Report to Congressional Committees

United States General Accounting Office

GAO

October 2001 SMALL BUSINESS

ADMINISTRATION

Current Structure

Presents Challenges

for Service Delivery

GAO-02-17
Page i GAO-02-17 Small Business Administration

Letter 1

Results in Brief 2

Background 2

Objectives, Scope, and Methodology 5

SBA Staff Identified Organizational Problems 6

Restructuring Efforts of Other Federal Agencies Provide a

Framework for SBA Managers 19

Observations 21

Agency Comments 22

Appendix I Legislatively Mandated Programs and Offices in SBA 23

Appendix II Legislatively Mandated Staff Positions at SBA 26

Appendix III SBA Field Locations Visited 27

Appendix IV Comments From the U.S. Business Administration 29

Figures

Figure 1: SBA Headquarters Organization Chart 4

Figure 2: SBA Workforce 1992-2000 5

Figure 3: SBA Former Headquarters-to-Field Communication

Model With Fully Staffed Regional Offices 7

Figure 4: Current SBA Headquarters-to-Field Communication

Model 9

Figure 5: SBA District Office-to-Small Business Interaction 11

Figure 6: Organizational Relationships Between SBA Headquarters

and Field Units 16

Figure 7: SBA Offices and Resource Partners in the United States 18

Contents
Page 1 GAO-02-17 Small Business Administration

October 26, 2001

The Honorable Donald A. Manzullo

Chairman

Committee on Small Business

House of Representatives

The Honorable Christopher S. Bond

Ranking Minority Member

Committee on Small Business and Entrepreneurship

United States Senate

Our recent performance and accountability series report on the Small

Business Administration (SBA) described major management challenges

and program risks the agency faces to efficient delivery of services.1

 One

important management area that our report did not address was how well

SBA’s organization was aligned to achieve its mission; that is, the

integration of organizational components, activities, core processes and

resources to support efficient and effective achievement of outcomes.

Believing that organizational alignment can be an important factor in

determining an agency’s efficiency and ability to administer its programs,

you requested that we identify and describe (1) SBA’s current

organizational alignment and issues it poses in SBA’s ability to meet its

mission and (2) information SBA should consider in determining if and

how to reorganize. In a briefing with your staff on May 4, 2001, we

presented preliminary information on challenges SBA faces in its current

alignment and identified issues to consider if its leadership decides to

undertake an organizational realignment. This report documents our

briefing and, as requested, provides information on past legislation that

mandates certain aspects of SBA’s current structure and outlines a

proposed framework for SBA to use if it considers restructuring the

agency.

 1

Major Management Challenges and Program Risks: Small Business Administration

(GAO-01-260, Jan. 2001).

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-02-17 Small Business Administration

SBA’s current structure contributes to the challenges SBA faces in

delivering services to the small business community. In particular,

ineffective lines of communication; confusion over the mission of district

offices; complicated, overlapping organizational relationships; and a field

structure not consistently matched with mission requirements combine to

impede the efforts of SBA staff to effectively deliver services. Among the

causes of SBA’s structural problems are past realignment efforts during

the mid-1990s that changed how SBA performed its functions but left

aspects of the previous structure intact, congressional influence over the

location of field offices and centers, and legislative requirements such as

specified reporting relationships.

Restructuring efforts of other federal agencies provide a framework and a

set of steps and considerations that may prove useful to SBA managers if

they decide to address the organizational alignment issues present in

SBA’s current structure. The realignment of the Federal Emergency

Management Agency, for example, demonstrated the importance of tying

organizational realignment to a clear and comprehensive mission

statement and strategic plan, while earlier restructuring efforts at the

Department of Energy showed how progress can be hampered by unclear

linkage between an agency’s mission and a proposed new structure.

Efforts at other agencies also demonstrate the need for buy-in from both

internal and external stakeholders and the importance of agency efforts to

consider the human impact of restructuring activities, including closure of

field offices. Some potential restructuring efforts by SBA would require

legislation modifying earlier laws mandating specific reporting

relationships or other aspects of SBA structure. We are not making any

recommendations in this report.

