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



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



Report 2: USPS has a wide range of domestic competitive products that are a growing sector of its business  The volume of USPS’s competitive products increased from approximately 750 million pieces in fiscal year 2008 to 4 9 billion pieces in fiscal year 2017  Revenue from these products increased from about 10 percent of all USPS mail revenues in fiscal year 2008 to about 28 percent in fiscal year 2017 (see fig  1)  USPS forecasts that continued growth in e-commerce will increase the volume of its competitive products, especially for the “last-mile” delivery service to consumers—which involves delivery from retail locations and fulfillment centers (i e , where online orders are processed, packaged, and shipped out to USPS for delivery) to customers  USPS reported that in fiscal year 2017, revenue from competitive products exceeded USPS’s expectations by $500 million due to the growth in e-commerce and successful marketing and sales campaigns  USPS expects increased competition, though, in the first- and last-mile delivery services—collection and delivery of packages—from other delivery providers  To remain competitive in the competitive product delivery market, USPS officials have stated that information gained from scanning is leveraged to provide customers with real-time visibility for the location of a competitive product in USPS’s delivery process as well as accurate estimates of the delivery time of USPS’s competitive products  Further, USPS’s latest strategic plan states that this information is one factor used to reduce its own costs through optimizing its network, including processing facilities, post offices, and numerous other facilities across the United States, and streamlining its operations  USPS delivers competitive products across the nation, which it divides into seven postal areas comprised of 67 postal districts (see fig  2)  Managers at each level—postal area, postal district, and post office—are responsible for overseeing and reporting on the performance of the level below them  For example, each district manager is accountable to the area vice president  Postmasters, who manage individual post offices, are accountable to district managers and also monitor the performance of employees at their post office  To track the movement of competitive products, USPS leverages automation (i e , scanning by postal-processing equipment) and passive and active scan technology (i e , scanning devices used by postal employees) to capture barcode information  In addition, when competitive products are not able to go through all the automated scans, USPS employees are to manually scan barcodes that have been placed on each item  These barcodes link the item with information in USPS’s databases such as: the delivery address, the type of USPS product, and when the item was accepted by USPS  According to USPS procedures, competitive products could be scanned up to 13 times to generate visibility necessary for USPS, mailers, and customers to track their packages as they move through USPS’s network (see fig  3)  For example, the first scan of the product—the “Acceptance” scan—is made when the item is dropped off at the post office or by a carrier if the product is picked up at a mailbox or customer address  The last scan—the “Acceptable Delivery Event” scan—generally means the item was successfully delivered to the addressee or that a delivery attempt was made (e g , the product requires a signature but the recipient was not at home so another attempt will need to be made or the recipient will need to pick up the product)  The interim scans reflect the product’s progress through the postal network, including through mail-processing plants and equipment  The scan data are transmitted to USPS’s data systems throughout the day  Scan information from these systems is available to USPS managers as well as mailers and customers who wish to track the progress of their items  USPS’s employees use devices to scan competitive products in postal facilities and on delivery routes (see scans 1, 2, and 11–13 in fig  3)  Carriers usually use a handheld Mobile Delivery Device (MDD) to scan a package’s barcode  MDDs contain Global Positioning System (GPS) technology and transmit package scanning data and carrier location data using a cellular network  USPS employees working inside post offices or other facilities use similar scanning devices without GPS technology, such as the handheld Intelligent Mail Device (IMD) to perform the manual scans (see fig  4)  USPS reports we reviewed indicate that competitive products are almost always scanned and scanned correctly  USPS has an overall organizational goal of accurately scanning 100 percent of all mail pieces—both competitive and other products—that have a barcode  This includes scanning each competitive product at several points from acceptance, as described earlier  However, individual management employee-performance goals for scanning are set slightly lower than 100 percent, as USPS officials stated that they recognize that some scanning issues, such as for missing or damaged barcodes, may occur across post offices  According to USPS data we reviewed for the first three quarters of fiscal year 2018, all but one of USPS’s 67 districts met USPS’s scanning goals for all five required scans for competitive products  Additionally, in one district we visited, a USPS internal report showed that every group of post offices in the district met its scanning goal for the arrival-at-unit scan for the week, the preceding 4 weeks, and the year-to- date periods, and all but one group of post offices met their scanning goals for the acceptable delivery scan for the same measurement period  In addition, representatives for mailers we interviewed that use USPS’s competitive products stated that they were generally satisfied with USPS’s scanning performance  Representatives of all the major mailers we spoke with that rely on USPS’s delivery network said they believed that USPS is generally scanning competitive products accurately, although issues still occur  Representatives of mailers told us that they receive scanning data from USPS for their items throughout the day, with some mailers receiving the data every 15 minutes, a rate that allows them to track their items through USPS  Some mailers use this information to calculate the expected time of delivery and monitor USPS’s progress against their own estimates of delivery time to measure USPS’s performance  Representatives for major mailers we spoke with said they also get complaints from customers if items are late, lost, or inaccurately scanned, so the customers provide another source of information on any scanning issues  Four of the five representatives for major mailers we interviewed that sent items via USPS competitive products told us that they have seen improvement in USPS’s scanning performance in recent years  Additionally, all of the representatives for mailers we spoke with stated that USPS has increased the amount of scanning and the information provided from the scans in recent years  Although USPS has a high scanning rate, some missed and inaccurate scans for competitive products do occur, errors that could potentially affect millions of competitive products  For example, several USPS OIG reports between 2016 and 2018 found that instances of missed or inaccurate scans still occurred both nationwide and that in nine USPS districts they analyzed, were due in part, to post office personnel not always following proper scanning procedures and post office supervisors not adequately monitoring how scanning procedures were implemented  For example, the USPS OIG analyzed approximately 2 billion delivery scans over a 6-month period in 2017 and found that 1 9 million delivery scans (about 0 1 percent) occurred at the post office instead of at the delivery address and were considered improper scans  Furthermore, examples of USPS’s internal reports we reviewed containing scanning performance results showed that a small percentage of competitive mail items had not been scanned  For example, one USPS internal report for a district we visited showed that for one week, USPS employees in the district missed about 0 73 percent of the expected delivery scans for competitive products  Due to USPS’s large volume of competitive products, a small percentage of products not scanned can represent large numbers of items  For example, about 155,000 competitive products were missing a delivery scan in one district’s 2018 year-to-date report we reviewed  Additionally, the representatives of mailers we interviewed also reported occasional scanning issues with USPS’s competitive products  Most of the mailers’ representatives stated that when they see competitive items missing scanning data, it is generally an isolated situation and USPS usually fixes the issue  According to these representatives, USPS provides them with points of contact to work with to resolve scanning issues immediately and on a regular basis  However, one major mailer’s representative we spoke with stated that even though USPS’s employees are generally good at scanning packages, inaccurate delivery scanning is an issue  The representative stated that about 8 to 10 percent of the company’s products sent through USPS were scanned by carriers as delivered, but not at the customer’s delivery address—contrary to USPS’s standard operating procedures for scanning  The representative stated that, although this percentage has decreased in recent years, the mailer would like to see that number decrease further because delivery to the destination address assures them that the item was left as close as possible to the customer  USPS is taking some steps to address missed or inaccurate scans  For example, USPS officials stated that the current electronic scanning device carried by almost all carriers on their routes does not prevent scanning a mail item as delivered to an address that is not the delivery address associated with the item’s barcode information  They also stated that USPS is updating scanning devices to alert carriers when they scan items as delivered when not physically at the correct delivery address  According to USPS officials, as of May 2018, 80 percent of hand-held electronic scanning devices used by USPS carriers had this functionality and that this functionality is being fine-tuned  This capability, though, still does not preclude all scanning errors, as it only affects the final delivery scan  USPS officials also stated that employees may still encounter scanning issues, such as damaged barcodes, which could lead to missed scans  USPS has not based its operational policies and procedures, such as those that support the accurate scanning of competitive products, on any standards for internal controls  USPS officials told us that they have not used any specific criteria for designing, implementing, and operating an internal control system for meeting its operational policies and internal controls, such as those that help ensure competitive products are accurately scanned  According to USPS officials, USPS does not follow the COSO Framework to design, implement or evaluate its operational internal controls as they believe that the COSO Framework standards are traditionally related to internal controls over financial reporting  In addition, USPS officials stated that USPS is not required to follow Standards for Internal Control in the Federal Government, and therefore USPS does not follow these standards as well  Instead, USPS officials stated that USPS has designed its operational policies and internal controls over the years based on its unique responsibilities, management experience, and sound business practices  However, officials could not identify any specific standards or framework they had followed  We have reported that standards for the design, implementation, and operation of their internal-control system provide an overall framework for establishing and maintaining an effective internal-control system—which is a key factor in achieving an entity’s mission  Further, internal controls help managers achieve desired results through effective stewardship of public resources  USPS has options to choose from in selecting standards for internal controls  Two widely used standards are the COSO Framework and Standards for Internal Control in the Federal Government, which was adapted for federal entities from the COSO Framework  Both standards are designed to help an entity design, implement, and maintain an effective internal-control system  Such a system should encompass all aspects of an entity’s objectives, including operations, reporting, and compliance objectives, and can help an entity adapt to shifting environments, evolving demands, changing risks, and new priorities  Non-federal entities can adopt either of these standards in their efforts to design, implement, and operate an effective internal control system  As stated above, we found that the COSO Framework to be a reasonable and relevant set of internal control standards to evaluate USPS’s operational internal-control activities  However, we and the USPS OIG have applied both the COSO Framework and Standards for Internal Control in the Federal Government in evaluating USPS’s operational internal controls in recent reports  Without standards for an effective internal-control system for its operational policies and procedures for scanning competitive products, USPS may miss opportunities to improve how it achieves its mission to deliver those important products  USPS management has designed standard operating procedures to provide assurance that competitive products are scanned accurately  We found some of these procedures to be consistent with the COSO Framework, which states that an organization should deploy control activities through policies that establish what is expected and procedures that put policies into action  USPS has developed a scanning policy for its products, stating that “properly scanning all barcodes will result in World Class Visibility and be instrumental in retaining and growing our shipping business and providing valuable data to drive improved operational performance and reduce costs ” USPS also has procedures that establish the responsibilities of employees for accurately scanning barcodes for competitive products at various points in the mail flow  Although USPS officials stated that employees should rely on prompts from their scanning devices to ensure scans are done correctly, USPS communicates these procedures in three main ways: documents, such as City Carrier Handbook and Rural Carrier Handbook, that outline scanning procedures and that explain carriers’ duties, including scanning; job aids, such as posters showing proper scanning procedures (see fig  5); and, standard work steps or guidance that lists procedural steps either for competitive products or for scanning mail in general (see fig  6)  Following these procedures is important to fulfill USPS’s scanning goals  As stated above, the USPS OIG found instances of missed or inaccurate scans for competitive items in recent reports  Further, the USPS OIG also recently found that USPS employees at all 15 postal facilities it visited in the Los Angeles District did not follow correct scanning procedures for USPS’s competitive Parcel Return Service product, leading to inconsistent counts for these products  Such errors can put USPS at risk of not collecting revenue for these products  The USPS OIG has made several recommendations in its recent reports to USPS management to reinforce the importance of these procedures to employees  USPS officials agreed with some of these recommendations and stated that they are taking action to address them  While reinforcing these procedures can be helpful, we found that USPS’s scanning procedures may not provide the necessary assurance for accurate scanning because they are not consistent  For example: The USPS’s City Carrier Handbook states that mail with a barcode should be scanned at the delivery point (or address)  However, a standard operating procedures document for city carriers at a post office we visited stated that carriers must scan each delivery confirmation mail piece but did not specify that this scan had to be at the delivery point or address  Locally developed procedures may not be uncommon, as one district manager told us that USPS headquarters allows managers to make a certain amount of flexibility to adapt the standard operating procedures for each post office  The USPS document, SCANNING at a Glance: Delivering 100% Visibility, states that all mail items that require delivery scanning should be scanned at the delivery address, but this document also provides additional scanning procedures not contained in the City Carrier Handbook and other standard operating procedures documents we examined  In particular, the document contained procedures for scanning to account for mail being held for customers on vacation; scanning items correctly to account for mail not delivered to business that were closed; and for mail that was refused by the addressee  This inconsistency in USPS’s scanning procedures has likely occurred because many of the documents have been updated at different times and have not always reflected new operations  For city carriers, the online version of the USPS’s City Carrier Handbook was last updated in April 2001  USPS officials stated that the most recent update regarding scanning was issued in November 2015 via a separate Postal Bulletin  Further, a separate standard operating procedure document for city carriers at a post office we visited was dated June 2006
