U.S. GOVERNMENT PRINTING OFFICE

67–562 WASHINGTON : 2000

HEARING ON THE NATIONAL OMBUDSMAN’S 2000

REPORT TO CONGRESS AND THE REGULATORY

FAIRNESS PROGRAM

HEARING

BEFORE THE

SUBCOMMITTEE ON REGULATORY REFORM

AND PAPERWORK REDUCTION

OF THE

COMMITTEE ON SMALL BUSINESS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

WASHINGTON, DC, JUNE 15, 2000

Serial No. 106–65

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS

JAMES M. TALENT, Missouri, Chairman

LARRY COMBEST, Texas

JOEL HEFLEY, Colorado

DONALD A. MANZULLO, Illinois

ROSCOE G. BARTLETT, Maryland

FRANK A. LOBIONDO, New Jersey

SUE W. KELLY, New York

STEVEN J. CHABOT, Ohio

PHIL ENGLISH, Pennsylvania

DAVID M. MCINTOSH, Indiana

RICK HILL, Montana

JOSEPH R. PITTS, Pennsylvania

JOHN E. SWEENEY, New York

PATRICK J. TOOMEY, Pennsylvania

JIM DEMINT, South Carolina

EDWARD PEASE, Indiana

JOHN THUNE, South Dakota

MARY BONO, California

NYDIA M. VELA ́ ZQUEZ, New York

JUANITA MILLENDER-MCDONALD,

California

DANNY K. DAVIS, Illinois

CAROLYN MCCARTHY, New York

BILL PASCRELL, New Jersey

RUBE ́ N HINOJOSA, Texas

DONNA M. CHRISTIAN-CHRISTENSEN,

Virgin Islands

ROBERT A. BRADY, Pennsylvania

TOM UDALL, New Mexico

DENNIS MOORE, Kansas

STEPHANIE TUBBS JONES, Ohio

CHARLES A. GONZALEZ, Texas

DAVID D. PHELPS, Illinois

GRACE F. NAPOLITANO, California

BRIAN BAIRD, Washington

MARK UDALL, Colorado

SHELLEY BERKLEY, Nevada

HARRY KATRICHIS, Chief Counsel

MICHAEL DAY, Minority Staff Director

SUBCOMMITTEE ON REGULATORY REFORM AND PAPERWORK

REDUCTION

SUE W. KELLY, New York, Chairmwoman

LARRY COMBEST, Texas

DAVID M. McINTOSH, Indiana

JOHN E. SWEENEY, New York

JOHN THUNE, South Dakota

BILL PASCRELL, New Jersey

ROBERT A. BRADY, Pennsylvania

DENNIS MOORE, Kansas

MEREDITH MATTY, Professional Staff Member

(III)

CONTENTS

Page

Hearing held on June 15, 2000 ............................................................................... 1

WITNESSES

McDonald, Gail, Small Business and Agriculture Regulatory Ombudsman ...... 3

Maust, Ann Parker, President, Research Dimensions .......................................... 18

Coratolo, Giovanni, Director, The Small Business Council .................................. 21

Hexter, John, President, Hexter and Associates, Inc. .......................................... 23

Lara, Scott, Director, Governmental Affairs Home Care Association of America .......................................................................................................................... 26

APPENDIX

Opening statements:

Kelly, Hon. Sue ................................................................................................. 34

Pascrell, Hon. Bill ............................................................................................. 36

Prepared statements:

McDonald, Gail ................................................................................................. 38

Maust, Ann Parker ........................................................................................... 46

Coratolo, Giovanni ............................................................................................ 54

Hexter, John ..................................................................................................... 66

Lara, Scott ......................................................................................................... 74

Additional Information:

SBA Executive Summary, National Ombudsman’s 2000 Report to Congress ............................................................................................................... 94

SBA, National Ombudsman’s 2000 Report to Congress ................................ 110

NFIB News Release .......................................................................................... 200

[1&2] Start of Care Assessment form ............................................................. 201

(1)

THE NATIONAL OMBUDSMAN’S 2000 REPORT

TO CONGRESS AND THE REGULATORY

FAIRNESS PROGRAM

THURSDAY, JUNE 15, 2000

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON REGULATORY REFORM AND

PAPERWORK REDUCTION,

COMMITTEE ON SMALL BUSINESS,

Washington, DC.

The subcommittee met, pursuant to call, at 10:12 a.m., in room

2360, Rayburn House Office Building, Hon. Sue Kelly (chairman of

the Subcommittee) presiding.

Chairwoman KELLY. Good morning, ladies and gentlemen. Welcome to today’s Subcommittee hearing on the Regulatory Fairness

Program, and the Small Business Ombudsman Report 2000 for

Congress.

For too long, small business owners have been subjected to overzealous enforcement by regulators who at times seem more interested in levying fines than ensuring compliance with the law. As

a former small business owner, I know personally the frustration

that exists among small business owners that, despite every effort

to be in compliance, they are still treated unfairly by their government.

The passage of the Small Business Regulatory Enforcement Act,

SBREFA, four years ago restored some hope that this unfortunate

reality might change. SBREFA established a Small Business and

Agriculture Regulatory Enforcement Ombudsman at the Small

Business Administration, and Regional Small Business Regulatory

Fairness Boards in each of the SBA’s 10 regions.

The ombudsman is charged with gathering and recording comments from small businesses in order to form an evaluation of each

agency’s enforcement performance. The fairness boards, each composed of five small business owners, provide an opportunity for

small businesses to come together on a regional basis to assess the

enforcement activities of various Federal regulatory agencies. The

ombudsman, using information provided by the fairness boards, is

required to compile the comments of small businesses and provide

an annual evaluation, similar to a customer satisfaction rating, for

different agencies and regions and offices. The goal of the rating is

to see whether or not agencies and their personnel are treating

small businesses more like customers than as potential criminals

and adversaries.

2

Today we are going to hear from Gail McDonald, who is currently the Small Business Ombudsman. Since she is the new ombudsman this year, she issued a report evaluating a year that she

was not the administrator of the program. Despite this fact, and

because of the importance of the program for small businesses, I

thought it was important to give Ms. McDonald an opportunity to

represent and present this report formally to Congress, and to discuss her vision for the program.

We also must deal with the reality that this program was without an appointed ombudsman for about seven months, so we need

to examine the impact this had on the program and the small business owners it attempts to serve. Moreover, while I know Ms.

McDonald is new to the program, there are portions of her report

that deserve closer scrutiny and it is crucial that we discuss the report today. I also think that the program needs continued monitoring and oversight to ensure that it is meeting the goals of Congress when we enacted SBREFA.

We will also hear testimony today from individuals from the

small business community who are familiar with the Regulatory

Fairness Program. They will discuss their views on how the program is working, as well as offer comments on how it might be improved in the future. Being treated fairly when regulatory enforcement takes place should be a fundamental right of every small

business owner.

SBREFA gave us the framework to help achieve this goal.

Progress has been made in reaching it, but perhaps we have

reached a crossroads with the program and it is time to examine

very specific aspects of the report, including the criteria for evaluating the agency performance, and to explore better ways of communicating poor agency response to small business to Congress.

More broadly, perhaps it is also the time to discuss the financial

resources of the office, the program structure and its independence.

It is the job of Congress, working with the small business community, to see that the program is meeting its worthwhile objectives.

We have a number of excellent witnesses with us this morning.

I am looking forward to their testimony. I thank all of you for being

here, and now I am going to turn to Mr. Pascrell for his opening

statement. And following that, since we have just been called for

a vote, we will have a 10-minute recess for us to go and vote, and

we will return. Thank you.

Mr. PASCRELL. Isn’t it great to have a recess right after you

start? [Laughter.]

Thank you, Madam Chairlady. First I would like to begin by

thanking you for your hard work in preparing these hearings in the

Subcommittee. The issues that the chairlady has chosen are giving

us beneficial opportunities for oversight of various Federal Government agencies and their interaction with small businesses. I know

that the knowledge I have gained in these hearings has opened my

eyes to some problems that remain in how these agencies deal with

small businesses throughout the government.

The need for reduced burdens on small business is our top challenge. We continue by looking at an interesting office today which

is designed to help small businesses deal with the bureaucracy. All

of us believe that there is too much bureaucracy.

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The office of the ombudsman is one that was an innovative idea

back when it was proposed a few years ago, and is in a position

that has much potential to serve small business interests nationwide. However, its work is showing the increased commitment toward having government and business work together to solve problems, as we steer away from a purely adversarial relationship.

I welcome the opportunity to learn more about what the ombudsman does, and more importantly, what it can do in the future. I

did read. I did do my homework.

One area that is especially in need of greater effort on the part

of the agencies is more equitable enforcement and compliance assistance. While the annual ombudsman report can play a critical

role in identifying potential problems and proposing solutions, both

the ombudsman and regulatory fairness boards are limited in their

ability to effect real change because they lack any leverage with

the agencies. If the ombudsman and the regulatory boards are to

evolve into anything more than advocates for small business regulatory concerns with agencies, I think they should change.

I want to thank Ms. McDonald for joining us today to explain her

vision for where the Office of Ombudsman is going, and possibly

explain what we can do in Congress to assist you in that mission.

I am interested to hear your thoughts on how more small businesses can make use of our office, and how we can make the agencies more receptive.

I look forward to today’s testimony. One of the questions I am

going to ask is, you presented us with this report after only being

there for three months. What would you change? And we will come

back to talk about that. Thank you.

Chairwoman KELLY. Thank you very much, Mr. Pascrell. We are

going to adjourn now for 10 minutes. We will be back.

[Recess.]

Chairwoman KELLY. Thank you for waiting. Let’s continue now

with the testimony of Gail McDonald. As I said before, Ms. McDonald, we are very pleased to have you before the Committee and I

really look forward to your testimony. Please proceed.

STATEMENT OF GAIL McDONALD, NATIONAL OMBUDSMAN

FOR SMALL BUSINESS AND AGRICULTURE REGULATORY ENFORCEMENT, SMALL BUSINESS ADMINISTRATION, ACCOMPANIED BY HATEM H. EL-GABRI, SENIOR COUNSEL; AND

JOHN T. GREINER, DIRECTOR, REGULATORY REVIEW

Ms. MCDONALD. Thank you. I am glad to be here, Chairwoman

Kelly, and good morning, Congressman Pascrell. I appreciated your

opening remarks. I know you both are very interested in this program, and indeed we have received assistance from you.

I am Gail McDonald, the Small Business and Agriculture Regulatory Enforcement Ombudsman, or Ombudswoman, if you prefer.

I was appointed by SBA Administrator Aida Alvarez this past February. Although my official capacity began in the midst of finalizing this report, my 10 years’ experience both in the Federal Government and working with small business in the transportation

sector, allows me to address the findings of the report. Certainly

my years in my own family’s businesses have helped me appreciate

firsthand the regulatory concerns of small business.

