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98–135 2016

ATTENTION NEEDED: MISMANAGEMENT AT THE 

SBA - THE GAO FINDINGS 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

JANUARY 6, 2016 

Small Business Committee Document Number 114–034 

Available via the GPO Website: www.fdsys.gov 

SBREP-219 with DISTILLER


Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

STEVE CHABOT, Ohio, Chairman 

STEVE KING, Iowa 

BLAINE LUETKEMEYER, Missouri 

RICHARD HANNA, New York 

TIM HUELSKAMP, Kansas 

CHRIS GIBSON, New York 

DAVE BRAT, Virginia 

AUMUA AMATA COLEMAN RADEWAGEN, American Samoa 

STEVE KNIGHT, California 

CARLOS CURBELO, Florida 

MIKE BOST, Illinois 

CRESENT HARDY, Nevada 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

YVETTE CLARK, New York 

JUDY CHU, California 

JANICE HAHN, California 

DONALD PAYNE, JR., New Jersey 

GRACE MENG, New York 

BRENDA LAWRENCE, Michigan 

ALMA ADAMS, North Carolina 

SETH MOULTON, Massachusetts 

MARK TAKAI, Hawaii 

KEVIN FITZPATRICK, Staff Director 

EMILY MURPHY, Deputy Staff Director for Policy 

JAN OLIVER, Deputy Staff Director for Operation 

BARRY PINELES, Chief Counsel 

MICHAEL DAY, Minority Staff Director 

SBREP-219 with DISTILLER

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Steve Chabot ................................................................................................... 1 

Hon. Nydia Vela ́zquez ............................................................................................. 2 

WITNESS 

William B. Shear, Director, Financial Markets and Community Investment, 

United States Government Accountability Office, Washington, DC ................ 3 

APPENDIX 

Prepared Statement: 

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

DC .................................................................................................................. 21 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

None. 

SBREP-219 with DISTILLER

SBREP-219 with DISTILLER

(1) 

ATTENTION NEEDED: MISMANAGEMENT AT 

THE SBA - THE GAO FINDINGS 

WEDNESDAY, JANUARY 6, 2016 

HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, DC. 

The Committee met, pursuant to call, at 11:00 a.m., in Room 

2360, Rayburn House Office Building. Hon. Steve Chabot [chairman of the Committee] presiding. 

Present: Representatives Chabot, Luetkemeyer, Hanna, 

Huelskamp, Brat, Radewagen, Curbelo, Hardy, Kelly, Vela ́zquez, 

Chu, Meng, Adams, and Moulton. 

Chairman CHABOT. Good morning. I call the Committee hearing appropriately titled ‘‘Attention needed: Mismanagement at the 

SBA’’ to order. I also want to welcome back a frequent witness before this Committee, Bill Shear, of the GAO, the General Accountability Office. 

Since 1946, federal agencies have been required to operate using 

rational decision-making procedures. That is the expectation of taxpayers whether it is the law or not. Congress made that sensible 

idea and the expectations of taxpayers the law when it enacted the 

Government Performance and Review Act back in 1993. To operate 

in the manner demanded by statute, agencies must make extensive 

efforts at strategic planning and actually carry that planning out. 

Today, the Committee will hear an assessment from the GAO on 

the SBA’s—that is the Small Business Administration’s efforts to 

deliver effective assistance to entrepreneurs in an efficient manner. 

With a $100 billion loan portfolio, $100 billion, the taxpayer has too 

much invested in this agency to allow mismanagement to continue. 

Barriers to effective and efficient operation of the SBA include the 

failure to address longstanding management challenges, failure to 

develop a human capital plan, failure to institute sound acquisition 

methods, failure to revise outdated policy directives, and failure to 

assess the structure of the agency, among other things. 

The GAO’s conclusions are clear; the SBA needs a complete overhaul of its operations. Finding a resolution to these problems will 

not be easy. GAO has taken the first step, identifying the problems 

at the SBA. The next steps are significantly harder. Meaningful solutions usually are. Problems that have existed for decades will not 

be resolved overnight. It will take the dedicated effort of agency officials and the watchful eye of those on this Committee to right 

those wrongs. 

This Committee’s efforts will not end with the review of this report. We will convene multiple hearings over the next few months 

SBREP-219 with DISTILLER

2 

to examine SBA programs and their implementation by various 

branches of that Agency. The hearings may reveal other barriers 

to official and effective operations of the SBA that will require further examination by this Committee and by the GAO. If the report 

examined today, subsequent hearings, investigations by the Committee, and additional reports by GAO continue to reveal problems 

that the administration will not fix, the Committee will not hesitate to take legislative action. 

The SBA plays a significant role in providing assistance to America’s entrepreneurs. The problems that have festered far too long 

must end so that small businesses and taxpayers can rely on an 

effective and efficient SBA. The taxpayers of this country deserve 

no less. 

I would now like to yield to the ranking member for her opening 

statement. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

Of the many responsibilities this committee has, one of our most 

important, is overseeing and examining the Small Business Administration. It is absolutely critical that we conduct this oversight. 

Doing so ensures that tax dollars are spent efficiently and appropriately. GAO has been a long-term partner of this committee’s 

oversight work and has helped us identify and solve a wide range 

of issues affecting the agency’s programs. 

Today’s hearing, however, does not focus on a particular program 

or initiative at the SBA; rather, it focuses on the overall management and strategic vision of the agency. I, along with prior Chairman Graves, requested this broad view of the SBA. 

GAO reported several key findings, many of which cite issues already raised by the SBA’s own inspector general over the last decade. At the top of the list are organizational matters which are critical to the agency’s ability to serve small businesses. GAO found 

the agency structure to be overly complex and that workforce planning was not up-to-date. Such redundancies and deficiencies can ultimately lead to poor service to entrepreneurs. In addition, GAO 

found that risk management and IT security are being inappropriately administered. Such co-activities and internal controls are central to the functioning of the SBA, and without adherence to federally-accepted standards, the agency is subjecting itself to unnecessary risks. 

Perhaps the most troubling issues raised by the GAO come into 

areas of procedural guidance and program evaluation. With regard 

to procedural guidance, GAO reported that as of March 2015, SBA 

had determined that 74 of its 165 standard operating procedures 

needed to be revised and 31 needed to be canceled. An additional 

9 needed to be issued. Without guidance, it is impossible for program participants or even the SBA to know how a program should 

operate. This makes it difficult for small firms to work with the 

agency, and given that these SOPs are not issued pursuant to notice and common rulemaking frustrates those that want greater 

transparency in how government works. The report shows that 

SBA has some work to do in improving its overall management of 

the agency. With that said, I was glad to see SBA has agreed with 

nearly all of the GAO’s recommendations and has begun to take action to address these matters. 

