entrepreneurial Development
manages programs that provide

direct service to the small business community. Entrepreneurial
development programs and special

initiatives provide information, education, and training opportunities
to small business owners and

individuals interested in starting a business.

The National Womens Business Council serves as an independent advisor to
the President, Congress,

and the Interagency Committee on Womens Business Enterprise, and the SBA
on issues concerning

women in business, and the effectiveness of Federal programs designed to
foster womens

entrepreneurship.

SBA supports the needs of veterans through the new Office of Veterans
Business Development. This

office was officially established on January 12, 2001. It is responsible
for the formulation, execution, and

promotion of policies and programs of the Administration that provide
assistance to small business

concerns owned and controlled by veterans and service-disabled veterans.
The office also supports

other SBA veteran-oriented objectives. It serves as a voice for veterans
by acting as an ombudsman

for full consideration of veterans in all programs of the
Administration. It supports ensuring veterans

access to capital through marketing and outreach efforts. It will help
make Federal procurement

opportunities available to veterans by working to ensure that 3.0
percent of Federal prime and

subcontracts go to service-disabled veteran-owned small businesses.

The Disability Related Business Initiatives assist small businesses in
the implementation of the

Americans With Disabilities Act and foster entrepreneurship among people
with disabilities.

Implementation of President Bushs New Freedom Initiative will be a major
focus in FY 2002. This

initiative will provide small businesses with training and technical
assistance to help them comply with the

Americans with Disabilities Act (ADA). This training will result in
increased hiring of people with

disabilities and an increase in customers who will be able to frequent
small businesses. A \$5 million

dollar budget is requested for this activity.

The Office of Entrepreneurial Development manages the following
programs:

· *Paul D. Coverdell Drug-Free Workplace Program *(DFWP): Through this
program, SBA funds

organizations that provide technical assistance services to small
businesses to implement programs

to address the issue of drugs in the workplace. 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.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

68

· *Womens Business Centers *(WBC): Through the WBC program, SBA provides
grants to nonprofit

organizations to train and counsel women entrepreneurs. In addition, the
Online Womens

Business Center offers a 24-hour Internet site with information aimed
specifically at women

entrepreneurs.

· *Service Corps of Retired Executives *(SCORE): Though a network of
11,400 counselors and 389

chapter locations, SCORE provides counseling and training services to
more than 350,000 clients

annually.

· *E-Commerce and Distance Learning*: Through this initiative, SBA is
developing distance learning

and other advanced learning applications to deliver E-Commerce and other
virtual business

development information to small businesses.

· *Small Business Development Centers *(SBDC): SBDCs provide management
and technical

assistance to small businesses though a network of service centers
located throughout the United

States, Puerto Rico, U.S. Virgin Islands, Guam and American Samoa.

· *Business Information Centers *(BIC): Through a network of 70
locations, BICs provide

entrepreneurs access to computers and other business resource materials.
Pre-business and inbusiness

counseling and training are also available at BIC locations using SCORE
volunteers.

· *One Stop Capital Shops *(OSCS): 22 OSCSs are operated in partnership
with the local

communities and provide clients a one-stop location for financial and
business assistance through a

full range of Federal, state and local resources.

· *Tribal Business Information Centers *(TBIC): In partnership with
Tribal colleges, 17 TBICs

provide entrepreneurial development assistance to Native Americans
interested in starting or

expanding a small business.

**Evaluation, Analyses and Surveys**

Customer Satisfaction Surveys. In September 2000, SBA contracted the
University of Michigan to

conduct three surveys of clients from the One Stop Capital Shops,
Service Corps of Retired Executives

(SCORE), and Womens Business Centers. The contractor conducted the
interviews in February and

March and will submit a final report in the spring of 2001.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

69

Review of the SBDC program. Between December 2000 and March 2001, SBA
conducted a

traditional program review of the SBDC network to 1) describe SBDC
inputs, outputs and outcomes;

2\) identify significant management issues regarding the SBDC network,
cooperation with SBA and SBA

oversight; 3) identify best practices in the network and suggest ways to
emulate these models; and

4\) identify ideas to make the SBDC more responsive to client and
community needs, and use

technology more effectively.

**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 programs 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.

In the past, the Office of Veterans Affairs (now the Office of Veterans
Business Development)

partnered with the Office of Small and Disadvantaged Business
Utilization in the Department of

Veterans Affairs, to conduct business-management briefings on resources
within SBA which help small

business grow and improve in doing business with the Federal Government.
The SBA and the

Departments of Veterans Affairs and the Department of Labor (DOL) have
entered into an MOU to

assist disabled veterans to become entrepreneurs by providing the
necessary entrepreneurial

development assistance needed to start a company.

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 veterans and the service-disabled veterans small business
community.

We are 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.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

70

The Disability Related Business Initiative is cross-cutting in that it
works with the Social Security

Administration, Department of Labor, Department of Education, and
Department of Defense and

Department of Veterans Affairs, to develop interagency educational
sessions on lending,

entrepreneurship, resource sharing and required training. This
cooperative effort works to support the

market education for entrepreneurs with disabilities

**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 out to more
than 1 million small firms annually.

Additionally, with new emphasis on delivery of management and technical
assistance via the electronic

media, a critical success factor will be access to and training in the
use of the Internet. Finally,

availability of resources and stakeholder support are essential to
successful implementation of this

strategy.

The SBA, through the Office of Veterans Business Development, has
established a relationship with the

National Veterans Business Development Corporation. The relationship is
critical to our efforts to

reach and develop initiatives designed to meet the needs of the veteran
and service-disabled veteran

small business market. Working with the Corporation (a public/private
initiative) enables SBA to engage

the private business community and develop cost-effective and efficient
ways of furthering our efforts.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

71

**GOAL 2: HELP FAMILIES AND BUSINESSES RECOVER FROM DISASTERS**

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 operates a direct loan program to assist victims of natural
disasters and supports the servicing and

collection of these loans after they have been made. We make disaster
loans totaling approximately \$1

billion each year, and we have an active portfolio of about \$8 billion
in loans. In FY 2000, 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 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 assistance to small businesses that are
economically impacted because its

owner(s) or employee(s) are called up for active duty due to a military
conflict.

SBA disaster assistance is a critical source of economic stimulation in
disaster-ravaged communities.

Eligibility is based on financial criteria. 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, for those with credit

available elsewhere. SBA offers physical disaster loans to individuals
and businesses of any size, and

economic injury loans to small businesses without credit available
elsewhere.

The dollar volume of approved loans varies widely from year to year,
reflecting the difficulty of planning

and accurate forecasting of the next disaster. Because it is difficult
to predict disasters, SBAs primary

objective is to offer victims quality, timely, easy access, and
cost-effective help to rebuild their homes

and businesses. Customer satisfaction is a key measure of success for
this program.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

72

**Performance Indicators and Resources Requested**

*(Dollars in Thousands)*

**FY 1998 FY 1999 FY 2000 FY 2001 FY 2002**

**Actual Actual Actual Estimated Projected**

**Performance Indicators**

Field presence within three days of a disaster 100% 100% 100% 98% 98%

Achieve high customer satisfaction rate N/A N/A 81% 80% 80%

Applications processed within 21 days 77% 60% 91%1 80% 85%

**Resources (\$000)**

Disaster Assistance Operating Expenses

Disaster Loan Making \$ 79,116 \$ 85,926 \$ 83,929 \$ 91,013 \$ 40,000

Disaster Loan Servicing 25,012 30,808 29,523 34,056 30,000

Loan Program Subsidy 149,953 170,427 173,908 144,353 32,850

Subtotal 254,081 287,161 287,360 269,422 102,850

Agency Support Cost Estimates:

Regional & District Offices (Field Support) N/A N/A 9,321 9,677 10,094

Executive Direction N/A N/A 5,162 5,252 5,419

Management & Admin Support 2 N/A N/A 0 0 0

Agencywide Costs (Rent, Telecom, etc.) N/A N/A 4,148 4,994 5,294

Subtotal 18,631 19,923 20,807

Total3 \$ 305,991 \$ 289,345 \$ 123,657

**Evaluation, Analyses and Surveys**

SBA will continue to conduct quality reviews of its disaster loan
underwriting and documentation

process. Customer surveys will 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,
families and business owners attempting

to recover from the effects of a major disaster (Presidential
declaration). 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.

1 In FY 2000, the bulk of the loan activity occurred during the first 3
months of the fiscal year, enabling the program to exceed the

loan processing goal due to low levels of activity in the remaining
months.

2 The majority of the Management and Administrative support for Disaster
is directly funded by the \$70 million appropriation for

program operating expenses.

3 These numbers represent spending and were funded partially with
carryover balances.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

73

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

purpose. 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 in which the major
forms of overlapping

assistance should be provided:

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

5\. Additional assistance from voluntary organizations

**External Factors**

The single most important external factor is the unpredictability of
disasters. Helping families and

businesses recover from disasters requires SBA to work closely with the
FEMA as well as other

Federal, state and local agencies. SBA must coordinate closely with FEMA
to establish disasterassistance

centers when natural disasters strike, provide expedited responses, cut
paperwork, and

create ongoing partnerships with voluntary agencies, businesses, and
industries in the affected area.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

74

**GOAL 3: IMPROVE SBA MANAGEMENT**

SBA is an Agency that is continuing to transform itself to meet the
challenges and opportunities of a

global marketplace. This integrated budget and performance plan
partially documents this

transformational process. We have already made changes and continue to
improve how we manage

ourselves and our resources. Similar to the private sector, SBA needs to
increase the pace of change

and reform itself based on a reexamination of the role of the Federal
Government. Our guiding principle

is to meet the needs of todays citizens, creating a culture that is
*results-oriented *(not processoriented),

*citizen-centered *(not bureaucracy-centered), and *market-based
*(promoting, not stifling,

innovation and competition). To achieve our overall goal of modernizing
the Agency, we have identified

six critical management objectives: (1) Managing for Results
(Transparency and Accountability); (2)

Transforming the Workforce (Human Capital Investment); (3) Modernizing
our Information Systems

(Information Technology Investment); (4) Improving Financial Management;
(5) Improving Credit

Program Management; and (6) Creating Electronic Government.

**Objective 1: Manage for Results**

**Performance Goal: Create Culture of Results**

The Results Act requires Federal agencies to institute changes to enable
them to measure and declare

the value of public sector programs to improve the internal management
and decision-making of related

public expenditures. The core of the Results Act is the ability of a
Federal Agency to be transparent

(i.e., define our work, our success, and our costs) and to be
accountable (i.e., measure and report on

our progress).

To achieve an acceptable level of transparency and accountability in the
Executive Branch, Congress

requires agencies to develop goals, objectives, and strategies for
success and to submit multi-year

strategic plans, annual performance plans, and annual performance
reports. SBA is meeting this

Congressional requirement by integrating its annual performance plan
with the budget contained in this

document as well as its annual performance report with its program and
financial accountability report in

the recently released Performance and Accountability Report.

To manage for results, SBA must ensure that performance information is
valid and verifiable, and that it

has a cost allocation system that links resources with results achieved.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

75

**Office of the Inspector General (OIG) Management Challenge**

The OIG has incorporated the need to improve managing for results in its
December 2000 major

management challenges.