4

In my position I am ably assisted by 50 small business owners

who make up the Regional Regulatory Fairness Boards, or we call

them the RegFair Boards. I want to thank the members who were

able to attend today, as well as those who could not. Each RegFair

Board member has made a significant personal and professional

sacrifice to serve, and has given us invaluable advice, program

guidance, and outreach assistance. Together, we can offer this Subcommittee our plans and ideas for the future of the office.

I would like to recognize Elise McCullough from Louisiana and

Vinh Cam from Connecticut, who are here today, and then you will

be hearing from two other of our members on the next panel.

The year 2000 report to Congress, ‘‘Building Small BusinessAgency Partnerships,’’ is a thorough review of the efforts of this

program. I would like to submit the executive summary for the

record. Today I would like to talk about what we have done in the

context of what we are doing.

The good news is, the tide is turning on a regulatory climate that

has for too long plagued our country’s small business owners. Step

by step, our program and others are building bridges to change the

way the Federal regulatory officials view small business compliance, and in some cases a change in the way small businesses view

Federal regulations.

The 2000 report demonstrates that these partnerships have improved agency enforcement practices by strengthening small business feedback, but we still have much work to do. Based on the recommendations of small business, we have prioritized four goals for

next year:

Encourage increased small business feedback; promote greater

agency accountability; develop more small business-agency communication; and foster creative partnerships between small business

and Federal regulatory agencies.

My appointment has brought about a change in the program. Administrator Alvarez recognized that one person should be dedicated

to the position of National Ombudsman, and that person should be

located at SBA headquarters so the program could be more visible

within the administration.

In the four months I have served, I have reached out to small

business owners, listening to their concerns and compliments, assisting them in resolving important regulatory issues. Perhaps

most importantly, I think the Office of the National Ombudsman

helps close the loop on Federal agency accountability by allowing

me to report directly to you, the Members of Congress.

The tide is turning. Small businesses are beginning to see improvement in the regulatory enforcement and compliance environment. While few agencies achieve the highest ratings in our report,

most are working to implement the annual recommendations to

Congress and generally to improve their enforcement and compliance policies and practices. Those who aren’t, certainly will hear

from me.

Federal agencies no longer feel that they are the only ones concerned with environmental protection or worker safety. Together,

small businesses and Federal agencies are learning to appreciate

each other’s contributions toward addressing these issues and

building a strong, healthy economy.

5

Thank you again for inviting me today. I am looking forward to

our joint efforts on behalf of this program.

[Ms. McDonald’s statement may be found in appendix]

Chairwoman KELLY. Thank you very much, Ms. McDonald. We

really appreciate having you here.

I have a couple of questions that I wonder about. You know, we

can assist you, and we would like to work with you, because I think

the voice of the small businesses of this Nation truly needs an ombudsman to do outreach, to listen to what they have, to the complaints and problems that small businesses have with the agencies,

and they really need to have your support. But from reading your

full testimony and your report, it seems to me that there is a couple of things.

In your opinion, do you think we ought to investigate further the

agencies, for instance, that have received unsatisfactory ratings in

the various categories. Do you think that you should be empowered

to be able to do that kind of investigative research?

Ms. MCDONALD. I am very disturbed that the three agencies

don’t participate, and I think, although they appointed someone

that we can call when things come up, I do think that there ought

to be some way to force them to comply with the law. When I was

an agency head, I certainly felt like I should comply, and I think

it is a great cause for concern.

Chairwoman KELLY. Well, I know that many of the agencies that

do comply, only partly comply. They marginally comply, and that

I find disturbing also.

Ms. MCDONALD. You know, I think in just going back and reading through the reports as they build forward, that you are seeing

progress. I think it is so much about bringing about a cultural

change with a lot of people in the agencies, that it takes a while,

and I believe we have been seeing improvements year by year, not

everywhere, but we certainly work at that.

And I would say that the report to Congress is really a thing that

the agencies spend a lot of time talking to us about. It sort of pulls

together what they are doing and how they are doing it, and focuses our discussions very tightly. And they compete to get in the

‘‘best practices’’ sections, and I think that section helps them, because a lot of times they are looking for new ideas.

So I wish it were better, but it is just three and a half years old,

and I think in that time there has been—you know, if you think

of all the work Congress has done to change IRS and the sea

change there, I mean the very organization of the whole agency has

been changed, and when I work with the Taxpayer Advocate, I am

just amazed at all the resources they have brought to bear on their

small business issues, and that is an excellent thing. So I do see,

you know, improvement around the government from say 1990,

when I was in an agency where we just had one small effort going

on.

Chairwoman KELLY. I am interested. You say they actually could

compete, would compete, are competing to be in ‘‘best practices’’?

Ms. MCDONALD. Right.

Chairwoman KELLY. Because if you look at what is at least my

interpretation of your Table 3 on page 18 of your annual report,

you know, I look at that ‘‘timeliness of initial agency response,’’ for

6

instance, and you look at the enormous number—IRS, USDA, DOT,

DOL, FCC, FDA, HUD, INS, none of those did very well. They actually received lower ratings. Now, I am interested that you would

feel that they are competing to be in ‘‘best practices’’ when in fact

it doesn’t look that way to me from that table, if that table is accurate.

So I think maybe the question here then resolves to, is that report—and I am not holding you responsible, please understand, I

know you have been there just a short period of time—but is that

report accurate and detailed enough to do the requirement for the

RegFair hearings and the appraisal forms to provide this comprehensive picture that we in Congress are really asking for.

Ms. MCDONALD. Sure. The Acting National Ombudsman last

year was Hatem El-Gabri, who is still our senior counsel. He is

here, and John Greiner, our program manager here, and they

might speak to the criteria, because they fought that out on how

you develop effective, objective criteria.

Chairwoman KELLY. Well, I think that is fine. If they are here,

if they would like to come and sit at the table and respond to that

question, by all means, please come up and identify yourself, and

let’s get into a discussion here, because I think this is important

for our small businesses.

Mr. EL-GABRI. Good morning.

Chairwoman KELLY. Please pull the microphone close to you so

we can all hear you, and identify yourself when you speak.

Mr. EL-GABRI. I am Hatem El-Gabri.

Chairwoman KELLY. I am sorry. Please pull that microphone

closer to you.

Mr. EL-GABRI. I am Hatem El-Gabri, senior counsel, and I was

Acting National Ombudsman when Peter Barca left July 2nd, until

Ms. McDonald was appointed.

Chairwoman KELLY. I am still having real trouble hearing you.

Is that microphone on?

Mr. EL-GABRI. Can you hear me now?

Chairwoman KELLY. I think that is a little better. Okay, people

in the room can also hear. Yes, please speak directly into the

microphone. You may have to share.

Mr. EL-GABRI. I am Hatem El-Gabri—— Chairwoman KELLY. Thank you.

Mr. EL-GABRI [continuing]. Senior counsel, and I was Acting National Ombudsman from July 2nd to the end of January, when Ms.

McDonald was appointed.

Chairwoman KELLY. From July——

Mr. EL-GABRI. Second.

Chairwoman KELLY. Thank you. All right. You heard my question to Ms. McDonald about the agencies actually receiving, in the

evaluation—if you have that report in front of you, turn to page 18.

Mr. EL-GABRI. Yes, I have it.

Chairwoman KELLY. Okay. On Table 3, the agencies, like—and

I read out the list, beginning with IRS, USDA, DOT, et cetera— actually received lower ratings in the category of timeliness of the

initial responses since the RegFair inception. And I want to know

what you think, then, about whether or not, when Ms. McDonald

testified that they are actually trying to compete to be better,

7

whether this is a fair indication, and does this indicate that the report is in fact accurate?

Mr. EL-GABRI. I think the ‘‘best practices’’ section is separate

than the question of timeliness. Timeliness addresses their response to specific small business comments and how long does it

take for them to send a response to us. The best practices are simply structural changes within the agency that different agencies

have undertaken.

We thought it is important to have a ‘‘best practices’’ section for

the sake of the agencies themselves, so one agency would know

what other agencies are doing and have that dialogue going on, and

to encourage them. The timeliness issue is something we have

worked on, are consistently working on, and when agencies are late

in submitting responses, we do have a dialogue with them, try to

identify what the problem is and rectify it.

So the fact that they are not timely does not mean they are not

competing for best practices. As I said, it is viewed as a different

matter than making structural changes within the agencies, and

we have seen that with a number of agencies.

Chairwoman KELLY. But are you saying that you have actually

seen the agencies make structural changes as a result of your interest and the fact that they aren’t timely and smiling?

Mr. EL-GABRI. Yes, ma’am. Yes, Congresswoman.

Chairwoman KELLY. What other changes have you seen them

make as a result of what your actions have been?

Mr. EL-GABRI. The individuals they have appointed to respond to

the timeliness issues, we have seen that over and over. We have

seen it with HCFA where we have, because of the timeliness issue,

it was an issue where they have brought it to high profile. In the

case of that agency, a direct dialogue was undertaken with the

chief of staff to make sure that we get responses to these comments

in a timely fashion, and responsive responses, not simply

boilerplate type of languages. These are the type of structure

changes we have seen as to the issue of timeliness, the kind of individual who the comments will be sent to, and the kind of responses

we will get back from the agencies.

Chairwoman KELLY. Mr. El-Gabri, do you think that this report

is detailed enough to do the RegFair hearings and appraisal forms

justice, in terms of providing us and Congress with a comprehensive picture of the agencies and what they are doing?

Mr. EL-GABRI. I believe it——

Chairwoman KELLY. I am deliberately asking you because you

have been working with the agencies and you obviously know. You

recognize also I didn’t include HCFA on that list.

Mr. EL-GABRI. I understand. The same format that was used

with this report is basically the same format that was used in the

previous two reports. We simply felt at that time that that was responsive as to what is going on.

But as you are also aware, this is not the only thing that is available to Congress with what is going on. All the public hearings are

on line and available to the Members of Congress. Members of Congress have been kind enough to attend these public hearings. So

I don’t think it is our position that any one document speaks as to

what is going on with regard to the small business community.

8

Chairwoman KELLY. Well, on the other hand, you are charged

with the responsibility of reporting back, in this document, accurate, detailed information to give us a pretty clear understanding

of what these agencies are doing vis-a-vis the small businesses.

And my reason for questioning, for this line of questioning, is that

I am wondering how seriously the agencies are taking this charge

of yours.

Mr. GREINER. Madam Chairlady, if I could—— Chairwoman KELLY. Please identify yourself.

Mr. GREINER. My name is John Greiner. I am, I guess, the Acting Program Manager and the Director of Regulatory Review. And

I think if I could elaborate on a couple of points that Hatem ElGabri made, on the timeliness alone, we get a lot of calls from

agencies when they see our draft.

