GAO United States

General Accounting Office

Washington, D.C. 20548

Resources, Community, and

Economic Development Division

B-277425 

July 11, 1997

The Honorable Richard K. Armey

Majority Leader

House of Representatives

The Honorable John Kasich

Chairman, Committee on the Budget

House of Representatives

The Honorable Dan Burton

Chairman, Committee on Government Reform

 and Oversight

House of Representatives

The Honorable Bob Livingston

Chairman, Committee on Appropriations

House of Representatives

Subject: Results Act: Observations on the Small Business Administration’s

Draft Strategic Plan

On June 12, 1997, you asked us to review the strategic plans submitted by

the cabinet departments and selected major agencies for consultation with

the Congress as required by the Government Performance and Results Act

of 1993 (the Results Act). This report is our response to your request

concerning the strategic plan of the Small Business Administration (SBA).

Objectives, Scope,

and Methodology

Specifically, you asked us to review SBA’s draft plan and assess (1) whether

it fulfills the requirements of the Results Act and to provide our views on

its overall quality; (2) whether it reflects SBA’s key statutory authorities;

(3) whether it reflects interagency coordination for crosscutting programs,

activities, or functions that are similar or complementary to other federal

programs; (4) whether it addresses major management problems that we

have previously identified; and (5) the adequacy of SBA’s data and

information systems for providing reliable information for measuring

results.

We obtained the March 5, 1997, draft strategic plan that SBA provided to

congressional committees. It is important to recognize that SBA’s final plan

is not due to the Congress and the Office of Management and Budget (OMB)

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until September 1997. Furthermore, the Results Act anticipated that it may

take several planning cycles to perfect the process and that the final plan

will continue to be refined as future planning cycles occur. Thus, our

comments reflect a snapshot of the plan at this time. We recognize that

developing a strategic plan is a dynamic process and that SBA is continuing

work to revise the draft with input from OMB, congressional staff, and other

stakeholders.

Our overall assessment of SBA’s draft strategic plan was generally based on

our knowledge of SBA’s operations and programs, our reviews of SBA, and

other existing information available at the time of our assessment.

Specifically, the criteria we used to determine whether SBA’s strategic plan

complied with the requirements of the Results Act were the Results Act

and the Office of Management and Budget’s (OMB) guidance on developing

the plans (OMB Circular A-11, Part 2). To make judgments about the overall

quality of the plan, we used our May 1997 guidance for congressional

review of the plans (GAO/GGD-10.1.16) as a tool. To determine whether the

plan contained information on interagency coordination and addressed

management problems, and whether SBA had adequate systems in place to

provide reliable information on performance, we reviewed reports on

audits of SBA’s fiscal year 1995 and 1996 financial statements and the

agency’s fiscal year 1996 Federal Managers’ Financial Integrity Act (FMFIA)

report. We also relied on our general knowledge of SBA’s operations and

programs and on the results of our previous work. In determining whether

SBA’s draft strategic plan reflects major statutory responsibilities, as you

requested, we coordinated our review with the Congressional Research

Service and relied on our independent analysis of the statutory provisions

applicable to SBA. Our work was performed in June and July 1997. We

obtained comments from SBA on a draft of this report.

Background SBA is an independent agency created in 1953 to aid, counsel, assist, and

protect the interests of small businesses. With a permanent staff of about

4,400 employees and an annual operating budget of about $800 million, SBA

administers loan and other programs that annually provide over $10 billion

in small business financing. SBA provides new and established small

businesses with financial assistance, including venture capital and

financing for long-term assets; provides management training, technical

assistance, and procurement opportunities to both small businesses and

small businesses owned by disadvantaged individuals; and assists small

contractors in obtaining bid, performance, and payment surety bonds for

construction and other contracts. In addition, SBA provides financial

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assistance to the owners of homes and businesses that are damaged or

destroyed by natural disasters, such as hurricanes and floods.