**Challenge: SBA needs to improve its managing for results processes and
produce reliable**

**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 more program outcomes, improve performance measures,
and increase the*

*accuracy of its data. SBA still needs to develop (1) Agency-wide
guidance on preparing*

*performance goals and indicators, (2) standards and procedures for data
verification and*

*validation, and (3) client surveys and other methods to obtain outcome
information.*

Goals:

· Develop guidance involving the preparation of organizational
performance goals and indicators

· Develop and promulgate standards and procedures for data verification
and validation

· Issue guidance to providers on how to count clients served, client
counseling and training sessions

· Develop a client survey to measure impact of counseling and training

Action Planned

· Develop guidance for preparation of organizational performance goals
and indicators

· Develop and promulgate standards and procedures for data verification
and validation

· Issue guidance on how to count clients served, client counseling, and
business training sessions

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

76

**Objective 2: Transform the Workforce**

**Performance Goal: Ensure a Workforce with the right skills and correct
placement.**

SBA has changed significantly and will continue to change in the way it
operates. We are moving

toward a more technologically driven operation, focused on providing
business development assistance,

oversight, and building partnerships to help serve the needs of small
business. We are phasing out some

functions, reemphasizing others, and creating new ones. Some new
functions include:

· Management and technical assistance tailored to small and
disadvantaged, HUBZone, disabled

veterans, and other entrepreneurs with disabilities.

· Oversight of lenders and business partners

· Response to asset sales

· Marketing and outreach to small business segments and our resource
partners

· Management of information technology (IT Security, IT Investment
Management, Internet, Quality

Assurance, IT Acquisition, Configuration Management)

· Creating E-Government and E-Commerce

Changes in how we do business and the demands of the New Economy create
situations where we lack

geographic or functional employee balance. We must keep pace with the
level of skill and technology

of our lending partners, since they originate 75 percent of our loans.
We are committed to a thoughtful

workforce transformation process for our affected employees. Through
discussions with our union

partners, we will invest in our human capital by providing employees
with transition services and training.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

77

**Office of Inspector General (OIG) Management Challenges**

**Challenge: Maximizing program performance requires that SBA fully
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 to maintain productivity. SBA
has prepared an analysis*

*that projects future workforce needs, expanded training and candidate
development programs,*

*and contracted for a workload and staffing study. The Agency needs to
continue to develop its*

*workforce planning, re-training, and other human capital management
activities to ensure*

*optimal performance of its employees.*

Goals:

· Identify the knowledge, skills, abilities, and other characteristics
that employees will need to perform

successfully in SBAs new business environment.

· Develop a succession plan for senior leaders and candidate development
programs.

· Ensure that employees receive adequate training to improve job
performance.

Action Taken

· Developed a comprehensive Workforce Transformation Plan that outlines
the current workforce

numbers and skills, and estimates the number of employees needed
categorized by types of skills

needed in the future.

· Conducted a workload and staffing analysis of SBA Headquarters.

· Provided leadership training to 134 SBA executives and senior managers
and trained more than

200 supervisors in leadership competencies.

· Reinstated candidate development programs for executives and district
directors for succession

planning.

· Completed competency models for Marketing and Outreach Specialist and
Public Information

Officer positions, and trained more than 300 employees in the skills
required.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

78

**Objective 3: Modernize Information Systems**

**Performance Goal: Provide Effective and Efficient IT Support to
Program Delivery**

Our financial management and information systems were developed when SBA
was primarily a direct

lender, and are currently more than 20 years old. They do not comply
with many new guidelines and

standards, including enhanced systems security, integration, standard
databases and reporting, and a

standard general ledger. They also do not fully support our transition
to the role of overseer of resource

partners, nor do they meet SBAs need for quicker, more comprehensive,
and accurate information on

program performance (Results Act compliance).

SBA is redefining how it does business to include outreach, marketing,
and program oversight. We are

using information technology, particularly the Internet, to become more
widely accessible to small firms.

Through modernizing our information systems, we can ensure reasonable
data accuracy, improve

decision-making, and increase productivity and cost-effective service
delivery to more small business

customers. Effective systems modernization requires replacement of old
and outdated legacy systems,

and installation of a new technology infrastructure. Once completed,
these improvements will improve

program oversight, enhance program management, and permit more accurate
and timely financial

reporting.

Our System Modernization Initiative (SMI) is divided into four phases:

1\. Phase I is a Loan Monitoring System (LMS) which addresses loan and
lender monitoring. The

LMS system includes loan management, lender management, and risk
management. The LMS is an

automated systems solution designed to automate the business functions
necessary to manage

SBAs portfolio, principally: process applications for loans and loan
guarantees, service loans and

loan guarantees, process payments and disbursements, liquidate and
litigate, maintain subsidiary loan

ledgers, perform debt collection, lender oversight, risk management,
subsidy rate calculations, and

portfolio management.

2\. Phase II is the Joint Accounting and Administrative Management
System (JA2MS) and Disaster

Credit Management Modernization (DCMM). JA2MS will provide common
processing routines

and support data for critical financial management functions affecting
the entire Agency. SBA will

have a fully integrated and modern financial management system that
includes human resources,

procurement, travel and finance (budget, reporting, and accounting).
DCMM will define the

requirements for a paperless loan application process to be used by the
Office of Disaster

Assistance. This system will expedite the disaster loan approval process
and result in substantial

savings in personnel and travel expenses.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

79

3\. Phase III includes Government Contracting and Business Development
and Entrepreneurial

Development. In order to more fully monitor the use of resource partners
in these areas and

quantify the performance of these programs, SBA will develop a client
tracking database and

identify counseling and training that is conducted on a consistent and
reliable basis. This data will

also allow us to better identify not just outputs but also program
outcomes.

4\. Phase IV will upgrade SMI functions which will greatly affect our
ability to achieve our goals: an upto-

date technology infrastructure that can support new work processes and
systems; (2) a strong IT

security program; and (3) IT standards management and governance. We
must also upgrade our

telecommunications network to support large data transfers at faster
speeds and must be able to

handle the increased complexity of hardware and software interfaces that
accommodate effective

data interchange with lending and resource partners. To succeed, we must
ensure that our IT

infrastructure remains current.

Finally, security will become increasingly important as we become more
automated. We must

assure the public, as well as our resource partners, that we have the
security policies, practices, and

infrastructure to maintain the privacy, confidentiality, and integrity
of the data that we collect and

exchange with them. We realize that maintaining good security requires a
continuous commitment of

resources and management attention.

**Office of Inspector General (OIG) Management Challenges**

**Challenge: SBA faces significant challenges in modernizing its major
loan monitoring and**

**financial management systems**

*Summary: SBA has ambitious plans to upgrade its systems for loan
monitoring and financial*

*management, but implementing those plans will require sustained
commitment to achieve*

*objectives and overcome system development obstacles. The Agency has
identified modernizing*

*these systems as a major priority and has made progress in developing
information technology*

*procedures and controls. SBA needs to continue to formulate and
implement sound procedures*

*for system development and acquisition to enable more effective and
efficient loan monitoring*

*and financial management.*

Goals:

· Adopt policies and procedures and define processes for investment
selection, control, and

evaluation.

· Develop a systematic process for architecture development, establish
policies and procedures for

architecture maintenance, and set a target date for implementation of
the maintenance process.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

80

· Develop a plan to institutionalize and enforce agency-wide use of SBAs
Systems Development

Methodology (SDM).

· Establish policies, procedures, and processes for software development
and software acquisition

and develop a mechanism to enforce them.

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.

· To address past criticisms and help support its strategic goals, the
Office of the Chief Information

Officer developed and started implementing the 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.

· SBA has begun development and implementation of a cost accounting
system. In addition, SBA has

implemented a cost allocation model to assign costs to each major
program, activity and function.

· The Agency has completed an IT architecture document and established
procedures for its

maintenance.

· SBA has developed configuration management and quality assurance
procedures for SMI projects.

**Challenge: Information systems security needs improvement**

*Summary: SBA operations depend heavily on the Agencys information
systems, and the security*

*of these 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 agency-wide systems security program
to include assessing*

*risks, establishing policies and controls, promoting awareness, and
evaluating security*

*effectiveness.*

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

81

Goals:

§ SBA needs to fully implement and maintain an ongoing information
security program aimed at

understanding and reducing its information security risks.

Action Taken

· Committed more than \$1.2 million in personnel and contract support to
enhance the Agencys

computer security program

· Increased the number of authorized personnel for IT security from 2 to
9 and acquired additional

contractor support to conduct security reviews

· Removed computer security as one of SBAs material weaknesses in the FY
2000 audit

· Issued an updated computer security policy document that incorporated
security policies covering

the latest Agency technology including client servers, e-mail, and the
Internet

· Documented the computer security program and produced guidance
documents and templates for

the performance of computer security functions within the Agency

· Completed certification and accreditation reviews for eight of the
most sensitive systems

· Developed a security training program

· Continued work on developing critical infrastructure protection and
security plans

Action Needed

· Perform vulnerability assessments on all critical cyber-based
infrastructure

· Complete remedial plans for vulnerabilities identified by the risk
assessments

· Develop a multi-year funding plan

· Include infrastructure assurance functions in the strategic planning
and performance measurement

framework

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

82

**Objective 4: Improve Financial Management**

**Performance Goal: Improve Financial Management**

Since the passage of the Chief Financial Officers Act of 1990 (CFO Act),
SBA has become a leader in

Federal financial management. In essence, SBA is primarily a financial
institution, due to the level of

credit extended annually and a loan portfolio more than \$50 billion. As
a financial institution, excellence

in financial management is paramount to ensuring public confidence in
SBA.

**Office of Inspector General (OIG) Management**

The OIG has incorporated its December 1999 cost accounting challenge
into its December 2000 Major

Management Challenge on modernizing Agency information systems for loan
monitoring and financial

management.

**Objective 5: Improve Credit Program Management**

**Performance Goal: Improve Loan Portfolio Performance**

SBA must maintain the financial stability and soundness of our \$50
billion loan portfolio. As with

financial institutions in the private sector, we have the fiduciary
responsibility to make our loan guaranty

decisions wisely and guard our current investments carefully. Risk
management issues have become

more critical as we have initiated a change to partnering with banks,
outsourcing our core processes,

and selling our 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 us to

outsource servicing 30 percent of our disaster home loans. In the past 2
years, we have 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 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, we have begun to build a system to identify,
understand, and respond appropriately

to the behavior of SBAs lending partners in a timely way. As described
previously, the Loan

Monitoring System (LMS) is part of SBAs Systems Modernization Initiative
and will create an

automated monitoring system for SBAs portfolio.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

83

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 require
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.

One of SBAs major management challenges is to make sure our lenders take
prudent and appropriate

risk. With this in mind, we are improving our ability to assess,
forecast, and manage risk.

Key objectives include:

· Delineating the difference between conventional bank lending and SBA
guaranties by industry at

different points in the economic cycle.

· Delineating an optimization of risk/benefit ratio for small business
borrowers.

· Detecting excessive risk-taking by marginal lenders earlier in the
loan cycle.

· Implementing a graduated system of enforcement to slow marginal
lending activity.

· Forecasting portfolio performance.

The Office of Lender Oversight is developing models and processes to
meet the above objectives.

Performance measures addressing delinquency and purchase and default
rates among other items will be

defined and monitored for individual lenders and by loan program.
Monitoring these measures will

allow the Agency to track trends by lender and within the loan
portfolio. The new approach will allow

longitudinal comparisons of lender behavior both among individual
lenders, and that of an individual

lender to a norm (constant) derived from the behavior of the portfolio
as a whole. By analyzing both

loan portfolio performance and lender behavior, the Agency gains a broad
analytical tool in which to

improve performance.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

84

**Office of the Inspector General (OIG) Management Challenges**

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

*Summary: As SBA becomes increasingly dependent on private lenders to
carry out business loan*

*functions, an effective lender oversight program is critical for
ensuring that lender activities*

*serve Agency objectives and comply with all rules and procedures. SBA
has established an Office*

*of Lender Oversight, completed the second round and started the third
round of Preferred*

*Lender Program (PLP) reviews, completed the second cycle of safety and
soundness*

*examinations of the non-depository Small Business Lending Companies
(SBLC) and begun*

*development of a comprehensive loan monitoring system. The Agency needs
to ensure that all*

*non-PLP lenders are reviewed periodically on a consistent basis, fully
implement the loan*

*monitoring system, establish baseline goals and measures for lender
processing errors, and*

*compare actual performance to goals.*

Goals:

· Ensure that all non-PLP lenders are reviewed periodically and on a
consistent basis. Results must

be documented, and recommendations made to correct any problems found.

