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86–619 2014

DUPLICATION, OVERLAP AND FRAGMENTATION 

IN FEDERAL FINANCIAL ASSISTANCE PROGRAMS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON AGRICULTURE, ENERGY, AND 

TRADE 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

FEBRUARY 6, 2014 

Small Business Committee Document Number 113–054 

Available via the GPO Website: www.fdsys.gov 

SBREP-219 with DISTILLER


Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

BLAINE LUETKEMER, Missouri 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

JAIME HERRERA BEUTLER, Washington 

RICHARD HANNA, New York 

TIM HUELSKAMP, Kansas 

DAVID SCHWEIKERT, Arizona 

KERRY BENTIVOLIO, Michigan 

CHRIS COLLINS, New York 

TOM RICE, South Carolina 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

YVETTE CLARKE, New York 

JUDY CHU, California 

JANICE HAHN, California 

DONALD PAYNE, JR., New Jersey 

GRACE MENG, New York 

BRAD SCHNEIDER, Illinois 

RON BARBER, Arizona 

ANN McLANE KUSTER, New Hampshire 

PATRICK MURPHY, Florida 

LORI SALLEY, Staff Director 

PAUL SASS, Deputy Staff Director 

BARRY PINELES, Chief Counsel 

MICHAEL DAY, Minority Staff Director 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Scott Tipton ..................................................................................................... 1 

Hon. Patrick Murphy ............................................................................................... 2 

WITNESSES 

Mr. William B. Shear, Director, Financial Markets and Community Investment, United States Government Accountability Office, Washington, DC ..... 3 

Ms. Ann Marie Mehlum, Associate Administrator, Office of Capital Access, 

United States Small Business Administration, Washington, DC .................... 4 

Ms. Lillian Salerno, Administrator, Rural Business-Cooperative Service, 

United States Department of Agriculture, Washington, DC ............................ 6 

APPENDIX 

Prepared Statements: 

Mr. William B. Shear, Director, Financial Markets and Community Investment, United States Government Accountability Office, Washington, DC ..................................................................................................... 20 

Ms. Ann Marie Mehlum, Associate Administrator, Office of Capital Access, United States Small Business Administration, Washington, DC .... 36 

Ms. Lillian Salerno, Administrator, Rural Business-Cooperative Service, 

United States Department of Agriculture, Washington, DC ..................... 39 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

None. 

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SBREP-219 with DISTILLER

(1) 

DUPLICATION, OVERLAP AND FRAGMENTATION IN FEDERAL FINANCIAL ASSISTANCE 

PROGRAMS 

THURSDAY, FEBRUARY 6, 2014 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON AGRICULTURE, ENERGY AND TRADE, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:00 a.m., in Room 

2360, Rayburn House Office Building. Hon. Scott Tipton [chairman 

of the subcommittee] presiding. 

Present: Representatives Tipton, Luetkemeyer, Mulvaney, 

Hanna, and Murphy. 

Chairman TIPTON. Good morning. Thank everyone for taking 

the time to be with us today. I would like to be able to call this 

hearing to order. 

To bolster our economy, Congress recognizes that it is essential, 

when possible, to reduce barriers to small business growth. One 

area where small businesses consistently feel that barriers exist is 

accessing capital. Capital is the lifeblood of a business. It is essential for the growth and expansion of every business. Without it, 

businesses are not able to develop products, services, and to be able 

to market themselves or to be able to hire employees. This is particularly true in rural areas where there are limited resources 

available for businesses. 

In light of this, Congress created the Small Business Administration 7(a) and 504 loan programs and the United States Department 

of Agriculture Business and Industry Loan Program to help businesses access capital. Despite this effort to help entrepreneurs, the 

Government Accountability Office has found that overlap exists between these programs, potentially confusing the people they are intended to benefit and wasting scarce taxpayer resources. 

Along with identifying areas of overlap in government financial 

assistance programs, GAO has offered recommendations to federal 

government agencies on best practices to ensure that programs are 

indeed meeting those goals. 

Progress in eliminating overlap, however, is dependent on the 

agencies placing a priority on implementing GAO’s recommendations and best practices. Not only will this help agencies focus on 

programmatic improvements, but it will also provide entrepreneurs 

and government resource partners with a clear understanding of 

the goals of each program and how it can best work for local businesses. 

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2 

Unfortunately, the agencies have not taken GAO’s recommendations as seriously as we had hoped, and we still have three programs, spread across two different federal agencies, that can offer 

similar assistance in the form of government-guaranteed loans to 

similar beneficiaries—in this case—small businesses. 

Today we are here to learn what steps agencies have taken to 

implement GAO’s recommendations to eliminate duplication in the 

federal guaranteed lending programs and what legislative changes, 

if any, are necessary to be able to assist these agencies in their efforts to eliminate overlap and duplication. 

With that, I would like to again thank all of our witnesses for 

taking the time to be able to be here with us this morning, and I 

now yield to Ranking Member Murphy for his opening statement. 

Mr. MURPHY. Thank you, Mr. Chairman. Excuse me for being 

a couple minutes late. I was at the prayer breakfast this morning, 

and beating the motorcade is quite a mission. 

I also want to thank the witnesses for being here with us all this 

morning and giving us an update on what Small Business Administration (SBA) and the U.S. Department of Agriculture (USDA) have 

done to reduce wasted taxpayer dollars as a result of duplicative 

programs. 

Mr. Shear, I am a big fan of the GAO and the work it does to 

evaluate our government’s performance and stewardship of American resources. I was extremely concerned when I read the report 

from a couple years ago identifying 53 potentially overlapping programs across the SBA, USDA, Department of Commerce, and the 

Department of Housing and Urban Development. A handful of 

these 53 were SBA and USDA loan programs, and I understand 

the two agencies along with the administration, have been working 

to improve coordination of programs and services. 

I am particularly interested to hear about these agencies’ efforts 

in two areas. The first is performance measurement. GAO has 

made the case in a number of instances that agencies have been 

unable to produce consistent, reliable, and meaningful metrics on 

their programs’ successes. This makes it incredibly difficult for an 

oversight body like Congress to make meaningful assessments and 

funding decisions. 

My second area of interest is how SBA and USDA are collaborating at the local level to improve services for private lenders and 

for businesses in need of loans. This is where the rubber meets the 

road. It makes no difference what strategies are devised or MOUs 

signed at the headquarters level in Washington, D.C., if they are 

not effectively implemented across agencies at the local level. Now, 

almost two years after GAO’s initial report was issued, I want to 

see how SBA and USDA’s services are more effectively helping 

businesses grow and generate new jobs. 

I again thank the witnesses and look forward to your testimony. 

Thank you. 

Chairman TIPTON. Thank you, Mr. Murphy. 

I believe you are all familiar with the timing lights that we have. 

Start out as green. When there is one minute remaining, will turn 

yellow. And then red, obviously, if you can conclude your testimony 

at that time. 

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3 

And if Committee members do have an opening statement, I 

would ask that it be submitted for the record. 

Our first witness is Bill Shear, the director of Financial Markets 

and Community Investment team at the Government Accountability Office. The Financial Markets team works to improve the effectiveness of regulatory oversight and financial and housing markets. Mr. Shear is a frequent guest before the Small Business Committee based on his audit work for the Small Business Administration. 

Mr. Shear, I would like to thank you for taking the time to be 

able to be here with us this morning. We look forward to your testimony. Please begin. 

STATEMENTS OF WILLIAM B. SHEAR, DIRECTOR, FINANCIAL 

MARKETS AND COMMUNITY INVESTMENT, UNITED STATES 

GOVERNMENT ACCOUNTABILITY OFFICE; ANN MARIE 

MEHLUM, ASSOCIATE ADMINISTRATOR, OFFICE OF CAPITAL 

ACCESS, UNITED STATES SMALL BUSINESS ADMINISTRATION; LILLIAN SALERNO, ADMINISTRATOR, RURAL BUSINESS-COOPERATIVE SERVICE, UNITED STATES DEPARTMENT OF AGRICULTURE 

STATEMENT OF WILLIAM B. SHEAR 

Mr. SHEAR. Thank you. 

Chairman Tipton, Ranking Member Murphy, and members of the 

Subcommittee, I am pleased to be here today to discuss our work 

on programs that provide financial assistance to entrepreneurs. 

In August 2012, we reported information on 52 programs at the 

Departments of Commerce, Housing and Urban Development, Agriculture, and the Small Business Administration. This statement is 

based on our report issued in August 2012 and information we 

have received since from the four agencies and the Office of Management and Budget. 

In summary, we found the following: 

First, federal programs that offer financial support to entrepreneurs, including loans, are fragmented and overlap based on the 

type of support they are authorized to offer and the type of entrepreneur they are authorized to serve. The four agencies and OMB 

have taken steps to collaborate more. However, the four agencies 

have not implemented a number of good, collaborative practices we 

have identified, such as establishing compatible policies and procedures to better support small businesses. The GPRA Modernization 

Act’s cross-cutting framework requires that agencies collaborate in 

order to address issues, such as economic development, that transcend more than one agency, and it directs agencies to describe 

how they are working with each other to achieve their program 

goals. Without enhanced collaboration, agencies may not be able to 

make the best use of limited federal resources in the most effective 

and efficient manner, and small businesses may struggle to navigate these fragmented programs. 

Our second major point is that while the four agencies collect at 

least some information on program activities, they do not track 

such information for many programs, a practice that is not consistent with government standards for internal controls. In addiSBREP-219 with DISTILLER

4 

tion, we found that the four agencies conducted program evaluations of 13 of the 30 financial assistance programs we reviewed. We 

found that SBA has conducted program evaluation studies on five 

of its 10 programs. We also found that USDA has evaluated one 

of its eight financial assistance programs, but the study did not address the extent to which the program was achieving its mission. 

The GPRA Modernization Act requires agencies to set and measure annual performance goals and recognizes the value of program 

evaluations because they can help agencies assess programs’ effectiveness and improve program performance. Without more robust 

program information, agencies may not be able to administer programs in the most effective and efficient manner, and scarce resources may be going toward programs that are less effective. 

We recommended that the four agencies and OMB explore opportunities to enhance collaboration among programs and that the 

four agencies track program information and conduct more program evaluations. Since that report was issued, OMB has established an interagency group, including Commerce, SBA, USDA, and 

others, that aims to streamline existing programs, improve cooperation among and within agencies, ease entrepreneurs’ access to 

the programs, and increase data-based evaluations of program performance. SBA has told us that it has undertaken a modernization 

project for its resource partner data collection system. USDA has 

told us that it has completed initiatives to improve the quality of 

performance measurement. 

Going forward, we will continue to obtain updates on the agencies’ progress. We will report on the actions taken by the agencies 

as we do for other areas included in our mandated work addressing 

federal programs with fragmentation, overlap, and duplication. 

Chairman Tipton and Ranking Member Murphy, this concludes 

my prepared statement. I would be happy to answer any questions. 

Chairman TIPTON. Thank you, Mr. Shear. 

Our next witness is Ann Marie Mehlum, the Associate Administrator for Capital Access at the Small Business Administration. In 

this capacity, Ms. Mehlum is responsible for overseeing SBA’s financial assistance programs, and prior to joining the SBA, Ms. 

Mehlum served as CEO and director of Summit Bank in Eugene, 

Oregon. 

I appreciate you being here with us today, and please begin. 