SBA’s March 5, 1997, draft strategic plan defines SBA’s mission as follows:

“It is the Mission of the Small Business Administration (SBA) to serve

America’s small businesses to (1) help preserve free competition,

(2) contribute to strengthening the Nation’s economy, and (3) assist

disaster-ravaged communities recover from their losses.” SBA’s strategic

plan presents seven goals for accomplishing the agency’s mission. These

goals are to (1) improve access to capital for small businesses to start and

grow; (2) reduce burdensome regulations and unnecessary paperwork;

(3) enhance education, counseling, and information for small businesses;

(4) serve as the President’s “eyes and ears,” reporting back to him on the

needs of small businesses, and function as an advocate for small

businesses; (5) provide a “lifeline” to disaster-ravaged communities;

(6) exercise effective and efficient executive management of the agency’s

activities; and (7) through the Office of Inspector General (OIG), improve

SBA’s management. The section of the plan outlining the objectives,

strategies, and measures for achieving the last goal is presented as, in

effect, a strategic plan for SBA’s OIG.

In January 1994, OMB designated the entire SBA as a performance planning

and reporting pilot under the Results Act (portions of other agencies were

also designated). In addition, SBA was required to prepare performance

plans for several fiscal years. In March 1994, SBA entered into a

performance agreement with the President that set forth the President’s

policy goals for SBA and established a basis for measuring the agency’s

progress in achieving those goals. This agreement with the President has

played a major role in fashioning the strategic goals in SBA’s draft strategic

plan. Three of the four policy goals explicitly outlined in the agreement

between SBA and the President—to increase capital access, reduce the

regulatory burden, and be the President’s eyes an ears for small

businesses—are among the seven goals in SBA’s draft strategic plan.

The Results Act requires that an agency’s strategic plan contain the

following six critical elements: (1) a comprehensive mission statement;

(2) agencywide long-term goals and objectives for all major functions and

operations; (3) approaches (or strategies), and the various resources

needed, to achieve the goals and objectives; (4) a relationship between the

long-term goals and objectives and annual performance goals;

(5) identification of key factors, external to the agency and beyond its

control, that could significantly affect the achievement of the strategic

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goals; and (6) a description of how program evaluations were used to

establish or revise strategic goals and a schedule for future program

evaluations.

Results in Brief A significant amount of work remains to be done by SBA before its draft

strategic plan can fulfill the requirements of the Results Act. The plan

lacks two required critical elements: (1) a discussion of the relationship

between the long-term goals and objectives and the annual performance

goals and (2) a description of how program evaluations were used to

establish or revise strategic goals and a schedule for future program

evaluations. Furthermore, the four elements that the plan contains could

better conform to the act’s requirements and OMB’s guidance. Many of the

goals and objectives appear less outcome-oriented (directed at the

long-term results that SBA wants to achieve), but rather process-oriented,

such as serving as the President’s eyes and ears. The strategies, which

consist entirely of one-line statements, are too vague to enable an

assessment of whether they would help achieve the goals and objectives in

SBA’s plan. Furthermore, because of the way in which the information is

presented, the linkage between specific performance measures, strategies,

and objectives is not clear. Also, while the plan identifies certain key

external factors, it does not yet include a discussion of how the external

factors will be taken into account when assessing progress toward goals.

Because the plan is incomplete, the Congress may be missing critical

information for its consultation with SBA.

SBA’s draft strategic plan reflects consideration of the key statutory

provisions authorizing SBA’s programs and activities. The plan could

benefit from more explicit references to the agency’s major statutes and a

clearer linkage between the authorities and the agency’s mission, goals,

and objectives.

SBA’s draft strategic plan does not explicitly address the relationship of

SBA’s activities to similar activities in other agencies and provides no

evidence that SBA coordinated with other agencies in developing its plan.

For example, the plan does not identify how SBA’s programs are

coordinated with the Department of Commerce’s Minority Business

Development Agency (MBDA), even though MBDA offers the same types of

assistance as SBA to clients (minority small businesses) that are often the

prime focus of SBA’s assistance. In addition, SBA’s strategic plan might

benefit by an explicit acknowledgement of the extent to which SBA must

rely on other federal agencies in carrying out its federal

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procurement-related responsibilities, such as the 8(a) minority enterprise

development program.