SBREP-219 with DISTILLER

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Today, I am looking forward to hearing from GAO about whether 

or not they believe SBA is carrying through on this commitment. 

This committee stands ready to examine the SBA and its program 

so that small businesses and the taxpayers benefit more broadly. 

It is a vital role and one that I want to ask all committee members 

to take part in. I look forward to hearing the GAO’s testimony, and 

I thank Mr. Bill Shear and his team for their continued work on 

our behalf. 

With that, Mr. Chairman, I yield back. 

Chairman CHABOT. Thank you very much. The gentlelady 

yields back. 

And we would ask that Committee members who have opening 

statements prepared, if they would submit them for the record. 

And just to explain very briefly our rules here and the time limits, which Mr. Shear is very familiar with, I am sure, we operate 

under the 5-minute rule where the witnesses get 5 minutes to testify. In this case, we will give you a little bit longer than that if 

you need it. Since there is only one witness and we generally have 

four that does not mean we want you to take 20 minutes, but if 

you need a little bit more time that is okay, and we will limit ourselves to 5 minute at least in the first round, and then we will determine whether we think it is necessary to go into a second round 

at the appropriate time. 

We have a light system there, as you know. The yellow light 

comes on and lets you know you have a minute to wrap up. The 

red light will come on and I will let you go a little bit further than 

that as I indicated. 

And now a brief introduction. Mr. Shear, who is our witness, he 

is the director of Financial Markets and Community Investment 

Team at the Government Accountability Office. Most of us refer to 

it as the GAO around here, and we look very forward to your testimony. And you are recognized for 5 minutes, or as I say, a little 

bit longer. 

Mr. SHEAR. Thank you. I will keep it under 5 minutes. 

Chairman CHABOT. Okay. Thank you. 

STATEMENT OF WILLIAM B. SHEAR, DIRECTOR, FINANCIAL 

MARKETS AND COMMUNITY INVESTMENT, UNITED STATES 

GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. SHEAR. Chairman Chabot, Ranking Member Vela ́zquez, and 

Members of the Committee, I am pleased to be here this morning 

to discuss our management review of the Small Business Administration. My testimony is based on our September 2015 report and 

related updates on the status of recommendations. Rather than focusing on individual SBA programs, we conducted a comprehensive 

assessment of SBA’s structure, processes, and systems, including 

its efforts to address its management challenges. 

In September, we reported that SBA had not resolved many of 

its longstanding management challenges due to a lack of sustained 

priority attention over time. Many of the management challenges 

that we and the Office of Inspector General had identified over the 

years remained, including some related to program implementation 

and oversight, contracting, human capital, and IT. SBA has generally agreed with prior GAO recommendations that were designed 

SBREP-219 with DISTILLER

4 

to address these issues. As we state in our report, the agency had 

made limited progress in addressing most of these recommendations but had recently begun to take some steps to address them. 

For example, as of July 2015, SBA had implemented four of six recommendations from the 2010 GAO Report on its 8(a) Business Development Program. 

In our report, we made eight new recommendations designed to 

improve SBA’s program evaluations, strategic and workforce planning, training, organizational structure, enterprise risk management, procedural guidance, and oversight of IT investments. SBA 

generally agreed with these recommendations. We also maintained 

that the 69 recommendations we made in prior work have merit 

and should be fully implemented. 

As of December 2015, SBA had implemented 7 of the 69 recommendations from prior reports that were identified in our September report. For example, with respect to disaster assistance, 

SBA revised its planning documents to adjust staffing and resources available for future disasters by considering the potential 

effect of early application submissions for disaster loans as we had 

recommended. In addition, SBA officials told us about actions the 

agency had initiated in response to the eight new GAO recommendations. For example, the SBA officials told us that the 

agency had established an Economic Impact Evaluation Working 

Group, which according to the SBA officials was developing evaluation plans for several program offices. 

Chairman Chabot and Ranking Member Vela ́zquez, this concludes my prepared statement. I would be happy to answer any 

questions. 

Chairman CHABOT. Thank you very much, and you definitely 

kept it under 5 minutes. Thank you. 

I will now recognize myself to begin the questioning. 

Mr. Shear, in the last year, we have seen the Federal Government hacked in a whole series of breaches. OPM, the Office of Personnel Management, had millions of fingerprint records stolen, Social Security numbers, addresses, health records, financial and biometric data were all taken. We have seen the IRS hit, the State 

Department, even the White House. Now, in your review of the 

SBA, the Small Business Administration, you have listed a whole 

range of deficiencies, areas where the SBA has fallen short, just 

not cutting it. And the one that worries me the most is in the area 

of IT security. First of all, the information that they keep on individuals and on small businesses can be pretty sensitive information. Is that right? Information you might not want a rival business, or your neighbors, or the Chinese government to have access 

to. Would you agree with that and would you like to comment? 

Mr. SHEAR. Chairman Chabot, you raise a very good point. And 

one of the things I just want to say procedurally, that when you 

take such an extensive operational view of an agency like this, we 

certainly partnered with SBA’s Office of Inspector General, and we 

greatly appreciate the interactions we had. And you see in our report that we refer to the IG’s work quite liberally and some of the 

issues raised by the IG. The issue of IT security is one where we 

relied on and we reported on the IG’s findings. So basically, there 

SBREP-219 with DISTILLER

5 

are issues identified by the IG that require attention. It is a very 

serious issue, and it is one of the issues—— 

Chairman CHABOT. Let me interrupt you for a second, if I can. 

Mr. SHEAR. Yes. 

Chairman CHABOT. Despite the logical concern that individuals 

or small businesses who deal with the SBA might have, the SBA 

has failed to implement more than 30 of the Office of the Inspector 

General’s recommendations related to IT security; is that correct? 

Mr. SHEAR. That is what we report based on what was available 

in September. We note that information technology security has 

been identified for well over a decade as a longstanding management challenge. In its most recent report which came out recently, 

there was not a report of the number, but it certainly is one of the 

longstanding management challenges, so I cannot attest to exactly 

what the number is at this time. 

Chairman CHABOT. Okay. I have got 2 minutes left, so let me 

move to a couple other areas that are in your review and that I 

also find disturbing. I will again quote from the review, and I 

quote, ‘‘In our September 2015 report, we found that the SBA has 

not resolved many of its longstanding management challenges due 

to lack of sustained priority attention over time.’’ And you went on 

to say, ‘‘This raises questions about the SBA’s sustained commitment to addressing management challenges to keep it from effectively assisting small businesses.’’ 

