prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.



Report 2: The Forest Service’s mission includes sustaining the nation’s forests and grasslands; managing the productivity of those lands for the benefit of citizens; conserving open space; enhancing outdoor recreation opportunities; and conducting research and development in the biological, physical, and social sciences  The agency carries out its responsibilities in three main program areas: (1) managing public lands, known collectively as the National Forest System, through nine regional offices, 154 national forests, 20 national grasslands, and over 600 ranger districts; (2) conducting research through its network of seven research stations, multiple associated research laboratories, and 81 experimental forests and ranges; and (3) working with state and local governments, forest industries, and private landowners and forest users in the management, protection, and development of forest land in nonfederal ownership, largely through its nine regional offices  According to the Forest Service, it employs a workforce of over 30,000 employees across the country  However, this number grows by thousands in the summer months, when the agency hires seasonal employees to conduct fieldwork, respond to wildland fires, and meet the visiting public’s needs  The Office of the Chief of the Forest Service is located in Washington, D C , with 27 offices reporting directly to the Office of the Chief, as illustrated in figure 1  The nine national forest regions, each led by a regional forester, oversee the national forests and grasslands located in their respective regions  Each national forest or grassland is headed by a supervisor, the seven research stations are each led by a station director, and a state and private forestry area is headed by an area director  The Forest Service collectively refers to its forest regions, research stations, and area as RSAs  The RSAs are organized differently according to their operations, and comparable operations within the RSAs, such as collections from reimbursable agreements, may be processed differently in the various regions and stations, resulting in highly decentralized operations  In addition, the offices of the Chief Financial Officer (CFO); Deputy Chief of Business Operations (includes the budget office); and eight other offices located in the Washington, D C , headquarters also report directly to the Office of the Chief of the Forest Service  The Forest Service receives appropriations for its various programs and for specific purposes to meet its mission goals  Prior to fiscal year 2017, the Forest Service’s budgetary resources consisted primarily of no-year funds  Its budget office in Washington, D C , initiates apportionment requests and monitors the receipt of Department of the Treasury (Treasury) warrants  Upon receipt of the warrant, the apportionment is recorded in the financial system and then the budget office develops an allocation summary detailing the allocation of its budget authority by fund, programs within the funds, and distribution of funds at the regional, station, and area levels  The Forest Service may also transfer funds from other appropriations to the appropriations account that funds its fire suppression activities when available funds appropriated for fire suppression and the Federal Land Assistance, Management, and Enhancement (FLAME) fund will be exhausted within 30 days  The Forest Service’s administrative policies, practices, and procedures are issued in its Directive System, which provides a unified system for issuing, storing, and retrieving internal direction that governs Forest Service programs and activities  The Directive System consists of the Forest Service’s manuals and handbooks  The manuals contain management objectives, policies, and responsibilities and provide general direction to Forest Service line officers and staff directors for planning and executing their assigned programs and activities  The handbooks provide detailed direction to employees and are the principal source of specialized guidance and instruction for carrying out directions issued in the manuals  Line officers at the national and RSA levels have authority to issue directives in the manuals and handbooks under their respective jurisdictions  The Forest Service’s policy states that the Directive System is the only place where Forest Service policy and procedures are issued  In addition to the Directive System, Forest Service staff have also developed standard operating procedures (SOP) and desk guides to supplement guidance provided in directives  However, the SOPs and desk guides are not part of the Forest Service Directive System and therefore are not official policy and procedures  While the Forest Service had documented processes for allotting its budgetary resources, it did not have an adequate process and related control activities for reasonably assuring that (1) amounts designated in appropriations acts for specific purposes are used as designated and (2) unobligated no-year appropriation balances from prior years were reviewed for their continuing need  In addition, the Forest Service did not have a properly designed and documented system for administrative control of funds  Finally, the Forest Service had not properly designed control activities for fund transfers for fire suppression activities under its Wildland Fire Management program  While the Forest Service had documented processes for allotting its budgetary resources, it did not have an adequate process and related control activities to reasonably assure that amounts designated in appropriations acts for specific purposes are used as designated—as required by the purpose statute, which states that “appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law ” We reviewed Forest Service documents about its budget authority processes, which included control objectives, related control activities, and processes over the allotment of its budgetary resources  We found that these documents, including manuals and handbooks, did not include an adequate process and related control activities for assuring that appropriated amounts are used for the purposes designated  For example, such a process would include the Forest Service allotting appropriated funds for specific programs or objects as provided in the applicable appropriation act, by either using specific budget line items already defined in the Forest Service’s financial system or creating new budget line items, as needed  Standards for Internal Control in the Federal Government states that management should define objectives clearly to enable the identification of risks and design appropriate control activities to achieve objectives and respond to the risks identified  As a result of the Forest Service not having an adequate process and related control activities for assuring that appropriated amounts are used for the purposes designated, the Forest Service did not properly allocate certain funds for specific purposes detailed in the appropriations acts for fiscal years 2015 and 2016  For example, in fiscal year 2015, the Forest Service did not set aside in its financial system the $65 million specified in the fiscal year 2015 appropriations act for acquiring aircraft for the next- generation airtanker fleet  According to Forest Service documents, as of January 6, 2016, $35 million of the designated funds was used for other purposes  In February 2017, we issued a legal opinion, related to the Forest Service’s use of the $65 million, which concluded that the Forest Service had failed to comply with the purpose statute  According to USDA’s Office of General Counsel, “this lack of any separate apportionment or account for the next-generation airtanker fleet was due to the fact that it was a new item, not included in the agency’s budget request, and added late in the appropriations process ” Similarly, in fiscal year 2016, the Forest Service did not create new budget line items to reserve in its financial system $75 million for the Forest Inventory and Analysis Program specified in the fiscal year 2016 appropriations act  Rather than creating a new budget line item for the program specified in the appropriations act, the funds were combined with an existing budget line item, making it difficult to track related budget amounts and actual expenditures  The lack of an adequate process and related control activities to reasonably assure that appropriated amounts are used for the purpose designated also increases the risk that the Forest Service may violate the Antideficiency Act  The Forest Service did not have a process and related control activities to reasonably assure that unobligated, no-year funds from prior years were reviewed for continuing need  We reviewed the Forest Service’s budget authority process document and related manuals and handbooks, which documented control objectives and procedures over its budgetary resources and the guidance for administrative control of funds  We found that these documents did not include a process for reviewing the Forest Service’s unobligated, no-year funds from prior years and related control activities to reasonably assure that such funds were reviewed for continuing need  Such reviews, if performed, may identify unneeded funds that could be reallocated to other programs needing additional budgetary resources, if consistent with the purposes designated in appropriations acts  The USDA Budget Manual states as a department policy that “agencies of the Department have a responsibility to review their programs continually and recommend, when appropriate, deferrals or rescissions ” The USDA Budget Manual further states the following: “Agency officials should remain alert to this responsibility since the establishment of reserves is an important phase of budgetary administration  If it becomes evident during the fiscal year that any amount of funds available will not be needed to carry out foreseeable program requirements, it is in the interest of good management to recommend appropriate actions, thereby maintaining a realistic relationship between apportionments, allotments, and obligations ” However, the Forest Service did not develop a directive addressing the control objectives, related risks, and control activities for implementing this USDA policy  Up until fiscal year 2017, Forest Service budgetary resources consisted primarily of no-year funds  At the beginning of each fiscal year, unobligated balances of no-year funds are carried forward and reapportioned to become part of budget authority available for obligation in the new fiscal year  Unobligated balances can increase during the fiscal year due to deobligation of prior years’ unliquidated obligations that the Forest Service determines it no longer needs  These resources are immediately available to the Forest Service to the extent authorized by law without further legislation or action from Office of Management and Budget (OMB) unless the apportionment states otherwise  According to Forest Service officials, unobligated funds reported in the Forest Service’s September 30, 2016, Statement of Budgetary Resources included $351 million in discretionary unobligated no-year funds, appropriated as far back as fiscal year 1999  The Forest Service did not identify and define a process and control objectives related to its review of unobligated no-year funds from prior years for continuing need  As a result, the Forest Service did not have reasonable assurance that prior no-year unobligated balances were properly managed and considered in its annual budget requests  This increased the risk that the Forest Service may make budget requests in excess of its needs  Additionally, the Forest Service could miss opportunities to use its prior year unobligated no-year funds more timely and effectively, for example, using these funds for other Forest Service program needs, if consistent with the purposes designated in appropriations acts  During our work, we brought this issue to management’s attention, and in response, Forest Service officials stated that the Forest Service is planning to develop a quarterly process to review available balances and, as needed, redirect funds to agency priorities  However, as of July 2017, the Forest Service had not yet developed this review process  Further, Congress rescinded about $18 million of the Forest Service’s prior year unobligated balances and required it to report unobligated balances quarterly within 30 days after the close of each quarter and appropriated multi-year funds instead of no- year funds to the Forest Service for fiscal year 2017  The Forest Service issued guidance related to administrative control of funds in manuals and handbooks, which USDA did not review and approve prior to their issuance  Based on our review of these documents, we found that the processes and related control activities over the administrative control of funds were dispersed in numerous manuals and handbooks, which may hamper a clear understanding of the overall system  Further, the system lacked key elements that would allow it to serve as an adequate system of administrative control of funds  For example, in its manuals and handbooks the Forest Service did not identify, by title or office, those officials with the authority and responsibility for obligating the service’s appropriated funds, such as funds for contracts, travel, and training  As a result, the responsibility for obligating funds was not clearly described and properly assigned in Forest Service policy as required by the USDA Budget Manual and OMB Circular No  A-11  OMB Circular No  A-11 states that the Antideficiency Act requires that the agency head prescribe, by regulation, a system of administrative control of funds, and OMB provided a checklist in appendix H to the circular that agencies can use for drafting their fund control regulations  This requirement is consistent with those in the USDA Budget Manual, which prescribes budgetary administration through a system of administrative controls for its component agencies, including the Forest Service  The USDA Budget Manual states that to the extent necessary for effective administration, (1) the heads of USDA component agencies may delegate to subordinate officials responsibilities in connection with the administrative distribution of funds within apportionments and allotments and the monitoring, control, and reporting of the occurrence of obligations and expenditures under apportionments and allotments and (2) the chain of such responsibility shall be clearly defined  In addition, USDA requires its component agencies to promulgate and maintain administrative control of funds regulation and to send such regulation to USDA’s Office of Program and Budget Analysis for review and approval prior to issuance  Because the Forest Service has not developed and issued a comprehensive system for administrative control of funds that considers all aspects of the budget execution processes, it cannot reasonably assure that (1) programs will achieve their intended results; (2) the use of resources is consistent with the agency’s mission; (3) programs and resources are protected from waste, fraud, and mismanagement; and (4) laws and regulations are followed  We also found that the Forest Service had not reviewed and updated most of its administrative control of funds guidance in the manuals and handbooks for over 5 years  The USDA Budget Manual requires each component to periodically review its funds control system for overall effectiveness and to assure that it is consistent with its agency programs and organizational structures  Further, Forest Service policy also requires routine review, every 5 years, of policies and procedures in its Directive System  According to Forest Service officials, when directives are up for review and update, a staff from the Office of Regulatory and Management Services (ORMS) sends an e-mail reminder to notify responsible personnel that updates to applicable directives are needed  However, we found that the Forest Service does not have adequate controls in place to monitor the reviews and any updates of the manuals and handbooks in its Directive System to reasonably assure that their efforts resulted in timely updates  As a result, the Forest Service is at risk that guidance for its system for administrative control of funds may lose relevance as processes change over time and control activities may become inadequate  The Forest Service did not have properly designed control activities over its process for fund transfers related to wildland fire suppression activities  The Forest Service receives appropriations for necessary expenses for (1) fire suppression activities on National Forest System lands, (2) emergency fire suppression on or adjacent to such lands or other lands under fire protection agreement, (3) hazardous fuels management on or adjacent to such lands, and (4) state and volunteer fire assistance  Transfer of funds from other Forest Service programs to its fire suppression activities occurs when the Forest Service has exhausted all available funds appropriated for the purpose of fire suppression and the FLAME fund  A key aspect of this process is assessing the FLAME forecast, which the Forest Service uses to predict the costs of fighting wildland fires for a given season, and developing a strategy to identify specific programs and the amounts that may be transferred to pay for fire suppression activities when needed  The process for reviewing the FLAME forecast and strategizing the fund transfers was documented in the Basic Budget Desk Guide created by staff in the Forest Service’s Strategic Planning and Budget Analysis Office  However, the desk guide did not contain evidence of review by responsible officials  As a result, the Forest Service lacked reasonable assurance that the desk guide was complete and appropriate for its use  The Basic Budget Desk Guide included a listing of actions to be performed by the analyst for reviewing the FLAME forecast report and developing a strategy for fund transfer from other programs  However, the desk guide did not specify the factors to be considered when developing the strategy  For example, it did not call for documentation addressing the rationale for the strategy or an assessment of the risk that the fund transfer could have on the programs from which the funds would be transferred  The desk guide also did not describe the review and approval of the strategy by a responsible official(s) prior to the fund transfer request sent to the Chief of the Forest Service  According to Standards for Internal Control in the Federal Government, management should design control activities to achieve objectives and respond to risks and that such control activities should be designed at the appropriate levels in the organizational structure  Further, management may design a variety of