Report 2:  Expected program tasks include updating asset records and improving and consolidating asset inventories in WMATA’s asset system of record (called Maximo)  WMATA’s efforts to develop more complete asset inventory and condition assessments are not complete  Among other things, WMATA documentation on the Enterprise Asset Management Program cited “inattention, poor standardization, and organizational silos” as factors that have resulted in WMATA having multiple sets of asset records in various states of accuracy and usefulness  The Enterprise Asset Management Program, according to WMATA, is an effort to help address this situation and improve asset data quality, including inventory and condition assessments  Although WMATA is developing a new Enterprise Asset Management Program, it has yet to develop a plan for obtaining a complete inventory or physical condition assessments of its assets  The Project Management Institute’s Guide to the Project Management Body of Knowledge, PMBOK® Guide describes the elements of good project management and their importance in achieving organizational goals  Among these elements are: Having a project charter that formally authorizes a project, that commits resources to the activity, and that provides a direct link to organizational strategic objectives; Preparing a project plan to define the basis of the project’s work and how the work will be performed; and Establishing a monitoring and control process to track, review, and report overall progress in meeting the plan’s objectives  WMATA has prepared draft documents that describe how it will implement the Enterprise Asset Management Program and that contain some elements of good project management  For example, in January 2018 WMATA circulated a proposed charter that once approved would authorize the Enterprise Asset Management program, identify needed resources, and link to WMATA’s strategic goals  As of October 2018, this proposed charter had not yet been finalized  Draft program documents also indicate there would be a monitoring and control process that would establish regular reporting to internal stakeholders to assess program accomplishments and progress implementing the program  While WMATA has developed a proposed charter and a monitoring and control process for its Enterprise Asset Management Program, it has not established a plan for collecting asset inventory and condition assessment information  The draft program charter includes general tasks for updating asset records and improving and consolidating asset inventory data in Maximo  However, a plan would provide more specific details for how the work would be completed, such as the information to be collected on different assets, how and when this information would be consolidated into Maximo, milestones for completing the work, or how the effort would be funded  Without a plan to obtain asset inventory and condition assessment information WMATA will continue to lack critical information needed for good capital planning and sound investment decision-making  WMATA has reported significant progress toward its goals of reducing track defects and fire incidents, but still faces several challenges with implementing its track preventive maintenance program  WMATA defines an incident as any unplanned event that disrupts rail revenue service  According to WMATA officials, within the track preventive maintenance program WMATA seeks to reduce incidents specifically caused by electrical wayside fires and track defects each by 50 percent from fiscal year 2017 to fiscal year 2019  WMATA reported that in fiscal year 2018 it had met its goal for track defect incidents but not for electrical wayside fires  According to officials, track defect incidents—which include incidents caused by defective fasteners, switches, and “ballast”—were reduced by 50 percent from a total of 778 in fiscal year 2017 to 387 in fiscal year 2018  Electrical-wayside-fire incidents—including incidents caused by cable and insulator fires—went down 20 percent from a total of 55 in fiscal year 2017 to 44 in fiscal year 2018 (see fig 5)  Although WMATA has reduced both track defect incidents and electrical fires, the track preventive maintenance program is not intended to address the full range of all defects and track fires that may occur on the system  WMATA officials told us that the track preventive maintenance program specifically seeks to reduce electrical-wayside-fire incidents, which are a specific sub-set of overall track fires, and does not include non-electrical fires or smoke incidents, such as the ones caused by railcars or debris  WMATA captures and publicly reports the non-electrical fires as part of its quarterly Metro Performance Report, but according to WMATA officials, these fires are not specifically addressed through the track preventive maintenance program  While electrical fires decreased in fiscal year 2018, non-electrical fires did not change, as WMATA reported 23 non-electrical fires for both fiscal years 2017 and 2018  Additionally the track preventive maintenance program addresses a certain sub-set of track defect incidents such as those caused by loose fasteners and defective switches  According to WMATA, these track defect incidents can be addressed through its track geometry, torqueing, and switch maintenance initiatives  WMATA addresses other types of track defects, such as rail breaks and third-rail defects, through its capital program  However, according to WMATA, track defects attributable to the capital program are still included as part of the overall goal to reduce all track defect incidents by 50 percent by fiscal year 2019  WMATA established goals for completing each of the six track preventive maintenance initiatives within a certain time period and reported that in fiscal year 2018 it was on-track to meet or exceed those goals for four of the initiatives  For example, in implementing its “cable meggering” initiative, WMATA established a goal to inspect and replace electric cables across its entire rail system within 4 years  According to WMATA, it met its target for fiscal year 2018 by completing 25 percent of the entire system in that year  In addition to cable meggering, WMATA also met its annual targets for the switch maintenance, track bed cleaning, and stray current-testing initiatives  As for the two initiatives behind schedule, the torqueing initiative was 70 percent complete and the tamping initiative stood at 90 percent for the 2018 target (see table 2)  Officials told us they have developed various ways to improve efficiency with these initiatives  For instance, WMATA improved the productivity of its switch maintenance initiative by separating the work to inspect the switches from the follow-up repair work to grind and weld them  These activities had previously been conducted by the same team  However, WMATA faces challenges in implementing the track preventive maintenance program moving forward  WMATA officials described track preventive maintenance as a necessary operation that must be continuously performed and balanced in conjunction with regular train operations that provide service to their customers  According to WMATA officials, executing this new program requires regular refinements to ensure it continues to progress toward its desired outcomes  Among the implementation challenges identified by WMATA officials were the following: Securing Sufficient Track Time  WMATA officials told us that getting adequate time to perform track maintenance is difficult because it requires reducing the number of hours in which WMATA provides service to customers  Consequently, increased maintenance hours can result in lost revenue  Officials from the peer transit agencies we interviewed stated that the tension between conducting maintenance and providing service is common in the transit industry  According to WMATA officials, prior to SafeTrack, windows for performing track maintenance were not sufficient to complete all necessary work, partially because of this need to balance maintenance hours and service hours  To address this issue, WMATA increased its weekly overnight work hours from 33 hours to 39 hours during SafeTrack  After SafeTrack was complete, WMATA extended weekly overnight work hours again to a total of 41 hours  However, maintaining these extended overnight work hours past fiscal year 2019 requires approval from WMATA’s board of directors  As a result, the long-term viability of WMATA’s track preventive maintenance program is partially dependent on the board’s decision to balance the competing demands for service hours and maintenance time  Work Time Productivity  To maintain extended track-maintenance hours into succeeding years, it will be important for WMATA to demonstrate the new program’s productivity  According to WMATA officials, making the most productive use of the extended working hours is a challenge, but it will be necessary to justify the extended maintenance windows  WMATA officials told us that only a portion of overnight work hours yields productive maintenance time  For example, once a line ceases operations, it takes an additional hour for all trains to reach their final destination, and another hour after that to safely turn off all power running to the track and then establish a work zone  Once maintenance work is completed, additional time must be allotted for restoring power and allowing trains to move back into position  Because of these requirements, a five-hour work window may only yield two hours of productive work time (called “wrench time”)  For this reason, WMATA began tracking its wrench time at the beginning of fiscal year 2018  As of June 2018, WMATA reported that average wrench time had increased from about 2 0 hours per day in July 2017 to 2 37 hours  Resource Constraints  According to WMATA officials, having sufficient people with the necessary skills and experience to perform track maintenance work is a significant challenge  For instance, expanded maintenance windows have increased WMATA’s workforce requirements  As a result, WMATA has used contractors to assist with its stray-current testing and track bed cleaning initiatives  In another example, WMATA’s torqueing initiative is particularly resource intensive as the entire rail system contains 135 miles of “direct fixation” track, where the torqueing work is being done, and over 504,000 fasteners to check and tighten as necessary  According to WMATA officials, bolts and fasteners are torqued during their initial installment and then again 90 days afterward as part of the initial capital expenditure  After that, any subsequent torqueing is executed as part of the new track preventive maintenance program  WMATA stated that the torqueing initiative seeks to torque all 135 miles of direct fixation track annually  WMATA officials said the torqueing initiative is a mix of contractor and in-house staff, with contractors supplementing WMATA forces as needed  WMATA’s track preventive maintenance program has followed certain leading program management practices such as establishing key performance metrics and monitoring progress toward them  Leading practices recommend that organizations establish performance baselines for their programs and communicate performance metrics to key stakeholders  For instance, as previously noted, WMATA established a measureable program goal to reduce track-defect and electrical-wayside- fire incidents by 50 percent within 2 years, and WMATA also established time periods to complete its system-wide preventive maintenance initiatives  In addition, WMATA’s Rail Services Department—which manages the track preventive maintenance program—among other things, holds a monthly “RailSTAT” meeting in which the teams leading the preventive maintenance initiatives report their progress toward these goals to WMATA’s management  However, WMATA’s program does not fully align with other applicable internal-control standards or leading program-management practices  Specifically, COSO internal control standards and leading practices identified by the Project Management Institute’s The Standard for Program Management stresses the importance of identifying and assessing program risks and developing a program management plan  COSO recommends that organizations identify risks to the achievement of its objectives and analyze risks as a basis for determining how the risks should be managed  Furthermore, the risk identification is to be comprehensive  The Standard for Program Management also recommends that when identifying risks, the assessments be both qualitative and quantitative in nature  Regarding program management plans: The Standard for Program Management recommends that organizations develop program management plans that align with organizational goals and objectives  This includes aligning the program management plan with the organization’s overall strategic plan  Elements of the plan are to provide a roadmap that identifies such things as milestones and decision points to guide program activities  In developing the track preventive maintenance program, WMATA did not fully identify or