STATEMENT OF ANN MARIE MEHLUM 

Ms. MEHLUM. Chairman Tipton, Ranking Member Murphy, and 

distinguished members of the Subcommittee, thank you for inviting 

me to testify on SBA’s ongoing work to expand access to capital for 

small businesses, while enhancing collaboration and avoiding duplication with other government programs. I greatly appreciate the 

opportunity to discuss our lending products and successful partnerships. As a former community banker from a largely rural state, 

it is truly an honor to be before this Subcommittee and alongside 

my colleagues from USDA and GAO. Together, we are committed 

to providing all entrepreneurs with the tools they need to start and 

grow companies and create jobs. 

Small businesses are the engine of our economy and one of our 

country’s greatest assets. They employ half of the private sector 

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5 

workforce and create two out of every three net new private sector 

jobs. And we know that innovation is not limited to Boston and Silicon Valley. It is happening in rural and industrial communities— 

from Florida to Colorado, and in my home state of Oregon. That 

is why at SBA we are focused on reaching all entrepreneurs in 

every part of this country. 

In my role as associate administrator for Capital Access, I rely 

on my 30-year career in commercial lending to help SBA better 

support small businesses. It is our top priority to fill market gaps 

by providing access to capital to small firms whose financing needs 

would not be met without our guarantee. Our loan guarantee programs have made it possible for lenders to support more businesses 

in rural and underserved communities. In Fiscal Year 2013, approximately 15 percent of all of our 7(a) loans and 16 percent of 

total dollars went to rural entrepreneurs. 

In order to reach even more small businesses in rural markets 

and ensure effective collaboration, SBA has signed several Memorandums of Understanding (MOU) with other agencies, including 

USDA. Leveraging SBA’s nationwide network of district offices and 

resource partners, as well as USDA’s extensive footprint of field 

staff in nearly every county in America, we are able to advise potential small business borrowers and lenders on both SBA and 

USDA loan programs. Through our collaboration, we educate each 

other on our respective products and services, exchange marketing 

materials, and host joint lender training sessions. 

We have seen the benefits of our collaboration through the success of countless small businesses like the Maupin Market in 

Maupin, Oregon. In 2011, the only grocery store in this 500-person 

town was slated to close, which would have forced residents to 

travel over 40 miles to buy food. Fortunately, a young couple, a 

local couple, Allison and Randy Bechtol, decided to reopen the 

store. Unable to obtain conventional financing, the Bechtols turned 

to the local Small Business Development Center (SBDC) for help. 

The SBDC connected them with a community bank that identified 

SBA’s 504 Loan Program and USDA Rural Development’s Intermediary Relending Program as strong matches for their capital 

needs. With a $279,000 SBA-guaranteed loan and a separate loan 

for $100,000 through USDA’s program, these entrepreneurs were 

able to remodel the old building and reopen the new Maupin Market. They created seven good-paying jobs in the community and 

provided new opportunities for the local farmers. 

SBA also supports rural small businesses through our Small 

Loan Advantage (SLA) loans. One of our signature low-dollar loan 

programs, SLA is designed to expand access to loans up to 

$350,000. Drawing on extensive input from our lending partners, 

we significantly reduced the paperwork and simplified the application process for this program. In order to make these loans even 

more attractive and less costly for lenders, we allow banks to use 

their own collateral, closing, and disbursing guidelines. 

At SBA, we are committed to collaborating with our federal, regional, and state partners to fill market gaps and ensure that all 

entrepreneurs have the resources and training they need to turn 

great ideas into growing businesses. By taking an inclusive view of 

entrepreneurship, one that expands access and opportunity to more 

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communities, we can spur new business formation, innovation, job 

creation, and help build strong regional economies throughout 

America. 

Thank you again for the opportunity to be here, and I look forward to answering your questions. 

Chairman TIPTON. Thank you very much, Ms. Mehlum, for your 

testimony. 

Our final witness is Lillian Salerno, Administrator for the Rural 

Business-Cooperative Service within the Office of Rural Development at the United States Department of Agriculture. Ms. Salerno 

was first appointed as Acting Administrator in September of 2012 

and became Administrator in July of 2013. Prior to joining the 

Rural Business Cooperative Service, Ms. Salerno served as Special 

Assistant in the Rural Housing Services. 

Welcome to the Small Business Subcommittee, and thank you for 

taking the time to be with us here today. Please continue. 

STATEMENT OF LILLIAN SALERNO 

Ms. SALERNO. Chairman Tipton, Ranking Member Murphy, 

and members of the Subcommittee, thank you for this opportunity 

to discuss USDA’s Business and Industry Guaranteed Loan program and the economic opportunity it provides to rural America. 

I am pleased to report that outreach and collaboration and 

leveraging of resources, both nationally and at the local level, are 

top priorities for this administration and are at the center of the 

USDA delivery system. As a former entrepreneur and rural small 

business owner, I am particularly aware of the value of federal financial assistance programs. In fact, the company I started in 1994 

began with an SBIR grant and still employs approximately 150 

persons in rural North Texas and supports additional jobs for suppliers and distributors in this small town. 

We appreciate the other agencies’ programs provide to assist 

rural businesses. While both the B&I program and the SBA 7(a) 

program seek to ensure small businesses have capital, Congress 

has determined that B&I serves the distinct purpose of providing 

resources to rural businesses that have greater individual capital 

needs. 

Let me emphasize the distinguishing feature of our program is 

providing assistance to businesses in those rural communities. 

Working with local lenders in rural communities, the B&I program 

is a critical component to increasing opportunities for rural Americans. Our field staff has worked closely with SBA offices for many 

years. The MOU signed late last year extended and broadened 

these opportunities for collaboration. USDA and SBA worked together to identify the best funding options for businesses. For example, the Iowa Cold Storage Company in Altoona, Iowa, recently 

needed capital to expand their business. Although USDA had previously provided a $17 million B&I loan to the company for the 

construction of the warehouse cold storage facility, USDA and SBA 

determined that the best option now for the company was a $3 million SBA loan to accomplish this mission and expansion. By working together, our agencies are able to increase access to private investment capital for small businesses. 

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Since the GAO report, we have improved the process for tracking, verifying, and reporting of the performance measures. We have 

issued and put into action a guidance document to our field offices. 

We have implemented an improved process for reviewing and 

verifying the data, and we have created a standardized format for 

reporting this data. Furthermore, because of the budget certainty 

you have afforded us, we are now able to make additional improvements, including IT enhancements, making it easier for our lenders 

and intermediaries to report our requested performance measures. 

In sum, no other federal agency is positioned as well as we are 

at USDA to meet the needs of rural America. Our extensive physical presence in rural communities distinguishes us from other federal agencies. We have the expertise and experience about the economic, social, and geographical characteristics of the rural communities to better serve them. Through our 47 state offices and 400 

local offices and service centers, we overcome the physical distance 

barriers that alone can hinder service delivery in these areas. 

I appreciate the opportunity to testify before you alongside my 

colleagues from SBA and GAO. We are committed to helping entrepreneurs and businesses succeed, and I welcome the chance to engage in a dialogue. Thank you for your support of rural business 

programs, and I am happy to answer questions. 

Chairman TIPTON. Thanks so much. 

We will start out with the questioning. I would like to begin with 

Director Shear. Based on your audit, can a small business located 

in a rural area obtain financial assistance from either the SBA’s 

7(a) program or the SBA’s 504 program or through the USDA Business and Industry Loan program? 

Mr. SHEAR. The answer is generally yes, that the 7(a) program 

funds a broad range of activities, including working capital. The 

504 program is more specific in that it finances fixed assets, so it 

funds a smaller subset of activities. Business and industry loans 

are available for a very broad range of activities. So the idea is that 

the programs certainly overlap in terms of the types of financial assistance they can provide. 

Chairman TIPTON. Okay. So we have got the two different programs, and this may well be a better question maybe for administrators. Do we have a streamlining process in terms of those applications? Because one of the great challenges that we hear from 

small businesses is the confusing nature of actually trying to be 

able to access capital even though the intent of the programs is obviously good. 

Ms. Mehlum? 

Ms. MEHLUM. Chairman Tipton, I would like to answer that 

from the lender perspective. Most of my career has been in the private sector as a lender and then as a chief credit administrator, 

and then as a CEO of a bank. And the reality from that perspective 

was that it was very helpful when we sometimes had more than 

one option to help a small business that we could not finance with 

conventional underwriting. If we had a customer that clearly we 

believed they were going to be successful but we could not do it 

with our underwriting guidelines, they did not have enough experience maybe or enough capital or whatever the deficit was, then we 

would look to the SBA or the USDA programs. And sometimes we 

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had both options. Not always. But I always felt that was complementary. And it was helpful in some cases, like the example 

that I mentioned in my testimony where we could use a combination. So I feel like, from a lender’s standpoint, having complementary loan programs from SBA and USDA is not a negative issue; 

it is a positive situation. 

Chairman TIPTON. Ms. Salerno. 

Ms. SALERNO. I would just like to add as a small business person, when one goes to get financing, the bank is your intermediary. 

We are committed to educating the bank about our suite of services. We have been doing a good job. I think we can do a better 

job and we are committed to do that. But I will give you one example. In Colorado, Mr. Chairman, we closed a $1.8 million guaranteed loan program with a company called White Rock Specialties. 

The bank that we were working with was a community bank and 

the company also needed a working capital. The SBA provided for 

that, coordinating with our field staff, by working with the bank 

and giving a cap line of credit for $250,000. So we have examples 

of those kind of things and we believe that is working. 

Chairman TIPTON. Mr. Shear, the SBA and the USDA singed 

a MOU on August 22, 2013, and I would like to know in your view 

does this agreement clearly define what steps the agencies will 

take to be able to eliminate duplication? 

Mr. SHEAR. The MOU is a positive step. We have looked for the 

use of other practices such as establishment of clearly defined roles 

and responsibilities and strategies for leveraging resources. There 

are some other actions we looked at. We know from USDA that for 

a number of years, even preceding our August 2012 report, it 

reached out to its state offices to report on what collaboration they 

have with local SBA district offices. So it seems like there is activity that I will call ‘‘check the box,’’ and there is interaction going 

on. As the witness said, there are joint training-type sessions going 

on, but in terms of duplication, to the degree that it might exist 

and certainly dealing with fragmented programs, we are looking for 

some movement to try to address how can these programs be better 

positioned so that if they are complementary, they are complementing each other in the right way. For those programs that substitute for each other—which are the best ones? Or in other words 

how do you get businesses to be served by the program that can 

serve them best? 

Chairman TIPTON. So you are not seeing any movement? 

Mr. SHEAR. We are not seeing a lot of evidence. So, for example, 

as part of this mandate, as an agency we reach out to agencies to 

obtain information on what actions they have taken. And just 

taken from the last submissions that we have received very recently from SBA and USDA, there is not anything in those submissions that would suggest to us that anything more than that they 

are tracking how many offices are collaborating with each other. 

We do not see movement or any suggestions as far as coming up 

with joint strategies or trying to coordinate policies and procedures 

that could make the programs serve rural areas better. 

Chairman TIPTON. Right. Thank you. 

Are you working on joint strategies? 

Ms. SALERNO. Yes. Thank you for the question. 

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As Mr. Shear said, we are doing a variety of joint trainings and 

webinars, and I think part of the challenge for us is we are field 

based. We do best when we do not do things from up here, when 

we do stuff in the states. And so we really rely on our district offices and our field offices to work out those. So for us to give a one 

direction from Washington about how to work in rural Colorado or 

rural Missouri we think is a mistake. And so we do let our field 

offices work out these strategies, but we do ask them to report, and 

we have received very good evidence which we have submitted to 

Mr. Shear regarding those roundtable and joint lender trainings. 