· Implement a comprehensive Loan Monitoring System (LMS) that will
enable SBA to better

evaluate the quality of a lenders SBA portfolio. Factors to be
considered should include loan

volume, loan origination, loan seasoning, and delinquency and default
rates.

· Establish baseline goals and measures for lender processing errors and
periodically compare

performance to goals.

· Implement the strategic plan for lender oversight.

Action Taken:

· SBA has established an Office of Lender Oversight.

· PLP lenders are reviewed annually by the PLP Review Branch with
contractor help.

· SBA is continuing to conduct Quality Service Reviews of all district
office functions.

· SBA has initiated steps to develop and implement a comprehensive Loan
Monitoring System

(LMS) to evaluate lender performance.

· SBA has implemented an examination program for the Agencys 14 Small
Business Lending

Companies.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**GOALS AND RESOURCES**

85

· SBA modified the PLP certification renewal process to strengthen the
process for evaluating lender

performance in loan origination and processing.

**Objective 6: Create Electronic Government**

**Performance Goal: Use the Internet to Serve Entrepreneurs and Small
Businesses.**

Electronic commerce (EC), loosely defined, is using computers,
telecommunications and all available

electronic resources to conduct business. For SBA, the E-Government
(e-gov) vision revolves around

customer service. Our objectives are to (1) educate small businesses on
the importance of using

electronic commerce services in their businesses (e-commerce), and (2)
deliver products and services

to small businesses anytime/anyplace through the Internet (e-gov).

At the core of our e-government and e-commerce strategy is an effort to
create a horizontally integrated

suite of programs and services available to small companies anyplace,
when they need it, and in a format

that is user-friendly, comprehensive and cost effective. We will use
information technology and

communications to implement electronic business transactions that will
replace the current paper

intensive processes as required by the Government Paperwork Elimination
Act.

86

**APPROPRIATIONS LANGUAGE AND**

**DESCRIPTION**

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

87

**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 and

minorities. 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 2002 Presidents Budget requests \$321.2 million in new budget
authority for the S&E

appropriation, a decrease of \$89.4 million from the FY 2001
appropriated level. Of this amount,

\$153.9 million is for non-credit programs (a reduction of \$101.2
million from the FY 2001

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 \$309.2
million in total resources (an

increase of \$13.0 million over FY 2001). A summary of the Presidents
Request for Salaries and

Expenses follows:

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

**Salaries and Expenses:**

New Budget Authority \$ 322,800 \$ 410,635 \$ 321,219 \$ (89,416)

Transfer from Business Loans Program 129,000 129,374 129,105 (269)

Transfer from Disaster Loans Program 20,000 9,854 9,854 0

Transfers from Other Agencies 11,654 5,000 1,800 (3,200)

Offsetting Collections - Fees 3,331 3,000 3,000 0

Estimated Gainsharing 0 3,000 3,000 0

Carryover from Prior Fiscal Year 4,089 2,791 0 (2,791)

Recoveries 10 0 0 0

Returned to Treasury (10,500) 0 0 0

Transfer to Other Accounts (4,248) (1,898) 0 1,898

Carryover into Next Fiscal Year (2,791) 0 0 0

Rescinded Funds Appropriated (3,185) (903) 0 903

Balance Expired (674) 0 0 0

**Total Salaries and Expenses \$ 469,486 \$ 560,853 \$ 467,978 \$
(92,875)**

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

88

*Non-Credit Programs and Initiatives (\$158.8 million)*

The FY 2002 request includes \$158.8 million for non-credit programs and
initiatives. Of this amount,

nearly \$76 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 Microloan technical assistance, Womens Business
Centers, and Veterans

Business Assistance. Other non-credit programs such as HUBZone
Empowerment Contracting and

7(j) Technical Assistance provide an advocate for small businesses in
the government contracting area.

In addition to funding business assistance programs, the Non-Credit
Programs and Special Initiatives

account funds management and information technology initiatives to help
transform SBAs workforce

and modernize its infrastructure. Funds are 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.

*Operating Budget *(\$309.2 million)

The total authority requested for SBAs operating budget is \$309.2
million, an increase of \$13.0 million

from the FY 2001 enacted level. The small increase (3.9 percent) is
primarily for the general salary pay

raises of 3.6 percent in January 2002 and for mandatory rate increases
in rent that are passed directly to

SBA by the General Services Administration. The request for SBAs
operating budget reflects the

minimum requirement needed to provide efficient customer services,
ensure a motivated and trained

workforce, and maintain an effective infrastructure to support SBA
programs and activities. In fact,

SBA will further reduce its workforce by 150 positions during FY 2002.
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 (\$51.9 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.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

89

*Field Operations (\$147.4 million)*

Funding for field operations covers the cost of operating 10 regional
and 70 district and branch offices

throughout the United States and Puerto Rico. The regional and district
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 (\$34.1 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 (29.6 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 (\$46.2 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.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

90

**SALARIES AND EXPENSES**

*For necessary expenses, not otherwise provided for, of the Small
Business Administration as*

*authorized by Public Law 105135, 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, \[331,635,000,000\] ***\$*321,219,000****: 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*

*\[\$88,000,000\] ****\$75,806,000 ****shall be available to fund grants
for performance in fiscal year*

*\[2001\] ****2002 ****or fiscal year \[2002\] ****2003 ****as
authorized by section 21 of the Small Business Act, as*

*amended. \[Provided further, That, of the funds made available under
this heading, \$4,000,000*

*shall be for the National Veterans Business Development Corporation
established under section*

*33(a) of the Small Business Act (15 U.S.C. 657c).*

*In addition, for the cost of programs related to the New Markets
Venture Capital Program,*

*\$37,000,000, of which \$7,000,000 shall be for BusinessLINC, and of
which \$30,000,000 shall be*

*for technical assistance: Provided, That the funds appropriated under
this paragraph shall not*

*be available for obligation until the New Markets Venture Capitol
program is authorized by*

*subsequent legislation.\]*

*In addition, to reimburse the Small Business Administration for
qualified expenses of delinquent*

*non-tax debt collection, to be derived from increased agency
collections of delinquent debt, 5*

*percent of such collections but not to exceed \$3,000,000. (Departments
of Commerce, Justice,*

*and State, the Judiciary, and Related Agencies Appropriations Act,
2001, as enacted by section*

*1(a)(2) of P.L. 106553).*

*\[For an additional amount for Salaries and Expenses, \$1,000,000 shall
be available for a*

*grant to the Electronic Commerce Resource Center in Scranton,
Pennsylvania, to establish an*

*electronic commerce technology distribution center. (Division A,
Miscellaneous Appropriations*

*Act, 2001, as enacted by section 1(a)(4) of P.L. 106-554.)\]*

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

91

***NON-CREDIT BUSINESS ASSISTANCE PROGRAMS***

*\[For non-credit programs authorized under the Small Business Act, as
amended, \$256,050,000,*

*of which \$89,500,000 shall be for grants for performance in fiscal
year 2001 or fiscal year 2002:*

*Provided, That (1) \$85,000,000 shall be for grants for the purposes
authorized by section 21 of*

*such Act, (2) \$3,000,000 to establish a reservation-based Native
American Small Business*

*Development Center network, including subcenters, to serve Native
Americans on a national*

*basis subject to section 21 of such Act but without the necessity for
matching funds, and (3)*

*\$1,500,000 to support the Tribal Business Information Centers:
Provided further, That any*

*balances of FY2000 funds appropriated for these non-credit programs
under the heading,*

*Salaries and Expenses, may be transferred to this heading, to be
available to carry out these*

*programs and to be available for the time period originally
provided.\]*

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

92

**Business Loans Appropriation**

The Business Loans 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 2002 budget requests \$1.5 million for the subsidy costs
associated with direct loans, \$0 for the

subsidy costs associated with guaranteed loans and debentures,
supporting and a total program level of

\$17.6 billion in net loan approvals to small businesses during FY 2002.
These approvals include the

effect of loan increases, decreases, and cancellations. In addition, the
Budget requests \$129 million for

administrative expenses to be transferred to the Salaries and Expenses
account.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

93

**Business Loan Programs Appropriation**

*(Dollars in Thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

**New Budget Authority**

Section 7(a) Guaranty \$ 107,390 \$ 114,960 \$ 0 \$ (114,960)

Section 7(a) Guaranty - DELTA 0 0 0 0

Y2K Loans1 110 0 0 0

Section 504 CDC Guaranty 0 0 0 0

Section 504 CDC Guaranty - DELTA 0 0 0 0

Microloan - Direct 0 2,250 1,500 (750)

Microloan - Guaranty 0 0 0 0

New Market Venture Capital 6,000 22,000 0 (22,000)

SBIC - Participating Securities 24,300 26,200 0 (26,200)

SBIC - Debentures 0 0 0 0

Rescinded Funds - Appropriation 0 (364) 0 364

Subtotal  Loan Programs 137,800 165,046 1,500 (163,546)

**Administrative Expense**

New Budget Authority 129,000 129,000 129,000 0

Rescinded Funds - Appropriation 0 (284) 0 284

Subtotal  Administrative Expense 129,000 128,716 129,000 284

Total New Budget Authority \$ 266,800 \$ 293,762 \$ 130,500 \$ (163,262)

**Business Loans - Summary**

Program Level \$ 13,180,670 \$ 17,565,152 \$ 17,595,075 \$ 29,923

New Appropriation \$ 266,800 \$ 294,410 \$ 130,500 \$ (163,910)

Carryover from Prior Fiscal Year 30,100 24,719 9,114 (15,605)

Carryover into Next Fiscal Year (24,719) (9,114) (8,798) 316

Transfer to Other Accounts (135,000) (129,974) (129,105) (231)

Recoveries 4,211 1,169 0 (1,169)

Balance Expired (13,100) 0 0 0

Transfer from Other Accounts 9,500 0 0 0

Rescinded Funds - Appropriation 0 (648) 0 648

Subsidy Budget Authority \$ 137,792 \$ 181,162 \$ 1,711 \$ (179,451)

1 Program authority expired 12/31/00.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

94

**Section 7(A) Loan Guaranty Program**

(*Dollars in Thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

Program Level \$ 9,679,569 \$ 11,008,547 \$ 10,700,000 \$ (308,547)

New Subsidy Appropriation 107,390 114,960 0 (114,960)

Carryover Balance - Beginning of Year 5,632 12,924 0 (12,924)

Recoveries 2,685 1,169 0 (1,169)

Carryover Balance - End of Year (12,924) 0 0 0

Transfer from Other Accounts 9,500 0 0 0

Rescinded Funds - Appropriation 0 (253) 0 253

Subsidy Budget Authority \$ 112,283 \$ 128,800 \$ 0 \$ (128,800)

Subsidy Rate1 1.16% 1.17% 0.00% (1.17%)

**Base Program**

The 7(a) Loan Guaranty Program is the SBAs primary business loan
program. The SBA guarantees

up to \$1 million of a \$2 million maximum loan. At present, 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 (except Export

Working Capital loans, which receive a guaranty of up to 90 percent). A
borrower may have more

than one SBA loan at a time, so long as the total amount does not exceed
the SBAs guaranty cap of \$1

million. The only exceptions are the International Trade and DELTA loan
programs, as noted in the

following pages.