And as the National Ombudsman stated earlier, that draft report

that Congress and the President thought should go out to the agencies so they could comment on it is a great vehicle to attract their

attention. When they see their initial ratings, for instance, on the

recommendations, based on the previous responses they provided

us, we get a lot of agencies that are very concerned about their ratings, so I think they are clearly interested in getting the highest

ratings possible.

On the timeliness issue in particular, a lot of agencies are working, even though I think you see the trend from ’99 to 2000 was

not a positive trend in terms of timeliness, a lot of agencies are

working to improve their timeliness. The manner in which the response will come, and in a lot of cases they pull, if the small business chooses to disclose its identity to the agency because they

want a high-level review of their particular circumstances, they actually pull the enforcement records. They talk to the officials and

the supervisors involved, and so there is a fairly in-depth process.

We encourage agencies, when this in-depth process is being undertaken, to provide us at least an initial response within the 45-

day time period, so that businesses know that they are working on

it. And I think, I know for instance with EPA, with SEC, I recall

specifically conversations with them, ‘‘What can we do when we

have a very complex situation, to improve this rating?’’ And basically we tell them that it is important that you give us an update

along the way; that we understand certainly in some cases these

are on appeal, and so they won’t actually be able to give us a final

response for years.

So there is an interest. I can’t say it is a level interest throughout every agency. We thought the timeliness of the initial response

was perhaps the best indicator, again because some of these appeals take years, and so to say the final response is the one evaluated is a little unfair, or maybe it is a less accurate judgment than

at least that initial response.

Another thing that we do in our office is, every 60 days we call

these agencies if we don’t have a response, and badger them basically. We tell them that we are going to continue to call them until

they get us the response, and then we let the small businesses

know that we are continuing to work on that.

So we are doing what we can to remind them. I think this report

does focus a lot of attention within the agency, and I think they

9

are now learning that this timeliness rating is going to be a mainstay of one of the ratings we do, and that if they want to improve

their ratings, they are going to have to improve, at least one of

them is the timeliness.

The other point, I think just real briefly, is the issue of the evaluations. In 2000 we added new evaluations, and I think that is the

continuing trend. As we get more sophisticated and we develop

more feedback from small businesses and through the board members, the feedback they are providing us, we are able to provide the

Members of Congress with more information and better evaluations.

Chairwoman KELLY. Thank you.

Mr. EL-GABRI. Madam Chairwoman.

Chairwoman KELLY. Yes?

Mr. EL-GABRI. If I may point to page 15 of the report, these are

questions we send to the agencies in addition to the comments that

we receive from small businesses. The agencies are required to answer some of these questions.

As you can tell, these are complex, elaborate questions, which

might explain some of the timeliness issue. So the timeliness in the

previous year I don’t think is necessarily an accurate reflection of

their effort in the year we evaluated, simply because of the type

of questions we have been asking, simply for us to get a better

sense of the small business climate within that agency.

Chairwoman KELLY. The point, though, I think of all of this really is, we need, we in Congress really need good and useful information. This Committee is going to take action with agencies. We can

do that, but we have to be confident before we draft letters and

begin to have a dialogue with agencies, that we are getting accurate information from the agencies.

And when Ms. McDonald testified, she said, well, they were competing in one area, but as I look at this chart on page 18, you see

a number of agencies here who didn’t bother to comment at all, and

that raises the question in my mind that I presented. I wonder if

all of these agencies actually have a liaison working with you, Ms.

McDonald?

Ms. MCDONALD. Yes, they all do have a liaison working with us.

Sometimes we ask for someone else. Sometimes we will go through

an issue with them, as we once did at the Department of Agriculture, and found that we needed someone at a higher level who

was indeed independent of the regulatory area we were looking

into. And we have also been encouraging the Department of Agriculture, where their different agencies have issues with us, to appoint someone like an FSIS, and they have done that recently. But

they have a full list, and I can submit it for the record if you would

like.

Chairwoman KELLY. I would like that, please.

Ms. MCDONALD. All right.

Chairwoman KELLY. And I would like to know what agencies are

not cooperating with you, because I think this Subcommittee has

a duty to make sure that SBREFA is implemented fully, and to do

that we have got to know who is cooperating with you and who

isn’t.

Ms. MCDONALD. All right.

10

Chairwoman KELLY. Because what you are doing needs to be

supported, and you have asked, you have set as one of your goals

that we would promote, that you would promote greater agency accountability. We in the small business community need that. We

need to know, if you are going to be our ombudsman, that you are

going to be there fighting for the small business people. And we

need to know in Congress whether or not we need to tell the agencies that it is their duty, because of the mandates of SBREFA, it

is their duty to cooperate and work with you so that you have the

information you need in order to help small businesses when they

have problems.

Ms. MCDONALD. Well, I would appreciate that. That of course is

very, very helpful. But I will put this in the record.

Chairwoman KELLY. All right. Fine. And any further information

you can give us about which agencies are and are not, especially

the ‘‘are not’’ cooperating with you, we would like to have that as

a part of the record.

Ms. MCDONALD. Yes. All right.

Chairwoman KELLY. I want to move on, because I just want to

ask you if you think that we should appoint—every agency has a

small and disadvantaged business utilization officer.

Ms. MCDONALD. Yes.

Chairwoman KELLY. Should we appoint an officer, a similar type

of officer, created within the agency, for resolving the enforcement,

the regulatory enforcement problems? Should we actually put

someone in each agency to do that? Do you think that would be a

good idea?

Ms. MCDONALD. Generally, I do think it would be a good idea,

but I was speaking with the ombudsman at EPA, for example, and

she was telling me that last year she received only 20 regulatory

enforcement problems. She deals with a broader, you know, spectrum of issues. And so I am sure it varies agency by agency on how

it could be most effective.

Chairwoman KELLY. Well, you said it was the EPA who said they

only got 20?

Ms. MCDONALD. Yes, it was EPA. Twenty on regulatory enforcement, you know, just my piece of it. She had many other issues

that she was working on. And they have had that office for quite

a long time.

Chairwoman KELLY. I am not sure that is a very good measure,

however. Put yourself in the position of being a small business person, wanting information, not sure if you have broken the law or

not, dealing with the EPA, many of whose people decide that it is

an ‘‘Ah, ha, gotcha’’ if you call them and say ‘‘Could you please give

me some direction here?’’

Quite honestly, I am not sure that is a good, a very good number,

and I am not sure that is—that is why I am thinking that maybe

we ought to think about asking the agencies to put someone in

each agency to deal directly with the small businesses. where there

is not going to be retaliation, where people—because most small

businesses want to cooperate. You know that, or you wouldn’t be

sitting in the ombudsman’s chair. And we need to have people understanding, because a lot of these rules and regulations are complicated.

11

Ms. MCDONALD. Right.

Chairwoman KELLY. And personally, as a small business owner,

I know full well you haven’t got time to sit down and read a whole

bunch of Federal regulations, and all of the pages that they entail.

Ms. MCDONALD. Right.

Chairwoman KELLY. You do need to be able sometimes to pick

up the phone, where you have got a finite area that you are not

sure about, and ask somebody honestly. Can you give me some help

here? I don’t see that as happening right now for small businesses

in government, in the way that we have this thing structured, and

I would hope that you would consider that in the way we have been

talking here.

I think we would have to have those people, though, report to the

Inspector General, to avoid politics, because I think these offices

tend to be very political sometimes, and we want to avoid that at

all cost.

Ms. MCDONALD. Truly. You know, I have had good luck referring

people to the Taxpayer Advocate at IRS. That office has been quite

active and has—— Chairwoman KELLY. We have had a very big attitudinal change

over there, which I am very glad to hear about. But yes, I mean,

and that has been very much welcomed by the small business community, I believe.

But we need to get word about your program out. I think it

lessens the fear, for small businesses to know that they have got

someplace to go. I think we get, you know, we get complaints and

requests for assistance. We get a lot of them, and when EPA said

they get 20 a year, well, we get them over here on this side of the

House at the rate of about 20 a month, so I know there is a little

more interest out there.

In testimony that we are going to hear from someone else who

is going to be appearing in the next panel, Mr. Hexter brings up

a point that I think is very interesting. He talks about a lack of

sufficient resources and insufficient authority to address specific

issues and complaints. Are those two things that you feel you need

support from our Committees on?

Ms. MCDONALD. Well, certainly every program director wants

such things, but my role is to work with what we have. And when

I visited with you before this meeting, you know, I knew because

of your role with so many volunteer organizations, you could give

us some nuts-and-bolts advice. Your suggestion that we go to the

SCORE office is just an excellent one, and we certainly will do

that.

But within my agency I certainly will be working on the 2002

budget, which is my first sort of shot at the apple to get us additional resources. I do think that our marketing efforts and so forth,

while they are indeed volunteer-based, we want to do more because

we want to get the word out so people can take advantage of their

rights to regulatory fairness. I mean, it is a revolution, if you think

about it, for small business people. So it is good news, and I am

certainly impatient to get it out faster.

Chairwoman KELLY. We need it. I would also hope that you will

put a big poster up in every post office in the Nation, if that is possible, because we need to get the word out as much as possible to

12

let people know. And I don’t even know if that is possible or not,

but——

Ms. MCDONALD. Well, we are working, still working on that suggestion you gave us. We are working on a box that would go, and

we are doing—the post office wants to do a pilot project with us,

and we will be doing that next year and then see how that works,

and then we could expand that program.

Chairwoman KELLY. That is good, because small business needs

all the help it can get. We are the engine driving this economy. We

need to help.

You are okay with, you are working out what is happening with

the post office?

Ms. MCDONALD. Yes, we are. We are doing a pilot project which will cost about $20,000.

It is not that much, you know, for the printing and so forth, and

so we are working on that. And then once, if the program is indeed

successful, we could do the whole country for about $100,000.

Chairwoman KELLY. Do you have a geographic area that you

have decided on for the pilot project?

Ms. MCDONALD. I have forgotten which one they told us. They

are doing a study to select it, Hatem tells me.

Chairwoman KELLY. How much money is the study costing?

Ms. MCDONALD. Oh, they are doing that. They are not asking for

money on that.

Chairwoman KELLY. Just a question. If it is $20,000 of printing, I hope they are not spending $40,000 on a study.

Okay. Thank you. I have taken up well more than my time here.

I am going to turn it over to Mr. Pascrell.

Mr. PASCRELL. Thank you, Madam Chairlady.

I think that the code of ethics that you put together for the board

members is a good one and a solid one, to avoid conflicts of interest. I think that is something we need to pay very careful attention

to, particularly in terms of loans and everything else in other agencies that we have to deal with.

I don’t think it should be too hard, though, to find out who is cooperating and who is not. I mean, you have been in business for

three years. Who is cooperating and who is not? And we need to

know that, because if they are not cooperating, I think that we

have a role here to play.