Now, the principal purpose of even having an SBA is to assist 

small businesses, and it is our responsibility as the Committee of 

oversight, to make sure that the SBA is living up to their responsibilities to small businesses. So would you like to comment on the 

fact that they lacked the long-term attention to this issue that it 

deserved? 

Mr. SHEAR. It is very disturbing when an agency, we have been 

here, with you Chairman Chabot and with Ranking Member 

Vela ́zquez, and previously with Representative Graves, and it is 

very disturbing to us that these challenges still remain. And they 

go down to some very basic functions. And with all the program audits that we have done at SBA, one of the reasons why we even 

suggested to the Committee the idea of undertaking such a review 

is that we saw certain recurring themes happen over and over 

again when you look across the agency that affect all aspects of its 

operations and its programs. And so we think that there is some 

work to be done here, and we are looking for some commitment to 

deal with many of these issues, many of which have an internal 

control type of issue which we pay very close attention to. 

Chairman CHABOT. Thank you. I have got more questions but 

in order to impose the same 5 minutes on myself as everybody else, 

I will stop there and I will now yield to the ranking member, Ms. 

Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman, and thank you, 

Mr. Shear, for being here. 

In the report, GAO found that the SBA still has not implemented 

disaster program reforms which this committee authored when I 

was chair in 2008. What are the major reasons why SBA has not 

established the needed Disaster Assistance Program? 

SBREP-219 with DISTILLER

6 

Mr. SHEAR. When we have done work, repeated work, and appeared before this Committee on the Disaster Loan Program, there 

seemed to be some positive movement in the period after the act 

was passed, the establishment of a Office of Disaster Preparedness 

within SBA. There appeared, up until I would say 2010, some collaboration that was going on between the Office of Disaster Preparedness, the Office of Disaster Assistance, and the Office of Capital Access, to try to stand up a pilot program for IDAP as a first 

step to try to move into these areas to better serve the needs of 

disaster victims. I use the expression ‘‘the ball was dropped’’ by 

SBA. When we did our work on Sandy, this collaboration just 

seemed to fall apart, and we have not seen any evidence that there 

is really a collaborative effort, which I think is what is necessary 

here, for SBA to try to develop these three programs, including 

IDAP. 

Ms. VELA ́ ZQUEZ. To what degree do you think these reasons 

may be symptomatic of some of the more general operational challenges you found in your management review? 

Mr. SHEAR. I think that it is a great question because one of 

our concerns, and sometimes we use a simple word like ‘‘silo effect.’’ 

SBA has a complex organizational structure, and you have reporting relationships that differ from working relationships. And you 

have different parties that are involved here. And the idea that 

with disaster assistance, it involves a number of parties, and it just 

seems like what I will call a silo effect, as far as the inability to 

work across the organization, it is relevant to the work we did on 

enterprise risk management. The failure to identify risks that are 

common to the agency and working on those risks across the agency, it just does not seem like that collaboration is there. And I really have to be critical about our first interview dealing with the 

three private loan programs when we were doing the Sandy work 

where we were told that there was a conference call after Sandy 

occurred with three lenders, and the three lenders could not even 

be named. It was not a documented interview, but the three lenders did not like IDAP. Well, that was a case I had to direct to SBA 

the people that had been involved earlier that were part of this collaborative effort to try to stand up IDAP, and that never came to 

the table. So it even seemed almost like if it was something that 

was developed, or there was work on such development by previous 

people in those positions, that had also kind of fallen off the table. 

Ms. VELA ́ ZQUEZ. So since the Tri-State area was affected by 

Hurricane Sandy, would you tell us that based on what you have 

seen, that if there is another large-scale disaster, such as Hurricane Sandy, that the SBA, will be prepared to tackle the challenges 

that we saw during Sandy? 

Mr. SHEAR. I do not think SBA has a real plan for addressing 

it, and especially when you have a congressional mandate to create 

three private loan programs, there was a rationale to those programs. Much of it, like, for example, with IDAP, there is certainly 

in the Gulf Coast with Katrina, and based on our work on the 

ground with constituents in the Tri-State area with Sandy, there 

certainly appeared to be demand for things like a bridge loan type 

of program and things like that, and I do not think SBA has really 

put itself in a position to serve those needs. 

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7 

Ms. VELA ́ ZQUEZ. Have you conducted any other management 

review with any other federal agency? 

Mr. SHEAR. As an agency, we did a lot of broad management 

reviews in basically the 1980s and 1990s, and now this was one 

time where we thought SBA was an agency, because of these recurring problems, that would require one. We currently have an ongoing general management review of HUD, and so that is one. We 

have done other things that would not be called general management reviews but are pretty broad looks at agencies, including one 

that we did a number of years ago at SBA. 

Chairman CHABOT. The gentlelady’s time is expired. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

Chairman CHABOT. The gentleman from Missouri, Mr. 

Luetkemeyer, who is vice chairman of this Committee is recognized 

for 5 minutes. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

Mr. Shear, your report is quite damning and quite concerning 

from the standpoint that it looks like we have an agency that is 

mismanaged from top to bottom. You know, I represent the district 

in Missouri that just got hardest hit in our state with regards to 

flooding these past 2 weeks. And so when I look at the Office of 

Disaster Assessment and then, because it could not really figure 

out what to do, they created the Office of Disaster Planning, and 

now because they cannot coordinate those two with anybody else, 

they are going to create an Office of Disaster Interagency Affairs. 

This is an example of government run amuck. We have one agency 

that cannot do the job, so we create a second agency that cannot 

do the job, and now we have got a third agency. Am I misreading 

what is going on here, the ineptness of the agency caused it to create more agencies which continue to be inept? Yes or no works for 

that. 

Mr. SHEAR. Okay, thanks. I see your concerns. You raise a very 

good point, and basically, what we look for generally with the way 

SBA operates, including assessing the risk of meeting its mission 

that you just need more thorough plans on how to do this and just 

creating additional entities is not necessarily the way to do that. 

You really need to develop a plan and think strategically about 

how to deliver this assistance. 

Mr. LUETKEMEYER. Well, through your discussion in your report you talk about GAO had—their own IG had 11 different challenges, and after 10 years only seven of them still existed. And 

some of them, as the chairman alluded to here, one of them is extremely important, which is, you know, the security of the data 

that this agency holds. Other ones in there, improper payments. 

This is a pretty basic function of the agency I would assume. Do 

you know off the top of your head what the past due rate is of the 

portfolio? 

Mr. SHEAR. I am sorry, the what? 