quantitatively assess risks associated with the program  WMATA officials told us that in developing the track preventive maintenance program they used their professional judgment to identify track-defect and fire incidents as the most significant risks that they needed to address through the program  However, WMATA’s risk identification was not comprehensive in nature, as it only considered two technical aspects of track maintenance: electrical fires and track defects  As previously mentioned, non-electrical fires—which were not included in the scope of the program or risk assessment—did not change from fiscal year 2017 through 2018 and represent approximately 30 percent of all fires on the system over those years  Although WMATA officials told us in designing the program they reviewed track-related incident data from 2016, they did not quantitatively analyze the impact of these incidents on service or safety  In addition, WMATA did not consider broader strategic risks to its program, such as the availability of a program’s funding and stakeholders’ support for the continuation of the program  Specifically, while WMATA has identified several challenges with implementing the program—such as securing sufficient track time, demonstrating work time productivity, and overcoming resource constraints—none of these factors, or potential mitigations, were documented in a risk assessment in developing the program  WMATA has also not prepared a program management plan for the track preventive maintenance program  Although WMATA has identified program goals, officials told us that WMATA has not formally documented the overall structure of the program or how it would be implemented  Instead, the officials said the presentations they provide to WMATA’s board of directors, along with their ongoing staff and executive team meetings, regarding the track preventive maintenance program cover the relevant information needed for running the program  While providing such information to the WMATA board of directors provides some accountability for the program, these presentations do not represent a formal program management plan that links with WMATA’s strategic plan or that identifies milestones and decision points necessary to guide the program  As we previously reported, WMATA did not develop a project management plan before starting its SafeTrack work, and due to this omission and other issues, we found that WMATA lacked assurance that the approach taken with SafeTrack was the most effective way to identify and address safety issues  Furthermore, as this is the first time WMATA has implemented a track preventive maintenance program, a program management plan could help formally establish the program, provide strategic guidance for this new program by providing accountability for both internal and external stakeholders, and ensure that program goals are met  A program management plan could also provide practical benefits, such as helping ensure that WMATA’s extended overnight work hours are efficiently implemented and that sufficient resources are devoted to the program  Without the strategic direction provided by a comprehensive risk assessment and a formal program management plan, WMATA lacks a documented vision for how the track preventive maintenance program should be structured and implemented in order to meet the agency’s strategic goals and improve track safety  Specifically, without a risk assessment that uses quantitative and qualitative data to assess risks— such as data for all fires on the system and qualitative risks such as securing sufficient time for maintenance—WMATA lacks assurance that the program is comprehensively designed to address risks affecting the safety of the rail system or other risks that could hinder the program’s success  Moreover, a program management plan that draws on information from a comprehensive risk assessment would provide WMATA officials with the assurance that they are prepared to respond to current and future challenges that could threaten the long-term viability of the program  Finally, although WMATA developed the track preventive maintenance program to prevent the need for another emergency repair project like SafeTrack, without a formal program management plan, the WMATA employees charged with managing and implementing the program lack an important document to guide their decision-making to meet that objective and the agency’s overall strategic objectives  Developing a program management plan would outline the specific requirements to successfully implement the program, including necessary track time, expected productivity of program initiatives, and required resources  Furthermore, it would provide WMATA’s board of directors with confidence that the program has a clear roadmap with milestones and decision points as the board considers maintaining the extended overnight work hours necessary to implement the program  WMATA’s rail and bus systems provide nearly a million passenger trips each day, and those passengers rely on WMATA for safe and reliable public transportation in the nation’s capital and the surrounding areas  The federal, state, and local jurisdictions that fund WMATA expect WMATA to wisely use taxpayer funds to ensure the system is safe and reliable  WMATA can better meet these expectations by establishing documented policies and procedures that outline how the new capital planning process will work and the basis of investment decisions  In addition, developing measures to assess the performance of individual projects and the capital planning process would provide greater assurance to WMATA’s funding partners that its investment decisions result in a measurable improvement in operating performance, reliability, or other metrics  Furthermore, WMATA’s recent efforts to establish an Enterprise Asset Management Program, once finalized, could help WMATA develop a more complete inventory of its assets and collect critical information on their condition—both of which are consistent with sound capital planning  However, without a plan that provides specific details for obtaining this information, WMATA will continue to lack the critical asset information necessary to make lasting improvements in its capital planning process and make sound capital-investment decisions  Similarly, track preventive maintenance plays a critical role as WMATA works to reduce the track defects and fires that have endangered safety and service reliability  WMATA could better demonstrate the direction of the track preventive maintenance program and how it can improve track safety by more comprehensively assessing the technical and broader risks facing the program and by developing a formal plan that provides greater assurance WMATA is prepared to address challenges that could threaten the long-term viability of the program  Both actions would help WMATA better focus the program on critical maintenance needs and demonstrate its value to WMATA’s board of directors and other stakeholders as WMATA endeavors to provide safe, reliable, and quality service to its riders  We are making the following five recommendations to WMATA  The General Manager of WMATA should establish documented policies and procedures for the new capital planning process  These policies and procedures should include methodologies for ranking and selecting capital projects for funding in WMATA’s fiscal year 2020 capital budget and fiscal years 2020-2025 Capital Improvement Program and for future planning cycles  (Recommendation 1) The General Manager of WMATA should develop performance measures to be used for assessing capital investments and the capital planning process to determine if the investments and planning process have achieved their planned goals and objectives  (Recommendation 2) The General Manager of WMATA should develop a plan for obtaining complete information regarding WMATA’s asset inventory and physical condition assessments, including assets related to track and structures  (Recommendation 3) The General Manager of WMATA should conduct a comprehensive risk assessment of the track preventive maintenance program that includes both a quantitative and qualitative assessment of relevant program risks  In addition to considering technical program risks, WMATA should also consider broader program risks, such as the availability of funding for the program and stakeholders’ support  (Recommendation 4) The General Manager of WMATA should prepare a formal program management plan for the track preventive maintenance program that aligns with WMATA’s strategic plan, addresses how the program is linked to overall strategic goals and objectives, and includes program milestones and decision points  (Recommendation 5) We provided a draft of this report to WMATA and the Department of Transportation for review and comment  WMATA provided written comments, which are reprinted in appendix II, and technical comments, which we incorporated as appropriate in the report  The Department of Transportation provided technical comments, which we incorporated as appropriate  WMATA concurred in part, or with the intent of four of the recommendations, and disagreed with a fifth  Specifically, regarding the first recommendation, which is that WMATA establish documented policies and procedures for the new capital planning process, and that the policies and procedures include methodologies for ranking and selecting capital projects for the fiscal year 2020 capital budget and fiscal year 2020—2025 capital-improvement program  WMATA stated that it agreed with the recommendation, in part  WMATA said it will continue its efforts to finalize and document policies and procedures for the capital planning process for fiscal year 2021 and beyond  WMATA noted that it already has in place numerous planning tools, such as the 2016 Capital Needs Inventory assessment, which helped inform the fiscal year 2020 capital planning process  According to WMATA, it is currently reviewing policies, procedures, training materials, and other documents for the fiscal year 2020 planning process, and those documents will be updated and formalized through final documentation in fiscal year 2021  WMATA noted that it anticipates that many of the elements we recommend regarding the capital planning process will be part of the process documented in fiscal year 2021  For example, WMATA expects that additional automation, decision-making, governance, and reporting capabilities, will be part of the process that will be documented for fiscal year 2021  However, while WMATA has tools available to inform the capital planning process, it has not prepared documented policies and procedures for this process in fiscal year 2020  As we reported, without documented policies and procedures, including those for ranking and selecting projects for the fiscal year 2020 capital budget, WMATA’s stakeholders do not have reasonable assurance that capital investment decisions are made using a sound and transparent process  Taking action now to establish methodologies for ranking and selecting projects for the fiscal year 2020 capital budget would provide WMATA with an opportunity to improve upon those methodologies for the fiscal year 2021 capital planning process to better ensure investments are directed to WMATA’s highest priority needs  As such, we continue to believe this recommendation is valid and that WMATA should fully implement it  Regarding the second recommendation that WMATA develop performance measures for assessing capital investments and the capital planning process, WMATA stated that it agreed with the intent of the recommendation  WMATA also stated that it has developed such measures through compliance with federal requirements, including the FTA’s performance-based planning requirements and the requirement under MAP-21 that tier I transit providers, such as WMATA, establish state-of-good-repair targets that are linked to the capital program  WMATA noted these targets are set forth in its Transit Asset Management Plan  Although WMATA’s October 2018 Transit Asset Management plan includes some broad performance measures and targets for the state-of-good-repair for its various asset classes, as we reported, WMATA has not developed performance measures to assess individual capital projects or the capital planning process itself, as suggested by leading practices in the Executive Guide  As discussed in the report, such measures are important to determine if capital investments have achieved their expected benefits and if they have achieved organizational goals  Leading practices also indicate that by using a mixture of measures managers can assess performance based on a comprehensive view of the needs and objectives of an organization  These needs and objectives can go beyond just the state-of-good-repair to include such things as measures for assessing projects that would improve service reliability, expand capacity, or achieve financial objectives  We continue to believe that fully implementing this recommendation would help ensure that capital investments meet their intended outcomes and that the capital planning process helps WMATA achieve its strategic goals and objectives  Regarding the third recommendation that WMATA develop a plan for obtaining complete information about asset inventories and condition assessments, WMATA stated that it agreed with the intent of the recommendation and that its 2018 Transit Asset Management Plan outlines plans for continuing its asset inventory update  WMATA also said that it is working to ensure it has a complete asset inventory that addresses legacy information and that includes accurate, up-to-date condition assessments  As we reported, the Enterprise Asset Management Program—the program that WMATA told us it plans to use to continue development of asset inventories and condition assessments—includes some elements of good project management, but it also lacks an established plan for collecting asset inventory and condition assessment information  Without a plan to obtain asset inventory and condition assessment information WMATA will continue to lack critical information needed for good capital planning and sound investment decision-making  Thus, we continue to believe that this recommendation is valid and that WMATA should fully implement it  Regarding the fourth recommendation that WMATA conduct a comprehensive risk assessment of the track preventive maintenance program that includes both quantitative and qualitative assessment of relevant program risks, WMATA stated that it agreed with the intent of the recommendation and is putting in place a new process that will address it  Specifically, WMATA stated it is in the process of developing a new Reliability Centered Maintenance process that will include a comprehensive risk assessment of track infrastructure that includes consideration of broader risks such as costs, funding, and track access  According to WMATA, the new process is an engineering framework that will define the maintenance regimen, including preventive maintenance, and improve safety, reliability, and cost-effectiveness  During our review, WMATA officials did not discuss the Reliability Centered Maintenance process in detail or provide documentation that allowed us to evaluate how this process might interface with the current track preventive maintenance program  As a result, we were not able to evaluate how it might address identification and assessment