We are not just in existence, as I understand the ombudsman to

be, we are not just in existence to have these agencies, these Federal agencies, produce more paperwork for you.

Ms. MCDONALD. Right.

Mr. PASCRELL. I mean, then we are defeating basically what—we

want to reduce paperwork and regulations for the business person,

but we don’t want to increase paperwork for those Federal agencies

that have the problem as well, same problem. So we are not here

just to create more paperwork.

I noticed some on the first chart, those that weren’t too quick to

respond to comments, cleaned up their act. When they did respond,

they did it well, like HCFA. We have a lot of complaints, a lot of

problems with HCFA nowadays, and I am meeting with them to

try to resolve them. But from what I see, it seems to me that they

are trying to clean their act up in terms of when they do respond,

13

there is substance. That can’t be said for DOD or Government

Services. Why not?

Ms. MCDONALD. DOD has a letter, which we included, where

they just don’t feel that they are covered by the law. They take

what I should not characterize, not being a lawyer, but they take

a narrower view of the law than we do.

Hatem, would you like to speak to the DOD comment?

Mr. EL-GABRI. That is an issue that was raised in the previous

hearing. There are a number of agencies who do not believe

SBREFA covers them. GSA is one of them. Department of Defense

is another.

Mr. PASCRELL. State Department?

Mr. EL-GABRI. State Department believes it is covered. They simply say their resources are very limited, so unless they know from

Congress they should participate, the person that was assigned did

not have the resources to be able to respond. But the main ones

were the VA, GSA, and DOD.

The position the National Ombudsman has taken is, the definition of agencies covered is synonymous with the definition under

FOIA, so as long as you are covered under FOIA, you are covered

under SBREFA. That is the position we have taken, but to be honest, it is an intellectual disagreement that is up to Congress to decide. I mean, having letters go back and forth is not going to

produce——

Mr. PASCRELL. The obligation to clear that problem up is on our

shoulders. It shouldn’t be on your shoulders. Because, very interesting, you are stating for the public record something that we

think, but you are stating it for the public record, and that is that

there are agencies who feel that they shouldn’t even be affected by

this. I find that to be unacceptable.

And that is why we have problems in procurement with small

businesses, with the DOD and Government Services. It is intolerable. We have written letters. And that is why, I am not speaking

for the Chairlady, but I think that is why she asked, ‘‘Do you need

more teeth in what you do, to make sure that people understand

that you are serious about it?’’

I mean, these agencies aren’t going to take you seriously because

they think that the law was not written for them. Whatever gave

them that idea, we might have to drag them in front of a panel

here and ask them, and I think that is serious, very serious. We

have had problems.

You know, one of the major things we tried to open up, in fact

around the country, we have had meetings and hearings and forums on how small businesses can compete for business with the

Federal Government. If parts of the Federal Government feel that

they don’t have to comply to what the Congress has passed, we

have a very serious problem here on contracting and services, and

I think we should bring that up, Madam Chairlady, and we should

bring it to a head.

Ms. MCDONALD. I would like to add that we currently have an

issue with the Department of Navy, and we just pursue it just like

we would with any other agency, but we are—I am, I should say—

largely jawboning. But we do have their attention, and I do think

14

we have clarified an issue for a small business owner. It is a patent

dispute.

But this small business owner cannot fight Stanford University

and the Navy in court and win, even though I have seen her data,

I suspect she could, if she could afford to go into court, but of

course she can’t. So we have tried to help clarify the issue and get

it to move on. And we are trying of course to encourage the Navy,

as part of its program, and it has a large program trying to improve its contracting and procurement, and we are trying to say to

them, at the same time, you know, ‘‘Don’t run this woman out of

business,’’ which is what the court case would do.

Mr. PASCRELL. Let’s take the example you just gave us. Do you

work with the Office of Advocacy within the SBA?

Ms. MCDONALD. Yes. And Advocacy sent me this woman, the second day I was on the job.

Mr. PASCRELL. How is that working out?

Ms. MCDONALD. That works very well. In fact, we have just done

a big issue where we went to EPA on a nitrates enforcement issue

and got them to back off of some 600 business people they had

given very short notice to, you know, of a kind of a requirement

that no one had noticed. And Advocacy held a roundtable which we

participated in, and Jere Glover and I followed up with a letter to

EPA and worked with a large number of trade associations here in

town who were involved. And some of the best compliers in terms

of the toxic release inventory were involved in this, so we were

gratified when they backed off.

Mr. PASCRELL. Are you getting many comments or complaints

about those small businesses dealing with contracts with the Federal Government, particularly the Department of Defense, that

they cannot get on a list to bid, they are not even accepted as bidders?

Ms. MCDONALD. I have not received those comments.

Mr. PASCRELL. Who would they go to? Would they go to the Office of Advocacy or you?

Ms. MCDONALD. No, they would go to us, wouldn’t they, John?

Have we gotten any in other years?

Mr. GREINER. Well, some of the comments we get on the Department of Defense and contracting issues generally do not directly

apply to enforcement or compliance. And what we try to do, I

mean, we want to be full service regardless of whether we have jurisdiction.

What we try to do is to work with the representatives in each

agency and say, ‘‘We’re not referring this to you in the role of regulatory fairness, but we’re referring this to you in the role of a sister

agency trying to make sure that the small business doesn’t get lost

in the cracks.’’ And by and large, with every agency we have

worked with, they are responsive. They do send us copies of their

reviews that they send to the small business.

There are some DOD comments that dealt with enforcement activities. I am not aware of any DOD contract issues, apart—there

was a bonding. There was one comment on a bonding issue for a

trucker, and so you could say it dealt with contracting because if

they weren’t able to come up with this bond, they weren’t going to

get the contract. And we have had other DOD instances where

15

there are enforcement activities that are—I guess they touch on

contracting issues.

Mr. PASCRELL. I looked at the ’98 recommendations, you know,

the period just before the ’99 recommendations.

Ms. MCDONALD. Yes, right.

Mr. PASCRELL. It seems to me that those recommendations could

be duplicated, some of them, for ’99. ‘‘To adopt and follow policies

and procedures that make it clear to small businesses that they

will not face retaliation,’’ you mentioned that before, raising concerns about compliance and enforcement.

Ms. MCDONALD. Right.

Mr. PASCRELL. How serious is that?

Ms. MCDONALD. Small business people always mention it to me.

They are very serious about it, and so we have made it very clear

that you can file without giving us your identity. We have an

agreement with the IGs in every agency that they will be careful

of people’s identity.

I have been actually pleased at the number of people who have

been willing to come forward and use their names and, you know,

will stand up. I know my father, just in his experience with the

FAA, would never have come forward and given his name.

Mr. PASCRELL. Well, I think that is one of the—— Ms. MCDONALD. So we work against that all the time.

Mr. PASCRELL. The chairlady discussed the promulgation of what

your office is all about. If small businesses don’t know about you,

they can’t take advantage of you, and they cannot come to you.

Ms. MCDONALD. Right.

Mr. PASCRELL. I think this is critical communication. Most small

businesses don’t even know you exist. How would they?

Ms. MCDONALD. Right.

Mr. PASCRELL. How would they?

Mr. GREINER. I guess one of the chief ways that the National

Ombudsman’s Office has worked to make sure small businesses

know about us is that every agency, actually to some extent you

can look at the previous reports, except the DOD has agreed to provide small businesses with notice of their rights to regulatory fairness when they take enforcement activity. So it is sort of, it is

somewhat similar to a police officer reading you your Miranda

rights when you are arrested.

It is a timely notice, and I think that that is—sometimes you get

a lot of paperwork, you know, during an enforcement activity, so

it is some notice. It may not be sufficient, and that is why we are

now working with agencies to market it beyond just notifying them

at the time of enforcement.

Mr. PASCRELL. You have a role to——

Chairwoman KELLY. Would the gentleman yield for one minute?

Mr. PASCRELL. Sure.

Chairwoman KELLY. I just want to ask what you think about including a posting of the rights of small businesses on the web sites

of each of the agencies. What do you think about that?

Ms. MCDONALD. I think that would be excellent. I think some of

them do that, you know, and reference our program that way as

well.

Chairwoman KELLY. Why can’t we ask them to do that?

16

Ms. MCDONALD. I can.

Chairwoman KELLY. You think you could ask them to do that?

Ms. MCDONALD. Oh, yes. Yes. Yes, we certainly could, and what

you have done in the past, you know, mailing your constituents the

card telling them about the program is a wonderful thing to do.

And I think if you would help me reach out to new Members of

Congress as they come in, tell them about the program and urge

them to do this, I think that would be something that could help

us get the word out. I think coming from a reliable source such as

your Representative gives the program a lot more credibility, and

so I would love to, as I say, use these cards a lot more.

Chairwoman KELLY. Thank you.

Mr. PASCRELL. Just one more question, that is all. You have been

there for three months.

Ms. MCDONALD. Yes, sir.

Mr. PASCRELL. What would you change? Easy question.

Ms. MCDONALD. You know, I don’t think there is anything to

change. I wish I could learn faster and, you know, come up to speed

faster, but I am pleased with many of the things we have done. We

did get the report out and meet our deadline. You know, in a small

program you are anxious about deadlines, and we are doing more

within the agency to publicize the program through other SBA programs, and I can see that moving on.

Mr. PASCRELL. So you don’t need more money and you don’t need

more teeth?

Ms. MCDONALD. Oh, we need everything. You know, every program needs more money and more teeth, but—— Mr. PASCRELL. Oh, I don’t know about that.

Ms. MCDONALD [continuing]. But, you know, I am working certainly within the agency to ask for more resources. SBA has been

generous in giving us printing and congressional representation

and outreach opportunities that we wouldn’t have if we were an

independent program, and I am grateful, and I am following up on

those things.

Mr. PASCRELL. Thank you.

Chairwoman KELLY. Ms. McDonald, I want to go to that independence question. You just raised it.

Ms. MCDONALD. Yes.

Chairwoman KELLY. Do you think that you might have more authority and be able to function better if you were an independent

commission?

Ms. MCDONALD. Oh, my perspective on that isn’t good. I think,

you know, that we benefit from our place in SBA, and the administrative contacts help us with the agencies when things get, you

know, tense. I mean, as we did with the HCFA situation, the administrator became involved in talking one-on-one with that administrator, so those things benefit us, too.

Chairwoman KELLY. One final question.

Ms. MCDONALD. Yes.

Chairwoman KELLY. Why do you think the President only asked

for half a million dollars for your agency?

Ms. MCDONALD. You know, I wasn’t here, and I don’t know exactly. As I say, I will work on it, and SBA has made up more. They

have given us 10 percent more this year, for example, to help us

17

out, and are looking for some people to detail. But when you take

from one program, it is a problem for the program that loses. So,

you know, I am not a good one to comment on that.