SBA’s mission is to maintain and strengthen the nation’s economy by

aiding, counseling, assisting, and protecting the interests of the nation’s

small businesses and by helping businesses and families recover from

natural disasters. SBA has a total portfolio of about $52 billion, including

$45 billion in direct and guaranteed small business loans and other

guarantees and $7 billion in disaster loans.2

 SBA provides small businesses

with access to credit, primarily by guaranteeing loans through its 7(a)

program. SBA provides entrepreneurial assistance through partnerships

with private entities that offer small business counseling and technical

 2

As of September 30, 2000.

Results in Brief

Background
Page 3 GAO-02-17 Small Business Administration

assistance. SBA administers the 8(a) business development program,

which is designed to assist small disadvantaged businesses in obtaining

federal contracts. SBA also makes loans to businesses and families trying

to rebuild in the aftermath of a disaster.

As of May 2001, SBA had 2,859 employees.3 About three-quarters of SBA’s

staff are assigned to the agency’s 10 regional offices and over 100 other

field locations. In addition to its federal workforce, SBA’s infrastructure

includes over 1,000 resource partners located nationwide who provide

technical and advisory assistance to small businesses. According to SBA,

the agency can have up to 60 appointee staff—4 presidential appointee

positions, an Office of Personnel Management allowance of 18 noncareer

Senior Executive Service appointees, and 38 other appointed positions.

As shown in figure 1, the agency’s management structure is relatively flat

in headquarters, with 19 offices reporting to the Office of the

Administrator.

 3

This number excludes 107 employees in the Office of the Inspector General and 1,180 in

the Office of Disaster Assistance and does not include contract personnel.
Page 4 GAO-02-17 Small Business Administration

Figure 1: SBA Headquarters Organization Chart

Source: SBA.

In the past 10 years, SBA has seen changes made in how it delivers

services and to its organization. The largest change to SBA’s service

delivery has occurred in its lending programs, where the agency went from

making loans directly to guaranteeing loans made by commercial lenders.

SBA’s loan programs have also been the focus of a major organizational

change in the creation of centers to process and service the majority of

these loans—work once handled largely by district office staff. Processing

and servicing of about three-quarters of SBA-guaranteed loans were
Page 5 GAO-02-17 Small Business Administration

handled in centers instead of district offices in 2000. In response to budget

reductions, SBA also streamlined its field structure during the 1990s,

downsizing the 10 regional offices, moving the workload to either district

offices or headquarters offices, and eliminating most of the regions’ role as

an intermediate management layer between headquarters and the field.

SBA created the Office of Field Operations to take over the role of

intermediary.

As shown in figure 2, SBA’s overall workforce has also decreased by more

than 20 percent since 1992.

Figure 2: SBA Workforce 1992-2000

Note: Employee data were as of September 30 of each year. These numbers exclude employees in

the Offices of the Inspector General and Disaster Assistance and do not include contract personnel.

Source: GAO analysis of SBA staffing reports.

To assess issues raised by SBA’s current organizational structure, we

conducted 58 interviews with 78 senior SBA officials in headquarters and

in the field. We met with senior officials and obtained documents on both

current SBA alignment and past reorganization efforts from 15 of the 19

headquarters offices reporting to the Administrator. At the request of your

Objectives, Scope,

and Methodology
Page 6 GAO-02-17 Small Business Administration

staffs, our scope did not include two of these offices, the Office of

Advocacy and the Office of the Inspector General. We also selected 17

field locations to visit in consultation with SBA headquarters officials, with

the aim of visiting a mix of geographic areas and office types and sizes.

The 17 field locations were a judgmental but representative sample. As

shown in appendix III, we visited offices in the eastern, southern,

midwestern, and western areas of the United States. Among the locations

we visited were small, medium, and large district offices and a variety of

centers across the country, including loan processing and servicing

centers, a disaster area office, and a Business Information Center. At each

field location, we interviewed and gathered documents from the manager

of the location and other program managers. We also held discussions

with lenders and lender associations from the National Association of

Government Guaranteed Lenders, National Association of Development

Companies, and Independent Community Bankers of America. The issues

raised in this report represent common themes we heard from many

senior officials in interviews throughout our fieldwork at the various

locations.