Chairman TIPTON. Thank you. 

I want to be respectful of our other members here. I will probably 

like to be able to come back to this but I would like to follow up 

again real quickly with Mr. Shear. In your testimony, you stated 

that you were not able to access data to determine whether duplication actually exists. What data do you need that is not available, 

and why is it not collected? 

Mr. SHEAR. Especially with respect to duplication, I know the 

focus today is on financial assistance programs, but what we have 

found on counseling and training programs, and what we have 

found just generally is that when somebody walks in to an SBA 

district office or a USDA state office, the kind of information that 

is available is based on who is coming in where. So basically, a lot 

of times it is which office a small business owner might walk into 

that will determine which financial assistance program they are 

participating in. 

So what is collected on technical assistance in terms of who is 

being served based on geographic location, some characteristics 

would be very useful on that. From a standpoint of the financial 

assistance programs, the way I would characterize it for SBA, is 

that SBA has at its disposal extremely rich data on who is being 

served, and where they are being served. We have certainly used 

SBA loan level data to conduct analysis by geocoding data. So data 

for the SBA financial assistance programs is not a problem. It is 

the question of SBA’s willingness to use it in collaboration with its 

efforts with USDA. 

With USDA, we asked ourselves when we did this work, should 

we be asking for loan level data from USDA to try to geocode as 

we have done for SBA, and try to look at who is serving where? 

Specifically, the USDA data on the financial assistance programs 

like Business and Industry loans is very granulated. It is quite 

good in that sense, but with the way it is collected, we question 

whether the data is collected in a way that is conducive to such 

analysis. You can run ad hoc reports but we question whether it 

is collected in such a way that it would really be conducive to say 

who is serving which borrowers where in rural-defined areas. So I 

think USDA has further to come in that respect in comparison with 

SBA. SBA, it is more of, I think, a willingness to use the data it 

has at its disposal. 

Chairman TIPTON. Thank you. 

I will ask one more and then yield to the ranking member and 

then come back after the other members have asked their questions. 

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Mr. Shear, the SBA recently decided to end several pilot programs, including one aimed at being able to reach out to rural businesses. I noted in the testimony that it was at 15 percent. That is 

a drop. Was this pilot program effective at reaching small businesses in rural areas? 

Mr. SHEAR. Here are you referring to Rural Advantage? 

Chairman TIPTON. Yes. 

Mr. SHEAR. Yes. I cannot answer that question, and I do not 

know how well SBA can answer that question. The pilot program 

we recently looked at was a pilot program called Patriot Express 

to serve the veteran community. One of the things that we observe 

when SBA does have pilot programs or initiatives like this is that 

there really is not the evaluation around who is being served by 

the program. So like with Rural Advantage, it is here that there 

can be reasons why USDA might be able to serve certain rural 

areas better than SBA, and this is part of why we think at the national level there should be more collaboration looking at who the 

programs are serving. The potential problem with SBA going into 

Rural Advantage is that it might be trying to expand its presence 

in an area without first asking the questions working with USDA, 

and working with this Committee and the Congress in terms of 

saying where should we be placing our resources? Who should we 

be serving? Because otherwise you are acting with incomplete information when you are introducing more programs and more initiatives. 

Chairman TIPTON. Do you have any comment on that? 

Ms. MEHLUM. Chairman Tipton, I would like to mention in the 

Small Rural Loan Advantage program, it was a program that started initially only for lenders that did a few loans which would imply 

that they were in rural areas, and it was a little clunky. It was not 

as streamlined. We actually have morphed that program into a 

much more streamlined loan called Small Loan Advantage, which 

I talked about. And I do have statistics on how those loans have 

grown and how they have also grown in rural areas. So basically, 

we have just made improvements to that program. We also have 

studied immensely our programs, including the veterans’ programs 

as to who they serve and how effective they are and how do we 

make them more effective. And we are doing that work all the 

time. 

Chairman TIPTON. Okay. Is there some concern, and then I will 

wrap up here, but I am a little concerned, that rural lending, it 

dropped from 25 percent of the portfolio to 15 percent of the portfolio. What is the reason for the decline? 

Ms. MEHLUM. That is information that I would be happy to go 

look for and bring back to you. 

Chairman TIPTON. I think, going back to your original testimony, being able to reach out into the rural communities, noting 

the job creation potential, and the entrepreneurialship that is 

there. With that kind of a drop, I think there is some concern in 

terms of some of the access to capital to be able to grow these businesses. Coming out of a rural area, I can tell you we are still in 

a recession. 

Ms. MEHLUM. Absolutely. And I am not sure it is a drop in 

total dollars. You said it was a drop in our portfolio. It might be 

SBREP-219 with DISTILLER

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that we are growing in other areas more. So I would like to get 

back to you on that. That is an important question. 

Chairman TIPTON. Is it your sense that these rural small businesses now have greater access to capital? 

Ms. MEHLUM. Than—— 

Chairman TIPTON. Before. 

Ms. MEHLUM.—five years ago? Yes. I would say yes. 

Chairman TIPTON. Okay. Great. Thanks. 

With that I will yield to Ranking Member Murphy. 

Mr. MURPHY. Thank you, Mr. Chairman. 

Mr. Shear, when you were with us last March you noted the importance of key metrics and data points to really evaluate some of 

the programs, see what is working, what is not working. 

I am wondering from Ms. Salerno first, if you could talk about 

some of the key metrics that you use at USDA and perhaps how 

long you have been using them and what you think about how it 

is going. 

Ms. SALERNO. Certainly, thank you for the question. 

We use the data, first of all, to determine if we are meeting certain benchmarks, such as reaching underserved populations, and if 

we are complying with our initiatives. For example, local foods is 

an initiative. Growing bio economies is an initiative. We use it to 

also help reduce waste, fraud, and abuse by conducting cross-program verification. As a guarantor, our data and our data collection 

system is based on a GLS system, a guaranteed loan system, where 

we rely on banks to give us the information. 

So there are about 62 data points. The question is whether or not 

we can access certain data. Over the course of a 25- to 3-year loan, 

that is a lot of data for the history of a loan. As mentioned earlier, 

we are storing loan data in a guaranteed loan system. We analyze 

it on a monthly to quarterly basis, depending on what we are looking for. We can run a report either in a spreadsheet form or we 

can ask for information on a specific initiative, for example, how 

many local food projects are in a given area. For our secretary, the 

local food initiative is very important. We can find out how many 

local food initiatives we are doing in Colorado or Missouri or Florida. We certainly can improve what we are doing, and with budget 

certainty, part of our objective is to enhance our IT systems. Furthermore, one of our hires is going to be a person dedicated to data 

integrity because we have not previously been able to put the kind 

of funds we would like into that part of the operation. 

Mr. MURPHY. So you are more concerned with the data collection than you are the analysis of the data? 

Ms. SALERNO. Yes. 

Mr. MURPHY. Okay. 

Ms. SALERNO. What we have done in response to the hearing 

last year is go back and verify the data. We guaranteed a little less 

than 400 or about 420 loans in 2013. When we collected the data 

we were looking for an opportunity to make sure that it was consistent with the types of investments that were made. We sent anything that fell outside the norm back to the states and to the lenders to validate. Now we have 2013 data cleaned up and we now are 

using that kind of operation to verify our 2014 data. And I would 

just like to add that because of our field presence, we are able to 

SBREP-219 with DISTILLER

12 

go and validate. So that field person can go and drive by and make 

sure that the manufacturer does indeed have the 200 jobs that they 

submitted that they were going to create. 

Mr. MURPHY. Okay. 

Ms. Mehlum, can you talk about some of the metrics that you 

use and that have been successful? 

Ms. MEHLUM. Could you specify exactly what you are asking? 

Mr. MURPHY. Some of the key metrics you used to evaluate 

SBA, GAO pointed out this morning and then last March that that 

is one of the keys to—— 

Ms. MEHLUM. If the programs are successful? 

Mr. MURPHY. Yes. 

Ms. MEHLUM. One of the things that we measure pilot programs against is just the amount of lending that we do on our flagship programs, the 7(a) Guarantee program and the 504 program. 

One of the things that we found in our veterans’ initiative—Veterans Express, which sunset because we have a better loan now for 

veterans called SBA Veterans Advantage Loan—is that we found 

that in those pilot programs there would be something about them 

that was not as attractive or workable for the borrower or the lender. And so we track the totals. We talk to bankers. We talk to borrowers. And if the programs are not growing, we look for ways to 

either enhance them and fix them or modify existing programs to 

fill that gap. 

Mr. MURPHY. So how often do you analyze that data? Is that 

a monthly or—— 

Ms. MEHLUM. Weekly, daily, weekly, monthly, quarterly. It just 

depends. We are looking at, I mean, one of the things I was very, 

very pleasantly surprised—not surprised, I really did not have a 

preconceived notion, but when I came to the SBA six months ago, 

how much data is collected and analyzed and reviewed consistently, constantly. There is an amazing amount of analysis of data 

that goes on at SBA. 

Mr. MURPHY. And are you working with the USDA on what is 

working, what is not working? 

Ms. MEHLUM. We are definitely working with them in the field 

of the programs. What are working together? Where are they complementary? We do share marketing materials. This last MOU has 

put more, as Mr. Shear has said, it has put more sort of specifics 

into how we collaborate, and that has been an evolving process, 

and I feel like we are making very good progress there. 

Mr. MURPHY. I do not want to oversimplify it too much, but Mr. 

Shear, it seems you would like more data points, more analysis, 

more key metrics to analyze, and Ms. Salerno, you pointed out 

some of the best improvements you have had have been really at 

the local level, some of the training. Is there a bridge there that 

needs to be crossed? I mean, I can completely understand at the 

local level—that is where the rubber meets the road, so of course 

that is where you would see the biggest difference. And inputting 

all the data is annoying, it is a nuisance, and reviewing it—but 

that is how Mr. Shear and us get to review it. Have you had that 

discussion? 

Ms. SALERNO. Yes, we have. Lots of discussion. I mean, if we 

had all the resources in the world, would we put more money 

SBREP-219 with DISTILLER

13 

there? Yes, we would. Where we are able to, we made sure that the 

data was correct. We had a session where our leadership reviewed 

the files that were inputted in GLS and said, you know, if there 

was a zero and we had given a million dollar loan, why did that 

not create a job? And so we went back to make sure that it had. 

We looked at what fell out of the norm. We think with the budget 

certainty, we now are able to allocate resources, and we feel very 

confident that we are going to do better, and we have been speaking a lot to my associate administrator colleague about ways I can 

learn from them, but we have not had those resources. We have 

been depending on our field staff which have done the best job that 

they can with the resources they had. 

Mr. MURPHY. Can you use SBA’s data systems and anlaysis? 

Are the systems integrated? 

Ms. SALERNO. My understanding is they are not integrated. 

Ms. MEHLUM. The systems are not integrated but we are, as I 

think someone mentioned early on, we are involved, both of us. I 

have not been personally involved with it but one of my deputies 

has been involved with a meeting of several agencies which is 

working on this issue of data sharing, making it—it is not that we 

do not share data. If anybody asks us for data, we give it to them, 

but they are trying to come up with systems to make that data 

sharing as part of the process. And I know that that is ongoing. 

Mr. MURPHY. Mr. Shear, any data? 