transaction control activities for operational processes, which may include verifications, authorizations and approvals, and supervisory control activities  The lack of properly designed control activities for supervisory review of the desk guide and strategy to identify the amounts for fund transfers does not provide the Forest Service reasonable assurance that the objectives of the fund transfers—including mitigating the risk of a shortfall of funding for other critical Forest Service program activities, such as payroll or other day-to-day operating costs—will be efficiently and effectively achieved  The Forest Service enters into various reimbursable agreements with agencies within USDA, other federal agencies, state and local government agencies, and nongovernment entities to carry out its mission for public benefit  The reimbursable agreements may be for the Forest Service to provide goods and services to a third party or to receive goods and services from a third party, or may be a partnership agreement with a third party for a common goal  According to Forest Service officials, the two distinct types of Forest Service reimbursable agreements are (1) fire incident cooperative agreements and (2) reimbursable and advanced collection agreements (RACA)  The Forest Service did not have documented processes and related control activities for its fire incident cooperative agreements to reasonably assure the effectiveness and efficiency of its related fire incident operations  In addition, processes and related control activities applicable to RACAs were not adequately described in applicable manuals and handbooks in the Directive System, to reasonably assure that control activities could be performed consistently and effectively  Further, certain RACA processes in the Directive System had not been timely reviewed by management and did not reflect current processes  Moreover, as previously discussed, SOPs and desk guides developed in field offices related to RACA processes were not in the Forest Service’s Directive System  Finally, the Forest Service lacked control activities segregating incompatible duties performed by line officers and program managers in creating reimbursable agreements and the final disposition of related receivables  The Forest Service did not have documented processes and related control activities for its fire incident cooperative agreements to reasonably assure the effectiveness and efficiency of its related fire incident operations and reliable reporting internally and externally  As part of the service’s mission objective to suppress wildland fires, Forest Service officials stated that they enter into 5-year agreements referred to as master cooperative agreements with federal, state, and other entities  These agreements document the framework for commitment and support efficient and effective coordination and cooperation among the parties in suppressing fires, when they occur  The master cooperative agreements do not require specific funding commitments as amounts are not yet known  These agreements vary from region to region because of the differing laws and regulations pertaining to the participating states and other entities  These variations can also result in different billing and collection processes between regions  When a fire occurs, supplemental agreements, which are based on the framework established in the applicable master cooperative agreements, are signed by relevant parties for each fire incident  These agreements establish the share of fire suppression costs incurred by the Forest Service and amounts related to entities that benefitted from those fire suppression efforts  These supplemental agreements require commitment and obligation of funds  As indicated in figure 2, the Forest Service’s obligations for fire suppression activities ranged from $412 million to $1 4 billion over the 10-year period from fiscal years 2007 through 2016  In response to our request for documentation of processes and related control activities over its fire incident cooperative agreements, Forest Service officials stated that processes and related control activities over reimbursable agreements were applicable to both fire incident cooperative agreements and RACAs  However, based on our review of the Forest Service’s processes and related control activities over its reimbursable agreements, we found that the unique features of fire incident cooperative agreements (as compared to features of RACAs) were not addressed in the processes and related controls for reimbursable agreements  For example, there was no process and related control activities over the negotiation and review of (1) a fire incident master cooperative agreement, which is developed before a fire occurs, and (2) supplemental agreements, which are signed by all relevant parties after the start of a fire incident  These supplemental agreements detail, among other things, the terms for (1) fire department resource use, (2) financial arrangements, and (3) specific cost-sharing agreements  Another unique feature of fire incident cooperative agreements, which was not covered in process documents for its reimbursable agreements, was the preparation of the Cost Settlement Package  The preparation of this package does not start until after the fire has ended and the Forest Service has received and paid all bills  According to Forest Service officials, a fire incident is deemed to have ended when there are no more resources (firefighters and equipment) on the ground putting out the fire  However, this definition was not documented in the Forest Service’s manuals and handbooks in the Directive System  Based on our review of documentation that the Forest Service provided for four fire incidents, we found that for these incidents the Cost Settlement Packages and the billings took several months to years to complete after the fire incident  According to Forest Service officials, delays in preparing the Cost Settlement Package in many cases were due to parties involved in suppressing the fires taking a long time to submit their invoices to the Forest Service for payment  Because the preparation of Cost Settlement Packages was not included in the process documents, the Forest Service did not have a defined time frame for when, in relation to the end of the fire, the Cost Settlement Package must be completed  For example, in one case we reviewed, the bill for a cost settlement was sent 9 months after the fire occurred, and in another case, settlement occurred approximately 2 years after the fire occurred  For both fire incidents, based on the reports we reviewed, the fires were contained within a week or two, but the Forest Service does not have a policy for documenting the date when the fire incident is deemed to have ended  Because of the complexity of the process for negotiating and determining the reimbursable amounts from all the costs that the Forest Service pays for a fire incident, the reimbursable amounts may take time to negotiate, and subsequent billing to and collection from parties may take much longer  Forest Service officials stated that some receivables that were not going to be collected until after its financial system’s aging process for receivables deemed such receivables uncollectible and a bad debt are tracked in a spreadsheet outside its financial system  We found that the Forest Service did not have a documented process and related control activities to reasonably assure that its Budget Office was informed of these older receivables being tracked in a spreadsheet and the related progress of collection activities that local program managers and line officers perform, which could affect the reliability of the reported reimbursable receivable amounts  According to Standards for Internal Control in the Federal Government, management should internally communicate the necessary quality information to achieve the entity’s objectives  Without proper communication, important information, such as amounts that the Forest Service will receive from fire incident cost settlement negotiations, may not be considered in the Forest Service’s strategy for the effective and efficient management of fund transfers for fire suppression activities  Processes and related control activities applicable to RACAs were not adequately described in Forest Service manuals and handbooks in its Directive System  RACAs, which may be for research or other nonemergency purposes, are billed and collected based on previously agreed upon billing and collection terms  In accordance with the Forest Service’s Directive System, policies related to business processes, such as RACAs, are documented in its manuals while procedures for performing specialized activities are documented in its handbooks  We found that the manuals and handbooks in the Directive System did not adequately describe the processes and related control activities over the RACA processes to enable efficient and effective performance of the work by appropriate and responsible personnel  The manuals and handbooks related to RACAs state that a manager review the documentation to ensure that the funding supports the objective of the agreement, the agreement is the correct instrument for funding the project, all relevant terms and conditions have been included in the agreement, the entity’s financial strength and capability are acceptable, and all applicable regulations and OMB circulars have been addressed  However, there was no discussion in the manuals and handbooks about when the manager needs to perform the reviews and how these reviews were to be documented  Further, in response to our inquiry regarding procedures performed to assess the entity’s financial strength and capability are acceptable before a RACA is signed, Forest Service officials stated that there is currently no formal process for determining financial capability for RACAs  For reimbursable agreements, the Forest Service’s process documented in its handbook consisted of completing a creditworthiness checklist  However, the handbook did not describe procedures for (1) completing the checklist and (2) documenting responsible personnel’s review and approval of an entity’s acceptable financial capability  Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks  Management’s design of internal control establishes and communicates the who, what, when, where, and why of internal control execution to personnel  Documentation also provides a means to retain organizational knowledge and mitigate the risk of having that knowledge limited to a few personnel  Further, the standards also explain that management clearly document internal control in a manner that allows the documentation to be readily available and properly managed and maintained  In addition, the manuals and handbooks applicable to the RACAs have not been timely reviewed by management, and had not been updated to reflect current processes
Report 2:  Also, the SBA spent $36 9 million on lender oversight, including oversight of 7(a) lenders  The SBA anticipated that 7(a) program administrative expenses will be about $82 2 million in FY2018 and $84 5 million in FY2019  In addition, the SBA anticipated that it will spend about $36 9 million in FY2018 and $36 6 million in FY2019 for lender oversight of the SBA's various lending programs  In FY2017, borrowers used 7(a) loan proceeds to purchase land or make land improvements (26 62%); purchase a business (17 06%); finance working capital (15 59%); pay off loans, accounts payable or notes payable (13 23%); construct new buildings (6 06%); purchase equipment (5 76%); make leasehold improvements (3 25%); expand or renovate current buildings (2 39%); refinance existing debt (1 40%); and cover other expenses (8 64%)  In 2008, the Urban Institute released the results of an SBA-commissioned study of the SBA's loan guaranty programs  As part of its analysis, the Urban Institute surveyed a random sample of SBA loan guaranty borrowers  The survey indicated that most of the 7(a) borrowers responding to the survey rated their overall satisfaction with their 7(a) loan and loan terms as either excellent (18%) or good (50%)  One out of every five 7(a) borrowers (20%) rated their overall satisfaction with their 7(a) loan and loan terms as fair, and 6% rated their overall satisfaction with their 7(a) loan and loan terms as poor (7% reported don't know or did not respond)  In addition, 90% of the survey's respondents reported that the 7(a) loan was either very important (62%) or somewhat important (28%) to their business success (2% reported somewhat unimportant, 3% reported very unimportant, and 4% reported don't know or did not respond)  The Urban Institute found that about 9 9% of conventional small business loans are issued to minority-owned small businesses, and about 16% of conventional small business loans are issued to women-owned businesses  In FY2018, 32 8% of 7(a) loan approvals ($8 32 billion of $25 37 billion) were to minority-owned businesses (23 0% Asian, 6 0% Hispanic, 3 1% African-American, and 0 7% American Indian) and 13 6% ($3 46 billion of $25 37 billion) were to women-owned businesses  From its comparative analysis of conventional small business loans and the SBA's loan guaranty programs, the Urban Institute concluded the following: SBA's loan programs are designed to enable private lenders to make loans to creditworthy borrowers who would otherwise not be able to qualify for a loan  As a result, there should be differences in the types of borrowers and loan terms associated with SBA-guaranteed and conventional small business loans  Our comparative analysis shows such differences  Overall, loans under the 7(a) and 504 programs were more likely to be made to minority-owned, women-owned, and start-up businesses (firms that have historically faced capital gaps) as compared to conventional small business loans  Moreover, the average amounts for loans made under the 7(a) and 504 programs to these types of firms were substantially greater than conventional small business loans to such firms  These findings suggest that the 7(a) and 504 programs are being used by lenders in a manner that is consistent with SBA's objective of making credit available to firms that face a capital opportunity gap  Congressional interest in the 7(a) loan program has increased in recent years largely because of concerns that small businesses might be prevented from accessing sufficient capital to enable them to assist in the economic recovery  During the 110 th and 111 th Congresses, several laws were enacted to increase the supply and demand for capital for both large and small businesses  For example, in 2008, Congress adopted P L  110-343 , the Emergency Economic Stabilization Act of 2008, which authorized the Troubled Asset Relief Program (TARP)  Under TARP, the U S  Department of the Treasury was authorized to purchase or insure up to $700 billion in troubled assets, including small business loans, from banks and other financial institutions  The law's intent was "to restore liquidity and stability to the financial system of the United States " P L  111-203 , the Dodd-Frank Wall Street Reform and Consumer Protection Act, reduced total TARP purchase authority from $700 billion to $475 billion  The Department of the Treasury's authority to make new financial commitments under TARP ended on October 3, 2010  The Department of the Treasury has disbursed approximately $430 billion in TARP funds, including $370 million to purchase SBA 7(a) loan guaranty program securities  In addition, as mentioned previously, in 2009, ARRA provided an additional $730 million for SBA programs, including $375 million to temporarily reduce fees in the SBA's 7(a) and 504/CDC loan guaranty programs and increase the 7(a) program's maximum loan guaranty percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90% for all standard 7(a) loans  Congress subsequently provided another $265 million, and authorized the SBA to reprogram another $40 million, to extend the fee reductions and loan modification through May 31, 2010, and the Small Business Jobs Act of 2010 provided another $505 million (plus $5 million for administrative expenses) to extend the fee reductions and loan modification from September 27, 2010, through December 31, 2010  Also, P L  111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the use of any funding remaining from the Small Business Jobs Act of 2010 to extend the fee subsidies and 90% maximum loan guaranty percentage through March 4, 2011, or until the available funding was exhausted  Funding for these purposes was exhausted on January 3, 2011  The Obama Administration argued that TARP and the additional funding for the SBA's loan guaranty programs helped to improve the small business lending environment and supported "the retention and creation of hundreds of thousands of jobs " Critics argued that small business tax reduction, reform of financial credit market regulation, and federal fiscal restraint are the best means to assist small business economic growth and job creation  Over the years, the SBA's Office of Inspector General (OIG) and the U S  Government Accountability Office (GAO) have independently reviewed the SBA's administration of the SBA's loan guaranty programs  Although improvements have been noted, both agencies have reported deficiencies in the SBA's administration of its loan guaranty programs that they argue need to be addressed, including issues involving the oversight of 7(a) lenders and the lack of outcome-based performance measures  On December 1, 2000, the OIG released its FY2001 list of the most serious management challenges facing the SBA and included, for the first time, the oversight of SBA lenders  Since then, the OIG has determined that the SBA has made significant progress in improving its oversight of SBA lenders  For example The SBA established an Office of Lender Oversight (renamed the Office of Credit Risk Management in 2007), led by an Associate Administrator, which, in October 2000, drafted a strategic plan to serve as a basis for developing a Standard Operating Procedure (SOP) for lender oversight and, among other activities, initiated "steps to develop and implement a comprehensive loan monitoring system to evaluate lender performance  The system will collect data on lenders such as delinquency default rates, liquidations, loan payments, and loan originations " In 2004, the SBA's National Guaranty Purchase Center developed a quality control plan "to review the quality of the guaranty purchase process " In 2006, the SBA issued an SOP that established procedures for on-site, risk-based lender reviews and safety and soundness examinations for 7(a) lenders and Certified Development Companies (CDCs) participating the SBA's 504/CDC loan guaranty program  In 2007, the SBA completed the centralization of all 7(a) loan processing activities and, with very limited exception, ended loan making, servicing, liquidation, and