Mr. LUETKEMEYER. The past due rate for the SBA loan portfolio? 

Mr. SHEAR. No. If you want to make a question for the 

record—— 

Mr. LUETKEMEYER. That is fine. I was just curious if you 

knew off the top of your head—— 

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Mr. SHEAR. No, I do not. 

Mr. LUETKEMEYER.—whether it was going up or down. That 

is always an indication of management problems when you have 

that as well as economic times. 

Also, you know, you are talking about they developed strategic 

plans, and yet, when they get the plan done, nobody goes in and 

is able to review it. Am I reading that right within your report? 

They develop strategic plans but yet there is no follow up as to seeing if the strategic plan is followed and whether there is an evaluation of its effectiveness, whether it was accurate. 

Mr. SHEAR. The strategic planning, the deficiency we identified—and it is consistent with other work we have done on individual programs—has been the lack of evaluations of its programs 

for effectiveness consistent with what the chairman brought up 

with GPRA. And here I refer to the GPRA Modernization Act, and 

state that there is a lack of evaluations, and the evaluations are 

not really being incorporated into strategic planning, and it is hard 

to really have an effective strategic plan if you do not have a concept of how well the various programs are working. 

Mr. LUETKEMEYER. Well, coming from the private sector, you 

need to have a strategic plan, know where you are headed. You 

need to have a review of that strategic plan on a regular basis so 

you know what you did right, what you did wrong, and how you 

can improve. And having a plan is fine, but if there is no followup action it is worthless. It is a waste of time. It is an exercise in 

futility. 

Also, you talk about the standard operating procedures here in 

rules and regulations, which seem to be either ignored or they just 

create them and they just kind of go off on their own tangent. 

There is no coordination. Can you elaborate just a little bit on that? 

Mr. SHEAR. Yes. It is in and of itself that the standard operating procedures are so out-of-date and are not kept up-to-date, 

and they might be being relied upon too heavily because there is 

a lack of specificity to begin with for operating programs. But if you 

put the different pieces together from what we have done, you have 

staff that are in the district offices. They are referred to as the 

‘‘boots on the ground,’’ so you have staff in district offices that are 

not being well trained to conduct their functions. When you have 

that, when you do not have clear guidance, we found it with individual program audits, clear guidance for how those regulations are 

supposed to be carried out, and then you are doing things in a 

makeshift manner that the SOPs do not reflect current practices, 

you are going to have what we have observed, which is a lot of inconsistency and incomplete oversight of SBA programs. 

Mr. LUETKEMEYER. I appreciate that. And just one moment of 

indulgence by the chairman, you know, it would seem to me that 

if we have this kind of, to me, reckless regard for the reports that 

are sent out, reckless regard for the recommendations, there needs 

to be some sort of punitive action taken by us, Mr. Chairman, 

against this agency, starting with freezing of their funds and freezing of all future rules and regulations and SOPs. If they cannot do 

the job with what they have got now, they do not need to be doing 

anything further. So I certainly will want to work with you on 

something along those yields, and I yield back. 

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Chairman CHABOT. Thank you. The gentleman’s time is expired. 

The gentlelady from California, Ms. Chu, who is the ranking 

member of the Economic Growth, Taxation, and Capital Access 

Subcommittee is recognized for 5 minutes. 

Ms. CHU. Mr. Shear, from this report it seems that there is 

some general agreement between SBA and GAO on the recommendations that GAO has made to address important problems 

that the agency is facing. It is of concern that of the 69 recommendations, that only seven have been met. However, it is also 

clear that SBA has taken steps to address at least some of the 

issues at hand. In preparing this report, did you find disagreement 

between SBA and GAO on what GAO recommendations should be 

considered completed or fully implemented by the agency? 

Mr. SHEAR. Over the past year, I would say roughly since last 

April or May, there has been a lot more focus at SBA in looking 

at our open recommendations, which is a long list. And it has been 

reported to this Committee before. SBA’s track record over the 

years in addressing our open recommendations has not been very 

good. The comptroller general actually in November sent a letter 

to the administrator like he did to other heads of agencies, and in 

this case, SBA’s implementation rate, the way we calculate that 

rate is around 58 percent and most of the government is around 

80 percent. So this has been a concern of ours. 

We have seen some attention and movement on this, and there 

has been, I think, a push from senior management, I would say 

roughly since last summer, and we have had multiple meetings at 

SBA, including senior leadership over our open recommendations, 

so it is a positive sign. So the idea was this actually represents an 

improvement. As you see in my statement that seven were implemented since issuance of our report is a positive change from what 

had occurred before, and there were a few that were implemented 

I would say roughly last summer, for example. I made reference in 

my statement to some recommendations we made in a report on 

the 8(a) program in 2010. So there is more attention to this. 

There are certain times when we get information from SBA and 

it says, ‘‘Here it is. We think we have implemented the recommendation.’’ That requires a lot of follow-up, and there are certain times where we just do not agree. There are certain times we 

explain in excruciating detail why we do not agree that a recommendation is implemented. Sometimes there is a back and forth. 

I will give an example. On disaster loans, the one dealing with the 

early submission of applications, that is one where it required some 

back and forth but I would say, James Rivera and his team worked 

very well with us in saying, okay, ‘‘What do we have to do to convince you that we are addressing your recommendation?’’ And we 

went through the different pieces of what we needed to understand. 

So it is a very collaborative process between us and SBA. There is 

more attention at SBA to make this process work now, but the 

agency is still very challenged in terms of addressing these recommendations. 

Ms. CHU. There were seven recommendations that went to full 

completion. Can you tell me why you believe SBA chose to 

SBREP-219 with DISTILLER

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prioritize these over the others and what was it that made these 

recommendations rise to the forefront? 

Mr. SHEAR. I think that there was one of the things that was 

always present here, the chief of staff said there was an emphasis 

in looking at the 8(a) program. And I would say the associate administrator that is relatively new to the position certainly reached 

out to us with the idea that she was taking these recommendations 

seriously and wanted to better understand what those recommendations were. And, they are somewhat dated, but they are 

still, we think, very relevant. So we were explaining the context— 

why were the recommendations the nature of what they were? And 

it had to do with how the program was operated, when we were 

writing the report. So there was a fair amount of back and forth 

and, as we stated, that just prior to issuance of our report four of 

the six recommendations from the 2010 report, were implemented. 

So I think there was a focus on 8(a) by both senior management 

at SBA and also, likewise by the associate administrator herself of 

the program. 

Ms. CHU. Okay. And if there is disagreement, how do you move 

forward if there is disagreement between the SBA and the GAO? 