Because the plan’s strategies are vague, the extent to which the plan

addresses management problems that we have previously identified is

unclear. For example, we have identified problems with SBA’s liquidation

of guaranteed loans and of small business investment companies (SBIC).

SBA’s plan proposes improving its liquidation processes, but it does not

describe the specific strategies that will help achieve the objectives. The

plan also does not directly address other identified problems. For

example, independent audits of SBA’s financial statements have identified

internal control weaknesses, including SBA’s failure to reconcile certain

fund balances with those of the Treasury Department.

SBA’s capacity to provide reliable information on the achievement of

strategic goals is uncertain. Not all of the goals and objectives in the plan

are stated in a manner that is measurable. Therefore, it is unclear as to

what information will be needed and how SBA will assemble and store the

information. However, the plan identifies a number of potential

performance measures for which obtaining reliable and accurate data

could be difficult, expensive, or both. Also, the plan does not clearly

address how to correct problems with existing information systems that

have been identified by SBA and its independent auditors, nor does it

identify the sources of other information that would logically be needed

for the identified performance measures.

SBA’s Strategic Plan

Does Not Yet Fulfill

the Requirements of

the Results Act

SBA’s draft strategic plan does not reflect the six requirements of the

Results Act, and a significant amount of work remains to be done by SBA

before its draft strategic plan can fulfill those requirements.

SBA’s Plan Does Not

Contain All Critical

Elements

SBA’s draft plan does not discuss the relationship between strategic goals

and annual performance goals. While strategic plans are not required to

identify specific performance measures, OMB Circular A-11 recommends

that the plans briefly outline (1) the type, nature, and scope of the

performance goals to be included in subsequent annual performance

plans; (2) the relationship between the performance goals and the general

goals and objectives; and (3) the relevance and use of the performance

goals in helping determine the achievement of goals and objectives.

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Furthermore, SBA’s draft strategic plan does not describe how program

evaluations were used to establish or revise strategic goals or include a

schedule for future program evaluations to help measure progress toward

strategic goals, as required by the Results Act. The section of the plan

concerning the SBA’s OIG references future audit work and evaluations that

will be done by that office to help improve SBA’s management, but this

information does not appear to meet the Results Act’s requirements for

substantive program evaluations.

Observations on the

Overall Quality of SBA’s

Plan

Overall, SBA’s draft strategic plan is not yet sufficient to achieve the

purposes of the Results Act and improve management and make programs

more effective. Our specific observations are discussed in the following

sections.

Mission Statement SBA’s mission statement is results-oriented in that it articulates the

intended results of SBA’s efforts to assist small businesses: preserving free

competition, strengthening the nation’s economy, and helping

disaster-ravaged communities. In accordance with the guidance in OMB

Circular A-11, the mission statement could be improved by more directly

incorporating key aspects of SBA’s legislative mandate to aid, counsel,

assist, and protect the interests of small businesses. In addition, because it

mentions assisting only small businesses, the mission statement does not

encompass one significant activity of SBA’s—making loans to individuals

who have suffered disaster losses. As of May 1997, disaster loans to

individuals accounted for more than 50 percent of the $767 million in

disaster loans made by SBA during fiscal year 1997.

Strategic Goals/Objectives OMB Circular A-11 suggests that strategic plans should set out the

long-term programmatic, policy, and management goals of the agency and

that the goals and objectives should elaborate on how the agency is

carrying out its mission.

SBA’s draft strategic plan lists seven strategic goals for accomplishing its

mission. In addition, the plan lists from two to four policy or program

objectives for each goal—a total of 24 objectives for the seven goals.

Generally, the goals cover the major functions and operations of SBA.

However, not all of the goals elaborate on how SBA carries out its mission.