Chairwoman KELLY. Well, what about these other gentlemen at

the table. They seem to have been there. Would they care to comment on that question? This seems to me to be one of the more important agencies for our Nation. It certainly is a very important

agency for our small businesses. It seems to me also that because

of the enormity of what small business means to this Nation, this

Nation ought to be perhaps more financially committed to what you

are doing to help our small businesses. Would either of you gentlemen care to comment on that?

Mr. EL-GABRI. Well, there has been discussion as to the annual

report that you have and the resources SBA has devoted. We, during that hiatus between January and February, not only did we

have the program continue as planned but I think we have done

significant initiatives through the assistance of SBA, especially the

chief of staff and the deputy general counsel and CLA.

Chairwoman KELLY. I am glad about that, but that is not going

to the heart of my question, which is why do you think you have

only been funded at such a low level?

Mr. GREINER. May I? I think one of the things that changed,

Peter Barca was the regional administrator, and so some of the

funding, the $500,000 that the program has been operating under,

has in many regards been about a $1 million budget, with Peter

Barca being paid out of the regional office, with our senior counsel

and his paralegal. I mean, we have got a large portion of his time

devoted to the program. We have had detailed employees from the

district office for quite a while, and that has been very helpful.

So I think in many ways the program has benefited greatly from

SBA monetarily. I mean, I think the benefit of having a full-time

National Ombudsman outweighs the impact on our budget, but

that does mean that for 2002 we definitely need to work with the

administration to compensate for that impact.

Chairwoman KELLY. I would agree with you that we need to

work with the administration to make sure that there is enough

funding that you can do your job. I think a low budget figure like

that indicates that there is no serious purpose behind it. I think

that lack of serious purpose sends a very strong and not very positive message to our small businesses of this Nation.

So I would hope that we are able to get you some funding at an

appropriate level so you can do your job, Ms. McDonald, because

I think that you have, with your background and just having

worked with you, I believe that you have the skill to negotiate well

for our small businesses, but I want to make sure that we are able

to empower you to do that job.

With that, I am going to thank you all for appearing and for

speaking, and I now I am going to go to the second panel. Thank

you.

Ms. MCDONALD. Thank you.

Mr. GREINER. Thank you.

Chairwoman KELLY. Good morning, and thank you very much for

being patient. And, Ms. McDonald, I am glad you are staying here

with us, because that indicates the strength of your commitment

18

to what we are trying to do here this morning, so I thank you very

much for being here.

Our second panel has Dr. Ann Parker Maust. She is the president of Research Dimensions of Richmond, Virginia, and we welcome you, Dr. Maust.

Dr. MAUST. Thank you.

Chairwoman KELLY. Our next panelist is Mr. Giovanni

Coratolo—I guess I got that right, I hope—director of the Small

Business Council here in Washington. Our next witness is Mr.

John Hexter. Mr. Hexter, I appreciate your comments, and picked

up a few when I was reading your testimony. I am glad to have

you here today. He is president of Hexter and Associates of Cleveland, Ohio. And our final panelist is Mr. Scott Lara. He is the Director of Governmental Affairs at the Home Care Association of

America from Jacksonville, Florida.

Welcome, all of you. We welcome your testimony here today, and

let’s begin with you, Dr. Maust.

STATEMENT OF ANN PARKER MAUST, PRESIDENT, RESEARCH

DIMENSIONS, RICHMOND, VIRGINIA

Dr. MAUST. Thank you, Chairwoman Kelly, Congressman

Pascrell, and members of the Subcommittee. I am pleased to be

here today to provide my perspectives on the Regulatory Fairness

Program and the National Ombudsman’s 2000 Report to Congress.

I currently serve as vice chair of the Small Business Regulatory

Enforcement Fairness Board for the South Atlantic States.

I am also a member of the Virginia State Leadership Council for

the National Federation of Independent Business, and served as

Chair of the ’95 Virginia delegation to the White House Conference

on Small Business. Our Virginia delegation was very active in

pushing for regulatory reform for small businesses.

We have been active supporters of SBREFA. We feel this legislation holds much hope for our small business community, not only

in terms of better communication with Federal agencies on enforcement and compliance issues but also as an avenue to voice concerns and have those concerns thoughtfully addressed before the

various Federal agencies.

We do feel, however, that we have lost much momentum this

year, as structural changes from the top of the SBREFA infrastructure have funneled down through the system, with small businesses in our State ultimately being the loser. In the face of these

changes, however, we applaud the efforts of the new National Ombudsman and her staff in preparing a well-documented and thorough annual report, produced in a timely fashion under very difficult circumstances, reflecting the best input to date from the

small business community.

From my perspective on the South Atlantic RegFair Board, ensuring the success of this program hinges on the careful nurturing

and development of a strong national infrastructure to provide support, guidance and assistance to the network of RegFair Boards. As

you know, small business owners are critical partners in this structure, and this partnership is what helps with the implementation

of SBREFA and provides it so much of its unique strength.

19

We must remember, however, that small business owners are

just that. They each own a business that requires considerable demands on their time, and the time that they devote to this program, while willingly given, must be backed up with strong staff

support from the top in order to ensure viability of the entire structure. When such support begins to waiver, the entire system is

jeopardized. This is indeed what I believe began to happen this

year, first with the departure of the National Ombudsman, then

followed by the significant time delay in the reappointment of a

new ombudsman.

Let me illustrate for the Subcommittee. On March the 4th, ’98,

I testified before this Subcommittee that I believe State industry

trade associations are a critical vehicle in the information dissemination process to the grassroots small business owner. I noted that

we had a huge job yet to do in educating the leadership of these

State associations about SBREFA, and until the leadership understands the value and power of this act for their respective memberships, the process of information dissemination will be stymied.

Further, my testimony indicated that outreach to the leadership

is needed, not simply to request that they put a letter about

SBREFA into their respective newsletters, but to inform and counsel about the value of this piece of legislation for their membership.

Such outreach will allow association leaders to link the opportunities under SBREFA with the regulatory issues brought before them

by their members, and to frame these opportunities in language

and options more familiar to the small business member.

The importance of such outreach to State associations, I believe,

rests with the fact that we can’t assume that the results of meetings with national trade associations will automatically filter down

to the State leadership. As such, while I think all information dissemination vehicles are important, and that programs like Association of the Month are a vital component in this initiative, particularly for national associations that don’t have State affiliates, I still

feel that we have much more intensive outreach that is needed at

the State level.

I would like to share with you what progress I believe has been

made in this type of outreach initiative since the March ’98 hearing, and how important the national infrastructure is in terms of

ensuring that small businesses at the grassroots are informed of

their rights under SBREFA. Please reference the outreach section

of the National Ombudsman’s 2000 Report to Congress, as this section indicates the Office of the National Ombudsman and the

RegFair Boards held Business Leader Roundtable Discussion

Groups across the country to build stronger relationships with

small business trade associations at the State and local levels.

As the report indicates, five roundtables were held between January and June of ’99. Suddenly, in June ’99, this series of

roundtables comes to a halt, and to this date, to my knowledge, no

others have been held, although it is my understanding that an additional series is planned for the future. What is significant about

the June ’99 date? It is at this time that the announcement was

made that the National Ombudsman was leaving his office to take

another position.

20

In Virginia, in the months leading up to the departure of Mr.

Barca, we were making considerable progress. We were building

important connections within the wider business community, and

had begun to obtain the support of several very influential organizations within our State for this initiative.

In September ’98 we had held a very successful public hearing

with testimony from a diverse group of small businesses. We were

on a momentum path. Our efforts were gathering steam, and more

and more small business owners and their organizations were becoming aware of SBREFA, the RegFair Boards, and the mechanism

for registering their concerns under the Act. In addition, our

RegFair Board was becoming much more cohesive and knowledgeable.

As part of this momentum, we were scheduled to hold a Business

Leader Roundtable in July of ’99. Working with the SBA district

office and the State office of the NFIB, we had already begun informally notifying some of our State associations about this meeting.

Abruptly, it was cancelled, not because of lack of interest but because of the other demands engendered by changes at the top.

In short, we have yet to gain the momentum in Virginia that was

lost at this time approximately a year ago. I believe that this momentum could have been regained if there had been a shorter period of time between Mr. Barca’s departure and the announcement

of a successor, or certainly if the work had been allowed to continue

under the able hands of the staff still in place to execute the program.

In summary, I still believe that these roundtables are needed,

and I assure the National Ombudsman that we will do all we can

in Virginia to continue to support this initiative. We feel that these

roundtables can play a vital role in strengthening the entire

SBREFA process.

By building strong, viable linkages with business leaders in the

various States, an automatic feeder network or system is put into

place, not only for informing the small business owner, the ultimate target of the Act, but also strengthening the public hearing

process. In short, with better informed State leadership, more productive input into the public hearing process can be assured, thus

hopefully ensuring that realistic and critical views of the various

industry sectors are fed into the public hearing process.

Chairwoman Kelly and members of the Subcommittee, let’s

strengthen the SBREFA network, not only by ensuring continuation of these roundtables, but also by ensuring that these

roundtables are linked to a public hearing process in a thoughtful,

analytical manner. Let’s also do whatever we can to ensure the creation of a strong national infrastructure. This does cost resources.

I believe that the substantive information resulting from the

small business community through this process will be better and

more representative than is currently obtained through regional

public hearings, which are costly for small businesses to attend and

often reflect the testimony of professionals randomly pulled into

the process rather than thoughtfully planned and provided for.

Thank you for your time and thoughtful consideration of the testimony.

[Dr. Maust’s statement may be found in appendix.]

21

Chairwoman KELLY. Thank you so much, Dr. Maust. As usual,

very concise and very precise. Thank you for speaking.

Next we will turn to Mr. Coratolo.

STATEMENT OF GIOVANNI CORATOLO, DIRECTOR OF SMALL

BUSINESS POLICY, U.S. CHAMBER OF COMMERCE, WASHINGTON, D.C.

Mr. CORATOLO. Thank you, Chairwoman Kelly, and thank you,

Congressman Pascrell. I am Giovanni Coratolo, Director of Small

Business Policy for the U.S. Chamber of Commerce. We applaud

this Subcommittee’s dedication and interest in reducing the regulatory burdens faced by the Nation’s 24 million small businesses.

I am here today representing the Chamber’s small business

membership. These are business owners who are faced with the

daily challenges of complying with thousands of pages of regulations that are generated by almost 40 government agencies on a

yearly basis, and that is just what is produced at the Federal level.

If you measure the cumulative effect of all Federal, State and local

regulations on the small business owner, the prodigious task of

compliance becomes overwhelming.