Mr. SHEAR. A lot of times it is not disagreement but it is kind 

of a question, does this do it for us? And sometimes the focus becomes very much we need documented evidence that you have actually conducted a change. Like, for example, there are many times 

where we stated that district office staff needed better guidance for 

the 8(a) program and other programs for how to carry out their responsibilities, and they would provide us dates where they are stating that training occurred, and we just say that, okay, so tell us 

what the training entailed. We have to see some substance as far 

as what is happening here. So it tends to be a back and forth process, and sometimes we reach resolution. A lot of it is just having 

a focus on these issues. Many of these issues, there is a real focus 

and a determination. They are not simple issues. They will take 

time to address. But without the focus on the issues, it is not going 

to happen, and I think you see a situation here where many of 

these issues have not had that focus. 

Chairman CHABOT. Thank you. The gentlelady’s time has expired. 

The chair would just note that if you had a teenager and you told 

them to clean up their room, they had 69 things sitting around the 

room and they cleaned up seven of them, that might be in a positive direction, but I do not think most parents would be satisfied 

with that, and I certainly would not be inclined to give them an 

increase in their allowance. 

The gentleman from Mississippi, Mr. Kelly, is recognized for 5 

minutes. 

Mr. KELLY. Thank you, Mr. Chairman. And thank you, Mr. 

Shear, for being here. 

It is my understanding that doing any interviews with their employees, that they require that their general counsel be present 

during this. In your experience, has that been the same routine 

with other organizations or other agencies when these investigations are conducted? 

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11 

Mr. SHEAR. No. The idea of having district counsel present 

when we are interviewing nonmanagement district employees, it is 

an experience we have not had with other agencies. 

Mr. KELLY. As a former prosecutor, generally, when people lawyer up, so to speak, that was kind of—when they did not have any 

reason to, when it was a routine just talking-to, there was generally something behind that. 

It is so important when you have an SOP to understand an SOP. 

And putting on my military side of experience, we have SOPs in 

every military unit for every single thing that we do. And if you 

do not understand and use that SOP, it is really not a SOP because 

that stands for standard operating procedure. And if you do not 

know and understand it and use it, it is not an SOP; it is just a 

bunch of guidelines that you are not using. In your experience, is 

the SOP that the SBA has basically just a bunch of guidelines, or 

do they actually use and understand and update and continue to 

update their SOP? 

Mr. SHEAR. You have asked a few questions, and the easiest one 

to answer is have they been in the process of updating SOPs and 

bringing them up to what their current practices are and trying to 

create the guidance that the district office staff need. This lack of 

procedural guidance is one of the major deficiencies, one of the 

major, I would call it, rather new deficiencies, that we identified in 

this report. With the SOPs, there is an issue of how specific they 

are. So, for example, no matter how good the SOP is, because they 

are pretty general, the idea that when we had district staff saying 

to us, I was made a business opportunity specialist and I was handled the SOP and that was my training. I might be reporting anecdotal evidence from one or two people but, the point is that within 

itself the SOP is not sufficient to really prepare somebody to carry 

out their job duties. 

Mr. KELLY. And now I want to talk about something else that 

is really important to the military side, which I do not see in the 

SBA, but that is risk management. And to understand risk, obviously, you have to understand risk, first of all. And it is my understanding they do not have any strategic plan. They do not have a 

risk management program which is ample to determine what the 

risks are, and do you know of any way, or do you think they are 

capable of, first of all, understanding their risk, and second of all, 

if they do understand it, are they capable of addressing the risk 

that they have experienced? 

Mr. SHEAR. It is a great question. As far as to strategic planning, I think we did find many elements of a positive strategic 

planning process. The part that we really see as deficient is the inclusion of evaluation in a strategic plan. 

With respect to enterprise risk management, it is almost like, 

well, they have identified the pieces of what would go into enterprise risk management, but it requires a very cross-cutting approach across the agency. They have created a board which is to 

say that at least in principle should be addressing these issues, but 

at first, there was unofficially a risk officer named. At the time it 

was a general counsel in 2009, and here we are years later and you 

just do not have the elements of a robust enterprise risk management system to really identify the risks not only from a financial 

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12 

standpoint but the risks having to do with carrying out the agency’s mission. Like, for example, in disaster assistance and the other 

pieces of the agency. So sometimes you can look at enterprise risk 

management and say, even before it was invented there were some 

basic common sense business practices where you could find similar types of language. But in terms of the enterprise risk management that is becoming looked upon more by the Office of Management and Budget, it just is that it is at a very premature stage. 

Mr. KELLY. And just a final comment. I find it kind of funny 

that for the personal risk, they made sure they had counsel present 

at all interviews with employees, but they do not pay that kind of 

attention to the organizational risk and risk management plan. 

I yield back, Mr. Chairman. 

Chairman CHABOT. Thank you. The gentleman’s time has expired. 

The gentlelady from New York, Ms. Meng, who is the ranking 

member of the Agriculture, Energy, and Trade Subcommittee is 

recognized for 5 minutes. 

Ms. MENG. Thank you, Mr. Chairman. 

The GAO identified several longstanding changes at the agency. 

Of course, of those that you have delineated, which are the most 

important when it comes to service delivery and more tangible and 

immediate resources for our small businesses, if you had to? 

Mr. SHEAR. As far as the longstanding business challenges, I 

would really focus on human capital and the need to really assess 

skills gaps to identify training that might be necessary. And all 

these different pieces fit together. For example, there are certain 

issues that are associated with, say, contracting programs that require participation across the agency and the various parts of the 

agency. So they all kind of fit together in a certain way. But if I 

had to identify one that really stands out it would be the human 

capital challenges as far as a longstanding challenge. Another one 

that has come up here, which whether you call it longstanding or 

not, is the need to be able to document decisions and to evaluate 

how well your programs are working and to document those decisions. So these are some of the things that really stand out based 

on our work. 

Ms. MENG. The report notes that the SBA has made significant 

progress when it comes to the loan guaranty process. Do you believe that the SBA in addressing human capital has helped it begin 

to turn the corner on some of those concerns? 

Mr. SHEAR. The concerns with loan guaranty. I am sorry, 

just—— 

Ms. MENG. Developing and implementing a quality control program for the loan centers to verify and document like compliance 

with the loan process? 

Mr. SHEAR. I do not know whether I can link it to human capital or not, but among the work that we cite from the inspector 

general, there have been certain actions to address those longstanding challenges. I do not know whether it can be linked to any 

particular type of training or not. I just do not have an answer for 

that question. 

Ms. MENG. I was just curious. Thank you. I yield back. 