The SBA has a number of specialized loans under the 7(a) Program that
help fill the particular needs of

small businesses:

*SBA LowDoc*: SBAs Low Documentation Loan Program (LowDoc) offers a
one-page SBA

application form and centralized processing with a rapid turnaround on
approvals for loans of \$150,000

or less. SBA established a requirement to process completed applications
within 3 days. Proceeds

may not be used to repay certain types of existing debt.

*SBAExpress: *SBA*Express *provides SBA guaranties on loans \$150,000 or
less, allowing lenders to

use their own forms and processes. In return for this convenience,
lenders receive a maximum 50

percent guaranty.

1 FY 2001: The Authorization Bill includes changes that lower the rate
to 1.16% effective December 21, 2000. The rate was 1.24%

from October 1, 2000 to December 21, 2000.

FY 2002: Assumes proposed fee changes (under 1 year = 1%, \<=\$150,000 =
1.5%, \>\$150,000 and \<=\$700,000 = 3.5%; \> \$700,000

= 4%; pass-thru \<= \$150,000 = 0.5%, \>\$150,000 = 0.8875%) to lower
rate from 1.07% current services rate to 0%.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

95

**Section 7(A) Loan Guaranty Program**

(*Dollars in Thousands)*

*CAPLines: *Under this program, SBA helps small businesses meet their
short-term and cyclical

working capital needs. A CAPLines loan can be for any dollar amount and
the SBA will guarantee

75 percent up to \$1 million (85 percent on loans of \$150,000 or less).
There are five short-term

working capital loan programs for small businesses under the CAPLines
umbrella: seasonal line,

contract line, builders line, standard asset-based line, and small
asset-based line.

*Prequalification Loan Program***: **Through the Prequalification Loan
Program, intermediaries

assist women, minorities, and veterans as well as exporters, rural
markets and designated

geographical areas, to develop viable loan application packages and
secure loans. This program is

a pilot and combines the Women and Minority Prequalification Pilots
established in 1994. It allows

SBA to prequalify guaranties of up to \$250,000 before a business owner
approaches a lender.

*International Trade Loan Program***: **The International Trade Loan
Program helps small

businesses that are either engaged in international trade, preparing to
engage in international trade or

adversely affected by competition from imports. SBA can guarantee as
much as \$1.25 million in

combined working capital, facilities, and equipment loans (including any
other current SBA loan

guaranties).

*Community Express: *Community Express is similar to SBA*Express *except
that it provides the

maximum guaranty available to loans up to \$250,000. That is, 75 percent
on loans over \$150,000

and 85 percent on loans up to and including that amount. The unique
feature of this program is that

it requires lenders to arrange for technical assistance to be provided
to meet the needs of the

borrower. The program is targeted to businesses located in low and
moderate income areas and

those owned by women, minorities, and veterans.

*Community Adjustment and Investment Program (CAIP) *Under a Memorandum
of

Understanding (MOU) with the Department of Treasury, SBA guarantees 7(a)
loans to businesses

in communities adversely affected by the North American Free Trade
Agreement (NAFTA) without

guarantee fees. This fee is paid from a special fund provided by the
Department of Treasury.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

96

**Section 7(A) Loan Guaranty Program (DELTA)**

*(Dollars in Thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

Program Level \$ 15,552 \$ 20,000 \$ 20,000 \$ 0

New Subsidy Appropriation 0 0 0 0

Carryover Balance - Beginning of Year 4,796 4,511 4,137 (374)

Carryover Balance - End of Year (4,511) (4,137) (4,005) 132

Transfer to Salaries and Expenses 0 0 0 0

Subsidy Budget Authority \$ 285 \$ 374 \$ 132 \$ (242)

Subsidy Rate 1.83% 1.87% 0.66% (1.21%)

**Base Program**

The Defense Loan and Technical Assistance Program (DELTA) is a joint
effort between SBA and the

Department of Defense. It provides both financial and technical
assistance to defense-dependent small

firms adversely affected by defense cuts and base closings to help them
diversify into the commercial

marketplace. The maximum SBA loan guarantee under DELTA is 80 percent
for all loans with a \$1.25

million loan ceiling.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

97

**Section 504 Development Company Loan Program**

*(Dollars in Thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

**Section 504/CDC Guarantees**

Program Level \$ 1,808,649 \$ 3,750,000 \$ 3,750,000 \$ 0

New Subsidy Appropriation 0 0 0 0

Carryover Balance - Beginning of Year 0 0 0 0

Recoveries 0 0 0 0

Carryover Balance - End of Year 0 0 0 0

Transfer to Salaries and Expenses 0 0 0 0

Subsidy Budget Authority 0 0 0 0

Subsidy Rate1 0.00% 0.00% 0.00% 0.00%

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

Program Level \$ 257 \$ 2,472 \$ 2,500 \$ 28

New Subsidy Appropriation 0 0 0 0

Carryover Balance - Beginning of Year 1,031 1,028 1,006 (22)

Recoveries 0 0 0 0

Carryover Balance - End of Year (1,028) (1,006) (985) 21

Transfer to Salaries and Expenses 0 0 0 0

Subsidy Budget Authority \$ 3 \$ 22 \$ 21 \$ (1)

Subsidy Rate 1.13% 0.89% 0.84% (0.05%)

**Base Program**

The 504 Development Company Loan Program is delivered through a network
of Certified

Development Companies (CDCs) that provide small businesses with
long-term fixed-rate financing for

the purchase of land, buildings and long-life equipment. The program is
designed to enable small

businesses to create and retain jobs in their business service areas and
to meet other legislatively

mandated public policy purposes. A CDC is generally a nonprofit
corporation that is set up to

contribute to the economic development of its community or region. There
are about 300 CDCs

nationwide. SBA guarantees debentures issued by the CDC for up to 40
percent of the project cost,

up to \$1.3 million.

1 No appropriation is required due to the annual adjustment of fees to
maintain a 0% subsidy rate. For FY 2002, the fee will be lowered

from 0.472% o 0.410%.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

98

**Microloan Program**

*(Dollars in Thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

**Miroloan Direct**

Program Level \$ 27,204 \$ 25,531 \$ 20,575 \$ (4,956)

New Subsidy Appropriation 0 2,250 1,500 (750)

Carryover from Prior Year 2,521 198 0 (198)

Recoveries 0 0 0 0

Carryover into Next Year (198) 0 0 0

Transfer to Salaries and Expenses1 0 (158) (105) 53

Rescinded Funds - Appropriation 0 (5) 0 5

Subsidy Budget Authority 2,323 2,285 1,395 (890)

Subsidy Rate 8.54% 8.95% 6.78% (2.17%)

**Microloan Guaranty Loans**

Program Level \$ 1,150 \$ 2,000 \$ 2,0002 \$ 0

New Subsidy Appropriation 0 0 0 0

Carryover from Prior 2,700 2,604 2,445 (159)

Recoveries 0 0 0 0

Carryover into Next Year (2,604) (2,445) (2,282) 163

Transfer to Salaries and Expenses 0 0 0 0

Subsidy Budget Authority \$ 96 \$ 159 \$ 163 \$ 4

Subsidy Rate 8.32% 7.95% 8.17% 0.22%

**Base Program**

The Microloan Program makes loans up to \$750,000 to intermediaries who
in turn make very small

loans (\$35,000 and under) to entrepreneurs traditionally considered
unbankable largely due to

inexperience with credit, lack of assets or the need for on-going
technical assistance. They may have no

prior business experience, have no credit history (or a blemished one),
have been on public assistance,

live in an area of economic downturn or face other factors that would
cause traditional lenders not to

consider them viable clients. Therefore, this program is accompanied by
a technical assistance grant

program that provides a significant contribution to the viability of the
business and supports the

repayment of the debt.

1 By SBA statute, 7% of the annual appropriation is to be transferred to
Salaries and Expenses to provide training to Microloan intermediaries.

2 The amount shown consists entirely of funds carried over from FY 2001
and may be reduced if expenditures during FY 2001 are

different from projections.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

99

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

100

Each loan generates approximately 1.7 jobs, and if a borrower was a
welfare recipient, it is common for

them to hire other welfare recipients. Since its inception in 1992, more
than 100 intermediary lenders

have made \$121 million in Microloans to more than 12,000 small
businesses. This program was made

permanent with the passage of P.L. 105-135 in December 1997.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

101

**Small Business Investment Company Programs**

*(Dollars in Thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

**Participating Securities**

Program Level \$ 1,260,630 \$ 2,104,580 \$ 2,500,000 \$ 395,420

New Subsidy Appropriation 24,300 26,200 0 (26,200)

Carryover Balance - Beginning of Year 320 1,928 0 (1,928)

Recoveries 0 0 0 0

Carryover Balance - End of Year (1,928) 0 0 0

Transfer from Debentures 0 0 0 0

Rescinded Funds - Appropriation 0 (58) 0 58

Transfer to Salaries and Expenses 0 (500) 0 500

Subsidy Budget Authority 22,692 27,570 0 (27,570)

Subsidy Rate1 1.80% 1.31% 0.00% (1.31%)

**SBIC - Debentures**

Program Level \$ 384,955 \$ 500,000 \$ 600,000 \$ 100,000

New Subsidy Appropriation 0 0 0 0

Carryover Balance - Beginning of Year 13,100 1,526 0 (1,526)

Recoveries 0 0 0 0

Carryover Balance - End of Year (1,526) (1,526) 0 1,526

Balance Expiring (13,100) 0 0 0

Recoveries 1,526 0 0 0

Subsidy Budget Authority \$ 0 \$ 0 \$ 0 \$ 0

Subsidy Rate2 0.00% 0.00% 0.00% 0.00%

**Base Program**

The need for the Small Business Investment Company Program (SBIC) was
established by a 1958

Federal Reserve Board Study, which identified a major gap in capital
markets for long-term financing of

smaller growth-oriented businesses. The SBIC program was reinvented in
FY 1994 with the creation

of a new participating security program and the issuance of final
regulations implementing a sweeping

overhaul of the program. SBICs, licensed and regulated by SBA, are
privately owned and managed

investment firms who make their own investment decisions.

1 FY 2002 assumes proposed fee change from 1.0% to 1.376% resulting in
0% subsidy rate.

2 No appropriation is required due to the annual adjustment of fees to
maintain a 0% subsidy rate. For FY 2002, the fee will be lowered

from 0.88% to 0.866%.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

102

**Small Business Investment Company Program**

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 always at risk ahead of the funding guaranteed by the SBA. This
program serves one of the

most important missions of the Agency\--that of helping qualified small
enterprises secure the capital to

start, maintain or grow a business.