of risks associated with track preventive maintenance  As we reported, going forward track preventive maintenance will play a critical role as WMATA works to reduce track defects and fires  We will review WMATA’s actions to conduct a comprehensive risk assessment as part of our routine recommendation follow-up process  Regarding the fifth recommendation that WMATA prepare a formal program management plan for the track preventive maintenance program, WMATA stated that it disagreed with the recommendation  WMATA noted that specific technical details of the track preventive maintenance program are evolving as it better understands the most effective maintenance regime through implementation of the Reliability Centered Maintenance process  WMATA stated that it believes the framework of Reliability Centered Maintenance is better suited to the ongoing mission of physical asset management than traditional project and program management tools  According to WMATA, the purpose of Reliability Centered Maintenance is to ensure that all efforts are focused on the safety, reliability, and cost-effectiveness of assets through their lifecycle, which is more relevant and applicable to WMATA’s strategic plan than any individual preventive maintenance program  As stated above, WMATA did not provide details about Reliability Centered Maintenance during our review so we are not able to evaluate this process in relation to the track preventive maintenance program  We will review WMATA’s actions related to implementation of the Reliability Centered Maintenance process as part of our routine recommendation follow-up process  We continue to believe this recommendation is valid and that WMATA should fully implement it  We will send copies of this report to appropriate congressional committees, the Secretary of Transportation, the Administrator of the Federal Transit Administration, and the General Manager of WMATA  In addition, we will make copies available to others upon request, and the report will be 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) 512-2834 or goldsteinm@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 III  This report examines: (1) How WMATA expended its capital funding from fiscal years 2011 through 2017; (2) How WMATA’s new capital planning process addresses weaknesses it identified in the previous process; and (3) WMATA’s progress toward its track preventive maintenance goals and how the program aligns with leading program management practices  For each of our objectives we reviewed pertinent federal statutes and regulations as well as WMATA and FTA policies and documents  We also selected a non-generalizable sample of five similar U S  transit agencies based on similarity to WMATA in transit route mileage, system use, capital spending, system age, and rail fleet age  We also factored geographical diversity into our selection process  We then interviewed the officials from these selected transit agencies using a standard set of questions to learn how they utilize their capital funds, conduct capital planning, and oversee maintenance; and then we compared their processes to WMATA  Transit route mileage, system use, capital spending, and rail fleet age were measured using data from FTA’s National Transit Database  We measured system age according to data available within the American Public Transportation Association’s 2017 Public Transportation Fact Book, and geographical diversity was determined through data available from the U S  Census Bureau  The transit agencies we selected were: (1) Bay Area Rapid Transit, Oakland, California; (2) Chicago Transit Authority, Chicago, Illinois; (3) Massachusetts Bay Transportation Authority, Boston, Massachusetts; (4) Metropolitan Atlanta Rapid Transit Authority, Atlanta, Georgia; and (5) Southeastern Pennsylvania Transportation Authority, Philadelphia, Pennsylvania  To assess WMATA’s capital spending from 2011 through 2017, we interviewed knowledgeable officials from WMATA and FTA and also reviewed WMATA annual budgets, fourth-quarter and year-end financial reports, budget reconciliation reports, comprehensive annual financial reports, and FTA grant awards  We selected fiscal year 2011 because it was the first year in which WMATA received federal funding authorized by the Passenger Rail Investment and Improvement Act of 2008 (PRIIA), and we selected fiscal year 2017 because it was the most recent year that capital expenditure data were available at the time of our review  By analyzing this information we determined that the following sources provided the most comprehensive and reliable available data on each of the following topics for our report (see table 3): We collected the aforementioned data, analyzed them to identify errors or other anomalies, and interviewed officials to determine how the data are compiled and checked for accuracy  We determined that these data had some limitations, as an external audit report of WMATA financial information for fiscal year 2016 noted a material weakness with WMATA’s process for accounting acquisition costs of capital assets  Specifically, there were inconsistencies between WMATA’s general ledger and sub- ledger, which are used to record acquisition costs, depreciation, and other financial information related to capital assets  As a result, additional steps were required to reconcile the differences between the two sources and could have resulted in a material error  However, after interviewing WMATA officials about the weakness and assessing the available financial information, we determined that the data we used were sufficiently reliable for our purpose of showing general trends of capital expenditures  Our analysis sought to depict how WMATA allocates and expends funds according to major asset categories within its capital-improvement plan  However, these asset categories only remained consistent from 2011 through 2015, and were revised during 2016 and 2017  However, we determined that each asset category consisted of Capital Improvement Projects that were each assigned a number  These projects and their corresponding numbers remained in existence from fiscal year 2011 through 2017, even though the asset categories were updated in fiscal year 2016  Tracking by Capital Improvement Project number provided a means to report consistently through that time period  Therefore, we used the asset categories from fiscal years 2011 through 2015 as our base reporting categories  These categories consisted of: (1) Vehicles/Vehicle Parts, (2) Rail System Infrastructure Rehabilitation, (3) Maintenance Facilities, (4) Systems and Technology, (5) Track and Structures, (6) Passenger Facilities, (7) Maintenance Equipment, (8) Other Facilities, and (9) Project Management and Support  We consolidated WMATA’s nine asset categories into five asset categories in order to represent broader categories of investment: Rail and Bus Vehicle Fleet (Vehicle/Vehicle Parts), Fixed Rail Infrastructure (Rail System Infrastructure and Track and Structures), Maintenance Facilities and Equipment (Maintenance Facilities and Maintenance Equipment), Passenger and Other Facilities (Passenger Facilities and Other Facilities), and Business Systems and Project Management Support (Systems and Technology and Project Management and Support)  We then reviewed WMATA’s fiscal year 2016 Fourth Quarter Report, fiscal year 2017 Fourth Quarter Report, and fiscal year 2017 Budget Reconciliation Report to match each project number from those two years to their corresponding category from fiscal year 2011 through 2015  To assess WMATA’s new capital planning process and how it addresses weaknesses WMATA identified in the previous process, we interviewed WMATA officials about their capital planning process and reviewed WMATA documentation related to the capital planning process  This included Capital Needs Inventories, WMATA’s policy for preparation of the 2010 and 2016 Capital Needs Inventories, annual capital budgets—to include capital improvement programs, and guidance documents issued by WMATA related to submitting projects for inclusion in the annual capital budget  We also reviewed the fiscal year 2018 business plan for WMATA’s Capital Planning and Program Management Department  We also interviewed officials from the Metropolitan Washington Council of Governments, the American Public Transportation Association, and FTA to discuss WMATA’s capital planning and budgeting processes  Furthermore, we compared WMATA’s capital planning practices to leading practices identified in GAO’s Executive Guide  The Executive Guide was used since it identifies leading practices for capital decision- making that are applicable to a wide variety of organizations, both public and private  For example, the Executive Guide developed leading capital planning practices by (1) identifying government and private sector organizations recognized for outstanding capital decision-making practices and (2) identifying and describing the leading capital decision- making practices implemented by these organizations  To identify leading practices for capital planning, we also reviewed Transit Cooperative Research Program Report 157  This report developed a framework for transit agencies to use when prioritizing the rehabilitation and replacement of capital assets and discusses leading practices in how to do this  We also identified project management principles from the Project Management Institute, Inc  Finally, we discussed capital planning with the peer transit agencies and prepared a summary of various aspects of capital planning in these agencies  To examine progress toward goals in WMATA’s track preventive maintenance program and how the program compares with leading program management practices, we reviewed WMATA documentation about the program, interviewed WMATA officials, and analyzed track- defect data and electrical-wayside-fire data provided by WMATA for fiscal years 2016 through 2018—which were the only years detailed track defect and electrical fire incident data were available  In order to determine whether the data provided were sufficiently reliable, we checked the data for errors, conducted interviews with knowledgeable officials to learn their procedures for collecting and analyzing the data, and performed independent tests that included verifying WMATA’s final tally of track defect and fire incidents and verifying there were no extended periods of time where data was missing  We also provided a set of data reliability questions to determine whether procedures were sufficient  After performing these steps we determined that the data were sufficiently reliable for the purposes of our report  In our interviews with WMATA, officials also described what goals they had created for the track preventive maintenance program, their progress in meeting those goals, and provided documentation to demonstrate their progress, which we reviewed  We also interviewed officials from the American Public Transportation Association and the American Railway Engineering and Maintenance-of-Way Association about best maintenance practices in the transit industry  We then compared WMATA’s track preventive maintenance program to leading program management practices identified by the Project Management Institute, Inc ’s The Standard for Program Management and internal control standards published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)  The Project Management Institute’s, standards are utilized worldwide and provide guidance on how to manage various aspects of projects, programs, and portfolios  In particular, The Standard for Program Management provides guidance that is generally recognized to support good program-management practices for most programs, most of the time  We conducted our work from November 2017 to January 2019 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  In addition to the contact named above, Matt Barranca (Assistant Director), Richard Jorgenson (Analyst in Charge), Melissa Bodeau, Lacey Coppage, Cory Gerlach, Erin Guinn-Villareal, Kirsten Lauber, Joshua Ormond, and Patrick Tierney made significant contributions to this report 

ground_truth: The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs designed to encourage lenders to provide loans to small businesses "that might not otherwise obtain financing on reasonable terms and conditions." The SBA's 7(a) loan guaranty program is considered the agency's flagship loan program. Its name is derived from Section 7(a) of the Small Business Act of 1953 (P.L. 83-163, as amended), which authorizes the SBA to provide business loans and loan guaranties to American small businesses. In FY2018, the SBA approved 60,353 7(a) loans totaling nearly $25.4 billion. The average approved 7(a) loan amount was $420,401. Proceeds from 7(a) loans may be used to establish a new business or to assist in the operation, acquisition, or expansion of an existing business. This report discusses the rationale provided for the 7(a) program; the program's borrower and lender eligibility standards and program requirements; and program statistics, including loan volume, loss rates, use of proceeds, borrower satisfaction, and borrower demographics. It also examines issues raised concerning the SBA's administration of the 7(a) program, including the oversight of 7(a) lenders and the program's lack of outcome-based performance measures. The report also surveys congressional and presidential actions taken in recent years to enhance small businesses' access to capital. For example, Congress approved legislation during the 111th Congress to provide more than $1.1 billion to temporarily subsidize the 7(a) and 504/Certified Development Companies (504/CDC) loan guaranty programs' fees and temporarily increase the 7(a) program's maximum loan guaranty percentage to 90% (funding was exhausted on January 3, 2011); raise the 7(a) program's gross loan limit from $2 million to $5 million; and establish an alternative size standard for the 7(a) and 504/CDC loan programs. The SBA waived the up-front, one-time loan guaranty fee for smaller 7(a) loans from FY2014 through FY2018; and is waiving the annual service fee for 7(a) loans of $150,000 or less made to small businesses located in a rural area or a HUBZone and reducing the up-front one-time guaranty fee for these loans from 2.0% to 0.6667% of the guaranteed portion of the loan in FY2019. The SBA has also waived the up-front, one-time loan guaranty fee for veteran loans under the SBAExpress program (up to $350,000) since January 1, 2014; and reduced the up-front, one-time loan guaranty fee on non-SBAExpress 7(a) loans to veterans from FY2015 through FY2018. P.L. 114-38, the Veterans Entrepreneurship Act of 2015, provided statutory authorization and made permanent the veteran's fee waiver under 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. Congress also approved legislation that increased the 7(a) program's authorization limit from $18.75 billion (on disbursements) in FY2014 to $23.5 billion in FY2015, $26.5 billion in FY2016, $27.5 billion in FY2017, $29.0 billion in FY2018, and $30 billion in FY2019. 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, starting in FY2019 and after providing at least 30 days' notice to specified congressional committees, 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 Appendix provides a brief description of the 7(a) program's SBAExpress, Export Express, and Community Advantage programs.