Additionally, we conducted a literature review of best practices that

included restructuring experiences of other federal agencies as well as

issue papers and books published by individuals having practical and

research experience in organizational structures. We also analyzed laws

mandating aspects of SBA’s current organization.

We conducted our work from February through June 2001 in accordance

with generally accepted government auditing standards.

Senior SBA officials in headquarters and the field identified aspects of the

current organizational alignment that contribute to the challenges faced by

SBA management, including cumbersome communication links between

headquarters and field units; confusion over the mission of district offices;

complex, overlapping organizational relationships; and a field structure

not consistently matched with mission requirements.

Several SBA district office managers expressed frustration with ineffective

field and headquarters communications. SBA officials told us that prior to

the mid-1990s restructuring of the regional offices, communication

between headquarters and the field was carried out in a different way from

how it is now. When the regions played a role as a layer of management

between headquarters and the field, they served as a filter. Headquarters

SBA Staff Identified

Organizational

Problems

Communication Problems

Exist Between

Headquarters and Field

Offices
Page 7 GAO-02-17 Small Business Administration

program offices only had to communicate with the 10 regions to provide

direction or make information requests. The regions would then

communicate to the districts. The regions were also in a position to

identify confusing or redundant information requests and prioritize new

initiatives for the districts. While some SBA officials felt that the regions

had a positive effect on communication between headquarters and the

districts, others felt that the regions were an unnecessary layer of

management and were more likely to be a bottleneck, hampering the

effective flow of information through the agency. SBA’s former

headquarters-to-field communication model is depicted in figure 3.

Figure 3: SBA Former Headquarters-to-Field Communication Model With Fully

Staffed Regional Offices

Source: GAO analysis.

Senior SBA officials in headquarters and the field said that the

realignment—in which the regions were downsized, but not eliminated,

and the Office of Field Operations was created, but never fully staffed—
Page 8 GAO-02-17 Small Business Administration

created communication problems. The primary function of the Office of

Field Operations was to facilitate the flow of information between

headquarters and district offices. However, the Office of Field Operations

has fewer than 10 staff, and senior SBA officials told us that it would be

impossible for such a small office to have the same information conduit

responsibility once held by multiple staff in each of 10 regional offices. As

a result, headquarters program offices sometimes communicate with the

district offices through the Office of Field Operations, but they more often

communicate directly with district office staff working on the SBA

programs they manage. For example, district officials said that the Office

of Capital Access may make a request for loan information through the

Office of Field Operations or may make the request directly to loan

program managers in every district office. Officials described how these

multiple lines of communication with the district offices have led to

district staff being on the receiving end of conflicting or redundant

requests. Finally, regional offices were downsized but not closed, and they

still play a role in monitoring goals and coordinating administrative

priorities with the districts. For example, officials told us that district

office goals are disseminated through the regions.

In addition, district managers said that districts are on the receiving end of

a flood of information but that the information received may not clearly

indicate priority or may lack practical application. District managers

described how the possibility that important information might be buried

among the large number of messages that are of little concern to them

meant having to spend hours sorting through incoming messages.

Furthermore, they described how important information may not be

disseminated at all. For example, district staff were notified of

headquarters blood drives or job opportunities open only to headquarters

staff but said that they were not formally notified when the former

administrator left the agency. Also, a District Counsel told us that she was

not notified when a new SBA General Counsel was named. Figure 3

depicts current headquarters-to-field communication in SBA.
Page 9 GAO-02-17 Small Business Administration

Figure 4: Current SBA Headquarters-to-Field Communication Model

Source: GAO analysis.