Only the first and third goals in SBA’s plan—to improve access to capital

for small businesses to start and grow and to enhance education,

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counseling, and information for small businesses—describe outcomes

logically linked to fulfilling SBA’s statutory mission. The remaining goals

are expressed as processes—reducing burdensome regulations and

unnecessary paperwork, serving as the President’s eyes and ears,

providing a lifeline to disaster-ravaged communities, exercising efficient

executive management, and improving SBA’s management through the OIG’s

operations—rather than as long-term results that SBA wants to achieve.

Similarly, some of the objectives associated with the goals are expressed

more as processes than as results, making linkage to mission less clear.

For example, the objectives listed under the fifth goal—to provide a

lifeline to disaster-ravaged communities—describe the characteristics of

the assistance (“customer-focused” and “cost-efficient”) rather than a

result that SBA intends to achieve.

Some of the goals and objectives lend themselves to performance

measurement; that is, data could be gathered that would allow SBA and/or

the Congress to assess the extent to which the goals or objectives are

being achieved. However, the plan does not clearly indicate how progress

would be measured. It could be difficult, for example, to measure a real

reduction in the paperwork burden on small businesses. Moreover, some

objectives are not outcome-oriented and do not imply a target that might

be measured. (As discussed below, the Results Act does not require that

strategic plans identify specific performance measures; however, in

accordance with the guidance in OMB Circular A-11, plans should briefly

describe the type, nature, and scope of the performance goals to be

included in subsequent annual performance plans and recognize the

relevance and use of performance goals in helping determine the

achievement of goals and objectives.) For example, the first goal—to

improve access to capital—includes the objective “offer specialized capital

access by providing bonding opportunities, venture capital, and export

financing.” Because SBA currently offers these services to small businesses,

the plan might more usefully state their intended outcome in a way that is

directed at achieving the goal.

Strategies to Achieve Goals

and Objectives

Under the Results Act, the strategic plans’ sections on strategies are to

briefly describe the operational processes; the technologies; and the

human, capital, information, or other resources needed to achieve goals

and objectives. Additionally, OMB Circular A-11 recommends that strategies

outline how agencies will communicate strategic goals throughout the

organization and hold managers and staff accountable for achieving these

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goals. With the exception of the plan dealing with the OIG’s efforts, SBA’s

plan does not meet these requirements.

The strategies outlined in SBA’s draft plan consist entirely of one-line

statements. Because they lack detail, most are too vague or general to

enable an assessment of whether or not they would help achieve the goals

and objectives in the plan. For example, it is unclear from SBA’s plan how

establishing a risk management database or completing a Certified

Development Company loan liquidation pilot will help SBA to improve

small businesses’ access to credit.

OMB Circular A-11 states that strategies should include schedules for

initiating or completing “significant” actions. Because of their brevity, it is

difficult to assess whether the proposed strategies in SBA’s plan might be

considered significant. However, those that might be deemed significant in

terms of the time and resources required—for example, developing and

expanding on-line services for small businesses or implementing a small

and disadvantaged business procurement reform program—lack

schedules as well as resource estimates.

SBA’s plan could also be improved by making the linkage between the

strategies and goals/objectives more explicit. In SBA’s draft plan, the

objectives are listed as a group, followed by the strategies, which are also

listed as a group. While the objectives and strategies may be linked, the

linkage is not easy to follow, which reduces the plan’s value to users in

SBA, the administration, and the Congress. One way that SBA could improve

the linkage would be to clearly describe the key strategies, objective by

objective, that it intends to use to accomplish each of its goals. This

structure would help make the plan meaningful to employees throughout

the agency, including those delivering services.

Relationship Between

General and Annual

Performance Goals

Under the Results Act, each general goal must be linked to annual

performance goals. A performance goal is the target level of performance

expressed as a tangible, measurable objective against which actual

achievement is to be compared. An annual performance goal is to consist

of two parts: (1) the measure that represents the specific characteristic of

the program used to gauge performance and (2) the target level of

performance to be achieved during a given fiscal year for the measure.

While strategic plans are not required to identify specific performance

measures, OMB Circular A-11 recommends that the plans briefly relate

general goals and objectives to annual performance goals.