The SBIC Program furthers this mission by: (1) facilitating the
formation of privately-owned and

operated investment companies to serve as a source of equity capital and
long-term loans to new or

expanding small businesses; and, (2) supplementing investment companies
private capital with funds

made available through SBA guarantees.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

103

**New Markets Venture Capital Program**

*(Dollars in Thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

Program Level \$ 0 \$ 152,022 \$ 0 \$ (152,022)

New Subsidy Appropriation 6,000 22,000 0 (22,000)

Carryover Balance - Beginning of Year 0 0 0 0

Recoveries 0 0 0 0

Carryover Balance - End of Year 0 0 0 0

Transfer to Other Accounts (6,000) 0 0 0

Rescinded Funds  Appropriation 0 (48) 0 48

Transfer to Salaries and Expenses 0 0 0 0

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

Subsidy Rate 15.00% 14.44% 14.47% 0.03%

**Base Program**

This Program was funded in FY 2001 for debentures spanning 10 years. The
consolidated

Appropriations Act of 2001 (P.L. 106-554) authorized SBA to provide
loans to geographic areas with

high unemployment or low income to help spur economic development in new
markets. This loan

program duplicates the effects of tax incentives also included in the
bill. The Act included a 30 percent

tax credit for investments in these areas, which will provide \$1.5
billion in investments over a 10 year

period. As a result, funding for the New Markets Venture Capital loan
program in FY 2002 will not

be necessary.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

104

**Surety Bond Guaranty Revolving Fund Appropriation**

*(Dollars in thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

Surety Guarantees \$ 0 \$ 0 \$ 0 \$ 0

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

Total Obligation \$ 3,300 \$ 0 \$ 0 \$ 0

Adjustments to Obligations 0 0 0 0

Offsetting collections \$ (3,300) 0 0 0

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

**Base Program**

The Small Business Administration (SBA) is authorized to issue bond
guarantees to surety companies

for construction, service and supply contracts that do not exceed \$2
million and to reimburse these

sureties up to 90 percent of the losses sustained if the contractor
defaults. SBAs guarantees provide

the incentive necessary for sureties to issue bonds to small contractors
who could not otherwise

compete in the contracting industry.

The Surety Bond Guaranty Program is delivered through the Prior Approval
Program and the Preferred

Surety Bond (PSB) Program. Under the Prior Approval Program, SBA must
approve each surety

bond guarantee agreement. The surety receives a 90 percent guarantee if
the bonds are issued on

behalf of a socially and economically disadvantaged firm or if the total
amount of the contract does not

exceed \$100,000. Otherwise the SBAs guarantee will not exceed 80
percent.

Under the Preferred Surety Bond (PSP) Program, participating sureties
are authorized to issue, monitor,

and service bonds without SBAs prior approval. Guarantees under this
program are limited to 70

percent. Currently, there are 15 participating sureties in the program.

Each of these programs provides assistance to a different segment of the
contracting community. There

is no subsidy loss rate for this program since it is not considered a
credit program under the guidelines of

credit reform. Instead, there is a revolving fund at the Treasury in
which income is deposited and from

which claims are paid.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

105

**BUSINESS LOANS PROGRAM ACCOUNT**

For the cost of direct loans, \[\$2,250,000\], **\$1,500,000 **to be
available until expended; \[and for

the cost of guaranteed loans, \$163,160,000, as authorized by 15 U.S.C.
631 note or subsequently

authorized for the New Markets Venture Capital program, of which
\$45,000,000 shall remain available

until September 30, 2002: Provided, That of the total provided,
\$22,000,000 shall be available only for

the cost of guaranteed loans under the New Markets Venture Capitol
program and shall become

available for obligation only upon authorization of such program by the
enactment of subsequent

legislation in fiscal year 2001\]: *Provided further*, 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 \[2001\], **2002
**commitments to guarantee loans under section

503 of the Small Business Investment Act of 1958, as amended, shall not
exceed \$3,750,000,000:

*Provided further*, That during fiscal year \[2001\] **2002,
**commitments for general business loans

authorized under section 7(a) of the Small Business Act, as amended,
shall not exceed

\[\$10,000,000,000 without prior notification of the Committees on
Appropriations of the House of

Representatives and Senate in accordance with section 605 of this Act\]
**\$10,700,000,000: ***Provided*

*further*, That during fiscal year \[2001\] **2002**, commitments to
guarantee \[loans\] **debentures and**

**participating securities **under section 303(b) of the Small Business
Investment Act of 1958, as

amended, shall not exceed \[\$500,000,000\] **\$3,100,000,000**.

In addition, for administrative expenses to carry out the direct and
guaranteed loan programs,

\$129,000,000, 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, 2001, as enacted by section 1(a)(2) of P.L. 106553).

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

106

**SURETY BOND GUARANTEES REVOLVING FUND**

No appropriation language is requested for FY 2002.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

107

**Disaster Loans Appropriation**

**Base Program**

The Small Business Administrations (SBA) Disaster loan Program is a key
component of the overall

Federal recovery effort in the wake of natural disasters. SBAs disaster
loans, made pursuant to

Section 7(b) of the Small Business Act, as amended, are the primary form
of Federal assistance for

non-farm, private sector uninsured losses as the result of natural
disasters such as hurricanes, floods,

wildfires and tornadoes. The disaster loan program is the only form of
SBA assistance that is not limited

to small businesses. Both the President and the SBA Administrator may
make disaster declarations, but

the vast majority of disaster loans (in number and dollars) are made to
victims of disasters declared by

the President. Disaster loans from SBA to homeowners, renters,
nonprofits and businesses make a

significant contribution to the process of the rebuilding and recovery
from these events.

The SBA Disaster Loan program helps control Federal disaster assistance
costs, by providing loans that

are repaid to the Treasury. When disaster victims need to borrow to
repair uninsured damages, the

comparably low interest rates and long period of repayment terms
available from SBA make recovery

affordable. Currently interest rates fluctuate according to statutory
formulas: a lower rate, not to exceed

4 percent is available to those applicants unable to obtain credit
elsewhere, while a higher rate, not to

exceed 8 percent is charged when other sources of credit are available.
SBAs disaster loans are a

critical source of economic stimulation for the economies of
disaster-ravaged communities, helping to

rebuild homes and businesses, spur employment and stabilize the tax
base.

**Appropriation**

As required by the Federal Credit Reform Act of 1990, the Disaster Loans
Program account includes

the subsidy costs associated with direct loans obligated committed in
the fiscal year in question.

The Disaster Loan program account also includes administrative expenses
associated with the delivery

of disaster loans. 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 by reimbursement to the Salaries and Expenses account.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

108

**Disaster Loans Appropriation**

The FY 2002 budget requests no new budget authority for loan subsidies
to support a \$300 million loan

program. This level will be funded by unobligated balances from FY 2001.
SBAs budget requests

\$75.4 million for administrative expenses to support the direct and
indirect costs associated with

administering the \$300 million in loans and servicing our disaster loan
portfolio. In addition to SBAs

direct request for new budget authority in FY 2002, the President
requests an appropriation of \$5.6

billion for a government-wide reserve account for disaster programs.
SBAs need for additional loan

funds and related administrative support, will be drawn from this
reserve account once the direct

appropriation is exhausted.

In addition, we propose to increase the interest rate for business loans
to borrowers who do not have

credit available elsewhere. Presently, these loans are capped at a 4
percent interest rate. SBAs

proposal would increase this rate to the Treasury cost of funds, which
is projected at 5.4 percent next

year. A maximum of 8 percent is also proposed to parallel the rate of
disaster business loans with credit

elsewhere. This proposal has the effect of reducing the subsidy rate on
the disaster loan program from

14.67 percent to 10.95 percent.

Detailed information on the FY 2002 budget request is provided on the
following pages.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

109

**Disaster Loan Program**

*(Dollars in Thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

Disaster Loans Program

Direct Loan Subsidy \$ 140,400 \$ 76,140 \$ 0 \$ (74,140)

Supplemental, Contingencies 15,500 0 0 0

Total Budget Authority \$ 155,900 \$ 76,140 \$ 0 \$ (76,140)

Loan Program Budget Authority

New Budget Authority \$ 140,400 \$ 76,140 \$ 0 \$ (76,140)

Supplemental, Contingencies 15,500 0 0 0

Carryover from Prior Fiscal Year 81,004 96,231 37,850 (58,381)

Recoveries 33,235 10,000 0 (10,000)

Carryover into Next Fiscal Year (96,231) (37,850) 0 37,850

Transfer to Administrative Expense 0 0 (5,000) (5,000)

Rescinded Funds Appropriated 0 (168) 0 168

Subtotal - Disaster Loans Program \$ 173,908 \$ 144,353 \$ 32,850 \$
(111,503)

Subsidy Rate 22.2% 17.46% 10.95% (6.51)%

Program Level \$ 783,369 \$ 826,,764 \$ 300,000 \$ (526,764)

Disaster Loans Program - Administration

New Budget Authority \$ 136,000 \$ 108,354 \$ 75,354 \$ (33,000)

Supplemental, Contingencies 25,400 0 0 0

Carryover from Prior Fiscal Year 779 27,307 0 (27,307)

Transfer from Loan Subsidy 0 0 5,000 5,000

Recoveries 1,128 0 0 0

Carryover into Next Fiscal Year (27,307) 0 0 0

Transfer to Salaries and Expenses (20,000) (9,854) (9,854) 0

Transfer to Inspector General (500) (500) (500) 0

Rescinded Funds Appropriated (2,048) (238) 0 238

Total - Disaster Administration \$ 113,452 \$ 125,069 \$ 70,000 \$
(55,069)

Disaster Loan Making \$ 83,929 \$ 91,013 \$ 40,000 \$ (51,013)

Disaster Loan Servicing 29,523 34,056 30,000 (4,056)

Total \$ 113,452 125,069 \$ 70,000 \$ (55,069)

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

110

**Disaster Loan Making**

**Summary Of Requirements By Object Class**

*(Dollars in Thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

Personnel Compensation \$ 34,848 \$ 37,789 \$ 8,472 \$ (29,317)

Overtime and Awards 5,855 6,349 2,790 (3,559)

Civilian Personnel Benefits 9,340 10,128 2,270 (7,858)

Workers/Unempl Compensation 1,429 1,550 1,550 0

Travel 9,756 10,579 300 (10,279)

Transportation of Things 14 15 15 0

Rental Payments to GSA 3,800 4,176 4,176 0

Rental Payments to Others 0 0 0 0

Communications, Utilities 1,274 1,381 1,381 0

Postage 735 797 797 0

Printing and Reproduction 25 28 28 0

Other Services 13,623 14,718 14,718 0

Supplies and Materials 92 100 100 0

Equipment 3,138 3,403 3,403 0

**Total Obligations \$ 83,929 \$ 91,013 \$ 40,000 \$ (51,013)**

**Total Positions1 916 927 695 (232)**

1 For FY 2002, this assumes additional funding from the Government-wide
Disaster Reserve to maintain approximately the same level

of staffing throughout the year.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

111

**Disaster Loan Servicing**

**Summary Of Requirements By Object Class**

*(Dollars in Thousands)*

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

Personnel Compensation \$ 12,138 \$ 14,002 \$ 13,992 \$ (10)

Overtime and Awards 253 292 257 (35)

Civilian Personnel Benefits 3,942 4,547 4,543 (4)

Workers/Unempl Compensation 32 37 37 0

Travel 51 59 52 (7)

Transportation of Things 10 12 12 0

Rental Payments to GSA 2,608 2,857 2,857 0

Rental Payments to Others 0 0 0 0

Communications and Utilities 409 472 472 0

Postage 1,113 1,284 1,284 0

Printing and Reproduction 3 4 4 0

Other Services 8,876 10,389 6,389 (4,000)

Supplies and Materials 61 70 70 0

Equipment 27 31 31 0

Grants and Subsidies 0 0 0 0

**Total Obligations \$ 29,523 \$ 34,056 \$ 30,000 \$ (4,056)**

**Total Positions 252 237 237 0**

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

**APPROPRIATIONS LANGUAGE AND DESCRIPTION**

112

**DISASTER LOANS PROGRAM ACCOUNT**

*\[For the cost of direct loans authorized by section 7(b) of the Small
Business Act, as*

*amended, \$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.\]*

*\[In addition, for*\] **For **administrative expenses to carry out the
direct loan program,

\[\$103,354,000\], **\$75,354,000 **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

\[\$98,000,000\] **\$65,000,000 **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\[:

*Provided*, That any amount in excess of \$9,854,000 to be transferred
to and merged with

appropriations for Salaries and Expenses for indirect administrative
expenses shall be treated as a

reprogramming of funds under section 605 of this Act and shall not be
available for obligation or

expenditure except in compliance with the procedures set forth in that
section\]. *(Departments of*

*Commerce, Justice, and State, the Judiciary, and Related Agencies
Appropriations Act, 2001, as*

*enacted by section 1(a)(2) P.L. 106563).*

113

**DATA VALIDATION AND VERIFICATION**

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

114

**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 highquality

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, and 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**. We will
assess the relevancy of

performance measures and data.