Chairman CHABOT. The gentlelady yields back. 

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The gentleman from Florida, Mr. Curbelo, is chairman of the 

Subcommittee on Agriculture, Energy, Trade, and Hoverboards is 

recognized for 5 minutes. 

Mr. CURBELO. Thank you for recognizing my unfortunate injury 

over the holiday break. I will reserve all my comments about 

hoverboards. 

Thank you very much for coming in today. There are a lot of specific questions that have been asked, and I think they are all very 

important. But I want to ask you more broadly, I mean, is this just 

a cultural issue that is going to have to be addressed beyond the 

specific fixes that you may recommend? Is there just a cultural 

structural issue here that we should really focus on? I mean, I do 

not think Congress is particularly well equipped to get into the details of how an organization is operating, but we can certainly lay 

out a vision and at least suggest a structure. And I am wondering 

if you can give us some guidance in that regard. 

Mr. SHEAR. You ask a great question, so I am going to stand 

back from what I will call the detailed auditing here and discuss 

how pieces fit together, and some of them fit in with enterprise risk 

management and some of the other matters we have talked about. 

I used the word earlier, and it has been used over the years with 

SBA of it being siloed, and the idea that you can have certain reporting relationships and working relationships that are different. 

And part of that is you do not have the collaboration needed across 

the agency. So whether you are trying to implement enterprise risk 

management or simply just manage, how do you put together an 

operation that has this many pieces to it? There has to be a way 

of having collaboration across the agency. You have to have more 

of a culture where bad news can flow to the top. I really think the 

idea that over the years that there has not been that much focused 

attention on either our recommendations, or I think I can say that 

for the IG as well, that there has to be an ability for information 

to flow up and across the agency. And to some degree, if you step 

back from enterprise risk management, that is what part of this is. 

In terms of the concerns that SBA had with us interviewing, the 

question came up of interviewing nonmanagement district office 

staff. SBA officials raised a concern that we were giving a platform 

for people to complain. Now, this might just come from one or two 

people in SBA but I just say I do not get the sense that employees 

at SBA feel that they can offer honest feedback to leadership. And 

I know from all the efforts we have at GAO, to really embrace employee feedback, that such feedback is important. All these pieces 

kind of fit together, and they fit together with issues associated 

with the organizational structure. So stepping back from basically 

this very detailed audit work, these are some of the observations 

that I would make. 

Mr. CURBELO. And I thank you because we are focusing on a 

lot of symptoms and, of course, that is important, but I think the 

root cause, and I agree with you, is a breakdown in communications at SBA. And I look forward to having the administrator in 

here tomorrow and figuring out with her and with all of my colleagues what we can do to promote a culture of communication 

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tions are, and how they think the organization can work better. 

Thank you. 

Mr. SHEAR. Can I make one more point? 

Mr. CURBELO. Please. 

Mr. SHEAR. One of the things that—we did not do a general 

management review, but earlier in President Bush’s administration, we evaluated something called Agency Transformation. It did 

not work out real well. Then Steve Preston came in as administrator, he implemented something he called business process reengineering, and there were certain actions there. And a lot of that 

stretched toward the end of that administration. And so one of the 

things that we were very conscious of when we reported on those 

efforts was that there is really a need for someone or some group 

of people in senior positions, because by its very nature, political 

appointments change with each administration even when you do 

not have changes in party. So the idea here is that we were kind 

of looking at what senior executive service career people might be 

in a position to kind of take hold of some of these efforts and to 

expand them? And I think that is one of the issues that this Committee should be thinking about and that SBA should be thinking 

about, because there is about a year left in this administration. 

Mr. CURBELO. Thank you. 

Chairman CHABOT. Thank you. The gentleman’s time is expired. 

The gentlelady from North Carolina, Ms. Adams, who is the 

ranking member of the Investigations, Oversight, and Regulations 

Subcommittee is recognized for 5 minutes. 

Ms. ADAMS. Thank you, Mr. Chair. I am from North Carolina. 

It was a mistake. 

Thank you, Ranking Member Vela ́zquez, as well, and Mr. Shear, 

thank you for being here and for your testimony. 

As an enthusiastic supporter of the work that SBA performs for 

our nation’s small businesses, it is critically important that the 

agency is run both efficiently and effectively. I am sure you would 

agree to that. But the GAO report noted that SBA is considering 

expanding SBA-1, an expedited application process, to include the 

8(a) program, which is critical for minorities to gain a foothold in 

the Federal Procurement Marketplace. Do you believe that this is 

a move in the right direction? 

Mr. SHEAR. It is a move that can be a promising move. From 

the basis of our audit work, on the use of technology, in this case, 

for the 8(a) program, I will emphasize the following. The Office of 

Management and Budget has very specific requirements that we 

have used in our audit work, our IT team that has worked with 

us on this, used, as far as analyzing existing IT, and in terms of 

requirements for investing in new IT. And SBA is engaged in a 

number of activities which SBA states that, might be sufficient for 

their IT outlook. But these very specific OMB requirements are 

there for a purpose, and we think that if SBA really wants to use 

technology to improve program delivery, which is a good thing to 

be thinking about, that it should have a more rigorous method for 

following the requirements that OMB has for IT investments and 

for the operational analysis of existing investments. 

SBREP-219 with DISTILLER

15 

Ms. ADAMS. Thank you. GAO found that SBA had not conducted regular interviews of its operational IT investments to ensure that they continue to meet agency needs. Why is this significant? 

Mr. SHEAR. For example, over time you might have certain systems that you have in place that become redundant with new investments, so that is part of the forward looking that I just mentioned in answering your question about SBA-One. And it is significant that way. And it is important to know, especially when you 

have systems that have been in place for a long time, whether they 

still are effectively meeting the needs of the agency in delivering 

its programs. So you are running a little bit blind if you do not go 

through these steps. 

Ms. ADAMS. Thank you. And in its report, GAO found several 

issues that SBA has not resolved. So what are the key actions or 

management changes that SBA needs to take to address these 

challenges? 

Mr. SHEAR. I think that we reiterated that at the time it was 

69 recommendations from earlier reports and now it is down to 62, 

but we had eight new recommendations. We think they are very 

substantive recommendations that are really necessary to be addressed to try to improve the operations of the agency. 

Ms. ADAMS. Okay. Let me quickly ask. The review found that 

SBA field office employees are primarily evaluated on quantitative 

measures, not qualitative. GAO also found that employees have reported technical problems with aspects of the electronic performance system. As a result, many field office employees feel that they 

are not being properly evaluated. So what is SBA doing to correct 

this problem? 