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



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

Report 1: The Small Business Administration (SBA) administers programs to support small businesses, including loan guaranty programs to encourage lenders to provide loans to small businesses "that might not otherwise obtain financing on reasonable terms and conditions " The SBA's 7(a) loan guaranty program is considered the agency's flagship loan program  Its name is derived from Section 7(a) of the Small Business Act of 1953 (P L  83-163, as amended), which authorizes the SBA to provide and guarantee business loans to American small businesses  The SBA also administers several 7(a) subprograms that offer streamlined and expedited loan procedures for particular groups of borrowers, including the SBAExpress, Export Express, and Community Advantage Pilot programs (see the Appendix for additional details)  Although these subprograms have their own distinguishing eligibility requirements, terms, and benefits, they operate under the 7(a) program's authorization  Proceeds from 7(a) loans may be used to establish a new business or to assist in the operation, acquisition, or expansion of an existing business  Specific uses include to acquire land (by purchase or lease); improve a site (e g , grading, streets, parking lots, and landscaping); purchase, convert, expand, or renovate one or more existing buildings; construct one or more new buildings; acquire (by purchase or lease) and install fixed assets; purchase inventory, supplies, and raw materials; finance working capital; and refinance certain outstanding debts  In FY2018, the SBA approved 60,353 7(a) loans totaling nearly $25 4 billion  The average approved 7(a) loan amount was $420,401  As will be discussed, the total number and amount of SBA 7(a) loans approved (and actually disbursed) declined in FY2008 and FY2009, increased during FY2010 and FY2011, declined somewhat in FY2012, and have increased since then  Historically, one of the justifications presented for funding the SBA's loan guaranty programs has been that small businesses can be at a disadvantage, compared with other businesses, when trying to obtain access to sufficient capital and credit  Congressional interest in the 7(a) loan program has increased in recent years because of concerns that small businesses might be prevented from accessing sufficient capital to enable them to grow and create jobs  Some Members of Congress have 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 worry about the long-term adverse economic effects of spending programs that increase the federal deficit  They advocate 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  This report discusses the rationale provided for the 7(a) program; the program's borrower and lender eligibility standards and program requirements; and program statistics, including loan volume, loss rates, use of the proceeds, borrower satisfaction, and borrower demographics  It also examines issues raised concerning the SBA's administration of the 7(a) program, including the oversight of 7(a) lenders and the program's lack of outcome-based performance measures  This report also surveys congressional and presidential actions taken in recent years to help small businesses gain greater access to capital  For example, during the 111 th Congress P L  111-5 , the American Recovery and Reinvestment Act of 2009 (ARRA), provided the SBA an additional $730 million, including $375 million to temporarily subsidize the 7(a) and 504/Certified Development Companies (504/CDC) loan guaranty programs' fees ($299 million) and to temporarily increase the 7(a) program's maximum loan guaranty percentage to 90% ($76 million)  P L  111-240 , the Small Business Jobs Act of 2010, provided $505 million (plus $5 million for administrative expenses) to extend the fee subsidies and 90% loan guaranty percentage through December 31, 2010; increased the 7(a) program's gross loan limit from $2 million to $5 million; and established an alternative size standard for the 7(a) and 504/CDC loan programs to enable more small businesses to qualify for assistance  P L  111-322 , the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorized the SBA to continue the fee subsidies and the 7(a) program's 90% maximum loan guaranty percentage through March 4, 2011, or until available funding was exhausted (which occurred on January 3, 2011)  During the 112 th Congress, several bills were introduced to expand the 7(a) program: S  1828 , a bill to increase small business lending (and for other purposes), would have reinstated for one year following the date of its enactment the fee subsidies for the 7(a) and 504/CDC loan guaranty programs and the 90% loan guaranty percentage for the 7(a) program, which were originally authorized by ARRA  H R  2936 , the Small Business Administration Express Loan Extension Act of 2011, 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  That temporary increase was authorized by P L  111-240 and expired on September 27, 2011  S  532 , the Patriot Express Authorization Act of 2011, would have provided statutory authorization for the Patriot Express Pilot Program and increased its loan guaranty percentages and its maximum loan amount from $500,000 to $1 million  The Patriot Express Pilot Program was subsequently discontinued by the SBA on December 31, 2013  During the 113 th Congress, the SBA 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 FY2015 as a means to encourage the demand for smaller 7(a) loans  H R  2462 , the Small Business Opportunity Acceleration Act of 2013, would have made the fee waiver for smaller 7(a) loans permanent  waived the up-front, one-time loan guaranty fee for a loan to a veteran or to a veteran's spouse under the SBAExpress program (up to $350,000) from January 1, 2014, through the end of FY2015 (called the SBA Veterans Advantage Program)  waived 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans of $150,001 up to and including $5 million in FY2015  In addition, P L  113-235 , the Consolidated and Further Continuing Appropriations Act, 2015, provided statutory authorization for the Veterans Advantage fee waiver in FY2015  During the 114 th Congress, the SBA waived the up-front, one-time loan guaranty fee for 7(a) loans of $150,000 or less approved in FY2016 and FY2017 as a means to encourage the demand for smaller 7(a) loans  waived the annual service fee for 7(a) loans of $150,000 or less approved in FY2016 (increased to 0 546% in FY2017)  waived 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans of $150,001 to $5 million in FY2016; and 50% of the up-front, one-time loan guaranty fee on all non-SBAExpress 7(a) loans to veterans of $150,001 to $500,000 in FY2017  In addition P L  114-38 , the Veterans Entrepreneurship Act of 2015, provided statutory authorization and made permanent the veteran's fee waiver under 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, FY2018, and is waiving this fee in FY2019  The act also increased the 7(a) program's FY2015 authorization limit of $18 75 billion (on disbursements) to $23 5 billion  P L  114-113 , the Consolidated Appropriations Act, 2016, increased the 7(a) program's authorization limit to $26 5 billion in FY2016  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)  During the 115 th Congress, the SBA waived the up-front, one-time loan guaranty fee for 7(a) loans of $125,000 or less approved in FY2018 as a means to encourage the demand for smaller 7(a) loans  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  is waiving the annual service fee for 7(a) loans of $150,000 or less made to small businesses located in a rural area or a HUBZone and reducing the up-front one-time guaranty fee for these loans from 2 0% to 0 6667% of the guaranteed portion of the loan in FY2019  In addition P L  115-31 , the Consolidated Appropriations Act, 2017, increased the 7(a) program's authorization limit to $27 5 billion in FY2017 and P L  115-141 , the Consolidated Appropriations Act, 2018, increased the 7(a) program's authorization limit to $29 0 billion in FY2018  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  P L  115-232 , the John S  McCain National Defense Authorization Act for Fiscal Year 2019, included provisions originally in H R  5236 , the Main Street Employee Ownership Act of 2018, to make 7(a) loans more accessible to employee-owned small businesses (ESOPs) and cooperatives  The act clarified 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 and an interagency working group to promote lending to ESOPs and cooperatives  President Trump's FY2019 budget request included proposals to offset SBA business loan administrative costs by, among other provisions, (1) allowing the SBA to set the 7(a) program's annual servicing fee at rates below zero credit subsidy; (2) increasing the 7(a) loan program's FY2019 annual servicing fee's cap from 0 55% to 0 625%; and (3) increasing the FY2019 upfront loan guarantee fee on 7(a) loans over $1 million by 0 25%  The Trump Administration estimated that these changes would raise $93 million in additional revenue  The Trump 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"; and that the SBAExpress program's loan limit be increased from $350,000 to $1 million  During the 116 th Congress P L  116-6 , the Consolidated Appropriations Act, 2019, increased the 7(a) program's authorization limit to $30 0 billion in FY2019  This report's Appendix provides a brief description of the 7(a) program's SBAExpress, Export Express, and Community Advantage programs  To be eligible for an SBA business loan, a small business applicant must be located in the United States; be a for-profit operating business (except for loans to eligible passive companies and businesses engaged in specified industries, such as insurance companies and financial institutions primarily engaged in lending); qualify as small under the SBA's size requirements; demonstrate a need for the desired credit; and be certified by a lender that the desired credit is unavailable to the applicant on reasonable terms and conditions from nonfederal sources without SBA assistance  To qualify for an SBA 7(a) loan, applicants must be creditworthy and able to reasonably assure repayment  SBA requires lenders to consider the strength of the business and the applicant's character, reputation, and credit history; experience and depth of management; past earnings, projected cash flow, and future prospects; ability to repay the loan with earnings from the business; sufficient invested equity to operate on a sound financial basis; potential for long-term success; nature and value of collateral (although inadequate collateral will not be the sole reason for denial of a loan request); and affiliates' effect on the applicant's repayment ability  Borrowers may use 7(a) loan proceeds to establish a new business or to assist in the operation, acquisition, or expansion of an existing business  7(a) loan proceeds may be used to acquire land (by purchase or lease); improve a site (e g , grading, streets, parking lots, landscaping), including up to 5% for community improvements such as curbs and sidewalks; purchase one or more existing buildings; convert, expand, or renovate one or more existing buildings; construct one or more new buildings; acquire (by purchase or lease) and install fixed assets; purchase inventory, supplies, and raw materials; finance working capital; and refinance certain outstanding debts  Borrowers are prohibited from using 7(a) loan proceeds to refinance existing debt where the lender is in a position to sustain a loss and the SBA would take over that loss through refinancing; effect a partial change of business ownership or a change that will not benefit the business; permit the reimbursement of funds owed to any owner, including any equity injection or injection of capital for the business's continuance until the loan supported by the SBA is disbursed; repay delinquent state or federal withholding taxes or other funds that should be held in trust or escrow; or pay for a nonsound business purpose  As mentioned previously, P L  111-240 increased the 7(a) program's maximum gross loan amount for any one 7(a) loan from $2 million to $5 million (up to $3 75 million maximum guaranty)  In FY2018, the average approved 7(a) loan amount was $420,401, and about 36% of all 7(a) loans exceeded $2 million  A 7(a) loan is required to have the shortest appropriate term, depending upon the borrower's ability to repay  The maximum term is 10 years, unless the loan finances or refinances real estate or equipment with a useful life exceeding 10 years  In that case, the loan term can be up to 25 years, including extensions  Lenders are allowed to charge borrowers "a reasonable fixed interest rate" or, with the SBA's approval, a variable interest rate  The SBA uses a multistep formula to determine the maximum allowable fixed interest rate for all 7(a) loans (with the exception of the Export Working Capital Program and Community Advantage loans) and periodically publishes that rate and the maximum allowable variable interest rate in the Federal Register   The maximum allowable fixed interest rates in February 2019 are 13 50% for 7(a) loans of $25,000 or less; 12 50% for loans over $25,000 but not exceeding $50,000; 11 50% for loans over $50,000 up to and including $250,000; and 10 50% loans greater than $250,000  The 7(a) program's maximum allowable variable interest rate may be pegged to the lowest prime rate (5 50% in February 2019), the 30-day LIBOR rate plus 300 basis points (5 51% in February 2019), or the SBA optional peg rate (3 13% in the second quarter of FY2019)  The optional peg rate is a weighted average of rates the federal government pays for loans with maturities similar to the average SBA loan  For 7(a) loans of $25,000 or less, the SBA does not require lenders to take collateral  For 7(a) loans exceeding $25,000 to $350,000, the lender must follow the collateral policies and procedures that it has established and implemented for its similarly sized non-SBA-guaranteed commercial loans  However, the lender must, at a minimum, obtain a first lien on assets financed with loan proceeds, and a lien on all of the applicant's fixed assets, including real estate, up to the point that the loan is fully secured  For 7(a) loans exceeding $350,000, the SBA requires lenders to collateralize the loan to the maximum extent possible up to the loan amount  If business assets do not fully secure the loan, the lender must take available equity in the principal's personal real estate (residential and investment) as collateral  7(a) loans are considered "fully secured" if the lender has taken security interests in all available fixed assets with a combined "net book value" up to the loan amount  The SBA directs lenders to not decline a loan solely on the basis of inadequate collateral because "one of the primary reasons lenders use the SBA-guaranteed program is for those Applicants that demonstrate repayment ability but lack adequate collateral to repay the loan in full in the event of a default " Lenders must have a continuing ability to evaluate, process, close, disburse, service, and liquidate small