§ **Fostering organizational commitment and capacity for data quality.
**We will achieve data

quality through different processes. As part of a formal process, our
managers will *attest *to the

quality of the data under their management. We are training managers to
make sure they

understand the need for quality data. This necessitates guidance to the
field on standards for data

collection and warehousing. In managing for results, we will require
development of better data

systems to provide relevant information for decision-making. We are also
using performance

information to evaluate our senior managers and the effectiveness of our
programs.

§ **Assessing the quality of existing data. **The quality of our
financial data systems is ensured by

audits and reviews. However, we must assess the quality of loan and
program data provided by our

resource partners. 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. We plan to 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, we must improve quality. Managers will be asked to
document how they intend

to reduce these limitations.

· **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 ensure that only correct data is entered into
the systems and that data is

stored with stringent verification and change rules.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

115

**DATA VALIDATION AND VERIFICATION**

In FY 1999, we tracked our performance goals monthly and verified the
accuracy of the data on an *ad*

*hoc *basis. As part of this internal performance monitoring, we tested
the relevance of the indicators and

identified problems of data completeness, timeliness, and accuracy.

In FY 2000, we began implementing a more formal quality process, which
included program managers

self-assessing the quality of their performance indicators, training
managers in data quality control and

improvement methods, developing data quality improvement plans, and
feedback to program managers

about data limitations determined through using the data. We completed
the program manager selfassessment

step in December 1999. Program managers were asked to:

· 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 we will continue to train our managers. Managers will be
informed of the elements of data

quality, how to ensure data quality through internal controls and how to
improve data quality. Managers

will be asked to provide data verification procedures and improvement
plans, with milestones, after

completion of the training. Explicit 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.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

116

**DATA VALIDATION AND VERIFICATION**

The table below provides a definition, source, validity statement and
discussion of limitations for each

performance indicator

**Measure Number of Small Businesses**

Definition Number of small businesses filing tax returns with the
Internal

Revenue Service (IRS). This number includes all firms with

employees, without employees and where the owner is working parttime.

Source Department of Treasury, IRS, Statistics of Income Bulletin

Validation (Self-Assessment) The indicator is a valid measure for the
growth of small businesses

Limitations None.

Remedies for Limitations N/A

Verification Through audits

**Measure Number of Small Businesses With Employees**

Definition Firms filing form 941 with IRS.

Source SBA, Office of Advocacy, from data provided by the U.S.
Department

of Labor, Employment and Training Administration

Validation (Self-Assessment) The indicator is a valid measure for the
growth of small businesses

Limitations None.

Remedies for Limitations N/A

Verification Through audits

**Measure Number of Jobs in Small Businesses**

Definition Firms with a positive payroll reporting on form 941 to IRS.

Source SBA, Office of Advocacy, from data provided by Census

Validation (Self-Assessment) The indicator is a valid measure for the
growth of small businesses

Limitations None.

Remedies for Limitations N/A

Verification Through audits

**Measure Number of Small Businesses Owned by Women and Minorities**

Definition Small firms that are self-certified as 51 percent woman- or
minorityowned.

Source SBA, Office of Advocacy, Women in Business, and Minorities in

Business based on Census of Women-Owned Business, IRS data on

sole proprietorships, Bureau of Labor Statistics data on self-employed

women.

Validation (Self-Assessment) The indicator is a valid measure for the
growth of small businesses

Limitations Only the Census Bureau does a survey every 5 years and uses
50

percent as criterion of ownership.

Remedies for Limitations None

Verification Through audits

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

117

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

118

**DATA VALIDATION AND VERIFICATION**

**Measure Regulatory Cost Savings to Small Business**

Definition Cost savings to Small Businesses in implementing regulations
because

of changes to proposed regulations as a consequence of Office of

Advocacy actions.

Source Office of Advocacy Report 20 Years of the Regulatory Flexibility

Act: Rulemaking in a Dynamic Economy.

Validation (Self Assessment) The indicator is a valid measure of the
impact of the Office of

Advocacy on small businesses.

Limitations The savings are an estimate provided by a model that was
developed

by a contractor.

Remedies for Limitations None

Verification Through audits

**Measure Jobs created by SBA borrowers**

Definition Estimates of jobs created by SBA loan programs.

Source Disbursed loans for 7(a) and 504 estimate from Loan Accounting
data

base.

SBIC dollar financings from program data base.

7(a): Based on a study done in 1994 of disbursed loans in 1990, with a

change in jobs between 1989 and 1994. Uses an estimated job creation

constant of one job for \$27,259.

504: Based on SBAs follow-up of jobs created from disbursed loan

funds. Job creation constant is \$33,366 for loans made 1998-2000.

SBIC: 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

Validation (Self Assessment) The indicator is a valid measure of the
impact of SBAs credit and

equity assistance to small businesses.

Limitations The studies used are old, based on a limited sample, and
based on selfreported

data.

Remedies for Limitations Discussions are under way with Bureau of Labor
statistics to obtain

current statistics on job creation by SBA loan recipients. This will be

possible for those firms that have EIN numbers.

Verification Not possible until SBA has access to data from BLS or IRS.

**Measure Improved Access to Capital and Credit: 7(a), 504, Microloan**

**and SBIC programs**

Definition Dollar amount of Gross Original Approval Loan Dollars for
7(a),

Microloans and 504. Dollar amount of actual financing by Small

Business Investment Companies to small businesses.

Source SBA internal databases.

Validation (Self-Assessment) The indicator is a valid measure of the
impact of SBAs credit and

equity assistance to small businesses.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

119

**DATA VALIDATION AND VERIFICATION**

Limitations OIG has recommended that SBA use disbursed loan dollars
instead of

approved loan dollars.

Remedies for Limitations None

Verification The source of data is complete and accurate. There are data

verification procedures in place to ensure that the data is accurate.

Data are provided in a timely manner for budget process/external

reporting/internal tracking.

**Measure Number of Loans to Women, Minorities, and Veterans**

Definition Loans made to small businesses 51 percent owned by Women,

Minorities, or Veterans

Source SBA internal databases.

Validation (Self-Assessment) The indicator is a valid measure of the
impact of SBAs credit and

equity assistance to small businesses.

Limitations By default, firms 50 percent owned by women are regarded as
maleowned.

A more valid approach would be to also indicate loans to firms

50 percent women-owned.

Remedies for Limitations None

Verification The source of data is complete and accurate. There are data

verification procedures in place to ensure that the data is accurate.

Data are provided in a timely manner for budget process/external

reporting/internal tracking.

**Measure Number of Start-up Firms Financed by 7(a), 504, and SBIC**

**programs**

Definition 7(a) and 504 loans made to start-up firms. Number of actual
SBIC

financings to start-ups. Start-ups are defined as firms less than 2
years

old (Census definition).

Source SBA internal databases.

Validation (Self-Assessment) The indicator is a valid measure of the
impact of SBAs credit and

equity assistance to small businesses.

Limitations The measure would perhaps be improved if the number of
disbursed

loans were used instead. The SBIC data shows number of start-up

financings rather than the number of start-up firms financed.

Remedies for Limitations None

Verification The source of data is complete and accurate. There are data

verification procedures in place to ensure that the data are accurate.

Data are provided in a timely manner for budget process/external

reporting/internal tracking.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

120

**DATA VALIDATION AND VERIFICATION**

**Measure Export Sales Assisted by SBA**

Definition Estimate of export sales by clients who receive SBA export
loans.

Source Office of International Trade loan documentation

Validation (Self-Assessment) This indicator is a valid measure of the
impact of SBAs assistance on

small businesses, since exporting is important to firm survival and

competitiveness.

Limitations This is an estimate and a derivative statistic.

Remedies for Limitations None

Verification Through audits

**Measure Share of Federal Procurement Prime Contract Dollars to Small**

**Firms, to SDBs (including 8(a)), to Women-owned, Minorityowned,**

**service disabled Veteran-owned Firms, and to Small**

**Businesses in HUBZones.**

Definition The extent to which these different categories of small
business

ownership receive Federal Prime Contract dollars.

Source The Federal Procurement Data System (FPDS).

Validation (External) This indicator is a valid measure of SBAs
assistance to small

businesses since Federal contracting provides a large source of

revenues, about \$190 billion per year, into the marketplace. The Office

of Federal Procurement Policy (OFPP) in its policy letter 99-1 supports

SBAs use of FPDS data to measure accomplishments rather then

requiring agencies to provide this information on separate reports.

Limitations Prime contracts 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 FPDS was not programmed to identify HUBZone awards during

FY 1999.

Remedies for Limitations SBA is working with agencies to ensure accuracy
of the data placed

into FPDS. SBA is a member of the PEC-Social Economic Work

Group that is reviewing methods to improve the accuracy of the FPDS

data. This is an on-going effort.

The FPDS has been modified to collect HUBZone contract award data

for FY 2000. The revised system will provide consistent, valid

information relative to goal achievement.

Verification There are data verification procedures in place to ensure
that the data

are accurate. The General Services Administration is responsible for

the accuracy of the FPDS database. SBA does not have access or

resources to review or evaluate this data.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

121

**DATA VALIDATION AND VERIFICATION**

**Measure 8(a) Client Success Rate 3 Years after Graduation**

Definition The percentage of firms 3 years after graduation that are
successful

and competitive.

Source SACS/MEDCOR data base, surveys, and Dunn and Bradstreet

Validation (Self-Assessment) The indicator is a valid measure of SBAs
assistance to small

businesses because the intent of the program is to increase the firms

competitiveness and survival rate.

Limitations The success rate is an estimate.

Verification Through audits

**Measure Customer Satisfaction rate with ED programs as determined by**

**Surveys**

Definition The percentage of customers receiving assistance from SBA
that were

satisfied with the assistance.

Source Surveys done by University of Michigan

Validation (Self-Assessment) This indicator is a valid measure of SBAs
assistance to small

businesses because we are customer-focused and strive to continually

improve our level of customer service and satisfaction.

Limitations An estimate.

Remedies for Limitations None

Verification Through audits

**Measure Number of Clients Trained and Counseled**

Definition The number of clients receiving entrepreneurial development

assistance by SBA and its resource partners.

Source Collected as part of normal reporting

Validation (Self-Assessment) This indication is a valid measure of SBAs
assistance to small

businesses because our mission is to assist in the start-up and survival

of businesses.

Limitations Consistency in reporting by different resource partners

Remedies for Limitations Consistent definitions

Verification Through audits.

**GOAL 2: HELP FAMILIES AND BUSINESSES RECOVER FROM DISASTER**

**Measure Field Presence within 3 days of Declaration of a Disaster**

Definition Percentage of Disasters where effective field presence is
provided

within 3 days of a physical disaster declaration. Field presence is

defined as SBA disaster office personnel on site to coordinate the

provision of disaster assistance with appropriate federal, state and
local

officials.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

122

**DATA VALIDATION AND VERIFICATION**

Source Closeout reports prepared by the disaster area office after each

disaster.