Mr. SHEAR. I think it is a good question to ask the administrator because I really think that among these issues, a lot of it 

comes down to having, in terms of our work, it falls into the pieces 

of the human capital planning, the training that is involved, and 

the appraisal system where we do note that the system seems to 

be heavily dependent on quantity, like how many events did you 

hold rather than the quality of those events. And the development 

of performance standards really gets at the quality issue—all government agencies have a challenge in this area—but I think SBA 

has a way to go this way, and I hope that they are developing responses to that. 

Ms. ADAMS. Thank you. I am out of time. 

I yield back, Mr. Chair. 

Chairman CHABOT. Thank you. The gentlelady yields back. 

The gentleman from New York, Mr. Hanna, who is chairman of 

the Subcommittee on Contracting and Workforce is recognized for 

5 minutes. 

Mr. HANNA. Thanks. I appreciate that. 

I do not know where to go with this. There is so much to talk 

about, especially the new American dream and the old one, right, 

that people are saying is disappearing. It was always built by small 

business, and according to Walter Mead, who has written widely 

about this, that it is the key to the future, and small business plays 

such a critical role in this. 

SBREP-219 with DISTILLER

16 

We are going to have the administrator here tomorrow to talk 

about this. It sounds like they are just ignoring you; that they do 

not regard you as either your agency either knowing what you are 

talking about or they do not consider it important because it does 

not feel like there is any urgency to this. And yet, we know that 

about 2 to 3 percent of business loans in this country flow through 

them and that number is growing. And we have authorized more 

money to go into those programs. But what do we really do about 

this? It sounds like we are going to have this same meeting again 

next year. 

Mr. SHEAR. I think oversight is important, and I would say 

there has been a slight change at SBA. I do not know how extensive the change is. We will see over time. But the idea that last 

summer, certain efforts were initiated by GAO and SBA. It was not 

just by me and our team. It included my managing director. It also 

included the new chief of staff at SBA convening meetings to go 

over open recommendations. 

Mr. HANNA. Do they take you seriously? Or do you believe that 

they agree with you or that they want to implement what you are 

asking? It sounds like they are just stonewalling you. 

Mr. SHEAR. It is one area where we see some positive movement. So unlike all the other times that I have been here and said, 

well, SBA seems to always agree but then it is very rare that actions are fallen. It is just in certain pockets and certain programs 

where we might have an associate administrator who is really in 

tune with our recommendations that an action is taken. There 

seems to be some movement, but I think time will tell, and I would 

hope—— 

Mr. HANNA. Is it just the case you have no levers to pull to 

make them do and follow your recommendations? All it is is polite 

conversation? 

Mr. SHEAR. So let me go back to what we do as an agency. Just 

recently, the Comptroller General, Gene Dodaro, testified about the 

importance of agencies implementing our recommendations and 

how doing such can improve the functioning of government. And 

this was all tied in again with him sending letters to the heads of 

agencies on recommendation implementation rates. We do get a lot 

of movement in the sense that government-wide, 80 percent of our 

recommendations are implemented. We just do not have that track 

record at SBA. We have not had it. There has been some positive 

movement—— 

Mr. HANNA. You said they are at a 50 percent productivity level 

compared to other agencies that are closer to 80 or more. 

Mr. SHEAR. Yes. 

Mr. HANNA. So the proof is in those numbers, that they are not 

highly functioning. So what would you ask Administrator Sweet tomorrow when she is here? I can imagine, but—— 

Mr. SHEAR. What would I ask? Many of the questions that you 

are asking me today are probably good questions to ask. But part 

of this is the areas where we are looking for in a sense of some of 

the bigger issues. For example, for SBA to come back to us and say 

during the course of this, which is saying, have you assessed your 

organizational structure? Because our analysis indicates that there 

are a lot of challenges associated with it. So either you have to 

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17 

change the structure or you have to do things to address the challenges. 

Mr. HANNA. What you are saying is that they just do not care. 

Mr. SHEAR. But then we get a response at the agency comment 

period, and then we get response now in a 60-day letter saying we 

have evaluated organizational structure. So really, the idea of really establishing very firm plans that would extend into the next administration is important. What plans does she have for what she 

wants to achieve. 

Mr. HANNA. So the long-term structural changes that are permanent and not based on the changes in command? 

Mr. SHEAR. Yes. I think that to really focus on some of the organizational structure issues and the associated—a lot of these things 

fall together. The human capital issues, the training needs, all 

those different pieces. I think, what is your plan for getting the 

agency to be a more highly functioning agency? 

Mr. HANNA. My time is expired. 

Chairman CHABOT. Yes, the gentleman’s time is expired. 

The gentleman from Massachusetts, Mr. Moulton, who is the 

ranking member of the Health and Technology Subcommittee, is 

recognized for 5 minutes. 

Then we will go to Ms. Radewagen, who is American Samoa, and 

she is also the chair of the Subcommittee on Health and Technology. 

Ms. RADEWAGEN. Thank you, Mr. Chairman. Welcome, Mr. 

Shear. 

During the GAO’s investigation of mismanagement of SBA, did 

you find that any regional offices took on more responsibility than 

other regional offices? For instance, there are two U.S. territories 

that do not seem to have regional representation, let alone a district office. Would it be accurate to say that SBA has neglected certain regions while perhaps overserving other regions? 

Mr. SHEAR. You ask a great question and I wish that I could 

say that we did audit work to see what representation there was 

of regional and district offices in a specific outreach, but we did not 

try to geocode the different activities of the various district offices 

in particular. It is a very good question but our audit work just 

does not address it. 

Ms. RADEWAGEN. Thank you, Mr. Chairman. I yield back. 

Chairman CHABOT. The gentlelady yields back. 

The gentleman from Virginia, Mr. Brat, is recognized if he has 

any questions. 

Mr. BRAT. Thank you, Mr. Chairman, I have no questions. 

Chairman CHABOT. Okay. If not, I think the ranking member 

has another question, and we now yield to her. 