Mr. SHEAR. I think that what the associate administrator is referring to is the OMB working group that is addressing these 

issues. And as I said in my statement, the OMB-led group is addressing the types of issues that we think should be addressed, so 

we think it is very positive that this working group has been put 

into place. What we have not seen yet is progress. We look forward 

to working with OMB and the agencies in their attempt to facilitate a more strategic approach. In this case, regarding the topic of 

this hearing, serving rural areas in terms of small businesses in 

rural areas seeking financial assistance. So we certainly hope it 

moves in that direction. So far we know that meetings have occurred. We have not seen a real framework established yet, but 

that is what we are looking for and hoping evolves over time. We 

just do not have evidence of it yet. 

One disappointment I will just state with the two agencies here 

is while we received feedback from OMB when we reached out and 

asked what progress has been made, we found it surprising that 

when SBA and USDA came back to us for information on what has 

occurred, there was no reference to that OMB task group. So I certainly hope that both agencies and all the agencies involved with 

OMB are really committed to the purpose of that task group and 

that they make progress. 

Mr. MURPHY. Okay. Thank you. I appreciate it. 

Thank you, Mr. Chairman. 

Chairman TIPTON. Thank you, Mr. Murphy. 

I now recognize Mr. Luetkemeyer for his questions. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

I come from a town with 300 people, so it does not get any more 

rural than that. So this is an important hearing to me from the 

SBREP-219 with DISTILLER

14 

standpoint of being able to help the small businesses and agricultural folks in my district. 

Mr. Shear, do you get a lot of complaints with regards to these 

two agencies with regards to the lack of their ability to address 

rural access to credit concerns? 

Mr. SHEAR. I would not call it complaints. It is not like you 

have people who are seeking loans who call up GAO, like we are 

a complaint line. 

Mr. LUETKEMEYER. Well, I was talking about the collaboration 

you are talking about, the overlap. Do you get complaints from different groups, different entities saying, hey, you know, these programs are nice but they are not working very well? 

Mr. SHEAR. What we have as we pointed out in our report, we 

really did an extensive effort to reach out to rural areas, in particular areas that are served by the Appalachian Regional Commission, the Appalachian Authority, the Delta Regional Authority and 

other entities involved with rural economic development. What we 

found in what they were reporting to us was the difficulty, especially with counseling and training-type resources, how hard it is 

for small businesses to navigate those areas. So I would say that 

was the major concern that we heard as an outgrowth of really 

reaching out to those who represent rural areas. 

Mr. LUETKEMEYER. Ms. Salerno, you made a comment a while 

ago with regards to the validation and I guess basically oversight 

over the funds that are given out or guaranteed. Can you give me 

a little bit of an insight as to your process? Do you work with the 

lending institution and they take the lead, and therefore, they do 

all of the underwriting, they do all of the servicing of this? What 

part do you play or what action do you take in this whole process 

that allows some oversight by you? Or are you totally relying on 

them? 

Ms. SALERNO. Thank you for the question. 

We are very fortunate that we have our field offices and they go 

through the entire process with the business with the lender. But 

we are, of course, the guarantee for the lender, so the lender has 

the paperwork at the state level. We, of course, want everything to 

happen at the state level, not to have to come up to Washington 

and potentially delay loans. The application only comes up to D.C. 

when the request is above a certain dollar amount. And so the 

business program officer works through the loan documents with 

the business, which is really important in rural American where 

folks maybe have special needs because of the low density of population. Sometimes they need to work with the city or the small 

town in order to get easements or ways to work with the rural coop. There are just all kinds of needs there. That is why our field 

structure is so important. And what happens from the data that is 

given by the bank, it is self-reported, so the business tells the bank, 

you know, I need a $5 million loan. I am going to put manufacturing into a small town in Missouri. I am going to create 100 jobs 

over the next two years. That is self-reporting. And then it comes 

back to us and we validate that information at the national office. 

Mr. LUETKEMEYER. Coming from the financial service community, as I recall, you have a checklist that you go through that the 

institution has to complete to be able to do things and I think it 

SBREP-219 with DISTILLER

15 

is the same way with SBA if I am not mistaken. So there is some 

coordination there. I was just kind of curious from the standpoint 

that, you know, it is very important that you continue to work with 

and verify and provide some oversight because at the end of the 

day we have got taxpayer dollars at risk here. So the lending institution probably has a better feel for what is going on there but certainly interaction is very important. 

As I was listening to the previous discussion here, one of the concerns that I had was the collection and review of data. It is wonderful to get that but if we do not act on it, what good is it? 

It sounds like in the last discussion we talked about this committee that was put together, and apparently there is some reaction to some of that information that was collected. Can you elaborate on it just a little bit, Ms. Mehlum? 

Ms. MEHLUM. Can I elaborate on what is happening with that 

committee? 

Mr. LUETKEMEYER. Yes. You had a committee that had 

some—we were kind of working on some issues here, and I think 

there was an inference that there was actually something being 

done. 

Ms. MEHLUM. My understanding is that that committee is 

working on this data issue of how to connect databases, how to utilize data and share the data so that we can use it more comprehensively. 

Mr. LUETKEMEYER. But there is some action. 

Ms. MEHLUM. My understanding is that those meetings are—— 

Mr. LUETKEMEYER. Those meetings are on the recommendations and the findings of the committee? 

Ms. MEHLUM. Yes. 

Mr. LUETKEMEYER. Okay. 

I have one more question before I am out of time here if I can 

indulge the chairman for just one second. Question for the two administrators. Each of your programs have caps as to how much you 

can guarantee per loan and what you have per program. Are those 

caps adequate? Are you utilizing the full amount of the money that 

is at your disposal? Should they be lowered? Do you have excess 

funds or should they be raised? Just a comment. 

Ms. SALERNO. I will happily answer that. We get our money. 

The rural sector needs more money. There is a huge issue about 

access to capital. That is what we hear at these roundtables and 

that is the kind of information we want to be able to give back to 

you is that there are still access to capital issues. 

Mr. LUETKEMEYER. Of the percentage of good loans that are 

applied for, how many do you not make because you are out of 

funds or cannot guarantee it? 

Ms. SALERNO. Two things. Thank you for the question. One is 

I am not sure I can give you that information but I will do my best 

and I will have to supplement that. 

Mr. LUETKEMEYER. Just round figures. It does not have to be 

perfect. 

Ms. SALERNO. Well, the issue is because of the last year and 

the uncertainty of funding, there was a lot of starting and stopping, 

and that was really hurtful to small businesses in rural America. 

So now with the certainty of funding I think I will be able to anSBREP-219 with DISTILLER

16 

swer that better. I just do not want to give you non-information. 

But we had businesses that were hurt because we did not have a 

pipeline of funds. 

Mr. LUETKEMEYER. Ms. Mehlum, could you? 

Ms. MEHLUM. I think our levels are at the right levels right 

now. We have not had to recently not make loans because of capital 

levels. 

Mr. LUETKEMEYER. Okay, perfect. Thank you very much. 

Thank you, Mr. Chairman, for your indulgence. 

Chairman TIPTON. Mr. Mulvaney. No questions? Okay. 

I would like to be able to follow up just a little bit because I 

would like to get down to the purpose of the hearing. You have 

demonstrated that you are serving a need, being able to help small 

businesses in a variety of different areas, but when we go back to 

the crux of the hearing, the GAO had made recommendations that 

the financial assistance programs and the report of the GAO that 

was released in August of 2012, that has been over a year and a 

half ago. Following this, our Committee held a progress report 

hearing a year ago where your agencies testified about your commitment to being able to increase the collaboration. And we are 

back here again today asking what is being done to address the collaboration and to be able to actually respond to the GAO’s actual 

recommendations. Are we making progress as opposed to continuing just to hold meetings and to be able to get our people together? What is the goal? What is the timeline? When is it going 

to be able to be achieved? 

Ms. Salerno or Ms. Mehlum? 

Ms. MEHLUM. I will answer to the best of my ability. 

My understanding is that the MOU is a three-year MOU with a 

possibility to renew. I may be incorrect on that. But we are continuing to work on all the issues in the MOU. It is about six or 

seven months old. We have definitely made progress in the field 

where they are doing joint trainings. We are sharing marketing 

materials and all that. And I feel like this is an MOU that is being 

taken very seriously at the SBA and we are all in agreement with 

it. It is the right thing to do. I am very proud that the 7(a) program 

is a zero subsidy program and we want it to continue and be sustainable, and it will be more effective as long as we can continue 

to do it cost-effectively and collaboratively. 

Chairman TIPTON. Ms. Salerno? 

Ms. SALERNO. Thanks for the question. I think we will have a 

better opportunity. I cannot promise anything. All I can do is we 

are doing the best we can with the information that we have, but 

I do think because of this consistent meeting that is going on about 

the technical assistance and trying to set metrics that is being really shepherded by OMB which all of our agencies participate in, I 

think they have got some pilots going on, so we will get that information. But for what we know how to do with our two programs 

for the Business and Industry Loan and the SB 7(a), I think we 

have made a commitment to make sure that we share data. We 

want to learn at USDA if there is a better way to collect data that 

is more in line with theirs, we want to learn that. But we do have 

challenges, but I do think because of the budget certainty we will 

be better able to address this. 

SBREP-219 with DISTILLER

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Chairman TIPTON. Well, just to be able to get a specific, can you 

point? Because you have been collaborating, you have been talking 

about it. What duplication have you identified? 

Ms. MEHLUM. I would like to answer that by saying I am not 

aware that we have specifically asked that question at a broad, 

strategic level. I think those are the questions we have been working on the field. 

Chairman TIPTON. Is this not the point though of the GAO report? We were talking about duplication. 

Ms. MEHLUM. As I mentioned when I first started, there is duplication and there is complementary products. And I do not think 

there is an exact duplication of specific product that is really the 

issue. And I have misunderstood that if that is what we are talking 

about. 

Chairman TIPTON. Do you have any comment, Mr. Shear? 

Mr. SHEAR. In our work, we did not find any evidence of duplication, meaning that you had multiple programs, multiple agencies 

undertaking the same activities, serving the same beneficiaries, 

and it does not mean that duplication does not exist. We did not 

find it. There are issues over how well from an internal control 

standpoint the agencies are following where the services are going. 

Chairman TIPTON. That was the point of the question. 

Mr. SHEAR. And so that is basically where we do not know. 

What we do observe for sure is that it just seems like there are inefficiencies associated with overlap and fragmentation and ability 

to evaluate how programs are serving their missions, and that is 

really a major focus for us, and we certainly hope, and it seems to 

be a focus of this OMB-led working group. 

Chairman TIPTON. We have business people that sit on this 

panel, obviously. Coming out and you are always looking to be able 

to create those efficiencies, to be able to streamline it to make sure 

that you are not getting overlap, not trying to go after the same 

customers, I guess, if you will. And during this process now over 

this last year and a half, in terms of trying to be able to identify, 

be able to get some of this collaboration going on, do you have any 

kind of a number of what we have been able to save the American 

taxpayer in terms of dollars through your efforts? 

Ms. MEHLUM. That is a really good question, and I would like 

to go back and see if we can tackle that. That would be an interesting question to look at because certainly that would be something that we would all be wanting to know and that is what we 

are all working towards. 

Chairman TIPTON. Are you aware of any, Ms. Salerno? 