Validation This indicator is a valid measure of SBAs assistance to
disaster

victims because timely assistance is critical to re-establishing lives
and

communities in the aftermath of a disaster.

Limitations Currently, this information is not received for
approximately 6 months

after a disaster is declared and there is some inconsistency in what is

meant by effective field presence among the area offices.

Remedies for Limitation SBA will consider options for obtaining this
information much sooner

after the disaster has been declared, including, but not limited to,

making a revision to the automated loan control system so that this

information can be inputted as soon as it is accomplished. SBA will

also provide further guidance to the area offices to define effective

field presence and its scope.

Verification Through audits

**Measure Customer Satisfaction Rate**

Definition The percentage of customers receiving assistance from SBA
that were

satisfied with the assistance.

Source Surveys

Validation (Self-Assessment) This indicator is a valid measure of SBAs
assistance to disaster

victims because we are customer-focused and strive to continually

improve our level of customer service and satisfaction.

Limitations The survey measures those who received disaster loans but
does not

include those who did not receive loans.

Remedies for Limitations None

Verification Through audits

**Measure Percentage of Disaster Loans processed within 21 days after**

**receipt of a Complete Application**

Definition Share of applications where the disaster office has provided
applicants

with a decision within 21 days of receiving a complete disaster loan

application,.

Source Disaster automated loan control system.

Validation This indication is a valid measure of SBAs assistance to
disaster

victims because timely assistance is critical to re-establishing lives
and

communities in the aftermath of a disaster.

Limitations

Verification

123

**CHARTS OF HISTORICAL DATA**

124

**OFFICE OF THE INSPECTOR GENERAL**

**FY 2002 Budget Request And Justification**

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

125

**FY 2002 BUDGET REQUEST AND JUSTIFICATION**

**Inc/(Dec)**

**FY 2000 FY 2001 FY 2002 vs FY 2001**

**Actual Estimate Request Estimate**

New Budget Authority \$ 11,000 \$ 11,953 \$ 11,927 \$ (26)

Carryover from Prior Fiscal Year 482 515 0 (515)

Carryover into Next Fiscal Year (515) 0 0 0

Transfer from Disaster 500 500 500 0

Recoveries 96 0 0 0

Balance Expired (130) 0 0 0

Rescinded Funds - Appropriation (95) (26) 0 26

Total Budget Authority \$ 11,338 \$ 12,942 \$ 12,427 \$ (515)

Positions 112 125 125 0

**Base Program:**

The Inspector General Act of 1978, Public Law 95-452 (as amended),
established the Office of

Inspector General (OIG) as an independent office within the Small
Business Administration (SBA) to

conduct and supervise audits and investigations of SBA programs and
operations; to provide leadership

for the detection and prevention of fraud, waste, and abuse; and to
promote policies for the

improvement of economy, efficiency, and effectiveness in the
administration of SBA programs and

operations. The Inspector General (IG) keeps the Administrator of SBA
and the Congress fully

informed of any problems and deficiencies relating to SBA programs and
operations, recommends

corrective actions to SBAs policy officials and program managers, and
monitors SBA\'s overall

progress toward the implementation of such actions.

OIG has a mandate to audit, investigate, and review a large number of
SBA programs and participants.

These oversight activities cover a universe of approximately 5,400
certified Section 8(a) firms, 330

Small Business Investment Companies, 214,000 business loans, more than
5,000 participating lenders

(of which more than 900 are certified and preferred lenders) 270,000
disaster loans, and \$328 million in

SBA liability for surety bond guarantees. These and other activities
comprise SBA\'s financial portfolio,

which has a current exposure of more than \$41 billion in SBA funds (of
which almost \$7 billion

represent the disaster portfolio) and potentially another \$22 billion
in other Federal Government

agencies\' funds. OIG conducts:

· Audits of financial statements and information systems to ensure
accurate information.

· Audits of selected operations to assess inherent program risks and
systemic problems.

· Audits of selected SBA program participants to identify money owed to
SBA.

· Inspections and other reviews that identify opportunities for more
effective operations.

· Investigations of suspected fraud and abuse.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

126

**FY 2002 BUDGET REQUEST AND JUSTIFICATION**

· Reviews of proposed legislation, regulations, and procedures.

· Reviews of complaints from the public and from SBA employees.

**Major Accomplishments for FY 2000**

· Overall office-wide dollar accomplishments of \$39 million, including
loans not approved as a result

of the Name Check Program, potential investigative recoveries and fines,
disallowed costs agreed

to by management, and recommendations to put Agency funds to better use.

· Major audits and inspections of the Small Disadvantaged Business
Certification and Eligibility Program,

Agency Government Performance and Results Act Performance Measures, as
well as Loan

Processing Centers, Entrepreneurial Development and Section 7(a) Loan
Programs that identified

opportunities for significant improvements.

· Seventy-three indictments and 38 convictions relating to fraud in SBA
programs.

· Issued 31 audit reports and 2 inspection reports, and obtained
management decisions on 104 audit

recommendations.

· Reviewed 304 proposed issuances, including legislation, regulations,
and procedures.

· Identified major SBA management challenges.

**Major Goals and Objectives for FY 2001**

OIG has three goals: (1) improve the economy, efficiency, and
effectiveness of SBA programs and operations;

\(2\) prevent and detect fraud and abuse and foster integrity in SBA
programs and operations;

and (3) ensure the economical, efficient, and effective operation of
OIG. Much of OIGs work is in

response to requests, complaints, and referrals. Given the unknown
nature of the work, it is difficult to

project results. OIG expects, however, that the workload will remain the
same or increase and therefore

OIG results in FY 2001 should be similar to those in FY 2000.

Congress appropriated \$11.9 million to OIG for FY 2001, with an
additional \$500,000 transfer from

the Disaster Program for disaster-related oversight. After a rescission
adjustment of .22 percent, OIGs

final budget authority is \$12.427 million. OIG priority areas for
review in FY 2001 are listed below:

· Continue to address Congress priority concerns about the Agencys
internal financial management

systems, the planned Loan Monitoring/Risk Management System, annual
exams of Small Business

Lending Companies, and Agency oversight on lenders and defaulted loans.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

127

**FY 2002 BUDGET REQUEST AND JUSTIFICATION**

· Identify the most significant management challenges facing SBA.

· Give primary attention to fraud in the Business Loan Guarantee and
Disaster Loan Programs.

· Evaluate the Agencys implementation of the Government Performance and
Results Act of 1994.

· Provide oversight to new Agency initiatives, such as the HUBZone
Empowerment Contracting Program

(HUBZone), asset sales, and new information systems.

**FY 2002 Justification**

The \$12.4 million budget request for FY 2002 will fund OIG at a current
services level in providing

oversight of SBAs programs and participants. OIG workload is based on
identified risks for the

Agency, referrals and requests from many sources, and complaints and
inquiries. Potential workload

always exceeds the OIGs available capacity to investigate or review
high-risk areas or to respond to all

inquires. OIG prioritizes its workload based on available resources, and
seeks alternatives when

internal resources are not available. Our FY 2002 priorities are
contained in our FY 2002 annual

performance plan.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

128

**Small Business Administration**

**Office of Inspector General**

**FY 2002**

**Annual Performance Plan**

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

129

**ANNUAL PERFORMANCE PLAN**

**Vision**

Our vision is to improve 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.

**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 the Small Business
Administration (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. 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.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

130

**ANNUAL PERFORMANCE PLAN**

The goals and objectives of the Strategic and Annual Plans reflect the
OIG\'s statutory mission. OIG

implementation of the Government Performance and Results Act (Results
Act) 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.

With SBA\'s Program Initiatives. 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 support SBA\'s purpose. In FY 2002, OIG will assist SBA in
identifying and mitigating

emerging vulnerabilities as SBA modernizes and changes its business
practices, work systems, and

procedures.

With the OIG Strategic Plan. The OIG FY 2002 Annual Performance Plan
also builds on the three

strategic goals and related supporting objectives found in the OIG FY
2001-2006 Strategic Plan. The

focus of the Strategic Plan is to increasingly direct our efforts to

· Financial management systems.

· Information systems and computer security.

· Lender oversight.

· Other selected high risk issues.

· New Agency initiatives.

OIG also places a high priority on responding to requests from SBA
management and congressional

committees and providing consultative assistance where appropriate.

**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. Some are predictable, such as
mandatory statutory

requirements. Others are unpredictable, such as the budget, or the
discovery of individual cases of

fraud with a potential to yield such substantial judgments or
settlements in a single year that they cannot

be easily compared to other work. Moreover, it often takes several years
after the completion of work

on a given audit, inspection, or investigation for its outcome to be
final and its results known.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

131

**ANNUAL PERFORMANCE PLAN**

In addition, the ultimate authority in implementing OIG recommendations
and improvements rests with

the Agency. OIG also cannot control the results of judicial or
administrative proceedings. To mitigate

these factors, OIG will expand on-going efforts with SBA\'s policy and
program officials to underline the

importance of OIG findings and encourage the implementation of OIG
recommendations. Likewise, we

will work closely with judicial and administrative officials to ensure
that criminal and administrative cases

are appropriately handled. Within these parameters, OIG strives to
improve the performance of SBA

programs and operations and deter fraud and other forms of misconduct.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

132

**ANNUAL PERFORMANCE PLAN**

**Data Collection and Validation**

As appropriate, quantitative data is being collected and stored in the
management information system

(MIS). Much of the quantitative data proposed has been collected for
several years. For some of the

measures, baselines have been established in FY 2000. Monetary results
will be 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 will be responsible

for collecting, verifying, and validating all data in the Annual
Performance Report. All qualitative data

will be thoroughly documented by the appropriate divisions. The data
will be reviewed quarterly and

consolidated by the Management and Policy Division. OIG believes that
the data is reasonably

accurate.

**Goals, Objectives, Performance Goals, and Resources**

**Goal 1. Improve the economy, efficiency, and effectiveness of SBA
programs and operations.**

FY 2002: Consistent with OIGs strategic plan, FY 2002 OIG audits and
inspections will focus on

financial management, information systems and computer security, lender
oversight, other selected high

risk issues, and new Agency initiatives.

To fulfill the legislatively mandated requirement, OIG will contract for
an audit of SBA\'s financial

statements to provide an opinion on whether they are presented fairly
and in accordance with Federal

accounting requirements. Financial management issues that are
identified, either through financial

statement auditing efforts or otherwise, will also be scheduled for
audit coverage.

A major focus of OIG efforts in FY 2002 is continued oversight of SBAs
systems modernization

efforts, which include planned major improvements to SBAs accounting
system and loan monitoring

systems. In addition, OIG will conduct computer systems security
assessments to identify vulnerabilities

such as unauthorized access and information accuracy. Regarding the
latter, OIG will selectively verify

the accuracy of data in support of the Government Performance and
Results Act (GPRA) reporting

process.

SBA\'s increasing reliance on banks and other lenders to perform loan
management functions previously

reserved to the Government presents inherent risks. OIG will conduct
oversight reviews to identify

vulnerabilities and offsetting controls to minimize potential problems
and continue its auditing of defaulted

loans to identify invalid claims and to identify lenders who do not
follow SBA rules. OIG will also

assess lenders performance and adherence to SBA requirements.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

133

**ANNUAL PERFORMANCE PLAN**

OIG will provide oversight of SBA\'s high-risk programs and will respond
to program managers

requests for reviews of programs, projects, or entities that they
consider vulnerable to loss or

mismanagement. OIG will continue to identify the major management
challenges facing the operation of

its programs. OIG will institutionalize an OIG advisory function, made
up of selected Agency program

managers, to identify high-risk operations.