The SBA Inspector General found similar problems with communication

within SBA. In 2000, the Inspector General conducted management

challenge discussion groups with almost 50 senior officials from SBA

headquarters, regional, and district offices and found that communication

issues were a recurring theme in these discussions. Participants in these

groups described the advantages provided by the former regional office

structure in funneling and distilling information and policy directives from

headquarters to the districts and the impossibility of a small Office of Field

Operations playing the same role. The senior officials noted that

communication gaps resulted in confusion and lower morale in the field.

They suggested that a more coordinated approach is needed where issues
Page 10 GAO-02-17 Small Business Administration

or problems arising in the field can be channeled to headquarters, and vice

versa.4

We found disagreement within SBA over the primary customer of the

district offices. Headquarters executives said that the main customer of

the district offices is small businesses, while district office officials told us

that their primary clients are lenders—encouraging them to make more

SBA guaranteed loans, providing support, and conducting oversight

reviews. SBA headquarters executives said that the role of the district

office is in transition. Under the previous administration, since lending

activities were being increasingly centralized, the district offices’ role was

primarily to work with small businesses. However, district office managers

pointed out that they are still responsible for a high level of interaction

with lenders, especially smaller lenders with infrequent involvement with

SBA programs. They also noted that they still play a role in servicing

problem loans and have a major role in liquidating defaulted loans.

Furthermore, although district office managers are given dozens of goals

each year related to every SBA program in which they have some

involvement, they believe that lender-related goals matter most because

their performance rating is weighted heavily on aspects of loan activity.

Associations representing lenders that we spoke to also mentioned

confusion over whether the districts’ customers are lenders or small

businesses.

As shown in figure 5, a small business owner seeking information on SBA’s

main program areas from a district office is likely to be sent to another

location, reinforcing the perception of district office managers that the

lender rather than the small business is their primary customer. Of the

“answers” shown coming from the district office in figure 5, only signing

up for and participating in the 8(a) program is likely to involve much in the

way of district office activity.

 4

Advisory Memorandum: Report on the Results of SBA Management Challenge

Discussion Groups, Small Business Administration, Office of the Inspector General (#01-

04-01, Apr. 4, 2001).

Confusion About SBA

District Offices’ Primary

Customer
Page 11 GAO-02-17 Small Business Administration

Figure 5: SBA District Office-to-Small Business Interaction

Note: This chart refers to the following SBA programs or entities: Business Information Center (BIC),

Empowerment Zone (EZ), One-Stop Capital Shop (One Stop), Women’s Business Center (WBC),

Service Corps of Retired Executives (SCORE), U.S. Export Assistance Center (USEAC), Small

Business Development center (SBDC), and 8(a) Business Development Program (8(a)).

Source: GAO analysis.

Human capital challenges at SBA make the agency’s district office role

more complex. SBA continues to deal with the problem of getting properly

trained people into the right places, especially the districts, to manage the

7(a) and 8(a) programs. SBA officials said that 7(a) staff have seen their

roles change from loan processors to financial institution overseers and

that 8(a) Business Opportunity Specialists are facing a role change from

program compliance monitors to business development coaches. A 1999

SBA report on agency modernization pointed to the importance of

retraining and reorienting SBA staff as a part of the agency’s

modernization efforts.5

 Our July 2000 testimony on SBA’s human capital

 5

SBA Modernization: Roadmap to the 21st Century, Small Business Administration,

October 1999.
Page 12 GAO-02-17 Small Business Administration

challenges noted that some district offices are cross-training staff in

multiple functional areas.6

 Executives told us that training and moving the

right people into the right places to take on these new roles is an ongoing

challenge.