Ms. SALERNO. From a USDA perspective, we look at duplication and strengthening of services and Secretary Vilsack has been 

very robust on his cost-savings measures which he has reported as 

$1.2 billion in tax dollars saved by the department. So our continued regionalization and ability to deliver services by streamlining 

at USDA, that is the only number that I know to give you. 

Chairman TIPTON. And we would like to follow up. Mr. 

Luetkemeyer brought it up. I had the opportunity to sit on a bank 

board before and we had loan officers, there is a checklist, and Ms. 

Salerno, you had mentioned that at the district offices you were 

having to be able to count on these folks to be able to create some 

SBREP-219 with DISTILLER

18 

awareness. Is that an actual checklist item for the district offices 

when they are working with local lenders saying here are the programs that are available? And by the way, the USDA has these 

programs that are available. Is that being done as an actual checklist item for your people in the field? 

Ms. SALERNO. Thanks for the question. 

If I am understanding the question correctly, at our USDA program level, our program officers in the field, they make contact 

with their SBA counterparts and they have their suite of services. 

So yes, it would be something where we show all of SBA’s loan programs as well as ours. I mean, I have been to enough of those 

meetings. That is for sure going on. That is for sure at the state 

and local level that is going on. 

Chairman TIPTON. Okay. And that is being expressed fully to 

the lenders, to the private lenders? 

Ms. SALERNO. That has been where we have really been the 

most successful, for the rural space, those lenders, I mean, those 

big banks are not coming to rural Colorado. They are not there to 

give that capital, so what SBA has been doing very well for our 

rural folks, which I know they care about also, is to make sure 

some of those big banks know about the rural services that we do 

and vice versa. And mostly those community banks now know 

about the SBA services, our services, and are able to help the customer more. 

Chairman TIPTON. Just a couple more questions just out of curiosity. On the USDA, it does not, to my understanding at least, 

track loans based on the size of a business. In order for it to be 

able to eliminate duplication and overlap in our rural areas, would 

this information be useful to determine how many small businesses 

utilize the USDA as opposed to the SBA resources? 

Ms. SALERNO. I hope I am understanding the question, Mr. 

Chairman. 

The USDA, when we were tracking the size, we have the number 

of projected jobs that will come out of any kind of loan that we do. 

So we are able to monitor that and do monitor that because we 

monitor the financial statements that are given to the bank that 

are given to us of that business that we have given a loan to. 

Chairman TIPTON. I think the other component of this is strictly the size of the business. We talked about the $1.8 million, a little 

bigger business than some others. Is that information being 

tracked as well? 

Ms. SALERNO. We certainly have the size of the business, but 

you are absolutely right. We help not just small businesses. I 

mean, we have helped businesses that have 500,000 employees in 

rural American because we do manufacturing loans, so then you 

are asking if we track it. We track the number of employees. I do 

not know if we are tracking it in the same way that SBA is but 

I can get back with you on that and submit that. 

Chairman TIPTON. I appreciate that. 

I guess my last question is I have got a note here that November 

2012, the USDA reported to GAO that over the next two years the 

USDA would conduct a broader analysis of its program data to assess program impact. And we are now in 2014. That started in 

2012. Can you just give a status report of that effort? 

SBREP-219 with DISTILLER

19 

Ms. SALERNO. Yes. We have done what I described. Because of 

our budgets, we have not been able to put the kind of resources towards that. It is in our budget now to put those kind of resources, 

so we are still working on it. We have put into action the guidance 

document that I talked about and tried to make it more standardized, but we have not put the resources towards the IT enhancements that will allow us to do I think what we reported in 2012. 

Chairman TIPTON. Okay. So basically from 2012 we had not 

made any real progress to straighten it out or really move on it? 

Ms. SALERNO. I believe that we made progress by actually validating the data which we did in 2013, and we have advised our 

field offices to make sure that they complied with the guidance document. We certainly can improve and plan on. 

Chairman TIPTON. Okay. Well, I would like to thank you all, 

unless any of our other members have any questions. I would like 

to thank you for participating today. One of the big issues—I think 

we all have a responsibility for those of us that are serving here 

in Washington—is to be looking out for the American taxpayer. 

And that is the idea of trying to be able to address some of the concerns that have been put forward by the GAO, and make sure we 

move beyond meetings into action on behalf of those taxpayers. Because when we are talking about budgets, the best way to be able 

to have the resources is to be able to assure the American people 

that we are doing the very best we can to be able to not only grow 

the economy but be able to handle those limited resources well. 

I do thank all of you for taking the time to be participants with 

us here today. We know that capital is critical for these small businesses in our rural areas and these programs can play an incredibly important role in helping businesses access that capital. However, these programs that confuse businesses and owners and 

waste taxpayer resources, I believe we can agree that it simply cannot be tolerated. Agencies need to be able to find a way to be able 

to work together, and I hope today’s hearing shows some of the importance of being able to bring together the issues and some of the 

challenges in terms of programs that are offered by the USDA and 

the SBA, and their efforts to be able to implement those GAO recommendations into best practices for true collaboration. 

With that, I would ask unanimous consent that members have 

five legislative days to be able to submit statements and supporting 

materials for the record. 

Without objection, so ordered. 

With that, this hearing is now adjourned. Thank you. 

[Whereupon, at 11:07 a.m., the Subcommittee was adjourned.] 

SBREP-219 with DISTILLER

20 

A P P E N D I X 

SBREP-219 with DISTILLER


Insert offset folio 20 here 86619.001

GAO-14-335T 

United States Government Accountability Office 

Testimony 

Before the Subcommittee on 

Agriculture, Energy, and Trade, 

Committee on Small Business, House 

of Representatives 

ENTREPRENEURIAL 

ASSISTANCE 

Opportunities Exist to 

Improve Collaboration and 

Performance Management 

for Financial Assistance 

Programs 

Statement of William B. Shear, Director 

Financial Markets and Community Investment 
21 

SBREP-219 with DISTILLER


Insert offset folio 21 here 86619.002

HighjightS of;:jA~1"33!;T, a t<>$timony belpro the Subj)onimlttee on Agrtcullure, 

Enel'lJll;.and Trade, Committee on Small Busifle$s, Hou.s:e of Representatives 

Why GAO Did This Study 

EcoltOrrii<;'d~\I~I~pment programs that 

effectlv$ly p(()lII(je :assistance to e~lrepr~rt!1«rs may helPbU$in~$ses 

de~oplln)! <!lIpand, Ir Augqst2012, 

GAO.~~~lnformation on 52 pro~1t1If!ltGom(llerce;HUD, S8A, 

and Vsp:A !l\afl?rOVidQd $2.0 billion ill 

suppdrttp: ~tii.preneurs il\ fiscal year' 

20n(13AO,~1l!): Otthese 52 

programs,3011rog",ms (fistributed 

acr<;jssllle!our agepcies can provide 

fill.8\lCial ~$Si$li'~pe illll).Horm Of 

grants aN" Ibans, IneffiCiencies in the 

This t~stltiiofly~($()Us.sea (1) the extent of ove.:tilp; fiagmentation, and 

dUPlictll1on,,\mQnlf~ese programs and 

the. &)(\eQI toW/liC.!:t pfe9ramS co"abo!1aI~.a\lit(2)tI1e extent to wfdch 

ag~511~.C\!tt~oti(tlim!lation net;&ssary to I(a!lf!: ~l)1grall) actl\iIUe~and whether 

It\ajl!fi!~rh~have mel\heir 

provt<:\\ls inlQnn~tiory on thE! aQ~ncies~ acti<1rls.llfaddress recommendations 

GAO. made in tna! report. 

What GAO Recommends . . In A\igullt 201't, GAO recommended 

that Ihe lOur agencies and OMS 

eXPioreopportunlties to enhance 

collatiptatioh all1oh~ programs and that 

the four. agen~ies track program 

informalk)n and conduct moTe program 

eYal~aiio"".rhe agencies Mlther 

at/rjled nor djsagreed with the recommendations .but did prolllqe information on their plans to address 

them. 

'(leV-{ !3AO.41f..335t" For m~ Inform~jon, 

contact vyillia.m 8, Shear at {202} 512~867a or 

sheatW@gao.gov. 

ENTREPRENEURIAL ASSISTANCE 

Opportunities Exist to Improve Collaboration and 

Performance Management for Financial Assistance 

Programs 

What GAO Found 

Federal programs GAO reviewed that offer financial support to entrepreneurs, 

such as grants and loans, are fragmented and overlap based on the type of 

support they are authorized to offer and the type of entrepreneur they are 

authorized to serve. The Departments of Commerce (Commerce). Housing and 

Urban Development (HUD), and Agriculture (USDA); the Small Business 

Administration (S8A); and the Office of Management and Budget (OMB) have 

taken steps to collaborate more in administering these programs in response to a 

recommendation in GAO's August 2012 report. For example, OMB has 

established a Cross-Agency Priority goal for entrepreneurship and small 

business and an associated interagency working group. However, the four 

agencies have not implemented a number of good collaborative practices GAO 

has identified, such as establishing compatible policies and procedures to better 

support rural businesses. The Government Performance and Results Act 

Modernization Act of 201 0 (GPRAMA) crosscutting framework requires that 

agencies collaborate in order to address issues such as economic development 

that transcend more than one agency, and GPRAMA directs agencies to 

describe how they are working with each other to achieve their program goals. 

Some entrepreneurs struggle to navigate the fragmented programs that provide 

technical assistance in the form of training and counseling. This difficulty can in 

turn affect referrals to other programs, including financial assistance programs. 

For example, some entrepreneurs and technical assistance providers GAO 

spoke with said the system can be confusing and that some entrepreneurs do not 

know where to go for technical assistance. Collaboration could reduce some 

negative effects of overlap and fragmentation, but field staff GAO spoke with did 

not conSistently collaborate to provide training and counseling services to 

entrepreneurs. Without enhanced collaboration and coordination, agencies may 

not be able to use limited federal resources in the most effective and efficient 

manner and entrepreneurs may struggle to navigate these fragmented programs, 

While the four agencies collect at least some information on entrepreneurial 

assistance program activities, they do not track such information for many 

programs, a practice that is not consistent with government standards for internal 

controls. They typically do not track detailed information on the characteristics of 

entrepreneurs that they serve, such as whether they are located in rural or 

economically distressed areas or the entrepreneurs' type of industry. In addition, 

GAO found that from 2000 through 2012, the four agencies conducted program 

evaluations of 13 of the 30 financial assistance programs reviewed. GPRAMA 

requires agencies to set and measure annual performance goals and recognizes 

the value of program evaluations because they can help agencies assess 

programs' effectiveness and improve program performance. Without more robust 

program information, agencies may not be able to administer programs in the 

most effective and efficient manner, and scarce resources may be going toward 

programs that are less effective. 

_____________ United States Government Accountability Office 
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Chairman Tipton, Ranking Member Murphy, and Members of the 

Subcommittee: 

I am pleased to be here today to discuss our work on programs that 

provide financial assistance to entrepreneurs. Entrepreneurs playa vital 

role in the U.S. economy, and the federal government provides a variety 

of support and assistance to them. In August 2012, we reported 

information on 52 programs at the Departments of Commerce 

(Commerce), Housing and Urban Development (HUD), and Agriculture 

(USDA), and the Small Business Administration (SBA) that support 

entrepreneurs.' In March 2013, we testified before the House of 

Representatives Small Business Committee on our findings from our 

August 2012 report and the actions the four agencies had taken since the 

report" According to agency officials, these programs, which typically 

fund a variety of activities in addition to supporting entrepreneurs, spent 

an estimated $2 billion on economic development efforts in fiscal year 

2011. Of these 52 programs, 30 programs distributed across the four 

agencies can support entrepreneurs through financial assistance in the 

form of grants and loans. 3 Economic development programs that 

effectively provide assistance to entrepreneurs, in conjunction with state 

and local government and private sector economic development 

initiatives, may help businesses develop and expand. However, we have 

found that the ways that these programs have been administered, and the 

lack of data collection and program evaluations, could lead to inefficient 

delivery of services. These inefficiencies could compromise the 

government's ability to effectively provide the needed services and meet 

the shared goals of the programs. 