guaranty purchase activity at district offices  In 2008, the SBA issued an SOP for 7(a) lender oversight which included uniform policies and procedures for the evaluation of lender performance and the SBA's Office of Financial Program Operations (OFPO) began designing "a comprehensive quality control program across all of its centers " Previously, quality control was conducted within each loan center (Standard 7(a) Loan Guaranty Processing Center, Commercial Loan Service Center, and National Guaranty Purchase Center) "at various levels of sophistication " The SBA issued an interim final rule in the Federal Register on December 1, 2008, incorporating the SBA's risk-based lender oversight program into the SBA's regulations  In 2010, the SBA's OFPO established its agency-wide quality control program, which is designed to improve service and "reduce waste, fraud, and abuse" by ensuring "that centers accurately and consistently apply statutory, regulatory, and procedural loan program requirements " The SBA also developed a "risk-based, off-site analysis of lending partners through its Loan/Lender Monitoring System (L/LMS), a state-of-the-art portfolio monitoring system that incorporates credit scoring metrics for portfolio management purposes " In 2012-2013, the SBA "(1) developed risk profiles and lender performance thresholds, (2) developed a select analytical review process to allow for virtual risk-based reviews, (3) updated its lender risk rating model to better stratify and predict risk, and (4) conducted test reviews under the new risk-based review protocol " In 2013-2014, the SBA "improved its monitoring and verification of corrective actions by lenders by: (1) developing corrective action assessment procedures, (2) finalizing a system to facilitate the corrective action process, and (3) populating the system with lender oversight results requiring corrective action " In 2015, the SBA's Office of Credit Risk Management (OCRM) "engaged contractor support to expand on its corrective action follow-up process  Additionally, OCRM issued its FY2015 Risk Management Oversight Plan, which included plans to conduct 170 corrective action reviews between 7(a) and 504 lenders " In 2016, OCRM reported that it conducted 147 corrective action follow-up assessments, established performance measures and risk mitigation goals for the SBA's entire lending portfolio, and "conducted portfolio analyses of problem lenders with heavy concentrations in SBA 7(a) lending and sales on the secondary market " Despite these improvements, the OIG continues to list lender oversight as one of the most serious management challenges facing the SBA because it argues that several issues that it has identified in audits have not been fully addressed  Specifically, the OIG reports that the SBA needs to show that the portfolio risk management program is used to support risk based decisions, implement additional controls to mitigate risks, develop an effective method for tracking loan agents, and update regulations on loan agents  GAO has argued that the 7(a) program's performance measures (e g , number of loans approved, loans funded, and firms assisted across the subgroups of small businesses) provide limited information about the impact of the loans on participating small businesses: The program's performance measures focus on indicators that are primarily output measures–for instance, they report on the number of loans approved and funded  But none of the measures looks at how well firms do after receiving 7(a) loans, so no information is available on outcomes  As a result, the current measures do not indicate how well the agency is meeting its strategic goal of helping small businesses succeed  The SBA's OIG has made a similar argument concerning the SBA's Microloan program's performance measures  Because the SBA uses similar program performance measures for its Microloan and 7(a) programs, the OIG's recommendations could also be applied to the SBA's 7(a) program  Specifically, as part of its audit of the SBA Microloan program's use of ARRA funds, the OIG found that the SBA's performance measures for the Microloan program are based on the number of microloans funded, the number of small businesses assisted, and program's loan loss rate  It argued that these "performance metrics     do not ensure the ultimate program beneficiaries, the microloan borrowers, are truly assisted by the program" and "without appropriate metrics, SBA cannot ensure the Microloan program is meeting policy goals " It noted that the SBA does not track the number of microloan borrowers who remain in business after receiving a microloan to measure the extent to which the loans contributed to the success of borrowers and does not determine the effect that technical training assistance may have on the success of microloan borrowers and their ability to repay loans  It recommended that the SBA "develop additional performance metrics to measure the program's achievement in assisting microloan borrowers in establishing and maintaining successful small businesses " In its response to GAO's recommendation to develop additional performance measures for the 7(a) program, the SBA formed, in July 2014, an impact evaluation working group to develop a methodology for conducting impact evaluations of the agency's programs using administrative data sources residing at the SBA and in other federal agencies, such as the U S  Census Bureau and the Bureau of Labor Statistics  Numerous SBA program offices participated in this working group and each office developed its own program evaluation methodology or established program evaluation frameworks  More recently, the SBA indicated in its FY2017 congressional budget justification document that although it "continues to face barriers gathering outcome rich evaluation data with current restrictions in collecting personal identification information (PII) and business identification information (BII)" it "plans to further develop its analytical capabilities, enhance collaboration across its programs, provide evaluation-specific trainings, and broaden use of impact evaluations to support senior leaders and institutionalize the evidence-based process across programs " To encourage evidence-based evaluations across its programs, the SBA has created an annual Enterprise Learning Agenda designed to "help program managers continue to build and use evidence and to foster an environment of continuous learning " As part of this agenda building process, the SBA identifies programs for evidence-based evaluation and undertakes both internal evaluations using available data or contracts with third parties to conduct the evaluations  Congress authorized several changes to the 7(a) program during the 111 th Congress in an effort to increase the number and amount of 7(a) loans  During the 111 th Congress, the Obama Administration supported congressional efforts to temporarily subsidize fees for the 7(a) and 504/CDC loan guaranty programs and to increase the 7(a) program's loan guaranty percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90%  Congress subsequently provided nearly $1 1 billion to temporarily subsidize fees for the 7(a) and 504/CDC loan guaranty programs and to increase the 7(a) program's maximum loan guaranty percentage to 90% for all standard 7(a) loans  The Obama Administration also proposed the following modifications to several SBA programs, including the 7(a) program: increase the maximum loan size for 7(a) loans from $2 million to $5 million; increase the maximum loan size for the 504/CDC program from $2 million to $5 million for regular projects and from $4 million to $5 5 million for manufacturing projects; increase the maximum loan size for microloans to small business concerns from $35,000 to $50,000; increase the maximum loan limits for lenders in their first year of participation in the Microloan program, from $750,000 to $1 million, and from $3 5 million to $5 million in the subsequent years; temporarily increase the cap on SBAExpress loans from $350,000 to $1 million; and temporarily allow in FY2010 and FY2011, with an option to extend into FY2012, the refinancing of loans for owner-occupied commercial real estate that are within one year of maturity under the SBA's 504/CDC program  The Obama Administration argued that increasing the maximum loan limits for the 7(a), 504/CDC, Microloan, and SBAExpress programs would allow the SBA to "support larger projects," which would "allow the SBA to help America's small businesses drive long-term economic growth and the creation of jobs in communities across the country " The Administration also argued that increasing the maximum loan limits for these programs would be "budget neutral" over the long run and "help improve the availability of smaller loans " Critics of the Obama Administration's proposals to increase the SBA's maximum loan limits argued that higher loan limits might increase the risk of defaults, resulting in higher guaranty fees or the need to provide the SBA additional funding, especially for the SBAExpress program, which has experienced somewhat higher default rates than other SBA loan guaranty programs  Others advocated a more modest increase in the maximum loan limits to ensure that the 7(a) program "remains focused on startup and early-stage small firms, businesses that have historically encountered the greatest difficulties in accessing credit," and "avoids making small borrowers carry a disproportionate share of the risk associated with larger loans " Others argued that creating a small business direct lending program within the SBA would reduce paperwork requirements and be more efficient in providing small businesses access to capital than modifying existing SBA programs that rely on private lenders to determine if they will issue the loans  Also, as mentioned previously, others argued that providing additional resources to the SBA or modifying the SBA's loan programs as a means to augment small business access to capital is ill-advised  In their view, the SBA has limited impact on small businesses' access to capital  They argued that the best means to assist small business economic growth and job creation is to focus on small business tax reduction, reform of financial credit market regulation, and federal fiscal restraint  As mentioned previously, in 2009, ARRA provided an additional $730 million for SBA programs, including $375 million to temporarily reduce fees in the SBA's 7(a) and 504/CDC loan guaranty programs ($299 million) and increase the 7(a) program's maximum loan guaranty percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90% for all standard 7(a) loans ($76 million)  P L  111-240 provided $505 million (plus $5 million for administrative expenses) to extend the 7(a) program's 90% maximum loan guaranty percentage and 7(a) and 504/CDC loan guaranty programs' fee subsidies through December 31, 2010 (later extended to March 4, 2011), or until available funding was exhausted (which occurred on January 3, 2011)  The act also made the following changes to the SBA's programs: increased the maximum loan size for 7(a) loans from $2 million to $5 million; temporarily increased for one year (through September 27, 2011) the cap on SBAExpress loans from $350,000 to $1 million; increased the maximum loan size for the 504/CDC loans from $1 5 million to $5 million for regular projects, from $2 million to $5 million for projects meeting one of the program's specified public policy goals, and from $4 million to $5 5 million for manufacturers; increased the maximum loan size for the Microloan program from $35,000 to $50,000; authorized the SBA to establish an alternative size standard for the 7(a) and 504/CDC programs that uses maximum tangible net worth and average net income as an alternative to the use of industry standards and established an interim size standard of a maximum tangible net worth of not more than $15 million and an average net income after federal taxes (excluding any carryover losses) for the preceding two fiscal years of not more than $5 million; and allowed 504/CDC loans to be used to refinance up to $7 5 billion in short-term commercial real estate debt each fiscal year for two years after enactment (through September 27, 2012) into long-term fixed rate loans  The act also authorized the Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) to encourage community banks to provide small business loans ($4 billion was issued), a $1 5 billion State Small Business Credit Initiative to provide funding to participating states with small business capital access programs, and about $12 billion in tax relief for small businesses  It also contained revenue raising provisions to offset the act's cost and authorized a number of changes to other SBA loan and contracting programs  Congress did not approve any changes to the 7(a) program during the 112 th Congress  However, several bills were introduced during the 112 th Congress that would have changed the program  S  1828 , a bill to increase small business lending, and for other purposes, was introduced on November 8, 2011, and referred to the Senate Committee on Small Business and Entrepreneurship  The bill would have reinstated for a year following the date of its enactment the temporary fee subsidies for the 7(a) and 504/CDC loan guaranty programs and the 90% loan guaranty for standard 7(a) loans, which were originally authorized by ARRA and later extended by several laws, including the Small Business Jobs Act of 2010  H R  2936 , the Small Business Administration Express Loan Extension Act of 2011, introduced on September 15, 2011, and referred to the House Committee on Small Business, would have extended a one-year increase in the maximum loan amount for the SBAExpress program from $350,000 to $1 million for an additional year  The temporary increase in that program's maximum loan amount was authorized by P L  111-240 , the Small Business Jobs Act of 2010, and expired on September 27, 2011 (see Appendix )  S  532 , the Patriot Express Authorization Act of 2011, introduced on March 9, 2011, and referred to the Senate Committee on Small Business and Entrepreneurship, would have provided statutory authorization for the Patriot Express Pilot Program  This program was subsequently discontinued by the SBA on December 31, 2013  The bill would have increased the program's maximum loan amount from $500,000 to $1 million, and it would have increased the guaranty percentages from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to up to 85% of loans of $500,000 or less and up to 80% of loans exceeding $500,000  H R  2451 , the Strengthening Entrepreneurs' Economic Development Act of 2013, was introduced on June 20, 2013, and referred to the House Committee on Small Business  It would have authorized the SBA to make direct loans of up to $150,000 to businesses with fewer than 20 employees  It would have also required the SBA to assess, collect, and retain a fee with respect to the outstanding balance of the deferred participation share of each 7(a) loan in excess of $2 million that is no more than is necessary to reduce to zero the SBA's cost of making the loan  H R  2461 , the SBA Loan Paperwork Reduction Act of 2013, was introduced on June 20, 2013, and referred to the House Committee on Small Business  It would have provided statutory authorization for the Small Loan Advantage (SLA) pilot program  The SBA started that program on February 15, 2011  It provided a streamlined application process for 7(a) loans of up to $350,000 if the loan received an acceptable credit score from the SBA prior to the loan being submitted for processing  The SBA adopted the SLA application process as the model for processing all non-express 7(a) loans of $350,000 or less, effective January 1, 2014  As mentioned previously, the Obama Administration waived the up-front, one time loan guaranty fee and ongoing servicing fee for 7(a) loans of $150,000 or less approved in FY2014 (and later extended the fee waiver in FY2015 and FY2016)  H R  2462 , the Small Business Opportunity Acceleration Act of 2013, introduced on June 20, 2013, and referred to the House Committee on Small Business, would have made the fee waiver permanent  Also, the Obama Administration waived the up-front, one-time loan guaranty fee for veteran loans under the SBAExpress program (up to $350,000) from January 1, 2014, through the end of FY2015 (called the Veterans Advantage Program)  S  2143 , the Veterans Entrepreneurship Act, would have authorized this fee waiver and made it permanent  Also, P L  113-235 provided statutory authorization to waive the 7(a) SBAExpress program's guarantee fee for veterans (and their spouse) in FY2015  P L  114-38 , the Veterans Entrepreneurship Act of 2015, authorized and made permanent the waiver of the up-front, one-time loan guaranty fee for veterans (and their spouse) in the SBAExpress program beginning on or after October 1, 2015, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero  The act also increased the 7(a) program's authorization limit from $18 75 billion in FY2015 to $23 5 billion  On June 25, 2015, the SBA informed Congress that the 7(a) program "is on track to hit its authorization ceiling of $18 75 billion well before the end of FY2015 " The SBA indicated that "our activity and trend analysis reveal a strong uptick that, if sustained, would exceed our lending authority ceiling by late August " If that were to occur, and in the absence of statutory authority to do otherwise, the SBA reported that it would have to suspend 7(a) loan making for the remainder of the fiscal year  The SBA requested an increase in the 7(a) loan program's authorization limit to $22 5 billion in FY2015  On July 23, 2015, citing "unprecedented demand," the SBA suspended 7(a) program lending  The SBA indicated that it would continue to process loan applications "up to the point of approval" and then place approved loans "into a queue awaiting the availability of program authority " Loans would be released "once program authority became available due to Congressional action or as a result of cancellations of loans previously approved this fiscal year " Applications would then "be funded in the order they were approved by SBA, with the exception that requests for increases to previously approved loans will be funded before applications for new loans " The SBA resumed 7(a) lending on July 28, 2015, following P L  114-38 's enactment  In addition to increasing the 7(a) program's authorization limit for FY2015, the act added requirements designed to ensure that SBA loans do not displace private sector loans (e g , the SBA Administrator may not guarantee a 7(a) loan if the lender determines that the borrower is unable to obtain credit elsewhere solely because the liquidity of the lender depends upon the guarantied portion of the loan being sold on the secondary market, or if the sole purpose for requesting