SBA also faces the human capital challenge posed by the agency’s

accelerated losses of experienced personnel, a problem we have identified

across the federal government.7

 Senior SBA officials pointed out that the

loss of experienced personnel is especially troubling at SBA because some

of these staff are the “institutional memory” that newer staff seek out

when they need information but find themselves stymied by the agency’s

cumbersome organizational and communication lines. The SBA Inspector

General’s management challenge discussion groups also raised concerns

over SBA’s aging workforce and the potential loss of institutional memory

as people retire.8

We found evidence of complex, overlapping organizational relationships,

particularly between field and headquarters units. Senior SBA officials

said that district office success depends on their ability to obtain

information or support from many other offices. For example, the district

offices have a direct relationship not only with both the Office of Field

Operations and a regional office but also with the headquarters offices

managing their programs. Senior officials said that although some of these

complex organizational relationships stem from legislative requirements

such as specified reporting relationships, past realignment efforts that

changed how SBA performed its functions while leaving aspects of the

previous structure intact (e.g., downsizing and taking away much of the

role of regional offices but not closing those offices) have also played a

part.

District staff working on SBA loan programs report to their district

management, while loan processing and servicing center staff report

 6

Small Business Administration: Steps Taken to Better Manage Its Human Capital, but

More Needs to Be Done (GAO/T-GGD/AIMD-00-256, July 20, 2000).

7

High Risk Series: An Update (GAO-01-263, Jan. 2001) and Managing for Results: Human

Capital Management Discussions in Fiscal Year 2001 Performance Plans (GAO-01-236,

Apr. 2001).

8

Advisory Memorandum: Report on the Results of SBA Management Challenge

Discussion Groups, Small Business Administration, Office of the Inspector General (#01-

04-01, Apr. 4, 2001).

SBA Organizational

Relationships Are

Complicated
Page 13 GAO-02-17 Small Business Administration

directly to the Office of Capital Access. Yet, the district office loan

program staff sometimes need to work with the loan processing and

servicing centers to get information or to expedite loans for lenders in

their district. Because loan processing and servicing centers report

directly to the Office of Capital Access, requests that are directed to the

centers sometimes must go from the district through the Office of Capital

Access then back to the centers. District managers and staff said that the

effect of these relationships is that sometimes they cannot get answers to

questions when lenders call and that they have trouble expediting loans

because they lack authority to direct the centers to take any action. The

Office of Capital Access commented that they rely on the district offices to

handle the most difficult loans and to work with infrequent lenders, while

the centers process the more standard loans made by frequent lenders.

Lender association representatives said that the lines of authority between

headquarters and the field can be confusing and can mean that practices

vary from district to district.

The SBA Inspector General’s management challenge discussion groups

also described how district staff were concerned that centralization has

resulted in district offices being increasingly “out of the loop” on decisions

affecting their small business customers or potential customers.9

 SBA’s

1999 report on agency modernization also described the district offices’

view that centers are not responsive enough to the field, but it pointed out

that centralization has freed up district staff to do more marketing and

working with small businesses.10

District managers also said that they are tasked with maximizing the

number of loans generated in their area while, at the same time, the Office

of Capital Access must make sure that the total number of loans stays

below the ceiling set by the SBA appropriation. They said that in 1997, they

were told to stop the lenders in their area from generating more loans

because of the appropriation ceiling, even though the district’s goal was

designed to generate more loans.

The Office of Government Contracting and Business Development

oversees implementation of the 8(a) program by district office staff (who

report to district management). It directly manages Government

 9

ibid.

10SBA Modernization: Roadmap to the 21st Century, Small Business Administration,

October 1999.
Page 14 GAO-02-17 Small Business Administration

Contracting field staff in six Area Offices and numerous posts of duty, and

business development staff in three Division of Program Certification and

Eligibility Centers. However, Business Opportunity Specialists in district

offices working on the 8(a) Business Development program compete with

Procurement Center Representatives working for the Office of

Government Contracting. Officials said that staff working on both

programs are working with the same procurement officials in other

agencies to encourage more contracting activity, respectively, for

procurement preference programs and small minority-owned businesses

enrolled in the 8(a) program. Moreover, we reported in 2000 that SBA did

not have enough Procurement Center Representatives to review contracts

at over 2,000 federal procurement centers.11 The SBA Inspector General’s

management challenge discussion groups also identified the need for

greater cooperation and coordination among these programs.12 Also, 8(a)

staff in the districts said they work with, but have no authority over, the

Division of Program Certification and Eligibility Centers to facilitate the

approval of 8(a) program applications from firms the district will work

with once the firms are in the program.13 Senior district office staff said

that firms find it difficult to navigate the process and express frustration

that they have to deal with more than one office.