In January 2011, Congress updated the Government Performance and 

Results Act of 1993 (GPRA) with the GPRA Modernization Act of 2010 

1GAO, Entrepreneurial Assistance: Opportunities EXist to Improve Programs' 

Coflaboration. Data-Tracking, and Performance Management, GAO-12-819 (Washington, 

D.C.: Aug 23.2012). 

2GAO, Entrepreneurial Assistance: Opportunities Exist to Improve Programs' 

Collaboration, Data-Tracking, and Performance Management, GAO-13-4S2T 

(Washington, D.C. Mar. 20, 2013). 

3The programs generally can be grouped according to at least one of three types of 

assistance that address different entrepreneunal needs: (1) technical assistance, (2) 

financial assistance, and (3) government contracting assistance. This testimony focuses 

on those programs that offer finanCial assistance. 

Page 1 GAO~14~335T Entrepreneurial Assistance 
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(GPRAMA). GPRAMA established a new framework aimed at taking a 

more crosscutting and integrated approach to focusing on results and 

improving govemment performance. Among other things, GPRAMA 

requires the Office of Management and Budget (OMB) to coordinate with 

agencies to establish outcome-oriented federal government priority goals 

covering a limited number of policy areas, as well as goals to improve 

management across the federal government. GPRAMA also highlighted 

the importance of program evaluation for federal agencies. Specifically, 

GPRAMA requires agencies to describe program evaluations that were 

used to establish or revise strategic goals. In addition, the President's 

2013 budget submission established Cross-Agency Priority goals, 

including one to increase federal services to entrepreneurs and small 

businesses, with an emphasis on start-ups, growing firms, and 

underserved markets: 

My testimony today is based on information on the 30 financial assistance 

programs discussed in our August 2012 report and 2013 testimony. 

Specifically, this testimony discusses (1) the extent of overlap, 

fragmentation, and duplication among these programs and the extent to 

which programs collaborate and (2) the extent to which agencies collect 

information necessary to track program activities and whether these 

programs, have met their performance goals and have been evaluated. 

This testimony also provides information on the agencies' recent actions 

to address recommendations we made in our August 2012 report. 

For our August 2012 report, we reviewed statutory and regulatory 

authority on the activities and services the agencies can conduct to 

administer each of the programs, and we found significant overlap and 

fragmentation among programs that provide financial assistance. We 

evaluated this information against promising practices of leading 

organizations and the requirements of GPRAMA. In addition, we obtained 

and reviewed the agencies' statements on their plans for implementing 

the recommendations made in our August 2012 report. The work on 

which this statement is based was performed during the June 2011 

through February 2014 time period in accordance with generally accepted 

government auditing standards. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide 

28, 

Page 2 

Goal: Entrepreneurship and Small Business, accessed on January 

performance gov/node/38579 

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Fragmented 

Programs Overlap, 

and Agencies' Efforts 

to Collaborate Have 

Been Limited 

a reasonable basis for our findings and conclusions based on our audit 

objectives. We believe that the evidence obtained provides a reasonable 

basis for our findings and conclusions based on our audit objectives. 

Programs providing financial assistance to entrepreneurs are 

fragmented-which occurs when more than one agency or program is 

involved in the same broad area of national interest. Of the 30 financial 

assistance programs we reviewed, 16 can provide or guarantee loans 

that can be used for a broad range of purposes by existing businesses 

and nascent entrepreneurs in any industry. Examples of programs in this 

category include SBA's 7(a) Loan Program and USDA's Business and 

Industry Loans. Other programs can support loans for a more narrow 

range of purposes or industries or can only support other types of 

financial assistance, such as grants, equity investments, and surety 

guarantees.5 

In addition, a number of programs overlap based on the characteristics of 

the targeted beneficiary. 6 Entrepreneurs may fall into more than one 

beneficiary category-for example, an entrepreneur may be in an area 

that is both rural and economically distressed. Such entrepreneurs may 

be eligible for multiple subsets of financial assistance programs based on 

their specific characteristics. For example, a small business in a rural, 

economically distressed area, such as Bourbon County, Kansas, could in 

terms of authority, receive financial assistance in the form of guaranteed 

or direct loans for a broad range of uses through multiple programs at the 

four agencies, including 

Commerce's Economic Adjustment Assistance; 

investments are capita! provided to a business to purchase common or preferred 

or a simllar Instrument SSA can guarantee surety bonds (that is, an agreement 

a surety company and the owner of a project that a contract will be completed) 

up to $10 miHion, These contracts can cover bonds for small and emerging 

contractors who cannot obtain surety bonds through regular commercial channels. SSA's 

guarantee gives suretIes an incentive to provide bonding for eligible contractors and 

thereby strengthens a contractor's ab!lity to obtain bonding and greater access to 

contracting opportunities 

6Appendix I lists the financ!al assistance programs GAO identified that may have similar or 

overlapping objectives. provide similar services, or be fragmented across government 

missions. 

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HUD's Community Development Block Grant (CDBG)/States 

Program; 

SBA's 7(a) Loan Program and Small Business Investment Companies 

Program; and 

USDA's Business and Industry Loans and Rural Business Enterprise 

Grants. 

While many programs overlap in terms of statutory authority, 

entrepreneurs may in reality have fewer options to access assistance 

from multiple programs. Agencies often rely on intermediaries (that is, 

third-party entities such as nonprofit organizations, higher education 

institutions, or local governments that use federal grants to provide 

eligible assistance directly to entrepreneurs) to provide specific support to 

entrepreneurs, and these intermediaries vary in terms of their location 

and the types of assistance they provide. Some programs distribute 

funding through multiple layers of intermediaries before it reaches 

entrepreneurs or may competitively award grants to multiple 

intermediaries working jointly in the same community to serve 

entrepreneurs. For example, Commerce's Economic Adjustment 

Assistance program can provide grants to intermediaries, such as 

consortiums of local governments and nonprofits, which in turn provide 

technical or financial assistance to entrepreneurs. 

Although we identified a number of examples of statutory overlap, we did 

not find evidence of duplication among these programs (that is, instances 

when two or more agencies or programs are engaged in the same 

activities to provide the same services to the same beneficiaries) based 

on available data. However, as discussed later, most agencies were not 

able to provide the programmatic information, such as data on users of 

the program that is necessary to determine whether or not duplication 

actually exists among the programs. 

In our 2012 report. we examined entrepreneurs' experiences with the four 

agencies' technical assistance programs-which provide services such 

as helping with development of business plans or a loan package to 

obtain financing-and found that some struggle to navigate the 

fragmented programs. For example, some entrepreneurs and various 

technical assistance providers with whom we spoke-including agency 

field offices, intermediaries, and other local service providers-told us that 

the system can be confusing and that some entrepreneurs do not know 

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what services are available or where to go for assistance.' Technical 

assistance providers sometimes attempt to help entrepreneurs navigate 

the system by referring them to other programs, but these efforts are not 

consistently successful. In addition, programs' Internet resources can also 

be difficult to navigate. Each agency has its own separate website that 

provides information to entrepreneurs, but they often direct entrepreneurs 

to other websites for additional information. SBA, Commerce, USDA, and 

other agencies have collaborated to develop a joint website, called 

BusinessUSA, with the goal of making it easier for businesses to access 

services. Some technical assistance providers and entrepreneurs we 

spoke with suggested that a single source to help entrepreneurs quickly 

find information instead of sorting through different websites would be 

helpful. 

Given the fragmented nature of the federal programs that provide 

financial assistance to entrepreneurs, enhanced collaboration between 

agencies could help improve program efficiency. In prior work we 

identified practices that can help to enhance and sustain collaboration 

among federal agencies, which can help to maximize performance and 

results, and we have recommended that the agencies follow them.' 

These collaborative practices include identifying common outcomes, 

establishing joint strategies, leveraging resources, determining roles and 

responsibilities, and developing compatible policies and procedures. In 

addition, GPRAMA's crosscutting framework requires that agencies 

collaborate in order to address issues, such as economic development, 

that transcend more than one agency, and GPRAMA directs agencies to 

describe how they are working with each other to achieve their program 

goals. While most of the agencies at the headquarters level have agreed 

to work together by Signing formal agreements to administer some of their 

similar programs, they have not implemented a number of other good 

collaborative practices we have previously identified. For example, SBA 

and USDA entered into a formal agreement in April 2010 to coordinate 

their efforts aimed at supporting businesses in rural areas. USDA's most 

funds typically flow from the federal agencies to different eligible intermediaries. 

which are third-party entities that receive federal funds, such as non profits or universities 

Although intermediaries are the primary providers of technical assistance, agency field 

offices may also provide some technical assistance, Field staff GAO spoke with did not 

consistently collaborate to provide training and counseling services to entrepreneurs. 

8GAO, Results-Oriented Government: Practices That Can Help Enhance and Sustain 

Coliaboration among Federal Agencies GAO-06-15 (Washington. O.C .. Oct 21, 2005). 

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Agencies Lack 

Information to Track 

Program Activities 

and Have Not 

Evaluated Programs 

recent survey of state directors indicates strong collaboration in several 

areas, including field offices advising borrowers of SBA's programs, 

referring borrowers to SBA and its resource partners, and exploring ways 

to make USDA and SBA programs more complementary, However, the 

agencies have not implemented other good collaborative practices, such 

as establishing compatible policies and procedures to better support rural 

businesses. 

While the four agencies collect at least some information on program 

activities in either an electronic records system or through paper files, 

most were unable to summarize the information in a way that could be 

used to help administer the programs. Similarly, the agencies typically do 

not track detailed information on the characteristics of entrepreneurs that 

they serve, such as whether they are located in rural or economically 

distressed areas or the entrepreneurs' type of industry. According to 

OMB, being able to track and measure specific program data can help 

agencies diagnose problems, identify drivers of future performance, 

evaluate risk, support collaboration, and inform follow-up actions. 

Analyses of patterns and anomalies in program information can also help 

agencies discover ways to achieve more value for the taxpayers' money. 

In addition, agencies can use this information to assess whether their 

specific program activities are contributing as planned to the agency 

goals. Promising practices of program administration include a strong 

capacity to collect and analyze accurate, useful, and timely data' Table 

1 summarizes the type of information that agencies maintain in a readily 

available format that could be tracked to help administer the financial 

assistance programs we reviewed. For example, USDA collects detailed 

information (19 categories) on how entrepreneurs use proceeds, such as 

for working capital, provided through five of its financial assistance 

programs. USDA maintains this information in an electronic database, 

and officials stated that they can provide this type of detailed information 

upon request 

9Harold L Steinberg, Using Performance Information to Drive Performance Improvement, 

Association of Government Accountants CPAG Research Senes: Report No. 29 

(A!exandria, Va. Dec. 2011) 

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Table 1: Financial Assistance Programs that Can Support Entrepreneurs and Maintain ReadUy Available Information, by 

Agency, Fiscal Year 2011 

Use of proceeds? 