the guarantee is to allow the lender to exceed the lender's legal lending limit), and requires the SBA to report, on a quarterly basis, specified 7(a) program statistics to the House and Senate Committees on Appropriations and Small Business  These required statistics are designed to inform the committees of the SBA's pace of 7(a) lending, provide estimates concerning the date on which the program's authorization limit may be reached, and present information concerning early defaults and actions taken by the SBA to combat early defaults  As mentioned previously, P L  114-113 increased the 7(a) program's authorization limit from $23 5 billion in FY2015 to $26 5 billion for FY2016  In addition, P L  114-223 , the Continuing Appropriations and Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2017, authorized the SBA to use funds from its business loan program account "to accommodate increased demand for commitments for [7(a)] general business loans" for the duration of the continuing resolution (initially December 9, 2016, later extended by P L  114-254 , the Further Continuing and Security Assistance Appropriations Act, 2017, to April 28, 2017)  In a related development, S  2496 , the Help Small Businesses Access Affordable Credit Act, introduced on February 2, 2016, would have authorized the SBA Administrator, with prior approval of the House and Senate Committees on Appropriations, to make loans in an amount equal to not more than 110% of the 7(a) program's authorization limit if the demand for 7(a) loans should exceed that limit  The Obama Administration also requested authorization to allow the SBA Administrator to continue to issue loans should the demand for 7(a) loans exceed the program's authorization limit  Also  S  2992 , the Small Business Lending Oversight Act of 2016, would have required the Director of the SBA's Office of Credit Risk Management (OCRM) to impose penalties on 7(a) lenders who "knowingly and repeatedly" undertake specified activities; required the SBA to annually undertake and report the findings of a risk analysis of the 7(a) program's loan portfolio; redefined the credit elsewhere requirement; authorized fees to be used to support OCRM operations; required the SBA to identify potential loan risks by lenders participating in the Preferred Lenders Program by requiring the SBA, at the end of each year, to "calculate the percentage of loans in a lender's portfolio made without a contribution of borrower equity when the loan's purpose was to establish a new small business concern, to effectuate a change of small business ownership, or to purchase real estate"; and, among other provisions, prohibited the SBA from approving any loan if its financing is more than 100% of project costs  Legislation was also introduced ( S  2125 , the Small Business Lending and Economic Inequality Reduction Act of 2015) to provide permanent, statutory authorization for the Community Advantage Pilot program (see Appendix )  The SBA announced on December 28, 2015, that it was extending the Community Advantage Pilot program through March 31, 2020  It had been set to expire on March 15, 2017  Recognizing that 7(a) loan approvals during the first half of FY2017 were about 9% higher than during the first half of FY2016, Congress included a provision in P L  115-31 , the Consolidated Appropriations Act, 2017, that increased the 7(a) program's authorization limit to $27 5 billion in FY2017 from $26 5 billion in FY2016  Congress also approved legislation ( P L  115-141 , the Consolidated Appropriations Act, 2018) that increased the 7(a) program's authorization limit to $29 0 billion in FY2018  In addition, as mentioned earlier, P L  115-189 , the Small Business 7(a) Lending Oversight Reform Act of 2018, among other provisions, codified the SBA's Office of Credit Risk Management; required that office to annually undertake and report the findings of a risk analysis of the 7(a) program's loan portfolio; created a lender oversight committee within the SBA; authorized the Director of the Office of Credit Risk Management to undertake informal and formal enforcement actions against 7(a) lenders under specified conditions; redefined the credit elsewhere requirement; and authorized the SBA Administrator to increase the amount of 7(a) loans not more than once during any fiscal year to not more than 115% of the 7(a) program's authorization limit  The SBA is required to provide at least 30 days' notice of its intent to exceed the 7(a) loan program's authorization limit to the House and Senate Committees on Small Business and the House and Senate Committees on Appropriations' Subcommittees on Financial Services and General Government and may exercise this option only once per fiscal year  Also, P L  115-232 , the John S  McCain National Defense Authorization Act for Fiscal Year 2019, included provisions to make 7(a) loans more accessible to employee-owned small businesses (ESOPs) and cooperatives  The act authorizes the SBA to make "back-to-back" loans to ESOPs to better align with industry practices (the loan proceeds must only be used to make a loan to a qualified employee trust); clarifies that 7(a) loans to ESOPs may be made under the Preferred Lenders Program; allows the seller to remain involved as an officer, director, or key employee when the ESOP or cooperative has acquired 100% ownership of the small business; and authorizes the SBA to finance transition costs to employee ownership and waive any mandatory equity injection by the ESOP or cooperative to help finance the change of ownership  The act also directs the SBA to create outreach programs with Small Business Investment Companies and Microloan intermediaries to make their lending programs more accessible to all eligible ESOPs and cooperatives, an interagency working group to promote lending to ESOPs and cooperatives, and a Small Business Employee Ownership and Cooperatives Promotion Program, administered by Small Business Development Centers, to offer technical assistance and training to small businesses on the transition to employee ownership through cooperatives and ESOPs  Congress did not focus much attention on the Trump Administration's proposal in its FY2019 budget request to "introduce counter-cyclical policies in SBA's business guaranty loan programs and update certain fees structures to offset $155 million in business loan administration " As mentioned earlier, the proposal included raising $93 million in additional revenue by allowing the SBA to set the 7(a) program's annual servicing fee at rates below zero credit subsidy; increasing the 7(a) loan program's FY2019 annual servicing fee's cap from 0 55% to 0 625%; and increasing the FY2019 upfront loan guarantee fee on 7(a) loans over $1 million by 0 25%  The Administration also requested that the 7(a) loan program's authorization limit be increased to $30 0 million in FY2019; that the SBA be allowed to further increase the 7(a) loan program's authorization amount in FY2019 by 15% under specified circumstances "to better equip the SBA to meet peaks in demand while continuing to operate at zero subsidies;" that the SBA be allowed to impose an annual fee, not to exceed 0 05% per year, of the outstanding balance on 7(a) secondary market trust certificates to help offset administrative costs; and that the SBAExpress program's loan limit be increased from $350,000 to $1 million  P L  116-6 , the Consolidated Appropriations Act, 2019, increased the 7(a) program's authorization limit to $30 0 billion in FY2019  The congressional debate concerning the SBA's 7(a) program during the 111 th Congress was not whether the federal government should act, but which federal policies would most likely enhance small businesses' access to capital and result in job retention and creation  As a general proposition, some Members of Congress argued that the SBA should be provided additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations with the expectation that in so doing small businesses will create jobs  Others worried about the long-term adverse economic effects of spending programs that increase the federal deficit  They advocated business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to help small businesses further economic growth and job creation  In terms of specific program changes, increasing the 7(a) program's loan limit, extending the 7(a) program's temporary fee subsidies and 90% maximum loan guaranty percentage, and establishing an alternative size standard for the 7(a) program were all designed to achieve the same goal: to enhance job creation by increasing the ability of 7(a) borrowers to access credit at affordable rates  However, determining how specific changes in federal policy are most likely to enhance job creation is a challenging task  For example, a 2008 Urban Institute study concluded that differences in the term, interest rate, and amount of SBA financing were "not significantly associated with increasing sales or employment among firms receiving SBA financing " The study also reported that the analysis accounted for less than 10% of the variation in firm performance  The Urban Institute suggested that local economic conditions, local zoning regulations, state and local tax rates, state and local business assistance programs, and the business owner's charisma or business acumen also "may play a role in determining how well a business performs after receipt of SBA financing " As the Urban Institute study suggests, because many factors influence business success, measuring the 7(a) program's effect on job retention and creation is complicated  That task is made even more challenging by the absence of performance-oriented measures that could serve as a guide  Both GAO and the SBA's OIG have recommended that the SBA adopt outcome performance-oriented measures for its loan guaranty programs, such as tracking the number of borrowers who remain in business after receiving a loan to measure the extent to which the program contributed to their ability to stay in business  Other performance-oriented measures that Congress might also consider include requiring the SBA to survey 7(a) borrowers to measure the difficulty they experienced in obtaining a loan from the private sector and the extent to which the 7(a) loan or technical assistance received contributed to their ability to create jobs or expand their scope of operations  The 7(a) program has several specialized programs that offer streamlined and expedited loan procedures for particular groups of borrowers, including the SBAExpress, Export Express, and Community Advantage programs  Lenders must be approved by the SBA for participation in these programs  SBAExpress Program The SBAExpress program was established as a pilot program by the SBA on February 27, 1995, and made permanent through legislation, subject to reauthorization, in 2004 ( P L  108-447 , the Consolidated Appropriations Act, 2005)  The program is designed to increase the availability of credit to small businesses by permitting lenders to use their existing documentation and procedures in return for receiving a reduced SBA guaranty on loans  It provides a 50% loan guaranty on loan amounts up to $350,000  As shown in Table A-1 , the SBA approved 27,794 SBAExpress loans (46 1% of total 7(a) program loan approvals), totaling $1 98 billion (7 8% of total 7(a) program amount approvals) in FY2018  The program's higher loan amount in FY2011 was due, at least in part, to a provision in P L  111-240 , the Small Business Jobs Act of 2010, which temporarily increased the SBAExpress program's loan limit to $1 million for one year following enactment (through September 27, 2011)  During the 112 th Congress, H R  2936 , the Small Business Administration Express Loan Extension Act of 2011, would have extended the SBAExpress program's higher loan limit for an additional year (through September 27, 2012)  SBAExpress loan proceeds can be used for the same purposes as those of the 7(a) program (expansion, renovation, new construction, the purchase of land or buildings, the purchase of equipment, fixtures, and lease-hold improvements, working capital, to refinance debt for compelling reasons, seasonal line of credit, and inventory); except that participant debt restructure cannot exceed 50% of the project and may be used for revolving credit  The program's loan terms are the same as those of the 7(a) program (the loan maturity for working capital, machinery, and equipment (not to exceed the life of the equipment) is typically 5 years to 10 years; and the loan maturity for real estate is up to 25 years, except that the term for a revolving line of credit cannot exceed 7 years  The SBAExpress loan's interest rates and fees are the same as those used for the 7(a) program  To account for the program's lower guaranty rate of 50%, lenders are allowed to perform their own loan analysis and procedures and receive SBA approval with a targeted 36-hour maximum turnaround time  Also, collateral is not required for loans of $25,000 or less  Lenders are allowed to use their own established collateral policy for loans over $25,000  As mentioned earlier, the SBA waived the up-front, one-time loan guaranty fee for 7(a) loans of $125,000 or less approved in FY2018  The SBA also waived 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans of $125,001 to $350,000 in FY2018  In addition, P L  114-38 , the Veterans Entrepreneurship Act of 2015, provided statutory authorization and made permanent the veteran's fee waiver in the SBAExpress program, except during any upcoming fiscal year for which the President's budget, submitted to Congress, includes a cost for the 7(a) program, in its entirety, that is above zero  The SBA waived this fee in FY2016, FY2017, and FY2018 and is waiving it in FY2019  The SBA indicated that its fee waivers for veterans are part "of SBA's broader efforts to make sure that veterans have the tools they need to start and grow a business " In a related development, the SBA discontinued the Patriot Express Pilot Program on December 31, 2013  It provided loans of up to $500,000 (with a guaranty of up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000) to veterans and their spouses  It had been in operation since 2007, and, like the SBAExpress program, featured streamlined documentation requirements and expedited loan processing  Over its history, the Patriot Express Pilot Program disbursed 9,414 loans amounting to more than $791 million  Export Express The Export Express program was established as a subprogram of the SBAExpress program in 1998, and made a separate pilot program in 2000  It was made permanent through legislation, subject to reauthorization, in 2010 ( P L  111-240 , the Small Business Jobs Act of 2010)  The Export Express program is designed to increase the availability of credit to current and prospective small business exporters that have been in business, though not necessarily in exporting, for at least 12 full months, particularly those small businesses needing revolving lines of credit  Export Express loans may not be used to finance overseas operations, except for the marketing or distribution of products or services exported from the United States  The program is generally subject to the same loan processing, making, closing, servicing, and liquidation requirements as well as the same maturity terms, interest rates, and applicable fees as the SBAExpress program  Two key differences between the two programs is that the Export Express program's maximum loan amount is up to $500,000, and its guaranty rate is 90% for loans of $350,000 or less, and 75% for loans exceeding $350,000  There were 215 lenders with approved SBA Export Express loan guaranties at the end of FY2017  These lenders are located in 46 states, Guam, and Puerto Rico  As shown in Table A-2 , the SBA approved 59 Export Express loans totaling $15 45 million in FY2018  Community Advantage 7(a) Loan Initiative The SBA's Community Advantage (CA) 7(a) loan initiative became operational on February 15, 2011  Originally announced as a three-year pilot program (through March 15, 2014), it subsequently was extended through March 15, 2017; March 31, 2020; and September 30, 2022  As of September 12, 2018, there were 113 approved CA lenders, 99 of which were actively making and servicing CA loans  The CA loan initiative is designed to increase lending to underserved low- and moderate-income communities  It, along with the now-discontinued Small Loan Advantage program, replaced the Community Express Pilot Program, which also was designed to increase lending to underserved communities  The CA loan initiative provides the same loan terms, guaranty fees, and guaranty as that of the 7(a) program on loan amounts up to $250,000 (85% for loans up to $150,000 and 75% for those greater than $150,000)  Loan proceeds can be used for the same purposes as those of the 7(a) program  The loan's maximum interest rate is prime, plus 6%  The program has an expedited approval process, which includes a two-page application for borrowers and a goal of completing the approval process within 5 to 10 days  The CA loan initiative is designed to increase "the number of SBA 7(a) lenders who reach underserved communities, targeting community-based, mission-focused financial institutions which were previously not able to offer SBA loans " These mission-focused financial institutions include the following: nonfederally regulated Community Development Financial Institutions certified by the U S  Department of the Treasury, SBA's Certified Development Companies, SBA's nonprofit microlending intermediaries, and, added in December 2015, SBA's Intermediary Lending Pilot Program intermediaries  They are expected to maintain at least 60% of their SBA loan portfolio in underserved markets, including loans to small businesses in, or that have more than 50% of their full-time workforce residing in, low-to-moderate income (LMI) communities; Empowerment Zones and Enterprise Communities; HUBZones; start-ups (firms in business less than two years); businesses eligible for the SBA's Veterans Advantage program; Promise Zones (added in December 2015); and Opportunity Zones and Rural Areas (added in October 2018)  The SBA placed a moratorium, effective October 1, 2018, on accepting new CA lender applications, primarily as a means to mitigate the risk of future loan defaults  The SBA also increased the minimum acceptable credit score for CA loans "that satisfies the need to consider several required underwriting criteria" from 120 to 140; increased the wait time for CA lenders ineligible for delegated lender status at the time of approval as a CA lender from 6 months to 12 months and increased the number of CA loans that must be initially dispersed before a CA lender may process applications under delegated authority from five to seven loans; increased the loan loss reserve requirement for CA loans sold in the secondary market from 3% to 5% of the outstanding amount of the guaranteed portion of each loan; modified requirements related to the refinancing of debts with a CA loan; limited fees that can be charged by a CA lender for assistance in obtaining a CA loan to no more than $2,500, with the exception of necessary out-of-pocket costs such as filing or recording fees; and as mentioned previously, added Opportunity Zones and Rural Areas to the list of economically distressed communities that are eligible for a CA loan  As shown in Table A-3 , the SBA approved 1,118 CA loans amounting to $157 5 million in FY2018 and 4,906 CA loans amounting to $643 72 million from the time the program became operational to the end of FY2018  As mentioned previously, legislation was introduced during the 114 th Congress ( S  2125 , the Small Business Lending and Economic Inequality Reduction Act of 2015) to provide the Community Advantage Pilot program permanent, statutory authorization 