The Office of Entrepreneurial Development has primary responsibility for

the operation of over 1,000 Small Business Development Centers,

Women's Business Centers, Service Corps of Retired Executives chapters,

and One-Stop Capital Shops. Business Information Centers are overseen

by staff in the district offices. One district official said that district offices

should be given more complete responsibility for entrepreneurial

development programs in their districts so that they can create more

customized programs better suited to the unique needs of their area. Also,

the SBA staff operating the Business Information Centers report directly to

their local district manager, but also receive direction and resources from

the Office of Entrepreneurial Development. In addition, as reported by the

 11Small Businesses: Limited Information Available on Contract Bundling’s Extent and

Effects (GAO/GGD-00-82, Mar. 2000).

12Advisory Memorandum: Report on the Results of SBA Management Challenge

Discussion Groups, Small Business Administration, Office of the Inspector General (#01-

04-01, Apr. 4, 2001).

13SBA said that it established the Program Certification and Eligibility Central Office Duty

stations in response to Congressional direction that it establish field offices as may be

necessary to efficiently perform its functions and responsibilities (P.L. 100-656, section

101).
Page 15 GAO-02-17 Small Business Administration

SBA Inspector General, SBA officials identified a disconnect between SBA

small business financing and technical assistance programs. Officials

noted that a more holistic approach would be for SBA to track SBA

borrowers to identify those who may need technical assistance.14 SBA’s

agency modernization report also called for the development of crosstrained teams of SBA staff in order to link SBA programs and better serve

the agency’s customers.15

We also found a situation where divided responsibility for a program was

working well. The Office of Disaster Assistance handles the processing of

loan applications from disaster victims then sends the loans to the Office

of Capital Access, which services them in four Disaster Home Loan

Servicing Centers around the country. SBA officials described this as a

positive relationship, allowing each of the two SBA offices to handle the

aspects of the disaster loan program they are best suited to manage.

Figure 6, depicts the variety of organizational relationships we found

between SBA headquarters and field units.

 14ibid.

15SBA Modernization: Roadmap to the 21st Century, Small Business Administration,

October 1999.
Page 16 GAO-02-17 Small Business Administration

Figure 6: Organizational Relationships Between SBA Headquarters and Field Units

Note: This chart refers to the following SBA offices: Office of Field Operations (OFO), Office of

Government Contracting/Business Development (GC/BD), Office of the General Counsel (OGC),

Government Contracting Area Offices (GC Areas), 8(a) Division of Program Certification and

Eligibility Centers. This chart also uses the term “storefronts” to characterize Small Business

Development Centers, Business Information Centers, Women’s Business Centers, and other such

locations where the public accesses SBA programs.

Source: GAO analysis of SBA organization.

Senior SBA officials said that some of SBA’s past efforts to change the

agency’s alignment have led to current problems because too much of the

prior structure was left intact. For example, the creation of loan

processing and servicing centers moved some, but not all, loan-related

workload out of the district offices. District offices retained responsibility

for the more difficult loans and loans made by infrequent SBA lenders.

Similarly, regional offices were downsized but not eliminated during the

1990s. Although most of the workload of the regions was transferred to
Page 17 GAO-02-17 Small Business Administration

other offices, the regional offices remained open and still retain some

organizational responsibility for overseeing the districts, along with the

newly created Office of Field Operations.

SBA managers also told us that some offices and centers are not located to

best accomplish the agency’s mission. For example, Iowa has two district

offices located less than 130 miles apart and neither manages a very large

share of SBA’s lending program or other workload. SBA has a loanprocessing center in Hazard, Kentucky; although, according to SBA

officials, the center is in an area with a small employment base, relatively

high costs, and is remote from major transportation hubs, making it

difficult to attract and retain staff and to oversee loan-processing activities

at the site. SBA also has another loan-related center located in New York

City; a very high-cost area where it has trouble attracting and retaining

staff. Figure 7 shows locations of SBA offices around the country.
Page 18 GAO-02-17 Small Business Administration

Figure 7: SBA Offices and Resource Partners in the United States

Source: SBA.