Typically, the small business owner is the human resource director, the maintenance engineer, the industrial hygienist, as well as

serving in many other positions that demand in-depth understanding and meticulous implementation of a plethora of rules and

regulations. The small business owner is faced with the presumption of knowledge of an array of confusing and sometimes conflicting mandates from the regulators, with heavy penalties for

noncompliance.

Small businesses bear a disproportionate regulatory burden, as

we all know. According to the report by the Small Business Administration, the total cost of Federal regulations per employee was 50

percent greater for firms with less than 20 employees than for

firms with more than 500 employees.

There is not compelling evidence that the disproportionate burden has at all subsided. Just this year alone, OSHA, in its proposed

ergonomics final rule, will likely add hundreds of pages of regulatory burden with vague guidelines on implementation and compliance. Conservative estimated cost to small business, $45 billion.

Now four years old, the Regulatory Fairness Program, RegFair,

offers an incentive for agencies to change their culture and treat

small businesses as partners. The primary mission of the program

is to encourage a regulatory enforcement environment that is fair

to small business. It is the current intent of the National Ombudsman to engender greater compliance by more consultation, communication, partnerships, accountability and feedback on behalf of the

small business and Federal agency enforcement communities.

The framework of this program remains unchanged since its inception. Coordinated and supervised by the statutory ombudsman

for the Small Business Administration, the boards’ activities include soliciting and gathering subjective views and comments from

small businesses about their interactions with Federal agencies in

their compliance efforts.

In order to encourage agencies to make changes, the RegFair

program required the National Ombudsman to file an annual reVerDate 11-MAY-2000 12:59 Feb 28, 2001 Jkt 069959 PO 00000 Frm 00025 Fmt 6633 Sfmt 6602 E:\HEARINGS\67562 pfrm02 PsN: 67562
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port to Congress on agency evaluation of enforcement and compliance activities. The annual report provides information and a rating system that praises those agencies that have successfully implemented cultural change.

Agencies that have resisted cultural change that would have allowed greater sensitivity to regulatory enforcement concerns of

small businesses are singled out in the report for criticism. Maybe

this is an area we can look at to find a little more teeth, and to

subjecting agencies to comply better.

We applaud the National Ombudsman’s efforts to partner with

organizations like the U.S. Chamber of Commerce to provide outreach and marketing of the program and the hearings. Based on

materials provided to us by the ombudsman’s office, we have recently developed and have widely disseminated to our members a

user-friendly reference brochure, and you will see an attachment

there, and it is titled, ‘‘When the government comes knocking on

your door, know your rights to regulatory fairness.’’ We also have

just recently implemented an e-mail notice to a small but growing

sample database of our membership that will announce each upcoming regulatory fairness hearing in the regions and encourage

their participation.

Even though we feel the overall program has been beneficial for

small businesses, it has been only incremental in changing the culture of the Federal agencies’ compliance activities from the ‘‘gotcha’’ mentality to the consultant or compliance advisor. If you

look at the back of the attachment, you will notice the Chamber

listed the Federal organizations with their respective regulatory

help phone numbers, agency ombudsman contacts, agency web site

home pages, and small business help links.

Some agencies have attempted to provide a wealth of web resources directed to small business, in order to provide information

on regulatory compliance. You will also note that agencies like the

Department of Agriculture, the Department of Transportation, and

Health Care Financing Administration provide little or no targeted

help for the small business community via their web sites.

Another concern of the program is the lack of broad-based small

business participation. We attribute this to the following: Even

with the most creative efforts to market the program, it is not

widely known or understood within the business community. Small

business owners feel they are no match against the resources of the

Federal agency. Small business owners fear retribution on behalf

of the Federal agency, and faced with the knowledge that the panel

can only report their findings to Congress and not change the outcome of a compliance disposition, small business owners feel voicing their grievance, regardless of its merits, is not a good use of

their valuable time.

As far as our recommendations, we feel the program can best be

served by stepping back and viewing the totality of SBREFA in the

regulatory process. The two departments within SBA that are responsible for carrying out the responsibilities of the small business

community under SBREFA are the Office of Advocacy and the Office of the National Ombudsman.

Each office must engage in duplicative and simultaneous efforts

in their mission to encourage Federal agencies to invoke a friendVerDate 11-MAY-2000 12:59 Feb 28, 2001 Jkt 069959 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 E:\HEARINGS\67562 pfrm02 PsN: 67562
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lier environment for small business to comply with the plethora of

Federal regulation. Each office must establish outreach into the

small business community in order to achieve their prospective objectives.

The Office of Advocacy needs feedback from small business owners in the early stages of rulemaking to determine what impact

these rules will have, and if there are alternative ways of achieving

the same agency objectives while mitigating their impact on small

business. The National Ombudsman needs the same small business

outreach in order to fulfill the objectives of her program. Each office must deal with high level contacts within Federal agencies to

act as liaisons for the small business community.

We strongly feel the interests of the small business community

would best be served by combining the RegFair Program under the

Office of Advocacy’s General Council and having one coordinated

force to administer the rights that SBREFA has created. In this

time of budget constraints, splintering the effectiveness of the full

potential of SBREFA by having two programs does not maximize

the potency and effectiveness that could be accomplished by unifying them under the guidance and direction of one office.

Furthermore, we feel that the combined overall budget of both

programs should be a line item designation in the SBA budget.

This would provide more independence from external pressures

that adversely affect sensitive decisions that must be made on behalf of small business regulatory reform. Even though the funding

for the SBA has increased over the last several years, the portion

allocated to Advocacy has decreased and the portion attributed to

the RegFair Program has remained constant. There should be a reallocation of funding within the SBA budget to fully fund both programs as a line item.

The Chamber appreciates the opportunity to comment on this

important program for small business. We especially applaud the

interest shown by Congress and this Subcommittee through hearings such as this, that clearly signal that Congress will do all that

it can do to make sure the law works as you intended it to, and

so that small business will be the beneficiaries.

Thank you, Chairwoman. Thank you, Congressman Pascrell.

[Mr. Coratolo’s statement may be found in appendix]

Chairwoman KELLY. Thank you very much, Mr. Coratolo. I let

you run over because I was watching your testimony, but if it is

possible, we really would like to adhere to that 5-minute rule.

Mr. Hexter, we would like to hear from you next.

STATEMENT OF JOHN HEXTER, PRESIDENT, HEXTER AND

ASSOCIATES, INC., CLEVELAND, OHIO

Mr. HEXTER. I think he covered a couple of my points, so I can

cut them out.

Madam Chairwoman, Congressman Pascrell, thank you for allowing me to testify today. My name is John Hexter, and I am the

chairman of National Small Business United. I have the opportunity and pleasure, in addition, to serve as a member of the Region V Regulatory Fairness Board since its inception.

Today’s hearing regarding the Regulatory Fairness Program is

critically important to the future of the small business community.

24

It has been over four years now since Congress passed, without dissent, and the President signed into law, SBREFA. Now, NSBU

worked for this passage, and it was a highly important item at the

White House Conference on Small Business in 1995, and we consider it one of our greatest successes that in the last few years we

have added teeth to the Regulatory Flex Act, 1980.

We have previously mentioned the impact of regulation on enterprises with fewer than 20 employees, and that represents the vast

majority of NSBU’s 65,000 members. No matter the perspective,

the report from the SBA found that the total costs of Federal regulation are generally 90 percent higher for small companies than

they are for large companies.

With 30 more hearings now behind us, I think it is a good time

to assess the success of that program and to suggest ways that this

effort can be improved. Understandably impatient with the bureaucracy and anxious to provide results and relief, we must view

the program as a mixed success. We see great potential, to date

largely unfulfilled, to make SBREFA the tool that Congress and

the small business community envisioned.

The problems we see stem essentially from two glaring shortcomings in the current program: one, a lack of sufficient resources;

and, two, insufficient authority to address specific issues and complaints.

Small businesses are mostly unaware—we have talked about

this—that there is a mechanism to address their regulatory concerns. Information about board hearings, the kinds of issues that

are being raised, and the relief that is possible, needs to be more

widely circulated. I don’t have to beat up on that.

There is a great deal of apprehension in the small business community about making our disaffection with the Federal Government known. A chilling effect does exist. Small businesses are concerned that any number of negative consequences may follow if we

take on a large government agency in a public forum. Retribution

is serious, real, and a legitimate concern. Small business owners

are uncomfortable about sharing business information with Federal

agencies. You have pointed this out already. We must work to find

a solution to that issue.

Returning again to the issue of impatience, entrepreneurial impatience I believe is the largest inhibitor of small business participation in the Regulatory Fairness Board process, because it has to

do with results. That is, from a small business perspective, can my

participation make my problem go away in the relative short term?

Because I will be out of business in the long term.

The answer, in most cases, I am afraid is no. How can a small

business owner justify traveling hours to an out-of-town hearing, or

even writing an extensive letter to an organization that is only

statutorily sanctioned to gather comments and issue a general report sometime next year? It is time, I believe, that we give another

look at the law in this regard. Small businesses need to be assured

that someone in this process has the authority to act in the most

egregious and pressing cases. I urge the Committee to consider initiating this discussion.

Further, the Office of the Ombudsman is crippled by dramatic

underfunding. In order to achieve the objectives Congress unaniVerDate 11-MAY-2000 12:59 Feb 28, 2001 Jkt 069959 PO 00000 Frm 00028 Fmt 6633 Sfmt 6602 E:\HEARINGS\67562 pfrm02 PsN: 67562
25

mously voted, the budget must be increased markedly. A handful

of staff people cannot possibly hope to both promote the program

and meaningfully address the regulatory enforcement issues encountered by millions of small businesses nationally, especially if,

as we recommend, the underlying statute is changed to enhance

the authority of the ombudsman. The resources of the office will be

doubly insufficient.

The dangers of continuing along the current path are substantial

to small business. Because of the lack of resources for outreach and

the lack of authority to actually address real problems, small businesses are not coming to the ombudsman or fairness boards in

great numbers. We are already seeing Federal agencies and others

pointing out those low response rates, suggesting, therefore, that

small business regulatory concerns are overblown. Allowing

SBREFA to limp along, as it currently is, undermines the cause of

small business regulatory fairness rather than promotes it.

While there are many positive aspects to the current and previous annual National Ombudsman’s Reports, the reports have not

measured up to our expectations. The Ombudsman’s Reports

should applaud all efforts to reduce the burden of regulation on

small business, but I believe that picture is not quite as bright as

the reports may lead some to believe.

NSBU works with Federal agencies regularly. We know the individuals at EPA, OSHA, and the IRS who are doing their very best

for small business. These individuals are lonely and too few in

number. The reason they are lonely is because their actions are not

embraced and fully supported by the rest of the agency. We are

talking about changing the culture. No matter the quality of individual or the quality of a single pro-small business program, we

have not overcome this regulatory culture. The Ombudsman’s Report must not shy away from the tough criticism of agencies when

necessary.