ground_truth: NSF has identified potential benefits and challenges associated with its use of rotators. Benefits include fresh perspectives and close connections to the scientific community, while challenges include staffing turnover and higher costs for some rotators compared with permanent employees. GAO was asked to review NSF's use and management of the IPA and VSEE rotator programs, among other things. This report examines (1) the number, costs, and uses of NSF rotators for fiscal year 2008 through fiscal year 2017; (2) the strategies NSF has used to manage rotator costs and the results of these efforts; and (3) the extent to which NSF has a workforce strategy for using rotators and has evaluated the results of its rotator programs. GAO analyzed summary-level data on NSF's rotators; reviewed key documents; interviewed NSF officials; conducted semistructured interviews with a nongeneralizable sample of rotators and permanent federal employees selected from different scientific directorates within NSF; and compared NSF's management of the program to key principles for effective strategic workforce planning. The numbers of rotators—outside scientists, engineers, and educators on temporary assignment—at the National Science Foundation (NSF) and their costs in proportion to other staff remained relatively stable in fiscal years 2008 through 2017. Most rotators joined NSF under its Intergovernmental Personnel Act (IPA) mobility program. IPA rotators comprised about 12 percent of NSF's workforce and 17 percent of staff costs on average and were not subject to a federal salary cap. They remain employees of their home institutions, with NSF reimbursing the institutions for most of their salaries and benefits. The remaining rotators are considered temporary federal employees under the Visiting Scientist, Engineer, and Educator (VSEE) program; their salaries could not exceed the federal maximum for their positions. Beginning in fiscal year 2017, NSF adopted IPA rotator program cost management strategies expected to achieve the greatest savings with the least harm to recruitment, but NSF officials said it is too soon to determine the full results. For example, for new IPA rotators who had not yet begun negotiating their assignments, NSF began requiring their home institutions to pay for 10 percent of the rotators' salary and benefits. NSF officials told GAO they expect to issue a report evaluating the strategies in December 2018. NSF's IPA program steering committee recommended developing a workforce strategy for balancing the agency's use of rotators with federal staff, but as of June 2018, NSF had not developed a strategy or fully evaluated the IPA and VSEE rotator programs' results, as called for by GAO's key principles for effective strategic workforce planning. NSF officials said they recognized the value of a workforce strategy but were focusing instead on other workforce planning efforts, and they had not fully evaluated program results in part because rotators are blended into the agency's permanent workforce, making a separate evaluation difficult. Without a workforce strategy and evaluation of results, NSF is limited in its ability to manage and, if warranted, adjust its use of rotators. GAO recommends that NSF develop an agency-wide strategy for balancing the agency's use of rotators with permanent staff and evaluate the contributions of its rotator programs toward NSF's human capital goals and programmatic results. NSF agreed with GAO's recommendations.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.

Report 1: NSF relies on two programs for bringing rotators into the agency: (1) the IPA program and (2) the VSEE program  The Office of Personnel Management develops policies on agencies’ use of the IPA program and promulgates program regulations  Rotators in NSF’s IPA and VSEE programs differ in key respects, including their employment status and compensation  IPA rotators  NSF enters into written agreements with rotators’ home institutions for all IPA assignments  The agreements detail rotators’ salaries and health, retirement, and other fringe benefits at their home institutions, as well as the cost-sharing amounts NSF and home institutions are to pay during rotators’ assignments  NSF reimburses its cost-sharing amounts to home institutions, which continue to pay rotators’ full salaries and benefits  NSF does not cap the salaries of IPA rotators; as a result, IPA rotators may receive salaries that exceed the maximum federal salary for the position they hold at NSF  In contrast, if an IPA rotator’s salary is less than the minimum federal salary for the position, NSF will supplement the salary to the minimum rate  VSEE rotators  NSF appoints VSEE rotators as federal employees on a nonpaid leave of absence from their home institutions  VSEE rotators receive their salaries directly from NSF but are not eligible for certain federal benefits, such as retirement; instead, NSF reimburses home institutions for the employer’s share of retirement, life insurance, and health benefits that would otherwise be discontinued  NSF’s policy is to set salaries for VSEE rotators that are generally comparable to the salaries the rotators would receive at their home institutions  In setting salaries, NSF also takes into account other sources of income, such as consulting, and allows for locality pay adjustments applicable to employees in the Washington, D C , metropolitan area  However, because VSEE rotators are federal employees, NSF caps their salaries at the federal maximum for the position they hold at NSF  Both IPA and VSEE rotators are eligible for certain other types of reimbursement  In particular, rotators have the option of having NSF pay their moving expenses to and from Washington, D C , or receiving per diem allowances in accordance with federal travel regulations for up to 2 years  In addition, NSF may reimburse rotators for travel-related expenses related to their participation in NSF’s Independent Research and Development program, which enables NSF staff to maintain their involvement with their professional research and research-related activities at their home institutions  Table 1 shows additional information on IPA and VSEE rotator expenses  Rotators are generally assigned to one of NSF’s seven directorates that support science and engineering research and education (see table 2)  Each directorate is headed by an assistant director and deputy assistant director  Directorates are further subdivided into divisions, offices, or sections  Each division is headed by a division director and typically a deputy division director, and each office is headed by an office director and typically a deputy office director  All these positions are executive positions at NSF  At the staff level, NSF uses program directors—subject matter experts in the scientific areas they manage—to conduct reviews of proposals and recommend which projects the agency should fund  With an annual budget of about $7 5 billion, NSF funds approximately 24 percent of all federally supported basic research conducted by colleges and universities in the United States  In 2016, NSF established the Steering Committee for Policy and Oversight of the IPA Program  The steering committee serves as the primary body for considering policy on NSF’s use of IPA rotators and overseeing common approaches to budgeting and implementation of the IPA program  The committee’s membership includes NSF’s chief human capital officer, who serves as the chair, and several other NSF officials  The steering committee has established strategic principles for management of the IPA program  These principles include maintaining a balance between IPA rotators and federal staff and a commitment to ongoing improvement of the program  NSF officials told us that there is no similar steering committee for overseeing VSEE rotators  Instead, each VSEE rotator is individually overseen by his or her respective supervisor  For the agency as a whole, NSF’s Office of Information and Resource Management and its Division of Human Resource Management conduct human capital management  NSF officials stated that the head of the Office of Information and Resource Management serves as the Chief Human Capital Officer and develops and oversees NSF’s human capital approaches and strategies  These officials also told us that the Deputy Chief Human Capital Officer serves as the division director of Human Resource Management and is responsible for administering the division’s day-to-day operations  The Division of Human Resource Management administers the agency’s human capital policies as set forth in NSF’s personnel manual  The numbers of rotators and their costs to NSF in proportion to other staff have remained relatively stable  Most rotators were IPA rotators, and were used in both executive and program director (staff-level) positions  NSF generally used VSEE rotators in program director positions  Most rotators at NSF were IPA rotators, and the proportion of rotators relative to other staff has remained relatively stable over time (see fig  1)  During the 10-year period we reviewed, from fiscal year 2008 through fiscal year 2017, IPA and VSEE rotators comprised about 12 percent and about 3 percent, respectively, of NSF’s total workforce; and the number of IPA rotators ranged from 162 to 190 (about 11 to 12 percent of total staff), and the number of VSEE rotators ranged from 22 to 52 (about 1 to 3 percent of total staff)  NSF primarily used rotators across its seven scientific directorates, using IPA rotators in executive and program director positions and VSEE rotators in program director positions  The agency used rotators in these positions alongside NSF’s permanent staff to perform day-to-day agency operations, including managing the agency’s merit review process for determining which projects to fund  NSF used IPA rotators in executive positions such as assistant director  According to agency officials, individuals in executive positions at NSF are responsible for setting the direction for the scientific area they are assigned, leading scientific and technical matters, establishing an organizational culture, overseeing outreach and collaboration with NSF stakeholders, and contributing to NSF and national policy development and implementation  For example, an executive IPA rotator that we interviewed told us that he emphasized forming partnerships with industry when setting the direction for his directorate, including issuing joint solicitations for research proposals with industry partners  In addition, according to NSF officials, individuals in executive positions provide guidance and team management for staff  The proportion of IPA rotators to federal employees in executive positions within NSF’s seven scientific directorates and other staff offices has generally increased since fiscal year 2012  As shown in figure 4, from fiscal year 2008 through fiscal year 2017, the number and proportion of executive positions filled by IPA rotators ranged from 18 of 98 (about 18 percent) in 2008 to 30 of 108 (about 28 percent) in fiscal year 2016  In November 2017, IPA rotators filled 29 of 88 (about 33 percent) executive positions within NSF’s seven scientific directorates  At that time, the proportion of executive positions filled by IPA rotators varied among directorates, as shown in table 3  For example, IPA rotators filled 4 of 8 (50 percent) of the executive positions in the Directorate for Social, Behavioral, and Economic Sciences and 2 of 14 (about 14 percent) of the executive positions in the Directorate for Mathematical and Physical Sciences  According to NSF officials, NSF often pairs IPA rotators and federal employees at the executive level so that each can benefit from the other’s experience and perspective  For example, in all but one directorate, an IPA rotator filled the assistant director position and a federal employee filled the corresponding deputy assistant director position  Two NSF executives we interviewed, including an IPA rotator and a federal employee, commented positively on the pairing of IPA rotators and federal employees at the executive level  For example, they said that rotators maintain close ties to the research community and federal employees may have more experience with NSF’s institutional history  One NSF executive told us that IPA rotators help keep the agency at the forefront of science because they have deep ties with the research community and regularly publish their own research  Additionally, a federal program director we interviewed told us that in one previous instance in which an IPA rotator filled an executive position without being paired with a federal employee, the rotator’s lack of institutional knowledge of NSF and the steep learning curve for the position caused inefficiencies during the rotator’s first year at NSF  The agency, however, does not require pairing IPA rotators and federal employees at the executive level, according to NSF officials  For example, in November 2017, IPA rotators filled both the division director and deputy division director positions in the Division of Behavioral and Cognitive Science and Division of Undergraduate Education  In our interviews with a nongeneralizable sample of NSF employees and rotators, we found mixed perceptions about the effect of NSF’s use of IPA rotators on opportunities for advancement for permanent employees  For example, in response to a question about this effect, one permanent NSF employee told us that she advanced to an executive position and that opportunities exist for advancement within the agency  In contrast, another NSF employee we interviewed told us that she did not feel there were opportunities for advancement because, in her view, executive vacancies created by the departure of rotators were exclusively filled with other rotators  NSF officials said that the agency has no policy that restricts repeatedly filling certain executive positions with rotators and that such a situation is a common practice  Nevertheless, NSF officials told us 32 of the 88 executives (about 36 percent) in NSF’s seven scientific directorates in November 2017 had held staff-level positions within the agency before becoming executives  NSF uses both IPA and VSEE rotators in program director positions, which are staff-level positions  In fiscal year 2016, NSF had a total of 506 program directors, including 139 IPA rotators (about 27 percent) and 39 VSEE rotators (about 8 percent)  According to NSF officials, program directors are responsible for conducting long-range planning and developing budgets for the areas of science represented by their program and for administrating the merit review process  In particular, IPA and VSEE rotators who serve as program directors help determine the projects that NSF funds  To do so, they review proposals, identify experts in their field to serve as external reviewers, and make funding recommendations to their respective division directors  NSF officials told us that, similar to the pairing of IPA rotators and federal employees at the executive level, permanent and rotating program directors frequently work together on a shared program so that each can benefit from the other’s experience and perspective  For example, a rotating program director we interviewed told us that she worked under the guidance of a program lead, who is typically a permanent employee  Another rotating program director told us that NSF’s permanent federal employees are good at training incoming rotators  Beginning in fiscal year 2017, NSF adopted rotator program cost- management strategies expected to achieve the greatest savings with the least harm to recruitment, but NSF officials said it is too soon to determine the full results because these new strategies are being phased in for new IPA agreements only  NSF considered other strategies to manage rotator costs, but it did not adopt them, generally because NSF anticipated negative effects on rotator recruitment or because it estimated the resulting cost savings would be small  NSF has adopted three strategies to manage rotators’ costs in fiscal year 2017, but, NSF officials said it is too soon to determine the full results because these new strategies are being phased in for new IPA agreements only  All three of these strategies relate to IPA rotators; NSF officials told us that they have not considered or adopted any cost- management strategies related to VSEE rotators  The officials explained that any such strategies could affect NSF’s entire federal workforce because VSEE rotators are federal employees  The three strategies are: (1) obtaining a minimum 10 percent cost-share from each IPA rotator’s home institution, (2) limiting IPA rotators’ paid trips to their home institutions to 12 per year, and (3) no longer reimbursing IPA rotators for consulting income that they forgo while at NSF  NSF officials told us they expect to issue a report with the results of evaluations of all three strategies in December 2018  In October 2016, NSF implemented a cost-sharing pilot program that requires institutions covered by the program—those who entered into negotiations for new IPA agreements in fiscal year 2017—to pay for at least 10 percent of the IPA rotators’ salaries and fringe benefits  Implementing this cost-management strategy, and the other strategies that NSF adopted, was consistent with recommendations from NSF’s steering committee for oversight of IPA rotators  This cost-management strategy targeted NSF’s costs for IPA rotators’ salary and fringe benefits, which constitute the largest component of IPA rotators’ costs  For example, these costs were about $34 7 million, or about 89 percent of IPA rotator costs in fiscal year 2017  Previously, according to NSF officials, the agency requested an optional cost-share amount of 15 percent from rotators’ home institutions, but it typically received less because of variations in the amounts that home institutions provided  According to an