Agency initiatives, such as Historically Underutilized Business Zones
(HUBZones), asset sales,

implementation of internal controls, and human capital programs, will be
selectively identified for OIG

oversight. OIG will also review proposed legislation, regulations,
standard operating procedures, and

other issuances for vulnerabilities and risks.

The majority of staff and other resources used to accomplish Goal 1 will
come from the Auditing and

Inspection and Evaluation Divisions, with contributions and support from
the Investigations,

Management and Policy, and Counsel Divisions. Approximately 36 percent
(or \$4,461,293) of OIGs

total FY 2002 resources will be dedicated to Goal 1.

**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 1999**

**Actual**

**FY 2000**

**Actual**

**FY 2001**

**Estimate**

**FY 2002**

**Estimate**

Output Performance Goals

Percentage of all recommendations on major

program activities accepted by management

or otherwise resolved within 6 months of

report issuance

86% 88% 90% 90%

**Narrative assessment of OIG contribution to Agency task forces**

Intermediate Outcome

Percentage of recommendations from reviews

of major program activities implemented

or corrective actions taken by management

within the timeframe agreed by

OIG and management

N/A\* 52% 60% 60%

**Outcome**

Identification and implementation of corrective actions by the Agency to
address the major

management and operating problems in SBA

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

134

**ANNUAL PERFORMANCE PLAN**

· The chart will be updated to reflect the percentage of recommendations
implemented or corrective

actions taken by management within the timeframe agreed by OIG contained
in reports issued

between April 1998 through March 31, 1999.

**Objective 1.2 Audit contracts, grants, surety claims, and defaulted
loans to determine**

**whether the costs claimed are allowable.**

**FY 1999**

**Actual**

**FY 2000**

**Actual**

**FY 2001**

**Estimate**

**FY 2002**

**Estimate**

Output Performance Goals

Percentage of all recommendations in audits

of contracts, grants, surety claims, and defaulted

loans accepted by management or

otherwise resolved within 6 months of report

issuance

95% 96% 95% 95%

Percentage of dollars in 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

97% 44%\* 60% 60%

Intermediate Outcome

Percentage of all recommendations in audits

of contracts, grants, surety claims, and defaulted

loans implemented by management

within the timeframe agreed by OIG and

management

N/A\*\* 44% 60% 60%

\* This reflects recommendations agreed to by management contained in
reports issued between April

1, 1999 through March 31, 2000.

\*\* This chart will be updated to reflects recommendations agreed to by
management contained in

reports issued between April 1, 1998 through March 31, 1999.

**Outcome/Impact for Goal 1: **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.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

135

**ANNUAL PERFORMANCE PLAN**

**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 2001.

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.

**Goal 2. Prevent and detect fraud and abuse, and foster integrity in
SBA programs and**

**operations.**

FY 2002: OIG places a high priority on combating and preventing both
fraud and abuse in SBAs

programs and operations and ensuring a high level of integrity in SBA\'s
applicants, lenders, and

employees. While the Investigations Division has the primary
responsibility for OIG efforts to prevent

fraud and abuse, all OIG divisions directly contribute to fostering
integrity in SBA programs and

operations. For example, audits frequently result in referrals for
investigations and investigative results

are always analyzed to identify potential steps to improve controls.
Much of the OIG effort in the area

of fraud and abuse is reactive.

For FY 2002, OIG will investigate those cases with the highest impact
and potential for successful

prosecution. In addition, OIG will expand activities to pursue civil
fraud under the False Claims Act and

the Financial Institution Reform, Recovery, and Enforcement Act of 1989.

Traditionally, the Investigations Division has relied on SBAs personnel
to refer allegations concerning

fraud, abuse, and mismanagement in SBA programs. As SBAs employees
reduce their direct

involvement in reviewing loans, however, fraud indicators will have to
be identified by lenders. OIG

integrity and fraud awareness programs will be restructured to equip SBA
employees to perform their

new or expanded lender oversight role. OIG will develop new programs to
educate the lending

community concerning their responsibilities to report allegations of
wrongdoing and heighten their

awareness of the role of OIG. Outreach will include attending and/or
participating in lender-related

conferences and other activities and educating non-SBA employees of the
more than 5,000

participating, certified, and preferred SBA lending partners. OIG will
also continue to conduct a

comprehensive employee integrity assurance program.

In addition, as resources are available, OIG will conduct studies of the
underlying conditions that foster

opportunities to commit fraud and recommend ways to detect
vulnerabilities.

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
of 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.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

136

**ANNUAL PERFORMANCE PLAN**

The Investigations Division will provide the majority of the staff and
other resources necessary to

accomplish Goal 2. In addition, goal achievement will depend on the
contributions of the Auditing,

Inspection and Evaluation, Management and Policy, and Counsel Divisions.
Approximately 50 percent

(or \$6,201,073) of OIG FY 2002 resources will be dedicated to Goal 2.

**Objective 2.1 Detect/identify waste, fraud, abuse and integrity
problems in SBA programs**

**and operations and take appropriate action.**

**FY 1999**

**Actual**

**FY 2000**

**Actual**

**FY 2001**

**Estimate**

**FY 2002**

**Estimate**

Percentage of criminal cases referred that

are accepted by U.S. Attorneys N/A\* N/A\* 50% 50%

Percentage of Affirmative Civil Enforcement

(ACE) cases referred that are accepted

by U.S. Attorneys

N/A\* N/A\* 35% 35%

Intermediate Outcomes

Percentage of potential monetary recoveries

to estimated losses

20% 17% 20% 20%

Percentage of closed cases resulting in

criminal, civil, or administrative actions 32% 23.5% 25% 25%

\* The Investigation Divisions current management information system
(MIS) does not record when a

referral, either criminal or ACE, is accepted by a Federal prosecutor.
When implemented in FY

2001, our new 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 1999**

**Actual**

**FY 2000**

**Actual**

**FY 2001**

**Estimate**

**FY 2002**

**Estimate**

Output Performance Goals

Number of SBA employees attending integrity

briefings

499 222 300 300

Number of private sector partners attending

integrity briefings

150 96 150 150

Intermediate Outcome

Percentage of target population reached

by integrity briefings

8% 4.2% 8% 8%

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

137

**ANNUAL PERFORMANCE PLAN**

**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

**Outcome/Impact for Goal 2: **SBA internal policies, procedures, and
controls are

strengthened and provide a deterrence for future wrongdoing. OIG
activities lead to

changes in SBA practices that effectively reduce fraud and abuse, and
promote the integrity

of SBA programs and operations.

**Methodology for Measuring Outcomes: **OIG will assess the practicality
and feasibility

of developing evaluations of major investigative cases and related
audits and inspections to

estimate the impact on the prevention and deterrence of fraud and abuse.
In addition, as

SBA develops and verifies the accuracy of its performance measurement
system, it may be

possible to use some of the information to indicate OIG effectiveness.

**Limitations: **Evaluation efforts will be constrained by a lack of
information on the extent

of actual fraud and other misconduct in SBAs programs and operations.

**Goal 3. Ensure the economical, efficient, and effective operation of
OIG.**

FY 2002: 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 will continue to explore innovative ways to recruit,
develop, and retain a wellqualified

work force, including regular assessments and provision of necessary
training. OIG will provide

up-to-date and secure computer technology and information systems for
OIG staff. Support functions,

such as legal advice, administrative services, budget development and
execution, and procurement,

will be timely to aid in carrying out OIG mandated functions.

OIG will continue to strive to improve communication with Agency
officials and stakeholders to improve

our planning process and information services on the results of our
operations. In developing our annual

operating plans, OIG will closely cooperate with SBA management to
identify areas for in-depth review.

OIG will seek 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.

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

138

**ANNUAL PERFORMANCE PLAN**

Maintaining ongoing liaison with Agency officials (both headquarters and
field), key congressional committees,

the Office of Management and Budget, the President\'s Council on
Integrity and Efficiency, and

others as appropriate is key to effectively accomplishing the OIG
mission. We will continue to identify

and share the knowledge/experience of individual staff members across
OIG organizations.

OIG will complete an annual plan\--based on current information from
strategic plans, budget, legislative

and program developments, previous reports, external sources, and in
consultation and coordination

with customers and stakeholders\--that identifies high-priority issues
for OIG review. As with the other

two OIG goals, staff and other resources necessary to accomplish the
support functions related to Goal

3 will come primarily from one divisionManagement and Policyalthough all
divisions are key to accomplishing

the objectives of this internal operating goal. Approximately 14 percent
(or \$1,764,634) of

OIG FY 2002 resources will be dedicated to Goal 3.

**Objective 3.1 Provide the tools, services, and supportive work
environment necessary**

**to improve employee productivity.**

**FY 1999**

**Actual**

**FY 2000**

**Actual**

**FY 2001**

**Estimate**

**FY 2002**

**Estimate**

Output Performance Goals

Percentage of staff that received the training

established by OIG for their career

needs

N/A\* 85% 100% 100%

Percentage of employees provided the IT

products necessary to do their jobs, as

established by the OIG

N/A\* 100% 100% 100%

Intermediate Outcomes

Percentage of employees satisfied or very

satisfied in annual employee surveys N/A\* 62%\*\*\* 65% 65%

No material weaknesses identified in audit

quality controls by external peer reviews N/A\*\* N/A\*\* None \*\*
N/A\*\*

\*Standards for measuring this goal and the employee survey instrument
were developed in FY 2000.

\*\*Peer reviews are conducted every three years. The peer review was
scheduled to be completed in FY 2000, but was actually completed

in FY 2001. The peer review found no material weaknesses in audit
quality controls.

\*\*\*Based on responses to an OIG Organization Assessment Survey
distributed September 2000: Considering everything, how satisfied

are you with your job?

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

139

**ANNUAL PERFORMANCE PLAN**

**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

**Objective 3.3 Develop and maintain a planning process that will
provide for effective**

**monitoring of operations and identify opportunities for improvement.**

Output Performance Goal/ Intermediate Outcome

Narrative assessment of the results of the OIG planning process

**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.

**Statistical Data on Selected Product Outputs**

**FY 1999**

**Actual**

**FY 2000**

**Actual**

**Office-Wide Dollar Accomplishments**

Potential Investigative Recoveries and Fines \$10,419,102 \$7,555,827

Management Avoidances As a Result of Investigations and

Name Checks

\$28,382,286 \$28,741,121

Disallowed Costs Agreed to by Management \$2,322,780 \$1,153,535

Recommendations That Funds Be Put to Better Use Agreed to

by Management

\$8,929,983 \$9,762,700

**Goal 1 Accomplishments**

Reports Issued 28 33

Number of Recommendations Made 103 126

Disallowed Costs Agreed to by Management \$2,322,780 \$1,153,535

*U.S. Small Business Administration*

*FY 2002 Budget Request and Performance Plan*

140

**ANNUAL PERFORMANCE PLAN**

Recommendations That Funds Be Put to Better Use Agreed to

by Management

\$8,929,983 \$9,762,700

Number of Reviews of Proposed Legislation, Regulations,

Standard Operating Procedures, and Other SBA Issuances 241 323

**Goal 2 Accomplishments**

Cases Closed 138 132

Indictments 44 73

Convictions 53 38

Potential Investigative Recoveries and Fines \$10,419,102 \$7,555,827

Loans not Approved as a Result of: \$28,382,286 \$28,741,121

1\) Investigations \$0 \$1,404,529

2\) Name Check Program \$28,382,286 \$27,336,592

Number of Integrity Briefings 12 15

**Goal 3 Accomplishments**

Number of FOIA Responses and Other Disclosures 67 89

Number of Subpoenas Issued 86 135

Number of External Reports Issued 19 14

Number of Employees Trained 114 94