Industry entrepreneur is working in? 

Type of entrepreneur by targeted categories? 

We also found that for fiscal year 2011, a number of programs that 

support entrepreneurs failed to meet some or all of their performance 

goals. GPRAMA requires agencies to develop annual performance plans 

that include performance goals for an agency's program activities and 

accompanying performance measures. According to GPRAMA, these 

performance goals should be in a quantifiable and measurable form to 

define the level of performance to be achieved for program activities each 

year. Leading organizations recognize that performance measures can 

create powerful incentives to influence organizational and individual 

behavior. Some of their good practices include setting and measuring 

performance goals. Measuring performance allows organizations to track 

the progress they are making toward their goals and gives managers 

crucial information on which to base their organizational and management 

decisions. 10 

Further, from 2000 through 2012, the agencies had conducted program 

evaluations of 13 of the 30 financial assistance programs that support 

entrepreneurs we reviewed. Based on our review, we found that SBA has 

conducted program evaluation studies on 5 of its 10 programs. We also 

10See GAO, Smalf Business Administration: Additional Guidance on Documenting Credit 

Elsewhere Decisions Could Improve 7(a) Program OverSight, GAO-09-228 (Washington, 

D,C,. Feb, 12, 2009) and Small Business Administration: Additional Measures Needed to 

Assess 7(a) Loan Program's Performance, GAO-07-769 (Washington, DC. July 13, 

2007). We also have ongoing work on SBA's 504 Loan Program including the 

performance measures SBA has established to help ensure 504 loans meet key 

requirements, among other issues. We plan to issue this report in the near future. 

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found that USDA has evaluated 1 of its 8 financial assistance programs, 

but the study did not address the extent to which the program was 

achieving its mission. Although GPRAMA does not require agencies to 

conduct formal program evaluations, it does require agencies to describe 

program evaluations that were used to establish or revise strategic goals, 

as well as program evaluations they plan to conduct in the future. 

Additionally, while not required to do so, agencies can use periodic 

program evaluations to complement ongoing performance measurement. 

Program evaluations that systematically study the benefits of programs 

may help identify the extent to which overlapping and fragmented 

programs are achieving their objectives. In addition, program evaluations 

can help agencies determine reasons why a performance goal was not 

met and give an agency direction on how to improve program 

performance. 

Since our August 2012 report we have also evaluated certain SBA 

financial assistance programs." For example, in September 2013 we 

reported on a pilot initiative within SBA's 7(a) loan guarantee program, 

the Patriot Express Pilot Loan Program, which provided small businesses 

owned and operated by veterans and other eligible members of the 

military community access to capital." We found that SBA did not 

establish measurable goals for the pilot and did not evaluate the effects of 

this pilot, which would have allowed SBA to assess if program operations 

have resulted in the desired benefits, and, for pilots, determine whether to 

make the programs permanent. In this report, we made two additional 

recommendations pertaining to program evaluation. SBA said it would 

consider the findings as it reviewed extending the pilot program. 13 

Subsequently, SBA discontinued the Patriot Express Pilot Program as of 

December 31,2013, but announced a temporary program, the SBA 

Veterans Advantage Program, to serve veteran-owned small businesses. 

11GAO has also issued a number of older reports reviewing vanous aspects of SBA's loan 

programs, including performance evaluations See GAO-09-228 and GAO-07 -769. 

12GAO, Patriot Express.- SBA Should Evaluate the Program and Enhance Eligibility 

Controls, GAO·13·727 (Washington, D.C .. Sept. 12, 2013). This pilot. program was 

terminated as of December 31,2013 

13See GAO-13-727 for more detailed information on OUf findings and recommendations 

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To address the issues identified in our August 2012 report and to help 

improve the efficiency and effectiveness of federal efforts to support 

entrepreneurs, we made the following recommendations: 

The Director of the Office and Management and Budget; the 

Secretaries of the Departments of Agriculture, Commerce, and 

Housing and Urban Development; and the Administrator of the Small 

Business Administration should work together to identify opportunities 

to enhance collaboration among programs, both within and across 

agencies. 

The Secretaries of the Departments of Agriculture, Commerce, and 

Housing and Urban Development and the Administrator of the Small 

Business Administration should consistently collect information that 

would enable them to track the specific type of assistance programs 

provide and the entrepreneurs they serve and use this information to 

help administer their programs. 

The Secretaries of the Departments of Agriculture, Commerce, and 

Housing and Urban Development and the Administrator of the Small 

Business Administration should conduct more program evaluations to 

better understand why programs have not met performance goals and 

the programs' overall effectiveness. 

The agencies, together with the administration, have taken some steps to 

address our recommendations. For example, the administration has 

initiated steps that provide the agencies with a mechanism to work 

together to identify opportunities to enhance collaboration among 

programs. In particular, it introduced a Cross-Agency Priority goal to 

increase services to entrepreneurs and small businesses in the 

President's fiscal year 2013 budget submission." One of the objectives 

under this goal is to use programs and resources across the federal 

government to improve and expand the reach of training, counseling, and 

mentoring services to entrepreneurs and small business owners. In 2012, 

the administration established an interagency group (including 

Commerce, SBA, USDA, and others) that aims to streamline existing 

programs, improve cooperation among and within agencies, ease 

entrepreneurs' access to the programs, and increase data-based 

14GPRAMA, among other things, required OMS to coordinate with agencies to establish 

outcome-oriented federal government priority goals-referred to as crosscutting 90alscovering a limited number of policy areas, as well as goals to improve management 

across the federal government. Entrepreneurship and small businesses was 1 of 14 

interim crosscutting priority goals included in the President's 2013 budget submission. 

Page9 GAO·14·335T Entrepreneurial Assistance 
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evaluation of program performance. According to the third quarter fiscal 

year 2013 status update on the administration's Cross-Agency Priority 

goal for small business and entrepreneurship, the working group was to 

create an interagency evaluation framework in the fourth quarter of fiscal 

year 2013 to measure the impacts of coordinating funding streams 

through cluster initiatives. It will be important for the interagency group to 

follow through on developing an evaluation framework, including metrics, 

to ensure that the programs are delivering assistance to entrepreneurs 

efficiently and effectively. In addition, in November 2013, OMB noted that 

an interagency group meets monthly to discuss individual agency efforts 

and identify key areas for improved interagency coordination for the 

BusinessUSA website. It will be important for the interagency group to 

follow through on any key areas identified to improve coordination among 

agencies. 

In addition, the four agencies have completed actions or have actions 

underway that are intended to improve data collected on program 

performance. 

In November 2013, USDA noted that the department's Rural Business 

Services completed three initiatives in fiscal year 2013 to improve the 

quality of performance measurement, including a project to improve 

the integrity of data the agency uses to compile program performance 

measures. 

In November 2013, HUD noted that the department had undertaken a 

series of actions to improve the quality of data on the department's 

Community Development Block Grant (CDBG) funded activities, 

including economic development activities. HUD's efforts include an 

extensive clean-up of CDBG data, which the department expects to 

complete by the end of the second quarter of fiscal year 2014. 

In February 2013, SBA noted that the agency had undertaken a 

modernization project for its resource partner data collection system 

to enhance current data fields, improve budget and performance 

integration capabilities, and expand reporting capabilities. 

In October 2012, Commerce's Economic Development Administration 

(EDA) noted that it had recently partnered with two universities to 

develop a comprehensive set of performance measures that can be 

used to evaluate the effectiveness of its programs. 

Going forward, we will continue to obtain updates on the agencies' 

progress. We will report on the actions taken by the agencies as we do 

for other areas included in our mandated work addressing federal 

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GAO Contacts and 

Staff 

Acknowledgements 

programs with fragmentation, overlap, and duplication.'s We look forward 

to continuing to work with the agencies as well as this and other 

congressional committees in addressing ways to assist entrepreneurs in 

the most effective and efficient manner. 

Chairman Tipton and Ranking Member Murphy, this concludes my 

prepared statement. I would be happy to answer any questions at this 

time. 

For further information on this testimony, please contact me at (202) 512-

8678 or shearw@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this statement. Key contributors to this testimony include Marshall 

Hamlett, Assistant Director; Catherine Gelb; John McGrail; and Jennifer 

Schwartz. 

15GAQ, Duplication & Cost Savings, Action Tracker, accessed February 3, 2014, avatlable 

at http!!wwwgao gov/duphcatlon/aCMn_tracker/all_areas 

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Appendix I: List of Programs That Provide 

Financial Assistance to Entrepreneurs 

Department of 

Agriculture 

Department of 

Commerce 

Department of 

Housing and Urban 

Development 

Small Business 

Administration (SBA) 

(251)768) 

Biomass Research and Development Initiative Competitive Grants 

Program 

Business and Industry Loans 

Intermediary Re-Iending 

Rural Business Enterprise Grants 

Rural Microentrepreneur Assistance Program 

Small Business Innovation Research 

Value Added Producer Grants 

Woody Biomass Utilization Grant Program 

Economic Adjustment Assistance 

Global Climate Change Mitigation Incentive Fund 

Community Development Block Grant (CDBG)/Brownfields Economic 

Development Initiative 

CDBG/Disaster Recovery Grants 

CDBGlinsular Areas 

CDBG/Non-entitlement CDBG Grants in Hawaii 

CDBG/Section 108 Loan Guarantees 

CDBG/States 

CDBG/Entitiement Grants 

Indian CDBG 

Rural Innovation Fund 

Section 4 Capacity Building for Affordable Housing and Community 

Development 

504 Loan Program 

7(a) Loan Program 

7(a) Export Loan Guarantees 

Federal and State Technology Partnership Program 

Microloan Program 

New Markets Venture Capital Program 

Small Business Innovation Research Program 

Small Business Investment Companies 

Small Business Technology Transfer Program 

Surety Bond Guarantee Program 

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copYrighted images or other matenaL permission from the copyright holder may be 

necessary if you wish to reproduce this material separately 
35 

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36 

Chairman Tipton, Ranking Member Murphy, and distinguished 

Members of the Subcommittee. Thank you for inviting me to testify 

on SBA’s ongoing work to expand access to capital for small businesses, while enhancing collaboration and avoiding duplication 

with other government programs. I greatly appreciate the opportunity to discuss our lending products and successful partnerships 

across the federal government. As a former lender from a largely 

rural state, it is truly an honor to be before this Subcommittee and 

alongside my colleagues from USDA and GAO. Together, we are 

committed to providing all entrepreneurs with the tools they need 

to start and grow companies and create jobs. 

Small businesses are the engine of our economy and one of our 

country’s greatest assets. They employ half of the private sector 

workforce and create two out of every three net new private sector 

jobs. And at SBA, we know that innovation is hardly limited to 

Boston and San Francisco. It’s happening in rural and industrial 

communities—in the South and across the Midwest. It’s happening 

in Florida and Colorado and in my home state of Oregon. That is 

why we are focused on ensuring that the economic benefits of entrepreneurship reach every corner of America. 

In my role as Associate Administrator for Capital Access. I rely 

on my 30-year career in commercial lending to inform how SBA can 

better support small businesses across the country. It is our top 

priority to fill market gaps and expand opportunities for companies 

that are often overlooked by investors and financial institutions. 

Over the past five years, our loan guarantee programs have made 

is possible for lenders to support more small businesses in rural 

and underserved communities. In Fiscal Year 2013 alone, approximately 15 percent of all 7(a) loans and 16 percent of total dollars 

went to rural entrepreneurs. 