October 2016 report from the task force on fiscal oversight, NSF decided on 10 percent for the cost-sharing pilot program because, historically, few home institutions provided the full 15 percent and NSF believed a requirement of 10 percent would not significantly affect its ability to recruit and hire IPA rotators  If a home institution is unable to provide the full 10 percent, the institution may request that NSF waive the cost-sharing requirement  According to NSF officials, such requests must be signed by a senior administrator at the rotator’s home institution and include the rationale for not being able to provide the required amount, the financial impact on the institution if it were to provide the full 10 percent, and associated documentation, among other things  Changes made in implementing this strategy, and the other strategies that NSF adopted, applied to new IPA agreements made in fiscal year 2017  These changes did not apply to IPA rotators with agreements made prior to 2017—even if those agreements are subsequently extended or renewed—or that were being negotiated at the time of the policy change, provided that the rotators’ appointment memoranda were already being reviewed by NSF’s Division of Human Resource Management  NSF officials told us that as of March 2018, the agency had not conducted full evaluations of this strategy or the other strategies because it was too soon to determine their full effects and NSF had not yet collected enough data to do so  Instead, NSF issued reports in January and March 2018 containing its preliminary analyses  In general, these preliminary reports found that the cost-management strategies resulted in savings to NSF  Similarly, our analysis of data from NSF found that cost sharing as a percentage of IPA rotators’ salary and fringe benefits increased from about 7 percent in fiscal year 2016 to about 8 percent in fiscal year 2017  NSF officials told us that of the 55 IPA rotators who were subject to the cost-sharing requirement in fiscal year 2017: the home institutions for 54 rotators met or exceeded the 10 percent cost-share requirement, and of those, 16 exceeded the cost-share requirement; and the home institution for 1 rotator did not cost-share because the rotator was from a Federally Funded Research and Development Center and NSF waived the cost-share requirement because cost- sharing would not decrease the overall federal cost  In November 2017, NSF decided to extend the cost-sharing pilot through at least the end of fiscal year 2018, to ensure a full evaluation could be conducted  In particular, NSF officials told us that they need more data and experience with this pilot program to better understand its effects, such as the ability to recruit potential IPA rotators  For example, one IPA rotator that we interviewed expressed concern with the cost-sharing requirement’s potential effect on small or publicly funded universities, which may lack funds to contribute to the cost of an IPA assignment  According to NSF officials, their evaluation will include an analysis of the cost of IPA rotators under the cost-sharing requirement and its effect on the IPA program, including recruitment  Beginning in fiscal year 2017, for IPA rotators who entered into negotiations for new agreements in that fiscal year, NSF placed a limit of 12 agency-funded trips per year that rotators may take to their home institutions under the Independent Research and Development program  In our analysis of data from NSF, we found that NSF’s costs for IPA rotators under this program decreased from about $1 5 million (about 3 percent of IPA rotator costs) in fiscal year 2016 to $1 1 million (about 3 percent of IPA rotator costs) in fiscal year 2017  NSF officials told us that the new limit applies only to an IPA rotator’s trips to their home institution and does not limit travel to other locations for fieldwork or scientific conferences, among other things  These officials explained that NSF chose not to limit trips to these other locations because they are considered fundamental to IPA rotators’ research and are infrequent—occurring one to three times per year, on average, per IPA rotator  Additionally, rotators are permitted to use annual leave, leave without pay, or flexitime to take trips using non-NSF funds for activities performed on a rotator’s own time  In adopting this cost-management strategy, NSF sought to balance the benefits of IPA rotators’ travel with the travel costs  According to the Task Force on Fiscal Oversight’s October 2016 report, NSF’s support for travel benefits the agency by providing a way for program directors and executives to stay current in their scientific fields, conduct outreach with scientific communities, and provide oversight and stewardship of NSF’s programs and awards  NSF officials told us that the agency sought to control travel costs under the Independent Research and Development program by setting a reasonable limit to NSF-funded trips that would cause the least harm to rotators’ research so as not to discourage them from coming to NSF  As a result, NSF decided on a maximum of 12 trips per year under this program because, historically, more than 80 percent of the IPA rotator participants traveled to their home institution less than once per month  In fiscal year 2017, for IPA rotators who entered into new agreements in that fiscal year, NSF ended reimbursements for consulting income that the rotators forgo as a result of their assignment to NSF  Previously, when an IPA rotator discontinued consulting activities during an IPA assignment, NSF would reimburse the rotator up to $10,000 a year  IPA rotators who entered into negotiations or agreements with NSF prior to this change may still receive this reimbursement  In fiscal year 2017, NSF’s cost for lost consulting reimbursements to IPA rotators was $150,000  This amount represented a decrease of about $160,000, or about 52 percent, from fiscal year 2016  NSF made this change because it determined that doing so would not negatively affect the IPA program  In particular, NSF found that other federal science agencies typically did not reimburse IPA rotators for lost consulting income and it concluded that IPA rotators typically do not expect NSF to offer reimbursement  In addition to the three adopted strategies, NSF’s Task Force on Fiscal Oversight identified other potential cost management strategies for the IPA program  The task force reviewed various data on the costs that make up the IPA program, such as the number of IPA rotators who received a particular form of compensation or who would be affected by the potential strategies  In addition, the task force took into account anecdotal and other evidence on how IPA rotators might react to the strategies  Using input from the task force, NSF opted against the other potential strategies because it either (1) expected the resulting cost savings to be small or (2) anticipated potential negative effects from implementing them, such as increased difficulty in hiring IPA rotators  These potential cost-management strategies primarily related to IPA rotator compensation, as described below  Capping IPA rotators’ salaries  NSF decided against establishing a salary cap for IPA rotators at various levels between about $185,000 and $240,000 annually  The task force found that salary caps at lower levels would have greater cost savings because of the higher number of individuals covered by the cap, but that the caps would also pose a significant risk to NSF’s ability to recruit IPA rotators  In particular, the task force found that salary caps at lower levels would disproportionately affect IPA rotators in two of its directorates—the Directorate for Computer and Information Science and Engineering and the Directorate for Engineering—because of the higher salaries of individuals in positions associated with those fields  As a result, the task force recommended that NSF first assess the effects of its cost-sharing pilot program before proceeding with any cap on IPA rotators’ salaries  Reducing or eliminating IPA rotators’ supplemental pay  NSF decided against reducing or eliminating the supplemental pay that IPA rotators receive when their salary at their home institution is below the minimum for their NSF position  In fiscal year 2017, NSF’s cost for IPA rotators’ supplemental pay was $1 0 million (about 3 percent of IPA rotator costs)  The task force recommended against this potential cost-management strategy because it would disproportionately affect IPA rotators in two of its directorates—the Directorate for Biological Sciences and the Directorate for Geosciences  In addition, the task force expected that any cost savings associated with this strategy would be small  Reducing IPA rotators’ per diem payments  NSF decided against reducing or eliminating per diem payments for lodging (excluding taxes), meals, and incidental expenses incurred during the length of rotators’ assignments  In fiscal year 2017, NSF’s cost for per diem payments was $3 1 million (about 8 percent of IPA costs)  The task force concluded, based on its analysis of per diem costs and anecdotal evidence, that many IPA rotators would opt to depart NSF if NSF did not provide per diem payments  As a result, the task force recommended against this strategy  As of June 2018, NSF had not developed an agency-wide workforce strategy for using rotators, as its IPA program steering committee recommended  In addition, NSF has not fully evaluated or developed plans to evaluate both IPA and VSEE rotator program results in terms of progress toward NSF’s human capital goals or programmatic results  As of June 2018, NSF had not developed an agency-wide workforce strategy that includes use of rotators, as NSF’s IPA program steering committee had recommended  In an August 2016 report on the IPA program, the steering committee stated that NSF did not have an agency- wide workforce strategy; instead, each directorate made decisions on its own about when and how to use IPA rotators in executive and program director positions  According to the report, an agency-wide framework would enable NSF to ensure an optimal balance of federal and rotator executives and program directors, which is a strategic principle that the steering committee developed for the IPA program  In February 2017, the committee issued an internal report to agency leadership that recommended expanding what was originally envisioned as a workforce strategy for the IPA program into a comprehensive agency-wide workforce strategy  The report stated that expanding the scope of the workforce strategy would have the greatest impact across the agency and would help NSF leadership in making strategic human capital decisions  The report outlined a process for developing a workforce strategy with various steps, including the following: Job analyses  The report recommended job analyses to review the roles and responsibilities of executive and staff-level positions and to identify the skills and capabilities required for successful performance of the work  According to the report, the steering committee’s working group for developing a workforce strategy found, based on its initial efforts to review position descriptions and roles and responsibilities, that some functions may be better served if performed by permanent federal employees and other functions by rotators  However, the working group concluded that NSF should obtain additional input and evidence before initiating large-scale changes in its workforce  Analysis of workforce gaps and surpluses  The report stated that identifying gaps and surpluses in the demand and supply for federal and rotator scientific staff would inform opportunities to optimize recruitment and retention efforts  The report recommended separate analyses for executive and scientific staff- level positions  Development of strategies to close workforce gaps and address surpluses  According to the steering committee’s report, examples of strategies include succession planning and rebalancing the mix of permanent federal staff and rotators to ensure an optimal workforce with the skills, experience, and capabilities to accomplish NSF’s science-related work  According to NSF officials, the agency’s Division of Human Resource Management was responsible for implementing the steering committee’s recommendation  In particular, it undertook an effort to work with senior leadership to develop a broad strategic workforce plan for the agency  However, in June 2018, NSF officials told us that they shifted their focus from developing a separate workforce strategy in order to focus instead on (1) development of a human capital operating plan, which agencies are required to develop and approve annually, and update as needed, under OPM regulations that went into effect on April 11, 2017; and (2) an Office of Management and Budget (OMB) memorandum issued in April 2017 directing agency heads to develop reform plans that identify ways to improve the efficiency, effectiveness, and accountability of their respective agencies  The NSF officials explained that they recognized the value in having a workforce strategy, but they did not consider it appropriate for the Division of Human Resource Management to develop a workforce strategy at the same time that the agency was completing the OPM and OMB plans  NSF did not specify how its efforts to complete the OPM and OMB plans would address the need the steering committee identified for an agency- wide framework that would enable NSF to ensure an optimal balance of federal and rotator executives and program directors  In particular, NSF’s human capital operating plan, which it approved in April 2018, does not discuss NSF’s use of rotators or include information on balancing the agency’s use of rotators with permanent staff  Furthermore, NSF has not yet determined how it will address its use of rotators as part of its agency reform plan  In particular, NSF officials told us in June 2018 that they may address the agency’s use of rotators under the workforce focus area of its reform plan, but that they were only just beginning to identify and select initiatives under this focus area and that these initiatives have not yet been finalized  The process the NSF steering committee laid out in its internal report, when implemented, would align with two key principles GAO has identified for effective strategic workforce planning  Specifically, it would align with the principles of (1) determining the skills and competencies that are critical to successfully achieving missions and goals, and (2) developing human capital strategies to address gaps and enable the contribution of critical skills and competencies needed for mission success  By incorporating the NSF’s steering committee’s recommendation for a workforce strategy—and the process outlined by the steering committee for developing this strategy—into its human capital operating plan or agency reform plan, NSF could better manage its use of rotators and balance them with its permanent staff  We have previously found that high-performing organizations recognize the fundamental importance of measuring both the outcomes of human capital strategies and how these outcomes have helped the organizations accomplish their missions and programmatic goals  However, as of May 2018, NSF had not fully evaluated and did not have plans to evaluate the results of its IPA and VSEE rotator programs in terms of progress toward human capital goals and the contributions the programs made toward achieving programmatic results  One of GAO’s key principles for effective strategic workforce planning states that agencies should monitor and evaluate progress toward the agencies’ human capital goals and the contribution that human capital results have made toward achieving programmatic results  In particular, we previously found that evaluation activities can improve the effectiveness of workforce strategies by identifying shortfalls in performance and other improvement opportunities  OPM also requires agencies to develop a human capital operating plan that will support the evaluation of the agency’s human capital strategies  In March 2014, NSF published a summary of the results of focus groups with IPA rotators and their supervisors  This summary outlined benefits and challenges of the program from the perspectives of both groups, such as the benefit of bringing fresh perspective and new ideas to NSF and the challenge of recruiting and retaining qualified IPA rotators  However, the summary did not provide the agency’s assessment of progress towards programmatic results and human capital goals  For example, it summarized the benefits of the program from the standpoint of rotators and did not provide NSF’s assessment of how individual IPA rotators or the program as a whole contributed to NSF’s scientific mission  In addition, the summary did not provide an assessment of the extent to which the current workforce balance of federal and rotator executives and program directors is aligned with NSF’s work  In our semistructured interviews with federal staff and rotators in executive and staff-level positions at NSF, most were comfortable with the current balance, but three individuals raised concerns about the use of rotators in executive positions, suggesting that NSF could benefit from further analysis of its balance of rotators and federal staff  In April 2018, NSF adopted its human capital operating plan which identifies specific, short-term actions that the agency will take to achieve its human capital goals  In its plan, NSF identified strategies derived from NSF’s commitment to ongoing improvement, such as reviewing and realigning its workforce to meet future needs  Also, NSF’s process for developing a workforce strategy, outlined in the steering committee’s February 2017 internal report, included recommendations to conduct an assessment of the outcomes of workforce strategies and the impact of these outcomes on helping NSF accomplish its scientific mission and related programmatic goals  However, plans for this assessment did not include an evaluation of the agency’s rotator programs  Moreover, neither the steering committee’s February 2017 internal report nor NSF’s April 2018 report committed to conducting such an evaluation or specified how assessments described in its reports would address NSF’s rotator programs  For example, neither report specified how NSF would evaluate the extent to which the rotator programs have achieved NSF’s objectives, which we identified through our review of NSF documentation and interviews with NSF officials  These objectives include: bringing fresh perspectives from across the country and across all fields of science and engineering supported by NSF; helping influence new directions for research in science, engineering, and education, including emerging interdisciplinary fields; providing scientific leadership and management of NSF’s