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While SBA’s draft strategic plan lists 66 potential performance measures

(excluding those for the OIG), it does not appear to meet the guidance set

forth in the circular. Examples of target levels for some performance

measures and a brief explanation of how achieving those target levels will

help achieve the strategic goal could help to meet these requirements.

In addition, SBA’s strategic plan could be improved by making the linkage

between the proposed performance measures, strategies, and objectives

more explicit. In the draft plan, the performance measures are listed as a

group following the strategies (which, as noted above, are also listed as a

group following the objectives). Consequently, the plan is unclear as to

which of the measures SBA proposes to use to assess its progress in

achieving each of the objectives. Such a linkage is important because it

will allow the Congress and SBA to judge whether or not the agency is

achieving its goals.

The annual performance plans required by the Results Act should help the

Congress and the executive branch make informed decisions by providing

a simple, straightforward linkage between plans, budgets, and

performance results. The Results Act attempts to establish this linkage by

requiring agencies to base the goals in their annual performance plans on

the program activity structures used in their budget submissions. SBA’s

draft plan does not explicitly recognize the need to link the identified

objectives or measures in the plan to the program activity structure in

SBA’s budget.

Key External Factors OMB Circular A-11 recommends that strategic plans briefly describe each

key external factor—economic, demographic, social, or environmental

conditions—and how each may influence the achievement of goals and

objectives. SBA’s draft plan lists a number of such factors associated with

each strategic goal. But the plan does not yet include a discussion of how

the external factors will be taken into account when assessing progress

toward goals. Furthermore, as discussed below, the plan does not make

clear the extent to which the success of many SBA programs depends on

the actions of other federal agencies.

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The Plan Reflects

SBA’s Key Statutory

Authorities

SBA’s draft strategic plan reflects consideration of the key statutory

provisions authorizing SBA’s programs and activities. However, while not

required by the Results Act, the plan might benefit from a discussion that

explicitly references SBA’s major statutes and links the authorities to the

agency’s goals and objectives.1

 This linkage is provided, for example,

under the goal of being a lifeline to disaster-ravaged communities: The

plan discusses SBA’s role under section 7(b) of the Small Business Act in

providing financial assistance to victims of natural disasters. The other six

goals do not explicitly reference a statutory authority. Such express

linkage throughout the strategic plan would help to ensure that the

agency’s stated goals and objectives include consideration of the entire

spectrum of the agency’s key statutory authorities.

The draft plan does not discuss mandated programs or duties that either

are ancillary functions for key program responsibilities (such as SBA’s

adjudicative functions that support its key contracting and loan programs)

or that potentially are subsumed under other key program functions in the

plan. The plan should mention these activities if their resource

requirements will affect the achievement of goals and objectives in the

plan.

Crosscutting Program

Activities Are Not

Sufficiently Identified

SBA’s draft strategic plan does not explicitly address the relationship of

SBA’s activities to similar activities in other agencies and provides no

evidence that SBA coordinated with other agencies in developing its plan.

For example:

• The Minority Business Development Agency, located in the Department of

Commerce, operates a network of centers throughout the country that

provide management and technical assistance to minority businesses.

There is no mention of coordination with MBDA in SBA’s draft strategic plan,

even though MBDA offers the same type of assistance as SBA, and to clients

(minority small businesses) that are often the prime focus of SBA’s

assistance.

• The Federal Emergency Management Agency (FEMA) is the lead federal

agency for assisting victims of hurricanes, floods, and other natural

disasters. As described, the SBA plan includes in the mission statement

“assist disaster-ravaged communities recover from their losses” and has as

one its strategic objectives to “provide a ’lifeline’ to disaster-ravaged

communities.” While SBA’s plan briefly mentions promoting better

1

OMB Circular A-11 suggests that an agency’s mission statement may include a brief discussion of the

agency’s enabling or authorizing legislation; this suggestion, however, does not extend to the

statement of goals and objectives.

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cooperation with FEMA and other agencies, the plan does not indicate how

SBA’s efforts relate strategically to those of FEMA.