In order to reach even more small businesses in rural markets 

and ensure effective collaboration across the federal government, 

SBA has signed several Memorandums of Understanding (MOU) 

with other agencies, including USDA. Leveraging SBA’s nationwide 

network of district offices and resource partners as well as USDA’s 

extensive footprint of field staff in nearly every county in America, 

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we are able to advise potential small business borrowers and lenders on both SBA and USDA loan programs. Through our collaboration, we educate each other’s staff on our respective products and 

services, exchange marketing materials, and host joint lender 

training. 

We have already seen the benefits of our collaboration through 

the success of countless small businesses like the Maupin Market 

in Maupin, Oregon. In 2011, the only grocery store in this 500-person town was slated to close, forcing residents to travel over 40 

miles to go food shopping. Maupin was en route to becoming a food 

desert when Allison and Randy Bechtol decided to reopen the store. 

Unable to obtain conventional financing, the Bechtols turned to the 

local Small Business Development Center (SBDC) for help. The 

SBDC connected the Bechtols with a community bank that identified SBA’s 504 Loan Program and USDA Rural Development’s 

Intermediary Relending Program as strong matches for their capital needs. With a $279,000 SBA-guaranteed loan and a separate 

loan for $100,000 through USDA’s Intermediary Relending Program, the Bechtols were able to remodel the old building and reopen the new Maupin Market. They have created seven good-paying jobs in the community and provided new business opportunities 

for the local farmers. 

The success of SBA’s strategic alliance with USDA has led to 

similar partnerships with the Delta Regional Authority (DRA) and 

the Appalachian Regional Commission (ARC). We are also working 

with the White House Rural Council on a number of initiatives to 

increase investment in rural communities. Specifically, we announced a new commitment with USDA to expand access to capital 

and provide targeted training and counseling services in rural markets. 

SBA also supports rural small businesses through our Small 

Loan Advantage (SLA) platform. One of our signature low-dollar 

loan programs, SLA makes loans up to $350,000 more attractive 

and less costly for banks. After receiving feedback from our lending 

partners on how to make the program more effective, we simplified 

the application process, allowed banks to use their own collateral, 

closing, and dispersing guidelines, and expanded the program to include all lenders. 

We also redesigned our CAPLines program, which provides working-capital to small businesses to help them meet contract obligations and fill work orders. This streamlined, and therefore less 

costly, process allows banks to reach smaller and more rural businesses. In FY 2012 and FY 2013, we experienced a significant increase in activity in this program with over 1,200 loans approved 

for more than $920 million. That is up from just 300 loans and 

$255 million approved during the three prior fiscal years combined. 

At SBA, and across the Administration, we are committed to collaborating with our federal partners to fill market gaps for loans 

in underserved communities and ensure that all entrepreneurs 

have the resources and training they need to turn great ideas into 

growing businesses. By taking an inclusive view of entrepreneurship, one that expands access and opportunity to more commuSBREP-219 with DISTILLER

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nities, we can spur new business formation, innovation, job creation, and build strong regional economies throughout America. 

Thank you again for the opportunity to be here, and I look forward to answering your questions. 

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Statement of Lillian Salerno, Administrator, Rural BusinessCooperative Services 

United States Department of Agriculture 

Before the House Committee on Small Business Subcommittee on 

Agriculture, Energy and Trade 

February 06, 2014 

Chairman Tipton, Ranking Member Murphy, and members of the 

subcommittee, I am pleased to have this opportunity to discuss, as 

a follow-up to last year’s hearing on the Government Accountability 

Office (GAO) report on ‘‘Entrepreneurial Assistance,’’ the coordination of the Business and Industry (B&I) Guaranteed Loan program 

with the Small Business Administration’s (SBA) 7(a) program and 

improvements we have made in our performance measure 

verification. Rural Business-Cooperative Service (RBCS) is committed to ensuring that entrepreneurs in rural communities have 

every opportunity to succeed. 

As a former entrepreneur and rural small business owner, I have 

firsthand knowledge of the value of Federal financial assistance 

program. In fact, the medical device company I founded in 1994 

began with a Small Business Innovation Research (SBIR) grant 

and has grown to approximately 150 employees in rural north 

Texas. 

In the August 2012 report on Entrepreneurial Assistance, GAO 

recommended that we do more to coordinate our programs and that 

we help entrepreneurs more efficiently identify the program that 

can assist them. Outreach and collaboration with other Federal 

agencies regarding our programs here at a national level and educating and encouraging our field staff to work with other Federal 

agencies in promoting our programs at a local level have been top 

priorities for me since I became Administrator in July 2013. 

B&I Guaranteed Loan Program 

Rural communities have historically lacked adequate access to 

private investment capital to support business development and job 

creation. The B&I Guaranteed Loan program helps to improve the 

economic condition of rural communities by enhancing the existing 

private credit structure through loan guarantees. Over the course 

of the past year, RBCS has provided $939 million in B&I loan 

guarantees to over 400 businesses across the country. 

We appreciate that other agencies’ programs may provide assistance to rural businesses. However, the distinguishing and critical 

feature of RBCS programs in general, and the B&I guaranteed loan 

program in particular, is our mission—to provide assistance to 

rural businesses in rural communities. While both the B&I program and the Small Business Administration’s 7(a) loan program 

have the goal of ensuring small businesses have capital, Congress 

has determined that B&I serves the distinct purpose of providing 

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resources to rural businesses that have greater individual capital 

needs. The B&I program is a critical component to increasing economic opportunity and improving life for rural Americans. The delivery system of our agency, with personnel and offices in rural 

areas, is particularly suited to assisting rural businesses and helping them to succeed. 

Furthermore, the universe of borrowers is broader for participants under the B&I program. The 7(a) program limits eligible borrowers to for-profit businesses, while the B&I program allows eligible borrowers to be for-profit, cooperatives, non-profit, individuals, 

corporations, or partnerships located in rural areas with a population of less than 50,000. Also, the guarantee loan limits for the 

B&I program are greater than those for the 7(a) program. 

USDA & SBA Coordination 

My agency works diligently to ensure effective coordination of the 

B&I program (as well as our other programs) with our partners, especially with SBA. While the National Office meets with SBA frequently because of our participation on Administration-wide, crosscutting initiatives, the coordination is even more evident at the 

state and local levels. Although our field staff has worked closely 

with SBA offices for many years, the Memorandum of Understanding (MOU) signed by former SBA Administrator Karen Mills 

and Department of Agriculture (USDA) Secretary Thomas J. 

Vilsack in September of last year provides an opportunity for even 

more collaboration. The intent of this MOU is to benefit small businesses and agricultural producers through a joint effort and to encourage sustainable growth and development through financial assistance from both SBA and USDA. 

On a recent visit to a Small Business Lender roundtable with 

bankers and small businesses, the State SBA representative highlighted the efficacy of the new MOU in an email to me, which reads 

in part: 

At the district level, we cut through red tape and bureaucracy 

much of the time because our leaders give us that ability. The 

MOU lays out the guide—which is very good in that it gives 

more details and specific achievements desired, but lets us design specific applications to fit our markets. I think this could 

be a best practice for other government programs to ‘‘virtually’’ 

consolidate ourselves around those common areas we naturally 

have. This is achieved without the cost and time involved in a 

full-blown reorganization and consolidation but achieves the 

same thing faster and better. 

Further, my agency, together with SBA, is committed to providing $175 million in micro-capital to rural small businesses and 

small farms over Fiscal Years (FY) 2013 and 2014 to support entrepreneurship in rural communities across America. This commitment represents a ten percent increase from FY 2012 micro-lending 

levels at both agencies. Through our coordination with SBA, we are 

able to increase access to private investment capital for small rural 

businesses, which helps ensure that rural communities are economically thriving and can compete in the global economy, This coSBREP-219 with DISTILLER

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ordination includes outreach and promoting each agency’s programs, resulting in better access for entrepreneurs and, in a number of instances, jointly funded projects. For example, last year, a 

lender in Sumter, South Carolina, was able to leverage both the 

B&I program and the SBA 7(a) program to help finance two 

projects that involved common ownership. Because the SBA 7(a) 

program has an exposure cap of $5 million, the lender needed to 

finance the remaining $6.5 million using the B&I guaranteed loan 

program. 

Measuring Performance 

RBCS has been, and continues to be, focused on improving our 

metrics by improving processes, increasing human resources, and 

investing in Information Technology. In the past year, RBCS has 

taken steps to improve its data collection and data validation. In 

the second quarter of FY 2013, we published guidance to our field 

offices to provide clarification and guidance regarding the collection, tracking recording, and verifying of jobs created/saved and 

other measures of impacts and outcomes of RBCS programs (e.g., 

energy saved or produced, producers of local foods projects). 

The Agency undertook an extensive data validation effort of FY 

2013 data. National Office personnel reviewed all of the performance measures for FY 2013, identifying in particular data that 

were deemed ‘‘outliers.’’ The data was distributed to our state offices and program offices for validation. We asked all offices to 

carefully review the data and to pay special attention to the information identified by the National Office as ‘‘outliers.’’ Once the 

data was confirmed or amended by the state and program offices 

it was resubmitted to the National Office. 

Concurrently, we created a specific spreadsheet that will be updated on a periodic basis to compile performance measures. The 

spreadsheet will improve the consistency and accuracy of our performance outcomes when we submit reports to the various oversight organizations, such as OMB, USDA’s Office of Budget and 

Policy Analysis (OBPA), the Office of the Inspector General (OIG), 

and the Government Accountability Office (GAO). 

For FY 2014, we are now able to undertake several actions as we 

have certainty in the amount of funding made available to us. Our 

first priority is a critical hire to oversee our data collection and 

verification activities. We are also revising the personnel description of one of our senior staff to address reporting consistency. Further, we will begin making IT enhancements including making it 

easier for our lenders and intermediaries to report the performance 

measures we request of them. 

Importance of RBCS Programs 

As Administrator, I have had the opportunity to meet with many 

small business owners and listen to their struggles to acquire needed capital to start, improve, or develop their businesses. Numerous 

small business owners have told me that without the B&I program 

the bank would not have made the loan. 

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To more efficiently and effectively deliver our programs, RBCS 

utilizes ten team leaders and two regional leaders. This allows us 

to better coordinate activities with the states and most importantly 

to assist rural Americans on a ‘‘horizontal’’ basis rather than the 

slower, less efficient ‘‘vertical’’ basis. For FY 2014, we are proposing 

to hire additional people. These additional positions will enable 

RBCS to further focus our resources on the economic needs at both 

the regional and community levels, thereby ensuring that our resources support the rural development needs specific to that region 

or community. 

In sum, no other Federal agency is positioned as well as we are 

to meet the needs of rural America. Our extensive physical presence in rural communities distinguishes us from other Federal programs. We have the expertise and experience with the particular 

economic, social, and geographic characteristics of rural communities. Through our 47 State Offices and hundreds of local offices 

and service centers, we overcome the physical distance barriers 

that alone can hinder service delivery in rural areas. 

Concluding Remarks 

I appreciate the opportunity to testify before members of the 

Committee alongside colleagues from SBA and GAO. We are committed to helping entrepreneurs and small businesses succeed. As 

you can see from the testimony above, we work well together and 

I anticipate that we will continue to do so in the future. I welcome 

the chance to engage in a dialog on even more ways we can further 

support American competiveness and growth. Thank you for your 

support of Rural Business programs. And at this time, I am happy 

to answer your questions. 

Æ 

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