research and education programs; and providing opportunities for researchers to gain first-hand knowledge of the philosophy and mechanisms of federal support for research and bring this knowledge back to their home institutions  According to NSF officials, the agency has not separately evaluated the results of its rotator programs in part because rotators are blended into its permanent federal workforce, making it difficult to evaluate the results of its rotator programs separately from those of its overall workforce  In our December 2003 report on key principles for effective strategic workforce planning, we found that federal agencies in general have experienced difficulties in defining practical and meaningful measures that assess the effects human capital strategies have on programmatic results  However, without an evaluation of the extent of the rotator programs’ contributions toward NSF’s human capital goals or programmatic results, NSF is limited in its ability to demonstrate the programs’ benefits to external stakeholders, such as the Congress, and to adjust the programs, if warranted  Such adjustments could include increasing or decreasing the use of rotators overall or in certain types of positions, such as executive or staff-level positions  In recent years, NSF has recognized the need to think more strategically about its use of rotators and has taken positive steps to manage its rotator programs  For example, beginning in fiscal year 2017, NSF adopted several strategies to manage the cost of rotators  However, as of June 2018, NSF had decided against developing a separate agency-wide strategy for balancing its use of IPA rotators and federal staff, as NSF’s steering committee for the IPA program recommended in February 2017  NSF officials said that they recognized the value in having a workforce strategy but wanted to focus instead on addressing OPM and OMB requirements related to workforce planning  By following through on the steering committee’s recommendation for a workforce strategy, NSF could better manage its use of rotators and balance them with its permanent staff  Moreover, as of June 2018, NSF had not fully evaluated the results of the rotator programs, as called for by key principles for effective strategic workforce planning  NSF officials told us they have not done so, in part, because rotators are blended into NSF’s permanent federal workforce, making it difficult to evaluate the results of its rotator program separately from those of its overall workforce  However, without an evaluation of the extent of the rotator programs’ contributions toward NSF’s human capital goals or programmatic results, NSF is limited in its ability to demonstrate the programs’ benefits to external stakeholders, such as the Congress, and to adjust the programs, if warranted  We are making the following two recommendations to NSF: The NSF Director of Human Resource Management should complete the development of an agency-wide workforce strategy for balancing the agency’s use of IPA and VSEE rotators with permanent staff as part of NSF’s current agency reform planning efforts or updates to its human capital operating plan  (Recommendation 1) The NSF Director of Human Resource Management should evaluate the contributions of the IPA and VSEE rotator programs toward NSF’s human capital goals and the contributions the programs have made toward achieving programmatic results  (Recommendation 2) We provided a draft of this report to NSF for comment  In its written comments, which are reproduced in appendix I, NSF concurred with our recommendations and stated that implementation of the recommendations will enhance efforts to fulfill the agency’s mission and strengthen its workforce  NSF also provided technical comments, which we incorporated as appropriate  We are sending copies to the appropriate Congressional Committees, the Director of the National Science Foundation, and other interested parties  In addition, the report is available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-3841 or neumannj@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix II  In addition to the individual named above, Joseph Cook (Assistant Director), Nkenge Gibson, Kathryn Smith, and Douglas Hunker made key contributions to this report  Also contributing to this report were Antoinette Capaccio, Serena Lo, Timothy Guinane, Cynthia Norris, and Sara Sullivan 


Report 2:  For example, the document that serves as direction for Forest Service personnel on how to enter into RACAs referred to an outdated financial system that was replaced in fiscal year 2013  Further, the manuals and handbooks for the RACA processes had no indication that they had been reviewed within the past 5 years  Forest Service policy requires routine review, every 5 years, of policies and procedures in its Directive System  According to Forest Service officials, a staff member from ORMS sends an e-mail to officials responsible for updating these policies and procedures  However, appropriate control activities have not been designed to reasonably assure that updates were made, reviewed, approved, and issued as needed for continued relevance and effectiveness  Without adequate descriptions of processes and related control activities in its manuals and handbooks over RACAs, the Forest Service is at risk that processes and related control activities may not be properly, consistently, and timely performed  Further, because it lacks a process and related controls for monitoring and reviewing the updates of the guidance and various process documents in the Directive System, the Forest Service is at risk that its policies and procedures may not provide appropriate agency-wide direction in achieving control objectives, particularly when financial systems change and old processes may no longer be applicable  SOPs and desk guides related to RACA processes were not in the Directive System and are not considered official Forest Service policy and procedures  Forest Service field staff responsible for various processes generally developed SOPs and desk guides to document day-to-day procedures for employees in carrying out RACA processes to supplement the manuals and handbooks  However, the SOPs and desk guides did not reference the applicable manuals and handbooks they supplemented  Further, the SOPs and desk guides did not provide descriptions of (1) review procedures for authorization, completeness, and validity of RACAs and related receivables; (2) detailed review procedures to be performed and by whom; (3) timing of review procedures; and (4) how to document the completion of the review procedures  Finally, SOPs and desk guides did not have evidence that responsible officials reviewed and approved them to authorize their use  These SOPs and desk guides are only available in the field office where these were developed, and if similar SOPs and desk guides were developed in other field offices, control activities and how they are performed could vary  We also noted that these SOPs and desk guides were not timely updated to reflect processes and systems currently in use  For example, there were many instances where the SOPs and desk guides referred to systems that the Forest Service no longer used  Standards for Internal Control in the Federal Government states that management should establish an organizational structure, assign responsibility, and delegate authority to achieve the entity’s objectives  Effective documentation assists in management’s design of internal control by establishing and communicating the who, what, when, where, and why of internal control execution to personnel  Documentation also provides a means to retain organizational knowledge and mitigate the risk of having that knowledge limited to a few personnel and to achieve the entity’s objectives  Management assigns responsibility and delegates authority to key roles throughout the entity  As a result of the issues discussed above, the Forest Service is at risk that control activities may not be properly and consistently performed and its related control objectives may not be achieved efficiently and effectively  In addition, the Forest Service is at risk that knowledge for performing the control activities may be limited to a few personnel or lost altogether in the event of employee turnover  The Forest Service lacked control activities over the segregation of incompatible duties performed by line officers and program managers for reimbursable agreements and any adjustments affecting the final disposition of related receivables  Field offices manage the majority of Forest Service projects, including authorizing the agreements and monitoring related collection  The Forest Service line officer for fire incident cooperative agreements and program managers for RACA at the RSA, unit, or field levels initiate and develop the terms of the agreements and are also responsible for any subsequent negotiation of the agreements  In the process of negotiating and settling costs, the line officer or program manager has the authority to cancel or change related receivables that they deemed uncollectible  For example, in a fire incident, the line officer at the region or field level is involved in both developing a Cost Share Agreement and after the fire incident has ended, negotiating the Cost Settlement Package with parties involved in the agreement to determine the final settlement amount that the Forest Service will be reimbursed for expenses paid in suppressing the fire incident  Therefore, the line officer is responsible for initiating the Cost Share Agreement, modifying the Cost Settlement Package, and changing or canceling the related receivable, which represent conflicting duties  We also found that the Forest Service did not have any mitigating controls, such as independent approval of any adjustments affecting the final disposition of receivables, to mitigate the risk of these incompatible duties  Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks  Segregation of duties contributes to the design, implementation, and operating effectiveness of control activities  To achieve segregation of key functions, management can divide responsibilities among different people to reduce the risk of error, misuse, or fraud  This may include separating the responsibilities for authorizing or approving transactions, processing and recording them, and reviewing the transactions so that no one individual controls all key aspects of a transaction or event  Forest Service officials stated they did not consider segregating the conflicting duties related to reimbursable agreements because these line officers and program managers were most familiar with the terms of the agreement and the activities performed  However, a lack of adequate segregation of conflicting duties or proper monitoring and review of conflicting duties for receivables from reimbursable agreements could result in receivables not being collected, and an increased risk of fraud  The Forest Service’s processes and related control activities over review of unliquidated obligations were not properly designed to reasonably assure optimum utilization of funds and were inconsistent with USDA and Forest Service policy  Further, Forest Service manuals and handbooks related to the review of unliquidated obligations did not clearly describe control activities and were not timely reviewed by management  The Forest Service reported unliquidated obligations of approximately $2 6 billion and $2 5 billion in its financial statements as of September 30, 2015, and 2016, respectively  In fiscal year 2016, the Forest Service deobligated about $319 million of its unliquidated obligations from prior years  The Forest Service’s procedures related to the review of unliquidated obligations were not properly designed and were inconsistent with USDA and Forest Service policy  In accordance with USDA Departmental Regulation (Regulation 2230-001) and related Forest Service policy, the Forest Service identifies and reviews unliquidated obligations that have been inactive for at least 12 months to determine whether delivery or performance of goods or services is still expected to occur  Once a determination has been made that an unliquidated obligation can be deobligated, program or procurement personnel are to notify finance personnel, in writing, within 5 days of the determination to process the deobligation  Within 15 days of receipt of the written notification, the unliquidated obligations are to be adjusted in the financial management system  The Forest Service CFO is then to be notified in writing that the deobligation was processed  Within 1 month of the close of each quarter, the Forest Service CFO is to submit to USDA’s Associate CFO for Financial Operations a certification stating that the Forest Service has performed reviews of its unliquidated obligations and taken appropriate actions, such as promptly deobligating an unliquidated obligation that is no longer needed  However, the Forest Service’s quarterly certifications are inconsistent with USDA and Forest Service policy because the months included in each quarterly review do not line up with the months outlined in policy  For example, as shown in table 1, based on policy the certification due on October 31, covers the months July through September  However in practice, the certification that the Forest Service prepared for October 31 covers May through July  As a result, the review and certification for August and September would be delayed an entire quarter  According to Forest Service officials, it takes considerable time to produce accurate unliquidated obligations reports from USDA’s financial system and then distribute them to field offices  Therefore, there is not sufficient time for the field offices to review and deobligate amounts not needed from the unliquidated obligations balances to meet USDA’s certification timing and requirements  However, the Forest Service has not developed other processes and control activities that could help meet USDA and Forest Service policy and reasonably assure that unliquidated obligations are reviewed timely and appropriate actions are taken  As a result, there is an increased risk that the Forest Service may not achieve its control objectives of optimum utilization of funds and timely adjustments of obligated balances  The Forest Service’s process and related control activities over its review of unliquidated obligations and resulting certifications were not adequately described in manuals and handbooks in its Directive System  Further, the manuals and handbooks were not timely reviewed and updated to reflect processes and systems currently in use  In accordance with the Forest Service’s Directive System, policies are documented in its manuals while procedures for performing specialized activities are documented in its handbooks  However, we found that the Forest Service’s processes and related control activities for reviewing unliquidated obligations were not adequately described and documented in such manuals and handbooks  Although parts of the applicable section of the handbook referred to procedures, there were no detailed descriptions of the processes, and only references to objectives of the procedures for reviewing unliquidated obligations were listed  For example, in identifying unliquidated obligations for review, the narrative description of the procedures in the handbook states that the responsible obligating official must review each selected unliquidated obligation to determine whether (1) delivery or performance of goods or services has occurred or is expected to occur and (2) accounting corrections to the obligation data in the accounting system are necessary  The handbook also refers to an unliquidated obligations report listing the unliquidated obligations that must be reviewed  The narrative does not provide any detailed procedures that obligating officials or responsible personnel need to perform, how to perform those procedures, and how those control activities are to be documented  The guidance in the handbook was supplemented by two desk guides  However, the desk guides are outside the Forest Service’s Directive System and, as previously noted, the Directive System is the only place where the Forest Service’s policy and procedures are issued  In addition, these desk guides did not reference the applicable guidance in the Directive System that they were supplementing  Further, the process and related control activities for adjusting unliquidated obligations within 15 days of receipt of written notification, as stated in USDA’s policy, were not described in either the handbooks or the desk guides  Standards for Internal Control in the Federal Government states that management should design control activities to achieve objectives and respond to risks to achieve an effective internal control system  Management’s design of internal control establishes and communicates the who, what, when, where, and why of internal control execution to personnel  Documentation also provides a means to retain organizational knowledge and mitigate the risk of having that knowledge limited to a few personnel  Further, the standards also explain that management clearly document internal control in a manner that allows documentation to be readily available and that documentation be properly managed and maintained  In addition, manuals and handbooks for processes related to review and certification of unliquidated obligations had no evidence that they had been reviewed within the past 5 years for ongoing relevance and effectiveness  According to a Forest Service manual, all service-wide directives, except interim directives, shall be reviewed at least once every 5 years  The Forest Service does not have an effective process in place to monitor the reviews and any updates of the manuals and handbooks in its Directive System  As previously discussed, while ORMS sends an e- mail requesting that the applicable officials review and update the guidance in the manuals and handbooks, there is no follow-up process to help ensure that documents were reviewed and updated as needed  Because the Forest Service’s process and related control activities over its review and certification of unliquidated obligations were not adequately described in its manuals and handbooks, the Forest Service is at risk that its control activities may not reasonably assure that control objectives provide (1) optimum utilization of funds and (2) for unliquidated obligations that are no longer needed to be efficiently and effectively deobligated and made available for other program needs  Adequate processes and related control activities over the Forest Service’s budgetary resources are critical in reasonably assuring that these resources are timely and effectively available for its mission operations, including fire suppression  However, we identified deficiencies in the Forest Service’s