• There is no mention in SBA’s plan of the “harmonization” efforts for the

export program activities of SBA and the Export-Import Bank. In 1993, the

Trade Promotion Coordinating Committee, an interagency group,

recommended that the bank and SBA harmonize their working capital

guarantee programs to make them more customer-focused and take

advantage of the agencies’ respective strengths. As we recently reported,

the harmonization efforts between these two agencies are not complete.2

Among other things, the lack of harmonization has caused increased

paperwork and processing delays for lenders and exporters.

In addition, SBA’s strategic plan might benefit by an explicit

acknowledgement and discussion that the agency must, by necessity, rely

on other federal agencies in carrying out much of its federal

procurement-related activities. For example, SBA’s 8(a) minority enterprise

development program provides procurement opportunities to businesses

that are owned and controlled by disadvantaged individuals, and one

performance measure listed by SBA is the increase in the number of 8(a)

firms with developmental experiences. However, SBA must depend on the

other federal agencies to award contracts and, usually, to select the

contractors.

A similar situation exists with SBA’s Small Business Innovation Research

(SBIR) program, under which small businesses propose innovative ideas

that meet the specific research and research and development (R&D) needs

of the federal government. A performance objective of SBA is to increase

the commercialization of research and ensure that small businesses

participate in federal R&D efforts. Because the SBIR program is administered

by other federal agencies, SBA’s ability to achieve this performance

objective will not be solely in the control of SBA.

Plan Does Not Clearly

Address Previously

Identified

Management

Problems

Two of the goals in SBA’s draft plan are directed at better managing the

agency. For example, the plan outlines actions by the OIG to improve the

accuracy of SBA’s accounting and management information. The plan also

acknowledges the challenge of managing a growing workload with fewer

employees. However, the plan is vague on how SBA intends to correct

specific problems that we and others have previously identified. For

example:

2

See Export Finance: Federal Efforts to Support Working Capital Needs of Small Business

(GAO/NSIAD-97-20, Feb.13, 1997).

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• In 1991, we reported that SBA was incurring significant losses on liquidated

loans in the agency’s 7(a) program, in part because of overvalued or

nonexistent collateral and a failure to make the most of recoveries when

collateral existed.3

 We noted that at the time of our report, SBA’s

monitoring of private lenders’ liquidation activities was limited. One of the

draft strategic plan’s objectives is to improve the loan liquidation process

and rely on lenders to assist in liquidation activities, and the plan identifies

“recoveries on defaulted loans” as a performance measure. However, the

plan does not describe a strategy that will help achieve the objective.

• In 1995, we testified that weaknesses in SBA’s management and oversight

had contributed to losses in the liquidation of SBICs, which obtain funds

through SBA-guaranteed loans and/or selling preferred stock to SBA.

4

 While

SBA’s draft plan calls for improving the SBIC liquidation process, it does

not describe the actions that SBA plans to take to achieve the objective.

• Over the past few years, we have reported and testified often on the

difficulties that SBA has had in implementing many of the changes to the

8(a) minority business development program mandated by the Congress.5

Among other things, we reported that SBA had not developed an

information system able to provide the basic data needed to manage the

8(a) program and—of particular relevance to the Results Act—to evaluate

its effectiveness. A September 1995 report by SBA’s Inspector General also

concluded that SBA could not determine whether the 8(a) program was

accomplishing its intended purpose. One strategy in SBA’s draft plan calls

for improving the automated tracking system for the 8(a) program, and the

plan identifies as a potential performance measure “increased numbers of

disadvantaged firms helped by the 8(a) program.” However, the plan is not

clear on the specific actions SBA intends to take in order to obtain the

information needed for the performance measure.

• The 1996 independent audit of SBA’s financial statements identified a

number of internal control weaknesses, including one deemed to be a

material weakness. The material weakness related to SBA’s failure to

reconcile certain fund balances with those of the Treasury Department.

3

Small Business: Improving SBA Loan Collateral Liquidations Would Increase Recoveries

(GAO/RCED-92-5, Dec. 19, 1991).