The Fairness Program is still a work in progress, but a very important one that must be accelerated and strengthened to become

truly effective for small business. The program needs more resources; it needs more authority. We cannot let this experiment falter.

Let me conclude with praise and support for the efforts made by

my fellow volunteers who make up the Regulatory Boards, and I

also want to recognize the efforts of a number of excellent staff who

have shown great dedication and perseverance to keep the program

moving forward despite its lack of resources. On behalf of NSBU,

I would like to thank you, Chairwoman Kelly, Congressman

Pascrell, and the entire Committee for allowing me this opportunity to testify.

[Mr. Hexter’s statement may be found in appendix]

Chairwoman KELLY. Thank you very much, Mr. Hexter. I, too,

really want to go on record as lauding and very appreciative of the

people who take their time out of their business to sit at the

roundtables and try to help us in small business get our feelings

and our information out their and known, and work with the agencies. That is a very tough job to do, and it is one that we need to

have people do, and I am glad there are people willing to do it.

With that, let’s go on to you, Mr. Lara.

26

STATEMENT OF SCOTT LARA, DIRECTOR, GOVERNMENTAL AFFAIRS, HOME CARE ASSOCIATION OF AMERICA, JACKSONVILLE, FLORIDA

Mr. LARA. Good morning, Chairwoman Kelly, Representative

Pascrell, and esteemed members of the Subcommittee. My name is

Scott Lara, and I am the Director of Governmental Affairs for the

Home Care Association of America. HCAA represents over 250 locally owned and operated home health agencies across the United

States.

I deeply appreciate the opportunity to testify before you today regarding the Small Business Administration Regulatory Fairness

Program and its benefit to America’s small business men and

women. I would first like to commend you, Chairwoman Kelly, for

holding this hearing. It is important for you and for members of

the Subcommittee to know the importance of the Regulatory Fairness Program.

Under the leadership of former ombudsman Peter Barca, and

now Gail McDonald, the Regulatory Fairness Program has provided the opportunity for small business men and women to voice

their concerns over the excessive undue paperwork burdens and

about overzealous and unfair enforcement actions by Federal agencies.

Many of HCAA’s members, who are small business men and

women who own home health agencies, have taken the opportunity

to testify before the Regional Fairness Boards throughout the country. Without the Regional Fairness Boards, there would be no avenue for them to comment about the excessive regulations and paperwork requirements that have been placed on the home health

industry by the Health Care Financing Administration, HCFA. I

have personally taken the opportunity to testify before the Regional

Fairness Boards, most recently in Houston in April; and in Nashville, that was in 1998.

I would first like to discuss two of the main comments made to

the Regional Fairness Boards from home health agency owners:

first, the Outcome and Assessment Information Set, OASIS;

HCFA’s failure to protect patient choice. And hopefully in the follow-up I can discuss the 50–50 payment method.

The first issue is the OASIS information, which consists of hundreds of questions, over 50 pages of paper comprising several data

collection forms that home health nurses are required to complete

on each home health patient. It takes approximately three hours

for a home health nurse to complete the Start of Care form alone.

Now, I have included the OASIS forms with my testimony, and as

an example of the amount of paperwork that is required, allow me

briefly to demonstrate the amount of the OASIS forms.

Chairwoman KELLY. It needs to be shown as a part of the record

that this form is unrolling from the witness table all the way to the

back of the room and beyond. It looks as though it might go all the

way across the bridge to Arlington.

Mr. LARA. So, as I said, Madam Chairwoman——

Chairwoman KELLY. Excuse me, Mr. Lara, but I can’t believe the

length of this form. We have now wrapped this form around the

room, and it is continuing on. That needs to be a matter of record,

absolutely.

27

Mr. LARA. Thank you, Chairwoman.

Chairwoman KELLY. Thank you, Mr. Lara.

Mr. LARA. And I would request three minutes be restored to my

time. [Laughter.]

Chairwoman KELLY. We will see about that.

Mr. LARA. Thank you. In consideration of time, please allow me

to present only two examples of the many unnecessary and improper questions in that OASIS form that HCFA is mandating

home health agency nurses to ask our Nation’s Medicare beneficiaries.

First, a life expectancy question: A home health nurse is forced

to ask or to observe if the patient’s life expectancy is greater than

or less than six months. Secondly, the behaviors demonstrated at

least once a week, and I am paraphrasing these. You can refer to

my written testimony: Either having memory deficit; impaired decisionmaking; verbal disruption, which would include yelling, threatening, excessive profanity, sexual references; physical aggression;

disruptive or infantile behavior; delusional; or none of the above.

Now, clearly some paperwork is needed when treating Medicare

beneficiaries, but the OASIS data collection effort is a result of

HCFA’s overzealous attempt to collect highly personal information

which is not relevant to patient care, but instead is targeting to

make home health nurses part of the Census Bureau. Now, how

can a nurse or any health care professional determine how long a

patient will live?

Besides being unethical and overly burdensome, HCFA is now reimbursing home health agencies only $10 for each OASIS data set

that the home agency collects. This is a far greater cost than just

$10 to collect this information. Now, equally important is that

many good nurses who should be in the industry have opted not

to serve because they became a nurse to take care of patients, not

to become a spy or a paperwork pusher.

Now, the second issue is regarding the unethical referral processes by hospitals, which have resulted in denial of patient choice

as mandated by the BBA of ’97. By way of background, the BBA

of ’97 sought to prevent hospitals from denying patient choice by

systematically downstreaming patients into their own hospitalowned home health agencies. The BBA of ’97 mandated two things:

first, that hospitals disclose their financial interest to patients; and,

secondly, that hospitals provide a list of home health agencies in

the community to patients being discharged from the hospital who

will require doctor-certified home health services.

We have found that many hospitals are openly violating the intent of Congress, and in fact are further denying patient choice by

placing their hospital-owned agency frequently at the top of the

list; placing their hospital-owned agency in bold, and large font,

while placing the locally-owned and operated home health agency

in non-bold, lower type font; stating that their agency is fully licensed and certified by Medicare, while implying that the locallyowned agencies are not; stating that the hospital-owned agency is

accredited, implying that the locally-owned agencies are not; and

stating that they can only guarantee the quality of the services you

will receive by the hospital-owned home health agency, and cannot

28

guarantee or certify the quality of other home health agencies on

the list.

This coercion tactic at the patient’s most vulnerable moment

places doubt in the patient’s mind about the quality of care provided by the locally-owned and operated home health agencies.

Hospital discharge planners are not informing the patient of what

agencies are in the community and which one that the doctor recommends regarding home health care.

In summary, hospitals are denying patient choice by using the

patient notification as a blatant marketing tool. Hospitals are improperly misleading their patients by stating they cannot guarantee any care except theirs, and then conveniently refusing to tell

the patient whom their doctor recommends and feels which agency

is best qualified to provide the care they need.

Our recommendations: HCAA urges this Subcommittee to hold a

hearing this year specifically about the overzealous regulations and

burdensome paperwork requirements that HCFA is placing on

home health agencies. HCFA Administrator Nancy-Ann Min

Deparle should be asked about placing unrealistic burdens on home

health agencies without reimbursing those agencies for completing

that paperwork.

HCAA urges the Subcommittee to continue their support of the

Regulatory Fairness Program. Without this important program,

there would not be a vehicle to voice concerns about burdensome

regulations and paperwork such as the OASIS data collection effort.

HCAA requests that this Subcommittee take the lead by crafting

legislation to enforce the provision of the BBA of ’97 regarding hospital self-referrals; providing specific language on the notification to

patients which specifically outlaws hospital marketing, propaganda, and horn-blowing on the services of their hospital-owned

agency, and it should be on one page; and mandating that the patient be informed of their doctor’s recommendation for a home care

provider, and this physician designation should also be on the same

page. We would recommend that legislation state that those hospitals who are found in violation of denying patient choice would

lose their Medicare provider number.

In closing, HCAA deeply appreciates the opportunity to testify

before you today. We applaud Ombudsman McDonald, Mr. Jere

Glover, John Greiner, and the entire staff of the SBA for their leadership and commitment to our Nation’s small businesses. We also

applaud this Subcommittee and you, Chairwoman Kelly, for conducting this hearing today. Your commitment to the small business

men and women of America is a strong sign that Congress recognizes and is willing to deal with Federal agencies who are clearly

abusing their power.

I have included with my testimony the October 15, 1999 Heritage

Foundation Lecture No. 646 that talks about the OASIS data collection effort. Thank you. I appreciate this opportunity.

[Mr. Lara’s statement may be found in appendix]

Chairwoman KELLY. Thank you very much, Mr. LARA. I am beginning to wonder if you talked to my husband before you conducted your testimony, because my husband, who is in a totally unrelated business, also has to fill out a lot of forms. And he keeps

29

scratching his head and saying to me, ‘‘Sue, why do I have to fill

these forms out? Who is getting this information, and why? It takes

me hours to fill these forms out about my employees, and I’m not

even sure my employees know that I have to divulge this information to the Federal Government.’’

Good question, Mr. LARA. I don’t know, either, but if we can, we

are going to try to get at the root of that, because that is what this

Committee is all about, so I thank you very much.

Mr. LARA. If I may comment on that, Chairwoman Kelly, it is

amazing that you said that, because these patients that are in the

home do not know that the home health nurse, who is a trusted

clinician, is observing them about disruptive behavior, sexual references. And of course 99 percent of our patients don’t have that,

but to have someone who is trusted in your home being a spy for

the United States Government, specifically HCFA, is an outrage.

Chairwoman KELLY. Well, it certainly isn’t open democracy, is it?

Mr. LARA. No, ma’am.

Chairwoman KELLY. Well, at any rate, I am delighted to hear

from you. I want you to answer me a question, another question,

answer for me another question. I would like to know how, right

now, the ombudsman’s office is helping you, because you closed in

thanking them. How are they helping you address these concerns

right now, and what is the office doing to assist you?

Mr. LARA. Let me say that the office is doing great work on behalf of my industry. Peter Barca spoke to my association two years

ago in Las Vegas at our convention, and Ms. McDonald has committed to speak to our trade association in Biloxi, Mississippi in

July. So they are reaching out to us, to let us know what is available.

Secondly, John Greiner has been working very hard, along with

Jere Glover and Ms. McDonald, about setting up a forum between

the SBA, my trade association along with my colleague trade associations, and HCFA, to iron out some of these problems regarding

the 15 percent, the additional cut that is coming October 1, 2000;

regarding the 50–50 payment method, where government is only

going to pay us 50 percent up front, and then at the end of the 60

days pay us the remaining 50 percent, which no one can afford to

be paid 50 percent up front and then 50 percent at the end and

stay in business, when you have overhead. And they are also helping us with the surety bond.

So they are working very hard. We talk on a frequent basis, and

they have helped us immeasurably.

Chairwoman KELLY. Good. I am glad to hear that.