processes and related controls over allotments, unobligated no-year funds from prior years, administrative control of funds, fund transfers, reimbursable agreements, and available funds from deobligation of unliquidated obligations  Deficiencies ranged from a lack of processes to control activities that were not properly designed, resulting in an increased risk that Forest Service funds may not be effectively and efficiently monitored and used  In addition, the Forest Service’s manuals and handbooks, which provide the directives for the areas we reviewed, had not been reviewed by management in accordance with the Forest Service’s 5-year review policy  Further, Forest Service staff prepared SOPs and desk guides that documented control activities, but they were not issued as official policy and had not been reviewed and approved by responsible officials  As a result, the Forest Service is at increased risk that the control activities may not be consistently performed across the agency and that the guidance in the SOPs and desk guides may not comply with agency policy in the Directive System  To improve internal controls over the Forest Service’s budget execution processes, we are making the following 11 recommendations: The Chief of the Forest Service should (1) revise its process and (2) design, document, and implement related control activities to reasonably assure that amounts designated in appropriations acts for specific purposes are properly used for the purposes specifically designated  (Recommendation 1) The Chief of the Forest Service should (1) develop a process and (2) design, document, and implement related control activities to reasonably assure that unobligated no-year funds from prior years are reviewed for continuing need  (Recommendation 2) The Chief of the Forest Service should (1) design, document, and implement a comprehensive system for administrative control of funds and (2) submit it for review and approval by USDA before issuance, as required by the USDA Budget Manual  (Recommendation 3) The Chief of the Forest Service should design, document, and implement control activities over the preparation and approval of a fire suppression fund transfers strategy, to specify all appropriate factors to be considered in developing and documenting the strategy, and incorporate these control activities into the Directive System  (Recommendation 4) The Chief of the Forest Service should design, document, and implement processes and related control activities for its fire incident cooperative agreements to reasonably assure efficient and effective operations and timely and reliable reporting of reimbursable receivables related to fire incident cooperative agreements, and incorporate them in the Directive System  (Recommendation 5) The Chief of the Forest Service should update the RACA manuals and handbooks to adequately describe the processes and related control activities applicable to RACAs to reasonably assure that staff will know (1) how and when to perform processes and control activities and (2) how to document their performance  (Recommendation 6) The Chief of the Forest Service should design, document, and implement segregation of duties or mitigating control activities over reimbursable agreements and any adjustments affecting the final disposition of related receivables  (Recommendation 7) The Chief of the Forest Service should modify, document, and implement control activities consistent with USDA and Forest Service policy to reasonably assure that unliquidated obligations are reviewed timely and appropriate actions are taken  (Recommendation 8) The Chief of the Forest Service should adequately describe the processes and related control activities for unliquidated obligations review and certification processes in manuals and handbooks within the Directive System  (Recommendation 9) The Chief of the Forest Service should develop, document, and implement a process and related control activities to reasonably assure that manuals and handbooks for allotments, reimbursable agreements, and review of unliquidated obligations are reviewed and updated every 5 years, consistent with Forest Service policy  (Recommendation 10) The Chief of the Forest Service should develop, document, and implement a process and related control activities to reasonably assure that SOPs and desk guides (1) clearly refer to guidance in the Directive System for allotments, reimbursable agreements, and review of unliquidated obligations and (2) are reviewed and approved by responsible officials prior to use  (Recommendation 11) We provided a draft of this report to USDA for comment  In its comments, reproduced in appendix III, the Forest Service stated that it generally agreed with the report and that it has made significant progress to address the report’s findings  Specifically, the Forest Service stated that its financial policies concerning budget execution have been revised to address our concerns with allotments, unliquidated obligations, commitments, and administrative control of funds as prescribed by OMB Circular No  A-11  Further, the Forest Service stated that it has undertaken an in-depth review of its unliquidated obligations and modified the certification process to comply with the USDA requirement  We are sending copies of this report to the appropriate congressional committees and to the Secretary of Agriculture and the Chief of the Forest Service  In addition, this report is available at no charge on the GAO website at http://www gao gov  If you or your staff members have any questions about this report, please contact me at (202) 512-9869 or khana@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff members who made key contributions to this report are listed in appendix IV  Our objectives were to determine the extent to which the Forest Service properly designed control activities over (1) allotments of budgetary resources, its system for administrative control of funds, and any fund transfers between Forest Service appropriations; (2) reimbursables and related collections; and (3) unliquidated obligations  We reviewed the Forest Service’s process documents and control activities, policies and procedures from its manual and handbooks in its Directive System, and other guidance in the form of standard operating procedures (SOP) and desk guides to obtain an understanding of internal controls at the Forest Service related to our three objectives  We reviewed the control activities that the Forest Service identified to determine whether the activities would achieve the control objectives that the service identified and whether the activities were consistent with Standards for Internal Control in the Federal Government  We also reviewed recent relevant GAO and U S  Department of Agriculture (USDA) Office of Inspector General reports to obtain background information related to the Forest Service’s budget execution processes  We evaluated the design of the Forest Service’s control activities based on data for fiscal year 2016  To address our first objective, we reviewed Forest Service process documents related to allotments and budget authority to obtain an understanding of control activities over the allotments of budgetary resources, its system for administrative control of funds, and any related fund transfers between Forest Service appropriations  The process documents included a list of control objectives and related control activities that the Forest Service had used to assess its internal controls  We also reviewed the related guidance in appendix H to Office of Management and Budget Circular No  A-11, Preparation, Submission, and Execution of the Budget for Administrative Control of Funds, to identify requirements that agencies must meet to ascertain whether their controls over funds management are properly designed  We interviewed key officials from the Forest Service’s Strategic Planning, Budget and Accountability Office to gain an understanding of their processes for allotments of budgetary resources, its system for administrative control of funds, and fund transfers between Forest Service appropriations for wildland fire suppression activities, including how each of their risk assessments were performed and their plans to mitigate the risks  We reviewed and analyzed the processes documented in the manuals and handbooks collectively referred to as directives to determine whether the processes and control activities were designed to achieve the Forest Service’s stated objectives  Specifically, we examined the Forest Service’s control activities to determine whether these sufficiently communicated the procedures to be performed and the documentation to be prepared  We also reviewed USDA Budget Manual to determine whether Forest Service guidance was consistent with USDA’s requirements for all of its component agencies, specifically requirements related to the administrative control of funds  To address our second objective, we reviewed the Forest Service’s policies, procedures, and other documentation and interviewed agency officials to develop an understanding of its processes related to reimbursable agreements and related collection activities  We first identified, through interviews with Forest Service officials, the different kinds of reimbursable agreements that the Forest Service enters into with other USDA components, other federal agencies, state and local government agencies, and nongovernment entities to carry out its mission for the benefit of the public  Two distinct types of reimbursable agreements include (1) fire incident cooperative agreements and (2) reimbursable and advanced collection agreements  We reviewed Forest Service process documents and templates related to these two types of reimbursable agreements provided to obtain an understanding of control activities over reimbursable processes  We reviewed the list of control objectives and related control activities that the Forest Service identified to determine whether the control activities were designed to achieve the applicable control objectives  To address our third objective, we reviewed the Forest Service’s policies, procedures, and other documentation related to and interviewed agency officials about unliquidated obligations to develop an understanding of the Forest Service’s review and certification processes for unliquidated obligations balances  We reviewed the Forest Service’s control activities related to its process for reviewing unliquidated obligations to obtain an understanding of control activities around its process and to determine whether the control activities were designed to achieve the applicable control objectives  Based on the results of our evaluation of the Forest Service’s design of internal control activities over the budget execution processes, we did not evaluate the implementation of the control activities or whether they were operating as designed  While our audit objectives focused on certain control activities related to (1) allotments of budgetary resources, the Forest Service’s system for administrative control of funds, and related fund transfers; (2) reimbursables and related collections for reimbursable agreements; and (3) unliquidated obligations, we did not evaluate all control activities and other components of internal control  If we had done so, additional deficiencies may or may not have been identified that could impair the effectiveness of the control activities evaluated as part of this audit  We conducted this performance audit from August 2016 to January 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  Standards for Internal Control in the Federal Government provides the overall framework for establishing and maintaining internal control  Internal control represents an agency’s plans, methods, policies, and procedures used to fulfill its mission, strategic plan, goals, and objectives  Internal control is a process by an entity’s oversight body, management, and other personnel to provide reasonable assurance that the objectives of the entity will be achieved  When properly designed, implemented, and operating effectively, it provides reasonable assurance that the following objectives are achieved: (1) effectiveness and efficiency of operations, (2) reliability of internal and external reporting, and (3) compliance with applicable laws and regulations  Internal control is not one event, but a series of actions that occur throughout an entity’s operations  The five components of internal control are as follows: Control Environment - The foundation for an internal control system that provides the discipline and structure to help an entity achieve its objectives  Risk Assessment - Assesses the risks facing the entity as it seeks to achieve its objectives and provides the basis for developing appropriate risk responses  Control Activities - The actions management establishes through policies and procedures to achieve objectives and respond to risks in the internal control system, which includes the entity’s information system  Information and Communication - The quality information management and personnel communicate and use to support the internal control system  Monitoring - Activities management establishes and operates to assess the quality of performance over time and promptly resolve the findings of audits and other reviews  An effective internal control system has each of the five components of internal control effectively designed, implemented, and operating with the components operating together in an integrated manner  In this audit, we assessed the design of control activities at the Forest Service related to its (1) allotments of budgetary resources and any related fund transfers between Forest Service appropriations, (2) reimbursables and related collections, and (3) review of unliquidated obligations  In addition to the contact named above, the following individuals made key contributions to this report: Roger Stoltz (Assistant Director), Meafelia P  Gusukuma (Auditor-in-Charge), Tulsi Bhojwani, Cory Mazer, Sabrina Rivera, and Randy Voorhees 

ground_truth: The Forest Service, an agency within USDA, performs a variety of tasks as steward of 193 million acres of public forests and grasslands. Its budget execution process for carrying out its mission includes (1) allotments, which are authorizations by an agency to incur obligations within a specified amount, and (2) unliquidated obligations, which represent budgetary resources that have been committed but not yet paid. Deobligation refers to an agency's cancellation or downward adjustments of previously incurred obligations, which may result in funds that may be available for reobligation. GAO was asked to review the Forest Service's internal controls over its budget execution processes. This report examines the extent to which the Forest Service properly designed control activities over (1) allotments of budgetary resources, its system for administrative control of funds, and any fund transfers between Forest Service appropriations; (2) reimbursables and related collections; and (3) review and certification of unliquidated obligations. GAO reviewed the Forest Service's policies, procedures, and other documentation and interviewed agency officials. In fiscal years 2015 and 2016, the Forest Service received discretionary no-year appropriations of $5.1 billion and $5.7 billion, respectively. It is critical for the Forest Service to manage its budgetary resources efficiently and effectively. While the Forest Service had processes over certain of its budget execution activities, GAO found the following internal control deficiencies: Budgetary resources . The purpose statute requires that amounts designated in appropriations acts for specific purposes are used as designated. The Forest Service did not have an adequate process and related control activities to reasonably assure that amounts were used as designated. In fiscal year 2017, GAO issued a legal opinion that the Forest Service had failed to comply with the purpose statute with regard to a $65 million line-item appropriation specifically provided for the purpose of acquiring aircraft for the next-generation airtanker fleet. Further, the Forest Service lacked a process and related control activities to reasonably assure that unobligated no-year appropriation balances from prior years were reviewed for their continuing need; did not have a properly designed system for administrative control of funds, which keeps obligations and expenditures from exceeding limits authorized by law; and had not properly designed control activities for fund transfers to its Wildland Fire Management program. These deficiencies increase the risk that the Forest Service may make budget requests in excess of its needs. Reimbursable agreements . To carry out its mission, the Forest Service enters into reimbursable agreements with agencies within the U.S. Department of Agriculture (USDA), other federal agencies, state and local government agencies, and nongovernment entities. The Forest Service (1) did not have adequately described processes and related control activities in manuals and handbooks for its reimbursable agreement processes and (2) lacked control activities related to segregating incompatible duties performed by line officers and program managers. For example, line officers may be responsible for initiating cost sharing agreements, modifying cost settlement packages, and changing or canceling the related receivable, which represent incompatible duties. As a result, programs and resources may not be protected from waste, fraud, and mismanagement. Unliquidated obligations . The Forest Service's processes and control activities over the review and certification of unliquidated obligations were not properly designed to reasonably assure the best use of funds and that unliquidated obligations would be efficiently and effectively deobligated and made available for other program needs. Further, the current process, as designed, was inconsistent with USDA and Forest Service policy. In addition, the Forest Service's manuals and handbooks, which provide directives for the areas that GAO reviewed, had not been reviewed by management in accordance with the Forest Service's 5-year review policy. Further, standard operating procedures and desk guides prepared by staff to supplement the manuals and handbooks were not issued as directives and therefore were not considered official policy. This increases the risk that control activities may not be consistently performed across the agency. GAO is making 11 recommendations to improve processes and related internal control activities over the management of the Forest Service's budgetary resources, reimbursable receivables and collections, and its process for reviewing unliquidated obligations. The Forest Service generally agreed with the report and stated that it has made significant progress to address the report findings.