4

Small Business Administration: Status of Small Business Investment Companies

(GAO/T-RCED-95-145, Mar. 28, 1995) and Small Business Administration: Better Oversight of SBIC

Programs Could Reduce Federal Losses (GAO/T-RCED-95-285, Sept. 28, 1995).

5

For example, see Small Business: Status of SBA’s 8(a) Minority Business Development Program

(GAO/T-RCED-96-259; Sept. 18, 1996); Small Business Administration: 8(a) Is Vulnerable to Program

and Contractor Abuse (GAO/OSI-95-15, Sept. 7, 1995); Small Business: SBA Cannot Assess the Success

of Its Minority Business Development Program (GAO/T-RCED-94-278; July 27, 1994); Small Business:

Problems Continue With SBA’s Minority Business Development Program (GAO/RCED-93-145; Sept. 17,

1993); and Small Business: Problems in Restructuring SBA’s Minority Business Development Program

(GAO/RCED-92-68, Jan. 31, 1992).

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Without accurate and complete reconciliations, SBA can neither fully

support its fund balances with Treasury or ensure proper asset

accountability and control and proper matching of revenues and expenses.

In addition, SBA—like many federal agencies—faces a major challenge in

managing information resources to ensure that information technology

tools and resources are consistent with the agency’s mission. While SBA’s

draft plan cites information technology initiatives as part of the strategies

for achieving several objectives, the plan does not yet contain a discussion

of SBA’s information technology strategy. This strategy should include how

SBA plans to address the “year 2000 problem,” which involves the need for

computer systems to be changed to accommodate dates beyond 1999, as

well as any significant information security weaknesses—two issues that

we have identified as high risk across the government. (The report on the

audit of SBA’s fiscal year 1995 and 1996 financial statements cited the

agency’s failure to provide adequate protection of computer users’ security

codes, which negates the control of separation of duties and provides an

opportunity for unauthorized transactions.) In addition, the information

technology strategy should contain information on how SBA plans to

comply with the Clinger-Cohen Act of 1996. The act calls for agencies to

implement a framework of modern technology management based on the

practices followed by leading private-sector and public-sector

organizations that have successfully used technology to dramatically

improve performance and meet strategic goals.

SBA’s Capacity to

Provide Reliable

Information on the

Achievement of

Strategic Goals Is

Uncertain

To measure progress in achieving goals, SBA needs reliable data. SBA’s draft

strategic plan has not yet been developed sufficiently to identify all of the

data needed to measure performance because not all of the goals and

objectives in the plan are stated in a manner that is measurable. However,

the plan identifies a number of performance measures for which obtaining

reliable and accurate data could be difficult, expensive, or both because of

weaknesses with SBA’s current information systems.

A number of problems have been identified with SBA’s existing information

systems:

• According to an assessment by SBA’s Office of Information Resources

Management, in addition to developing new systems to meet the needs of

evolving program operations, SBA needs to resolve problems with

incompatible systems and data and inadequate access to data in order for

the information systems to adequately support the management of

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program operations. Our past work has shown that in some cases SBA has

not established the controls to ensure that information systems contain

timely and accurate information.6

• SBA received an unqualified audit opinion on its fiscal year 1996 financial

statements. Notwithstanding this, as previously mentioned, a number of

internal control weaknesses continued to be reported by the auditors. For

example, the auditors found that SBA did not maintain comprehensive

inventory records of acquired property and noted that complete and

reliable data were difficult to obtain from SBA’s loan accounting databases.

• SBA’s Federal Managers’ Financial Integrity Act reports have cited

weaknesses with the agency’s data systems. For example, the agency’s

fiscal year 1996 FMFIA report cited as a material weakness the data system

for SBA’s surety bond guarantee program, noting that the system “is

outdated and does not meet the needs of management” and that its reports

“are inaccurate and unreliable.” The report also noted a need for an

improved system for tracking the lenders participating in the agency’s

lending programs.