business loans; be open to the public for the making of such loans (and not be a financing subsidiary, engaged primarily in financing the operations of an affiliate); have continuing good character and reputation; and be supervised and examined by a state or federal regulatory authority, satisfactory to the SBA  They must also maintain satisfactory performance, as determined by the SBA through on-site review/examination assessments, historical performance measures (such as default rate, purchase rate, and loss rate), and loan volume to the extent that it affects performance measures  In FY2017, 1,978 lenders provided 7(a) loans  The SBA started the Preferred Lenders Program (PLP) on March 1, 1983, initially on a pilot basis  It is designed to streamline the procedures necessary to provide financial assistance to small businesses by delegating the final credit decision and most servicing and liquidation authority and responsibility to carefully selected PLP lenders  PLP loan approvals are subject only to a brief eligibility review and the assignment of a loan number by SBA  PLP lenders draft the SBA Authorization (of loan guaranty approval) without the SBA's review, and execute it on behalf of the SBA  In FY2018, PLP lenders approved 26,497 7(a) loans (43 9% of all 7(a) loans), amounting to $18 8 billion (74 2% of the total amount approved)  PLP lenders must comply with all of the SBA's business loan eligibility requirements, credit policies, and procedures  The PLP lender is required to stay informed on, and apply, all of the SBA's loan program requirements  They must also complete and retain in the lender's file all forms and documents required of standard 7(a) loan packages  Borrowers submit applications for a 7(a) business loan to private lenders  The lender reviews the application and decides if it merits a loan on its own or if it has some weaknesses which, in the lender's opinion, do not meet standard, conventional underwriting guidelines and require additional support in the form of an SBA guaranty  The SBA guaranty assures the lender that if the borrower does not repay the loan and the lender has adhered to all applicable regulations concerning the loan, the SBA will reimburse the lender for its loss, up to the percentage of the SBA's guaranty  The small business borrowing the money remains obligated for the full amount due  If the lender determines that it is willing to provide the loan, but only with an SBA guaranty, it submits the application for approval to the SBA's Loan Guaranty Processing Center (LGPC) through the SBA's E-Tran (Electronic Loan Processing/Servicing) website (which is available through SBA One, the SBA's automated lending platform) or, if attachments to the application are too large for E-Tran, by secured electronic file transfer  The LGPC has two physical locations: Citrus Heights, CA, and Hazard, KY  This center has responsibility for processing 7(a) loan guaranty applications for lenders who do not have delegated authority to make 7(a) loans without the SBA's final approval  The SBA has authorized PLP and express lenders to make credit decisions without SBA review prior to loan approval  However, the PLP and express lender's analysis is subject to the SBA's review and determination of adequacy when the lender requests the SBA to purchase its guaranty and when the SBA is conducting a review of the lender  As an additional safeguard against the potential for loan defaults, the SBA now requires all non-express 7(a) loans of $350,000 or less to be SBA credit scored through E-Tran prior to submission/approval  If the credit score is below the minimum set by the SBA (currently 140 for 7(a) loans of $350,000 or less, including Community Advantage loans), the loan must be submitted to the SBA for approval with a full credit write-up for consideration  The loan cannot be processed under delegated authority  If the credit score is acceptable to the SBA, the lender is a PLP lender, and the loan is eligible to be processed under the PLP lender's delegated authority, the lender will receive an SBA loan number indicating that the loan is approved  The PLP lender's documentation, including underwriting, closing, and servicing, must be maintained in their files, and can be reviewed by the SBA at any time  If the lender is not a PLP lender or if the loan is not eligible to be submitted under the PLP lender's delegated authority, the lender must refer the loan to the LGPC for review  The application materials required for a SBA guaranty vary depending on the size of the loan ($350,000 or less versus exceeding $350,000) and the method of processing used by the lender (standard versus expedited/express)  The following SBA documentation is required for all 7(a) standard loans of $350,000 or less: Form 191 9: Borrower Information Form   SBA form 1919 provides information about the borrower (name, name of business, social security number, date and place of birth, gender, race, veteran, etc ); the loan request; any indebtedness; the principals and affiliates; current or previous government financing; the applicant's eligibility (e g , criminal information, citizenship status); the loan's eligibility for delegated or expedited processing (e g , the borrower is not more than 60 days delinquent in child support payments, not proposed or presently excluded from participation in this transaction by any federal department or agency, has no potential for a conflict of interest due to an owner being a current or former SBA employee, a Member of Congress, or a SCORE volunteer); and, among other disclosures, the firm's existing number of employees, the number of jobs to be created as a result of the loan, and the number of jobs that will be retained as a result of the loan that would have otherwise been lost  Form 912 : Statement of Personal History   SBA form 912 is required if the borrower reports on Form 1919 an arrest in the past six months for a criminal offense or had ever been convicted, plead guilty, plead nolo contendere, been placed on pretrial diversion, or been placed on any form of parole or probation (including probation before judgment) of any criminal offense  Form 912 requires the borrower to furnish details concerning his or her offense(s) and authorizes the SBA's Office of Inspector General to request criminal record information about the applicant from criminal justice agencies for determining program eligibility  It must be dated within 90 days of the application's submission to the SBA  Form 159 : Fee Disclosure and Compensation Agreement   SBA form 159 is required if the borrower reports on Form 1919 that he or she used (or intends to use) a packager, broker, accountant, lawyer, etc  to assist in preparing the loan application or any related materials  SBA form 159 is also required if the lender retains the services of a packager, broker, accountant, lawyer, etc  to assist in preparing the loan application or any related materials  Form 159 provides identifying information about the packager, broker, accountant, lawyer, etc  and the fees paid to any such person  Form 601 : Agreement of Compliance (prohibiting discrimination)  SBA form 601 is required if the borrower reports on Form 1919 that more than $10,000 of the loan proceeds will be used for construction  Form 601 certifies that the borrower will cooperate actively in obtaining compliance with Executive Order 11246, which prohibits discrimination on the basis of race, color, religion, sex, or national origin and requires affirmative action to ensure equality of opportunity in all aspects of employment related to federally assisted construction projects in excess of $10,000  Form 1920 : Lenders Application for Guaranty for all 7(a) Programs   SBA form 1920 provides identifying information about the lender; the loan type (standard, SBAExpress, Export Express, etc ); loan terms; use of proceeds; the business's size and information about affiliates, if any; the applicant's character; if credit is reasonably available elsewhere; the type of business; potential conflicts of interest; and other information such the number of jobs created or retained  PLP lenders complete the form and retain it in the loan file  Other lenders must submit this form electronically to the LGPC  Verification of Alien Status   Documentation of the U S  Citizenship and Immigration Services (USCIS) status of each alien is required prior to submission of the application to the SBA  Lender's Credit Memo randum   For loans up to and including $350,000, the Lender's Credit Memorandum includes a brief description of the history of the business and its management; the debt service coverage ratio (net operating income compared to total debt service must be at least 1:1); statement that the lender has reconciled financial data (including seller's financial data) against IRS transcripts; an owner/guarantor analysis (including personal financial condition); lender's discussion of life insurance requirements; explanation and justification for any refinancing; analysis of credit, including lender's rationale for recommending approval; for a change of ownership, discussion/analysis of business valuation and how the change benefits the business; discussion of any liens, judgments, or bankruptcy filings; and discussion of any other relevant information  For loans exceeding $350,000, the Lender's Credit Memorandum must also include an analysis of collateral and a financial analysis which includes an analysis of the historical financial statements; defining assumptions supporting projected cash flow; and, when used, spread of pro forma balance sheet, ratio calculations, and working capital analysis  Cash Flow Projections   A projection of the borrower's cash flow, month-by-month for one year, is required for all new businesses, and when otherwise applicable  The following forms and documentation are also required for 7(a) standard loans exceeding $350,000: Form 413 : Personal Financial Statement   SBA form 413 provides detailed information concerning the applicant's assets and liabilities and must be dated within 90 days of submission to the SBA, on all owners of 20% or more (including the assets of the owner's spouse and any minor children), and proposed guarantors  Lenders may substitute their own Personal Financial Statement form  Form 1846 : Statement Regarding Lobbying   SBA Form 1846 must be signed and dated by lender  It indicates that if any funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an officer or employee of a Member of Congress in connection with this commitment, the lender will complete and submit a Standard Form LLL "Disclosure of Lobbying Activities " A copy of Internal Revenue Service (IRS) Form 4506-T, Request for Copy of Tax Return   Lenders must identify the date IRS Form 4506-T was sent to the IRS  For nondelegated lenders, verification of IRS Form 4506-T is required prior to submission of the application to the SBA  For PLP and express lenders, verification of IRS Form 4506-T is required prior the first disbursement  Business Financial Statements or tax returns dated within 180 days of the application's submission to the SBA, consisting of (1) year-end balance sheets for the last three years, (2) year-end profit and loss statements for the last three years, (3) reconciliation of net worth, (4) interim balance sheet, and (5) interim profit and loss statements  Affiliate and Subsidiary Financial Statements or tax returns dated within 180 days of the application's submission to the SBA, consisting of (1) year-end balance sheets for the last three years, (2) year-end profit and loss statements for the last three years, (3) reconciliation of net worth, (4) interim balance sheet, and (5) interim profit and loss statements  A copy of the Le ase Agreement , if applicable  A detailed Schedule of C ollateral   A detailed List of M&E (machinery and equipment) being purchased with SBA loan proceeds, including cost quotes  If real estate is to be purchased with the loan proceeds, a Real Estate Appraisal , Environmental Investigation Report questionnaire, a cost breakdown, and copy of any Real Estate Purchase Agreements   If purchasing an existing business with loan proceeds, a (1) copy of buy-sell agreement, (2) copy of business valuation, (3) pro forma balance sheet for the business being purchased as of the date of transfer, (4) copy of the seller's financial statements for the last three complete fiscal years or for the number of years in business if less than three years, (5) interim statements no older than 180 days from date of submission to the SBA, and (6) if the seller's financial statements are not available, the seller must provide an alternate source of verifying revenues  An explanation of the type and source of applicant's equity injection  Proper evidence of a borrower's equity injection may include the copy of a check together with proof it was processed, or a copy of an escrow settlement sheet with a bank account statement showing the injection into the business prior to disbursement  A promissory note, "gift letter," or financial statement is generally not sufficient evidence  To offset its costs, the SBA is authorized to charge lenders an up-front, one-time guaranty fee and an annual, ongoing service fee for each 7(a) loan approved and disbursed  The SBA's fees vary depending on loan amount and loan maturity  The maximum guaranty fee for 7(a) loans with maturities exceeding 12 months is set by statute and varies depending on the loan amount  The fee is a percentage of the SBA guaranteed portion of the loan  On short-term loans (maturities of less than 12 months), the lender must pay the guaranty fee to the SBA electronically through www pay gov within 10 days from the date the SBA loan number is assigned  If the fee is not received within the specified time frame, the SBA will cancel the guaranty  On loans with maturities in excess of 12 months, the lender must pay the guaranty fee to the SBA within 90 days of the date of loan approval  For short-term loans, the lender may charge the guaranty fee to the borrower only after the lender has paid the guaranty fee  For loans with maturities in excess of 12 months, the lender may charge the guaranty fee to the borrower after initial disbursement  Lenders are permitted to retain 25% of the guaranty fee on loans with a gross amount of $150,000 or less  The annual service fee cannot exceed 0 55% of the outstanding balance of the SBA's share of the loan and is required to be no more than the "rate necessary to reduce to zero the cost to the Administration" of making guaranties  The lender's annual service fee to the SBA cannot be charged to the borrower  In an effort to assist small business owners, the SBA waived its annual service fee for all 7(a) loans of $150,000 or less approved from FY2014 through FY2016 (the annual service fee for other small businesses was 0 52% in FY2014, 0 519% in FY2015, and 0 473% in FY2016); is waiving the annual service fee for 7(a) loans of $150,000 or less made to small businesses located in a rural area or a HUBZone in FY2019 (the annual service fee for other small businesses is 0 55% in FY2019); waived the up-front, one-time guaranty fee for all 7(a) loans of $150,000 or less approved