Ms. VELA ́ ZQUEZ. Mr. Shear, you know, I cannot help but feel 

frustrated because we have been in this predicament for so many 

years. I have been sitting on this committee for 23 years, and the 

Disaster Loan Program has been one that I care about because it 

has impacted New York City. We have worked on legislation since 

Katrina and here we are today passing a new law that I authored 

to reopen the Disaster Loan Programs because the percentage of 

decline in loan applications were so high. I am happy to see that 

the administration is moving to provide the assistance people deSBREP-219 with DISTILLER

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serve, particularly the victims of Hurricane Sandy. But tomorrow 

we are going to have the administrator before us. We are going to 

have to ask the tough questions that need to be asked based on the 

review you just conducted. My question to you, after listening to 

my colleagues and the answers that you have provided, is that it 

looks like someone needs to be in charge of watching the store, 

right? And it goes to the issue of the organizational structure that 

could survive the fact that pretty soon we are going to be looking 

at a new administration in the White House. How can we address 

that? Who do we hold accountable in terms of making sure? Because you said that in terms of the 8(a) program, well, there is an 

associate administrator that cares about making sure that the suggested recommendations are implemented to make the program 

better. Nevertheless beyond the administrator, is there anything 

that could be done at the organizational structure of the agency 

that will be accountable in making sure all these recommendations 

are implemented? 

Mr. SHEAR. At the organizational structure level, one of the 

most basic things that we said was there is nothing magical about 

having the 10 regional offices and the 68 district offices and different lines of reporting, in terms of working relationships and reporting relationships. There are other ways the agency could structure itself. We do not feel that we have the basis for saying this 

is what the organizational structure should be, but we certainly 

identify that there are these challenges. And you know, when we 

reported on the 8(a) program, it is a symptom of a situation where 

you have district staff that are not necessarily sure what their jobs 

are in terms of continued eligibility and things like that and the 

oversight that is needed. But from a standpoint of organizational 

structure, there was a consultant’s report, and when it was not 

given to us, we did not feel that was very important because the 

important thing is what are you doing SBA to address, if you are 

going to keep your organizational structure largely intact, how are 

you going to address these issues that are associated with it? And 

we still have not seen anything. When we followed up with them 

last month, we still do not see anything in terms of what are you 

going to do about the structure of this agency, or if you are not 

making structural changes, how are you making changes to make 

sure that people are accountable and that people are trained to do 

their jobs and they understand what their jobs are? And I think 

those are some of the more fundamental issues that we really have 

here. You can put all these other things aside and you say that is 

some of the more fundamental issues that have been around for 

years. There are a lot of things we have talked about over the 

years with individual programs and even looking more broadly 

across the programs that now fall under the rubric of enterprise 

risk management. But that actually gives a pretty good rubric as 

far as saying how do you really define what the mission of the 

agency is and how you put the pieces together. And then the other 

piece that we would certainly discuss, with this Committee and we 

have discussed with you over the years, we think of the GPRA 

Modernization Act and the need to collaborate across agencies, 

whether it be USDA Rural Development or these working groups 

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ration in delivering assistance, things like that, a more collaborative approach would be the other things that really stand out 

when I just step back from all these individual recommendations. 

Ms. VELA ́ ZQUEZ. Thank you. Thank you, Mr. Chairman. I yield 

back. 

Chairman CHABOT. Thank you. Thank you very much. The 

gentlelady yields back. Her time is expired. 

Just one quick question, Mr. Shear. What is your assessment of 

the SBA’s response to the GAO report that was submitted to Chairman Chaffetz and the Committee on Oversight and Government 

Reform? 

Mr. SHEAR. Oh, boy. You asked for a short answer. 

One of the things that it does note and I think that I would expect in a 60-day letter, because I have read enough 60-day letters 

and comments in our draft reports from SBA to know certain common themes, such as we agree and we are taking action. Some of 

the things that reflect something positive that is in my statement 

was even though it might be a small number of recommendations, 

a relatively small number over the last year, that there is at least 

some focus on those recommendations, and I hope it is not viewed 

as just a fire drill within SBA that they are trying to do this over 

a short period of time, but they are trying to create a culture and 

a management structure that can work over time, even into the 

next administration on working on those issues. 

So as far as there is a lot of activity going around, and a lot of 

what we found in doing this work and that we found in looking at 

other programs, particularly the contracting programs over the 

years, there is always a lot of activity around things that are somehow related to certain things that we are finding, but the idea of 

going the extra mile is not quite there. There are a lot of initiatives 

and activities that have occurred but it is a matter of taking it to 

the next level. 

Let me just mention two things that are in the letter where I just 

say that raises a little bit of concern. One is that I have already 

referred to, that the agency has conducted an assessment of its organizational alignment. It is not just for the purpose of documentation or for our audit work that we see documented evidence of a 

thorough evaluation. It should be an important living document 

over time that its current leadership and future leadership can rely 

on in terms of addressing the issues of the agency—it is not as important as to whether we see the assessment or not. What is important is that there is documented evidence of a thorough examination of the organizational structure. And then the other one, there 

was reference made to doing the operational analyses of the IT. 

This is one where the requirements that OMB has are very specific 

and our IT team relies on the OMB guidance. And this is one 

where there is a statement in there that, we and our IT team take 

some exception to that, we have not seen documented evidence that 

the required operational analyses have been done. So there might 

be good things going on in the agency in terms of oversight of its 

IT, but we just do not see documented evidence that meet these 

very specific requirements that OMB has. 

Ms. VELA ́ ZQUEZ. Would the gentleman yield? 

Chairman CHABOT. I yield. 

SBREP-219 with DISTILLER

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Ms. VELA ́ ZQUEZ. On the IT issue, you say that there has to be 

oversight, OMB, do they conduct any oversight? 

Mr. SHEAR. I would like to follow up with the Committee on 

that and really get the full input. I know that my colleague, Dave 

Powner, our director in the IT team has testified before this Committee, and I would want to follow up with him on specifically the 

oversight of OMB. My simple answer to your question is yes; OMB 

is involved in conducting oversight. Whether it is a question for the 

record or whether, with Committee staff of following up with Dave 

and his team, who have collaborated with us so much on this work, 

I think that could give a more complete answer than what I could 

give you. 

Ms. VELA ́ ZQUEZ. Okay. 

Chairman CHABOT. Okay. Reclaiming my time. 

Ms. VELA ́ ZQUEZ. Thank you. I yield. 

Chairman CHABOT. I would just note that we have heard the 

shortcomings, the deficiencies. I could use a lot of other words, too, 

but the problems that are going on at the SBA at this time, the 

administrator will have an opportunity tomorrow to address the 

Committee and then to take questions as well, and we would invite 

members on both sides of the aisle and the public to attend and 

hear the response tomorrow as well. It is at 11 o’clock in the morning. 

I would ask unanimous consent that members have 5 legislative 

days to submit statements and supporting materials for the record. 

Without objection, so ordered. 

If there is no further business to come before the Committee, we 

are adjourned. Thank you very much. 

[Whereupon, at 12:15 p.m., the Committee was adjourned.] 

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SBREP-219 with DISTILLER


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36 

Æ 

SBREP-219 with DISTILLER


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