Furthermore, many of the objectives and performance measures cited in

the draft plan would require information from sources other than SBA’s

existing information systems. For example, the plan cites measures such

as the increased number of businesses created, maintained, or expanded;

the increased numbers of jobs; the increased taxes paid; and the increased

sales of client small businesses. In order for these to be effective

performance measures for SBA’s strategies, SBA would need not only

information on the number of businesses, jobs, etc., but also information

that would enable it to attribute the changes in these numbers to its

programs. SBA’s Inspector General has reported on the difficulty of

measuring job creation for just one program—the 7(a) guaranteed loan

program. In its November 1994 report, the OIG concluded that the more

direct the correlations made between the information collected and the

success of the program, the greater the need for accuracy and that

regardless of the methodology used, the actual number of jobs attributable

to a 7(a) loan would be difficult to measure definitively because many

other variables can affect job creation.

Because of these factors, SBA’s draft strategic plan would benefit from a

discussion of (1) what it has done, is doing, or plans to do to address

previously cited problems with its existing information systems and (2) the

ease or difficulty it foresees in obtaining additional data with which to

6

Small Business Administration: Better Planning and Controls Needed For Information Systems

(GAO/AIMD-97-94, June 27, 1997).

Page 14 GAO/RCED-97-205R SBA’s Draft Strategic Plan
B-277425 

measure results. Once SBA develops its final performance measures, it may

need to consider appropriate system modifications to capture needed

data. Key requirements of the Chief Financial Officers Act of 1990 are the

development of cost information to enable the systematic measurement of

performance and the integration of systems—program, accounting, and

budget systems.

Agency Comments We provided SBA with a draft of this report for review and comment. While

SBA agreed with our observations, it pointed out that our report is based on

a version of its strategic plan that the agency prepared in March 1997 and

that it had made a number of changes to its plan since that time that

address issues raised in our report. (See enc. I.)

In addition, SBA outlined a number of other actions that will strengthen the

agency’s strategic planning process, improve the report that the agency

ultimately transmits to the Congress, and go a long way in addressing the

issues raised in our report. Among other actions, SBA noted that it will

address the management weaknesses not identified in its strategic plan,

including improving the agency’s internal controls. SBA also noted that

program evaluation functions are an important element for effective

management of any organization and that it will incorporate program

evaluation efforts into its strategic plan. SBA stated that although it has

numerous collaborative program efforts ongoing with other federal

agencies, it also clearly recognizes that agencies need to coordinate their

plans. Therefore, SBA stated it has developed a schedule for ensuring

crosscutting reviews of its strategic plan and will share the next draft of its

plan and discuss mutual issues with its partner agencies. Finally, SBA

stated that management of the agency will be based on strategic objectives

and performance goals and that evaluations of senior managers’

performances will be based on how well goals in the annual plans are

achieved.

As arranged with your offices, unless you publicly announce its contents

earlier, we plan no further distribution of this letter until 30 days from its

issue date. At that time, we will send copies of this letter to the Minority

Leader of the House of Representatives; Ranking Minority Members of

your Committees; the Chairmen and Ranking Minority Members of the

House and Senate Committees on Small Business; the Administrator, SBA;

and the Director, Office of Management and Budget.

Page 15 GAO/RCED-97-205R SBA’s Draft Strategic Plan
B-277425 

Please call me at (202) 512-7632 if you or any of your staff have any

questions about this report. Major contributors to this report include Dave

Wood, Stan Ritchick, Scott Riback, and James Hamilton.

Judy A. England-Joseph

Director, Housing and Community

 Development Issues

Enclosure

Page 16 GAO/RCED-97-205R SBA’s Draft Strategic Plan
Page 17 GAO/RCED-97-205R SBA’s Draft Strategic Plan
Enclosure I 

Comments From the Small Business

Administration

Page 18 GAO/RCED-97-205R SBA’s Draft Strategic Plan
Enclosure I 

Comments From the Small Business

Administration

Page 19 GAO/RCED-97-205R SBA’s Draft Strategic Plan
Enclosure I 

Comments From the Small Business

Administration

(385690) Page 20 GAO/RCED-97-205R SBA’s Draft Strategic Plan
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