from FY2014 through FY2017; waived the up-front, one-time guaranty fee for all 7(a) loans of $125,000 or less approved in FY2018; and is reducing the up-front one-time guaranty fee for loans made small businesses located in a rural area or a HUBZone from 2 0% to 0 6667% of the guaranteed portion of the loan in FY2019  Table 1 shows the annual service fee and guaranty fee for 7(a) loans in FY2019  The annual service fee is a percentage of the outstanding balance of the SBA's share of the loan  The guaranty fee is a percentage of the SBA guaranteed portion of the loan  As mentioned previously, the SBA waived its up-front, one-time guaranty fee for all veteran loans under the 7(a) SBAExpress program (up to $350,000) from January 1, 2014, through the end of FY2015  P L  114-38 , the Veterans Entrepreneurship Act of 2015, made this fee waiver permanent, 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 also waived 50% of the up-front, one-time guaranty fee on all non-SBAExpress 7(a) loans of $150,001 to $5 million for veterans in FY2015 and FY2016; 50% of the up-front, one-time guaranty fee on all non-SBAExpress 7(a) loans of $150,001 to $500,000 for veterans in FY2017; and 50% of the up-front, one-time guaranty fee on all non-SBAExpress 7(a) loans of $125,001 to $350,000 for veterans in FY2018  The Obama Administration argued that fee waivers for 7(a) loans of $150,000 or less were necessary because the demand for smaller 7(a) loans had fallen and the waiver reduction "can be achieved with zero credit subsidy appropriations" because the "annual fees for larger 7(a) loans will cover the cost for those smaller loans " The Administration also contended that waiving the fees on smaller SBA loans would "promote lending to small businesses that face the most constraints on credit access " For context, 7(a) loans of $150,000 or less accounted for about 11 8% of the total amount of 7(a) loan approvals in FY2010 ($1 46 billion of $12 41 billion); 8 3% in FY2011 ($1 63 billion of $19 64 billion); 9 5% in FY2012 ($1 44 billion of $15 15 billion); 8 1% in FY2013 ($1 45 billion of $17 87 billion); 9 7% in FY2014 ($1 86 billion of $19 19 billion); 9 7% in FY2015 ($2 28 billion of $23 58 billion); 9 4% in FY2016 ($2 75 billion of $24 13 billion), and 9 2% in FY2017 ($2 33 billion of $25 45 billion)  The SBA also announced that eliminating guaranty fees for 7(a) loans of $150,000 or less ($125,000 or less in FY2018) was part of its broader effort to "reduce barriers, attract new lenders, grow loan volumes of existing lenders and improve access to capital for small businesses and entrepreneurs " Some in Congress questioned whether it is appropriate to require borrowers of larger 7(a) loans to, in effect, subsidize borrowers of smaller 7(a) loans, who might be direct competitors  They have suggested that it might be more appropriate to reduce fees across-the-board without regard to loan size  The lender may charge an applicant "reasonable fees" customary for similar lenders in the geographic area where the loan is being made for packaging and other services  The lender must advise the applicant in writing that the applicant is not required to obtain or pay for unwanted services  These fees are subject to SBA review at any time, and the lender must refund any such fee considered unreasonable by the SBA  The lender may also charge an applicant an additional fee if, subject to prior written SBA approval, all or part of a loan will have extraordinary servicing needs  The additional fee cannot exceed 2% per year on the outstanding balance of the part requiring special servicing (e g , field inspections for construction projects)  The lender may also collect from the applicant necessary out-of-pocket expenses, including filing or recording fees, photocopying, delivery charges, collateral appraisals, environmental impact reports that are obtained in compliance with SBA policy, and other direct charges related to loan closing  The lender is prohibited from requiring the borrower to pay any fees for goods and services, including insurance, as a condition for obtaining an SBA guaranteed loan, and from imposing on SBA loan applicants processing fees, origination fees, application fees, points, brokerage fees, bonus points, and referral or similar fees  The lender is also allowed to charge the borrower a late payment fee not to exceed 5% of the regular loan payment when the borrower is more than 10 days delinquent on its regularly scheduled payment  The lender may not charge a fee for full or partial prepayment of a loan  For loans with a maturity of 15 years or longer, the borrower must pay to the SBA a subsidy recoupment fee when the borrower voluntarily prepays 25% or more of its loan in any one year during the first three years after first disbursement  The fee is 5% of the prepayment amount during the first year, 3% in the second year, and 1% in the third year  As shown in Table 2 , the total number and amount of SBA 7(a) loans approved (before and after cancellations and modifications) declined in FY2008 and FY2009, increased during FY2010 and FY2011, declined somewhat in FY2012, and have increased since then  The number and amount of 7(a) loans approved annually is higher than the number and amount of loans disbursed because some borrowers decide not to accept the loan for a variety of reasons, such as financing was secured elsewhere, the funds are no longer needed, or there was a change in business ownership  The SBA attributed the decreased number and amount of 7(a) loans approved in FY2008 and FY2009 to a reduction in the demand for small business loans resulting from the economic uncertainty of the recession (December 2007-June 2009) and to tightened loan standards imposed by lenders concerned about the possibility of higher loan default rates resulting from the economic slowdown  The SBA attributed the increased number of loans approved in FY2010 and FY2011 to legislation that provided funding to temporarily reduce the 7(a) program's loan fees and temporarily increase the 7(a) program's loan guaranty percentage to 90% for all standard 7(a) loans from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000  The fee subsidies and 90% loan guaranty percentage were in place during most of FY2010 and the first quarter of FY2011  The increased number and amount of 7(a) loans approved since FY2012 are generally attributed to improving economic conditions  Table 2 also provides the 7(a) program's unpaid principal balance by fiscal year  Precise measurements of the small business credit market are not available  However, the SBA has estimated that the small business credit market (outstanding bank loans of $1 million or less, plus credit extended by finance companies and other sources) is roughly $1 2 trillion  The 7(a) program's unpaid principal balance of $92 41 billion at the end of FY2018 was about 7 7% of that amount  One of the SBA's goals is to achieve a zero subsidy rate for its loan guaranty programs  A zero subsidy rate occurs when the SBA's loan guaranty programs generate sufficient revenue through fee collections and recoveries of collateral on purchased (defaulted) loans to not require appropriations to issue new loan guarantees  From 2005 to 2009, the SBA did not request appropriations to subsidize the cost of any of its loan guaranty programs, including the 7(a) program  However, as indicated in Table 3 , loan guaranty fees and loan liquidation recoveries did not generate enough revenue to cover loan losses in the 7(a) loan guaranty program from FY2010 through FY2013 and in the 504/CDC loan guaranty program from FY2012 through FY2015  Appropriations were provided to address the shortfalls  Congress did not approve appropriations for 7(a) and 504/CDC loan guaranty program credit subsidies for FY2016 through FY2019 because the President's budget request indicated that those programs did not require appropriations for credit subsidies in those fiscal years  In FY2017, the SBA spent $82 2 million on the 7(a) program for administrative expenses, including $63 0 million for loan making, $4 1 million for loan servicing, and $15 1 million for loan liquidation  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 


Report 2:  For rural carriers, the most recently updated scanning procedures we found was dated 2013  As a result, some of these documents are not updated with the latest information on new scanning procedures  In a related example, the USPS OIG recently found that employees at three of the six USPS facilities the USPS OIG visited did not have an adequate understanding of the procedures for processing election and political mail due, in part, to guidance that was not updated, even though the procedures were centrally documented on an internal USPS website  USPS officials recognized this issue and stated that these handbooks are not updated regularly as the content of the handbooks are subject to labor negotiations  Therefore, new procedures are presented to USPS employees outside of the handbooks  However, given that these efforts rely on employees to orally communicate information, having consistent documented procedures is even more important  In addition to stating that the organization should deploy control activities through policies and procedures, the COSO Framework states that senior management should communicate objectives clearly through the organization so that other management and personnel understand their individual roles in the organization  By not having consistent procedures, USPS risks not clearly communicating to its employees how they should carry out scanning procedures and therefore contributing to scanning errors  As discussed below, USPS officials told us that management updates its procedures typically through regular meetings with employees, which are documented in handouts or slides  USPS officials stated that management stresses the importance of scanning and that employees should follow the prompts on their electronic devices when scanning competitive products  However, employees can still scan competitive products as delivered even if they are not, as device prompts can be misread, misinterpreted, or ignored  Furthermore, even with current prompts, scanning errors can and do occur  Consistent procedures, clearly communicated to employees, have become increasingly important as USPS hires new employees to handle, in part, anticipated growth in the volume of competitive packages  For example, GAO analysis of USPS data showed that USPS’s carrier workforce increased by 6 4 percent between fiscal years 2015 and 2017  The USPS OIG has found that these new employees require training and guidance to properly perform their roles and to reduce turnover  In addition to deploying policies and procedures to achieve an organization’s objectives, the COSO Framework states that an organization should internally communicate objectives and responsibilities that are necessary to support the functioning of internal controls  This process can be accomplished through training and meetings  Specifically, the COSO Framework states that training should enable individuals to develop competencies appropriate for assigned roles and responsibilities, among other things, and that active forms of communication such as face-to-face meetings are often more effective than passive forms such as broadcast e-mails and intranet postings  To communicate how its procedures should be correctly implemented, USPS has developed both initial and on-going training for employees  USPS officials stated that new employees are formally trained in scanning procedures when they start their employment  For example, carriers are trained how to use USPS’s electronic scanning devices, when to scan competitive items, the correct codes to use for different delivery situations (i e , signature required, vacation holds, how to code where a package was left at a delivery address)  Any new procedures can be introduced through presentations given by managers during meetings, as described below  Required regular meetings may be tracked by USPS management to ensure they are completed  Some district officials we spoke with stated that they certify that their employees have received required training and send that certification to area and USPS headquarters officials  Additional training also helps USPS reinforce correct scanning procedures  When scanning procedures are not being followed or scanning goals are not met at a post office, USPS officials stated that reminders of the correct procedures designed to reinforce USPS’s scanning procedures are presented to employees through presentations, posters, job aids, and additional documents such as carriers’ handbooks  For example, the representative of the major mailer we spoke with that had 8 to 10 percent of competitive products not scanned to the final delivery address stated that training was needed for both new and experienced carriers to reinforce that they should scan items at the delivery address  To further ensure the accurate scanning of competitive products, USPS reported that it holds internal and external meetings  Specifically, these meetings are designed to: Reinforce procedures: Post office managers can use stand-up talks— weekly meetings between management and employees at the post office—to discuss scanning issues with employees and opportunities to address those issues  For example, the postmaster at one post office we visited stated that this post office reinforces the standard work procedures designed to improve the scanning performance of employees during these meetings  Carriers and clerks can ask questions and learn why they are asked to do something or how to do a specific task, allowing for additional training and reinforcement of procedures  For example, we reviewed a handout developed by USPS headquarters to provide managers with talking points for service talks  This handout provided information on carriers delivering and scanning accurately and instructions on scanning at point of delivery on rural routes  Introduce new procedures: USPS officials told us that post office managers use stand-up talks to introduce new procedures and processes with carriers and clerks  For example, postmasters stated that they used these meetings to introduce and train carriers on new scanning features at the post offices  USPS district and area management develop and disseminate memos and handouts to assist managers conducting these meetings  We reviewed handouts USPS provided to managers for service talks  These handouts provided information on the rollout of some of the most recent scanning procedure changes  Continuously improve operations: District managers we interviewed stated that post offices with low scanning performance scores are placed on a district’s list of underperforming post offices  USPS district managers we interviewed told us that they meet with these post offices to determine how each post office plans to improve its scanning performance  District management also conducts audits of underperforming post offices and post offices that are in need of improvement  Our review of one district office’s service review checklist identified the key areas of audit for underperforming post offices  