Ms. McDonald, I am glad you are here to hear that praise.

I find it interesting, again, that you are talking about getting 50

percent up front. I find it very curious that the U.S. Government,

with as many tax dollars as we take in, tries to live on the ‘‘float’’

from other people, so I am glad to hear you are working on that,

Ms. McDonald.

Mr. Coratolo, I want to go to your testimony right now. You

spoke about the fact that the small businesses are faced with a lot

of vague guidelines on the implementation and compliance, on the

rules and regulations, and that you feel that the Office of Advocacy

30

and the Ombudsman need feedback early in the process. Now, is

that happening with the roundtables?

Mr. CORATOLO. Well, it is to an extent, but there is a lot of duplicative efforts being done through having both offices separate. You

know, we feel that outreach to a small business community

shouldn’t have to take place in two separate offices. They should

be combined. They should have one streamlined way of outreaching

small business. Certainly they, the National Ombudsman as well

as Jere Glover has leveraged his position with the different associations, with the U.S. Chamber. We are always invited to the

roundtables. We always try to disseminate that information, and

they are widely attended.

Chairwoman KELLY. Well, then, that is good. I think obviously

the ombudsman is struggling right now to get more information out

into the community. I would hope the Chamber would work with

the ombudsman to get information, and I know that you probably

are.

One thing I want to throw in here, because it is my pet project,

is that with the CORA legislation passage, if we can get that office

in place, that will help because we can pick up the feedback from

the small businesses of the Nation and talk with an office that

would be in the General Accounting and would be able to intercede

before the rules and regulations become absolute. After the comment period but before they become absolute, that office could inform Congress about what is going on.

With the plethora of rules and regulations that are being promulgated over there by the agencies, I think we have got to have some

control. So I am hopeful that, working together with the Office of

Advocacy, with the Ombudsman, and having this CORA office in

place, those three things can be like the three legs of a stool that

is holding up and supporting the small businesses of the Nation.

And I also feel that a lot of the problems with the vague guidelines

can be corrected through that office. I think that, again, we could

address the vague guidelines and the problems of implementation.

I have got a couple of other questions that I wrote out here that

I wanted to ask you, and that goes back to one of the comments

I made. How do you think we can address the problem of marketing this program? Have you got any suggestions for that?

Mr. CORATOLO. Marketing the program is difficult. You are trying to get the attention of people that are always on the go. They

don’t necessarily have time. A business person that is not truly involved at the upper levels of advocacy and Federal regulation tends

not to have the time to visit web sites, to look at rules, to look at

regulations.

The other thing is, small businesses tend to be more focused on

local regulation, because you have got to remember we are not only

competing with Federal guidelines, but there are local and State

guidelines that tend to be—also take them off, you know, take

them on as far as their time. A lot of times they will be facing a

compliance officer and they feel that, ‘‘Well, you know, there is so

much that I don’t know, that if I open my doors, while they got me

on this one, while this may be a cost of doing business, there may

be 10 other things that they haven’t seen or they forgot.’’

31

So it is a tough thing to market. It is a tough program to market.

I think we have to look at it on a statistical basis. Every time we

get a comment, there is probably 100 m more people back there

that had the same comments or the same concerns. We are doing

all we can to market the program.

Mr. LARA. If I can respond to that also, Chairwoman Kelly, the

fear of retribution for people coming forward is amazing. I know

with the home health agencies I represent, they are scared to come

out and say, a HCFA surveyor or an auditor came out and denied

this, and they are scared to death that they are going to swing

right back around and punish them further.

Chairwoman KELLY. I think that is a normal fear of anyone who

is in business, because there has been this long history of the ‘‘Ah,

ha, gotcha’’ mentality. That is why I feel so strongly that we have

got to have some help here for our small businesses. We are drowning, I think.

And with that I want to talk about the historical perspective, and

I am going to go to you, Dr. Maust. Dr. Maust, in 1998 you told

us you only had one appraisal form filed and three inquiries which

didn’t result in appraisal forms being filled out. Do you know if the

number of filings in Virginia has increased?

Dr. MAUST. I don’t believe they have. Maybe one or two more. I

don’t think we have had a lot of appraisal forms filed.

Can you help me with that, John?

Mr. GREINER. Yes, if we can get back to that.

Chairwoman KELLY. Why don’t we get back to that, and I will

ask you another question.

Dr. MAUST. Okay.

Chairwoman KELLY. I want to know if you know how your national trade association informs its members about SBREFA.

Dr. MAUST. You are talking now the NFIB?

Chairwoman KELLY. Right.

Dr. MAUST. Obviously we have national newsletters, we have

State meetings, we have national meetings and that type of thing.

The issue here, and I think maybe I mentioned this before, NFIB

represents a wide diversity of small businesses, and these regulatory issues are often obviously very industry-specific, and because

of that they are complex to the industry. And the businesses in

those industries’ linkage with their State associations, the State associations can, I think, target those issues more specifically and

can in a way run protection and interference from some of the owners themselves in terms of some of these issues. That is why I just

think this mechanism is so important, and—well, I will just stop

there.

Chairwoman KELLY. Thank you. In the interests of letting Mr.

Pascrell speak up here, I am going to stop my line of questioning.

We will talk in a minute.

Go ahead, Mr. Pascrell.

Mr. PASCRELL. I just want you folks to go away from here knowing that we want to address—we think that this could be such a

great thing for small business, as well as the Advocacy Office, we

want it utilized. We want to promulgate, you know, what is available, so that people feel armed, if I can use that term, to protect

themselves.

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On the other hand, many of these regulations are generated by

us. Some are generated by second and third level management.

You know, what protection do you have? I do notice this, and I can

say, I mean, anybody on the panel can agree or disagree. I do notice in the past few years, not only on the Federal level but the

State level, that these agencies have become less prosecutorial and

more abatement oriented. We are always going to have regulations.

We are always going to have rules. The question is, what are reasonable and what are not, and how do we judge?

Mr. LARA. If I may respond to that, sir—— Mr. PASCRELL. Sure.

Mr. Lara [continuing]. Regarding home health agencies, they

have been overpaid because of the interim payment system, well,

home health agencies have filed for bankruptcy and they have gone

into Federal court and they have told HCFA, ‘‘Please don’t shut our

doors. We know we owe you $1.5 million. Will you take $1 million?’’ HCFA says, ‘‘No, shut them down.’’ So for the Health Care Financing Administration not to take something and just to send that

kind of a message is unbelievable.

Mr. PASCRELL. Well, we certainly don’t want you to go out of

business. You almost described what some HMOs have done. You

know, they don’t pay their bills, either, and we are getting back 15,

16 cents on the dollar in some places, and they have utilized already Federal dollars, our tax dollars. So, I mean, you know—— Mr. LARA. And let me follow up on that, sir. Don’t be misled, as

Members of Congress, that it is your fault. It is not your fault. Certainly you did the BBA of ’97, but HCFA helped you to write that.

And on the surety bond issue, they had plenty of latitude, along

with the 50–50 payment method, they have plenty of latitude, and

they will use that latitude when they want to. But when they don’t

want to, they will throw their arms up and say, ‘‘Well, that’s the

way Congress wrote it. That’s how Bill Thomas wrote it.’’ That is not true. They have the authority and they refuse to use

it. So please don’t be misled that ‘‘Oh, no, we did it,’’ and beat yourselves up, because certainly on some things Congress has to do

things legislatively, but on the other hand, HCFA does have the

authority to do it. And, Chairwoman, I would respectfully request

that you call Nancy-Ann Min Deparle, or ask Mr. Talent to do that,

and ask her some of these questions. I would be honored to testify

at that hearing.

Mr. PASCRELL. I think you ought to run for Congress. [Laughter.]

Mr. LARA. I am planning on it, sir. Thank you.

Mr. PASCRELL. I mean, you go straight to the issue.

Mr. LARA. Thank you, sir.

Mr. PASCRELL. I have no other questions. Well, I have other

questions but we have to go and vote. Thank you, all of you.

Chairwoman KELLY. I thank all of you, also.

I just wanted to ask Mr. Hexter, I did use some of your testimony before. I just want to talk with you a minute about the public

relations awareness that you think we could—have you got any

suggestions?

Mr. HEXTER. I do. One of the issues that you raised early on was

how to get the attention of the agencies, and it occurs to me that

Ms. McDonald waived the Miranda rights, loosely used. But it

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seems to me that anytime the interaction between the government

and the individual business owners is, from the business owners’ perspective, as limited as possible, we would rather not know and

not have to interact.

But at the point at which we do encounter those agencies, that

is when the Miranda rights are important, and it seems to me that

we could get the agencies’ attention if, A, they had to deliver the

Miranda rights with the visit and, B, that that in fact put a delay

in the enforcement action, unless there is a health and safety issue

that is clear and present, so that the attention of the business

owner was drawn to the fact that there is an agency out there that

could help and could in fact run interference. That would force the

agencies themselves to take a closer look at their enforcement actions and make sure they have something that was valid and

would last.

It bothers me that we get harassment enforcement by what I will

refer to as rogue agents who haven’t bought into the new culture,

so you have got to find a way to delay that process, and I think

you will get the attention of the people you need to get the attention of. We don’t need to inform the entire business community, as

Ann indicated, if it doesn’t apply to them. We need to make sure

that the people it applies to know that there is help out there, and

that should be at the point of the encounter. Every agency should

deliver that Miranda rights, and then have to step back so that the

employer/business owner could cure the problem.

Chairwoman KELLY. Well, if I remember correctly, there is a 30-

day time period for compliance once you are notified that there is

a problem with an agency. However, I am going to look into that

because I am not really sure of it. But if I understand what you

just said, you feel that an agent going in from an agency to a small

business should allow the small business first of all to understand

where there is a problem that brought the agent into the business,

and then there should be a wait period of time for that business

to be allowed to correct and work with the agency so they can correct, prior to anything else happening. Is that what you are asking,

what you are saying?

Mr. HEXTER. That is right. Yes, that is where I am coming from.

Your question dealt with informing everybody about the availability of the tools, and I am saying that the only people who need

to be informed are those that it applies to. We may not be missing

the mark as badly as we think, but we need to make sure that everybody that it does apply to gets appropriately informed and then

can use the tool. It is one thing to say it is out there. It is another

thing to be able to use that tool.

Chairwoman KELLY. Good. I thank you very much. This has really been an interesting hearing. I appreciate all of you being here.

I especially appreciate our roundtable participants.

You are wonderful to come and spend some more of your time

here with us. And I hope that the hearing, I am certainly going to

work to try to make sure that this hearing bears some fruit and

does have some—we are able to get some response from the agencies on this. So thank you so much for your participation, and I

have to bang this gavel here. We are adjourned.

[Whereupon, at 12:13 p.m., the Subcommittee was adjourned.

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