Reassess procedures: Representatives of mailers we interviewed told us that they meet with USPS representatives to discuss ways USPS can share scanning information for competitive products  Given that inaccurate scans can and do occur, it is important that postal managers explore and investigate any instances of missed or inaccurate scans  To do so, USPS managers—including area vice presidents, district managers, and postmasters—use a variety of reports as tools to ensure that the required scans are made at the appropriate place and time, and take action to monitor the status of competitive products, track lost items, and identify scanning issues  USPS headquarters designs reports used by managers to review performance at the local level across the country  Managers at each level are responsible for overseeing and reporting on the performances of the level below them  For example, the postmaster monitors performance of employees at the post office and is accountable to the district manager  In turn, each district manager is held accountable by the area vice president  To monitor performance of scanning of competitive products, these managers have access to several USPS data systems to generate reports  They can use the reports to monitor scanning performance of carriers and clerks at each post office and to identify the causes of scanning issues, such as missing or incorrect scans  Managers can also use these reports to track the status of competitive products or to investigate customer complaints of lost items  Some examples of reports available to managers include the following: Report 1: USPS officials told us that each post office receives this report from their District Office  The report identifies competitive products that do not have all the required scans, such as scans when the item arrives at the post office or when a delivery attempt was made  For example, one district official sends postmasters weekly reports on competitive products that do not have all the required scans  The officials told us that these reports help managers investigate the cause of incorrect scans identified in the report and how to prevent future occurrences  Report 2: USPS officials told us that this report is generated by district managers to proactively identify scanning irregularities, such as scans that may be out of sequence or multiple competitive products that are scanned at the same time but are for different addresses  District management can query postmasters about these scans and ask them to investigate the reason for the irregularities and determine if the scan was appropriate  Report 3: USPS officials told us that this report is generated by postmasters to monitor scanning status and performances for each competitive product that has received an arrival scan but lacks a delivery scan  While this may indicate a problem, it could also just reflect that the final scan had not been made by the end of the day or the scan that had not been uploaded into the USPS data systems when the report was generated  While having these reports are helpful, their full potential to help USPS managers may be limited because USPS lacks detailed and up-to-date standard operating procedures for how managers should use these reports or conduct other activities to efficiently investigate and resolve scanning issues  USPS’s Scanning Performance: Delivery Standard Operating Procedures for managers are a list of bullet points outlining managers’ responsibilities to meet scanning performance target goals and not a list of detailed procedures for managers to follow, such as how to use Report 1 to identify items that do not have all the required scans  In addition, USPS officials told us that this list has not been updated since approximately October 2005  The COSO Framework states that organizations should internally communicate information, including objectives and responsibilities for internal control, necessary to support the functioning of internal control  Further, it states that a process should be in place to communicate required information to enable all personnel to understand and carry out their internal-control responsibilities  Absent such communication, managers may take different actions to address problems or may have difficulty knowing where to find the appropriate information to locate a missing item to resolve a customer’s complaint quickly  For example, one post office manager told us that he will look at the scanning history in the USPS data systems to determine if the item received an acceptable delivery event scan or what the status of the item is on the route, while another post office manager told us he will use GPS data to see where the scans were made to determine if the item was delivered to the right address  If managers do not know where to find the appropriate information, they may spend more time investigating and be less efficient in resolving issues  Further, not having detailed standard operating procedures means managers may not be aware of all the reports available to them  For example, some post office managers told us that they use Report 3 while other post office managers told us that this report was not available to them  Without using Report 3, some managers told us that they look in several sources to find the same information needed to resolve the issue, such as locating a lost package  Some managers told us that USPS management discontinued the report because it was being misused by some managers  Specifically, managers told us that some managers were manually entering scanning or service-performance information retroactively to improve their performance scores  However, they told us that USPS management recently made Report 3 available to managers again but changed features to reduce any misuse  Additionally, USPS may miss opportunities to prevent scanning issues from happening again by not clearly communicating how managers should use the various reports to address specific scanning issues  For example, the USPS OIG recently determined that instances of missed and inaccurate scans for competitive products were a result of USPS management not adequately monitoring the implementation of those procedures  Without detailed procedures to guide managers in finding and using specific information in available reports and other tools, managers will not have consistent information to use to investigate and resolve customer complaints quickly or accurately  In addition, new managers may not know where to go for the most appropriate information and how to use this information to address some issues  As competitive products have become essential to USPS’s economic viability, it is increasingly important for USPS to accurately track them to remain competitive in this market  While USPS may be scanning most mail accurately, there continue to be instances where mail is not scanned accurately or is missing scans  Given the volume and growth in these competitive products, even a small percentage of inaccurately scanned products could be a large number of such products  Since USPS’s procedures were developed absent standards for internal control, the adoption of a set of internal control standards could enhance USPS’s efforts to continuously improve the design, implementation, and evaluation of its operational internal controls for scanning of competitive products  Further, since USPS’s standard operating procedures for scanning are located in numerous documents and are not always consistent—and given USPS’s reliance on stand-up talks and meetings to keep employees current—USPS employees may not always have accurate scanning procedures easily accessible to them  Having consistent standard operating procedures is increasingly important to ensure that employees are making accurate scans  Additionally, standard procedures that guide managers to investigate and resolve scanning issues would help managers more efficiently address these issues and ideally prevent these issues from happening again  To improve USPS’s competitive products scanning, we recommend that the Postmaster General take the following three actions  The Postmaster General should identify and adopt a set of internal control standards that can be used as the basis for operational internal-control activities, such as those for scanning competitive products  (Recommendation 1) The Postmaster General should improve the communication of standard operating procedures for scanning competitive products by, for example, updating or consolidating USPS documents, job aids, and standard work steps  (Recommendation 2) The Postmaster General should create standard operating procedures for managers on how to address inaccurate scans and use available reports to investigate and resolve scanning issues  (Recommendation 3) We provided a draft of this product to USPS for its review and comment  USPS’s comments are reproduced in appendix I  USPS stated that it cannot agree with our recommendation to identify and adopt a set of internal control standards for USPS’s operational internal control activities at this time  Although USPS has adopted an internal control framework for its financial internal control activities, USPS does not know what the benefits and costs are of adopting internal control standards for its operational internal control activities  As a result, USPS agreed to conduct a cost study to determine whether to commit resources to identifying and adopting a set of internal control standards for its operational internal control activities  We are encouraged that USPS is planning to conduct such a study and anticipate that performing this study will result in the implementation of an appropriate set of internal control standards  USPS agreed with the two recommendations regarding scanning procedures and committed to completing corrective actions by November of 2018  In its general comments, USPS noted that our reference to the USPS OIG’s report, Processing Readiness for Election and Political Mail for the 2018 Midterm Elections did not appear germane to the scanning of competitive mail  We recognize that this report was focused on a different type of mail, but as USPS noted in its letter, we use the OIG report as a related example of how USPS has taken efforts to improve the communication of its scanning procedures to employees  Therefore, we determined that our use of the report is appropriate  We have added information from the OIG report to characterize the OIG’s recommendations and USPS’s actions to address those recommendations  USPS also provided technical comments, which we incorporated as appropriate  We will send copies of this report to the appropriate congressional committees, the Postmaster General, the Chairman of the Postal Regulatory Commission, and other interested parties  In addition, the report will be 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) 512-2834 or rectanusl@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 making key contributions to this report are listed in appendix II  In addition to the individual named above, Kyle Browning (Assistant Director); Greg Hanna (Analyst-in-Charge); Michael Hansen; Thanh Lu; John Mingus; Faye Morrison; Malika Rice; Amy Rosewarne; Crystal Wesco; Elizabeth Wood; and Matthew Zaun made key contributions to this report 

ground_truth: USPS's competitive products have become increasingly important, comprising about 28 percent of USPS's total revenue. USPS scans these packages at various points throughout the postal network. When scans are inaccurate or missing, questions are raised about the veracity of USPS's data on scanning performance and can lead to customer complaints. GAO was asked to review USPS's scanning policies and procedures. In this report, GAO (1) describes USPS's scanning performance and (2) examines how USPS ensures accurate scanning. GAO reviewed USPS's policies and procedures and assessed them against internal control standards; interviewed officials from USPS and five high-volume mailers; and conducted site visits to six post offices in two USPS districts that represented a range of volume, number of routes, and performance. Mail products over which the United States Postal Service (USPS) does not exercise market dominance, such as many of its packages, are called competitive products. These items are scanned throughout the mail delivery system to track their progress (see figure). USPS data show that these products are almost always scanned. For example, USPS data showed that for the first three quarters of fiscal year 2018; all but one of USPS's 67 districts met their scanning goals. Additionally, mailers that account for a high volume of USPS's competitive products told GAO that they believed USPS was generally scanning products correctly. However, a small percentage of missed or inaccurate scans occur. For example, a report from one USPS district showed that for one week, 0.73 percent of the products delivered were missing a scan and that for the fiscal year to date almost 155,000 competitive products were missing a delivery scan. USPS has designed and implemented procedures and activities to help ensure accurate scanning, but some limitations could contribute to scanning errors. For example, USPS has not based its operational procedures for scanning on any internal control standards. USPS officials said the procedures were based on USPS's unique responsibilities, management experience, and sound business practices, but the officials could not identify specific standards or a framework that they followed as the basis for the procedures. USPS officials said they did not believe any internal controls standards applied to these procedures. By not basing procedures on standards, USPS may miss opportunities to improve how it achieves its mission to scan and measure the performance of competitive products. Additionally, USPS's scanning procedure documents, such as for outlining specific delivery scanning steps, are not always consistent, and USPS relies on more informal methods, such as meetings with employees to communicate changes. Thus, employees may not have accurate procedures available to them. Finally, USPS lacks procedures to help managers identify and address incorrect scans, address customer complaints or otherwise address scanning irregularities. For example, USPS's guidance for managers is limited to a list of bullet-points that do not detail the steps managers should follow to resolve scanning irregularities. In addition, this list has not been updated since 2005. Without consistent or detailed procedures, USPS's employees and managers may not scan items accurately or find information needed to resolve scanning issues—a situation that could hinder USPS's ability to reduce inaccurate or missing scans for these important mail products. GAO recommends that USPS: (1) identify and adopt internal control standards for its operational activities such as for scanning of competitive products; (2) improve the communication of procedures for scanning competitive products; and, (3) create procedures for supervisors on how to address inaccurate scans and resolve scanning issues. USPS agreed to explore addressing the first recommendation and agreed with the other two recommendations.