SBA officials stressed that congressional direction has played a part in

SBA’s current structure. SBA officials pointed out that Congress has
Page 19 GAO-02-17 Small Business Administration

created many new offices, programs, aspects of existing programs, and

pilot projects and has prescribed reporting relationship, grade, and/or type

of appointment for several senior SBA officials. Appendix I lists 78 offices

and programs or program changes created by laws. Appendix II lists 11

SBA staff positions and specific reporting relationships required by

legislation. SBA officials also said that congressional influence over the

agency’s field structure has led to placement of field activities in less than

optimal locations and prevented the agency from closing or consolidating

some of its inefficiently located field offices. Our March 2000 report on the

Government Contracting program noted that Congress directed the

deployment of SBA’s scarce Procurement Center Representatives in 17

specific locations.16 Also, SBA’s current appropriation includes a specific

provision precluding the agency from shifting funds between

appropriation accounts to relocate offices or employees, or reorganize

offices, programs, or activities without notifying the Appropriations

Committees.17

Organizational alignment is crucial if an agency is to maximize its

performance and ensure its accountability.18 Although difficult to make,

the choices that go into aligning an organization to support its strategic

and programmatic goals have enormous implications for further decisions.

As we testified in 1995, the key to any reorganization plan—and the key to

building a consensus behind it—is the creation of specific, identifiable

goals.19 In other words, the first thing to do is to understand what goals the

 16According to SBA Procurement Center Representative guidance, Conference Reports to

the SBA Continuing Appropriations for fiscal years 1988, 1989, 1991, 1992, and 1993 and

P.L. 100-590, Small Business Reauthorization and Amendment Act of 1998 specify that

Procurement Center Representative coverage is required in the following locations:

Connecticut; Iowa; Kentucky; Louisiana; Maine; Minnesota; Montana; Omaha, Nebraska;

Las Vegas, Nevada; New Hampshire; North Carolina; North Dakota; Oregon; Rhode Island;

Tennessee; West Virginia; and Clarksburg, West Virginia. Small Businesses: Limited

Information Available on Contract Bundling’s Extent and Effects (GAO/GGD-00-82, Mar.

2000).

17This restriction applies to all agencies funded by H.R. 5548, which makes appropriations

for the Departments of Commerce, Justice, and State, the Judiciary, and related agencies

for the fiscal year ending Sept. 30, 2001. H.R. 5548 became part of P.L. No. 106-553.

18Human Capital: Taking Steps to Meet Current and Emerging Human Capital

Challenges (GAO-01-965T, July 17, 2001).

19Government Reorganization: Issues and Principles (GAO/T-GGD/AIMD-95-166, May 17,

1995).

Restructuring Efforts

of Other Federal

Agencies Provide a

Framework for SBA

Managers
Page 20 GAO-02-17 Small Business Administration

agency is trying to achieve and then to build an organization around those

goals.

For example, SBA managers would need to begin any restructuring efforts

with an examination of how current activities, core business processes,

and resources are aligned to support SBA’s mission and how those efforts

help to achieve agency goals. A report on the Federal Emergency

Management Agency20 points to the critical part played by that agency’s

development of a clear and comprehensive mission statement that it used

as a guide to reorganization. On the other hand, in 1995 we identified the

lack of linkage between mission and structure as a missing piece of

restructuring efforts at the Department of Energy.21 Our earlier review of

SBA’s human capital management has shown that SBA has completed the

critical first element of this process in developing a shared vision of its

mission and has consistently communicated that vision in its planning

documents.22 SBA’s next step would be to build an organization around its

shared vision and goals.

SBA managers would need to obtain extensive input from internal and

external stakeholders first to identify (1) how well the current structure is

aligned with the agency’s mission and strategic plan and establishes clear

lines of authority and accountability, (2) how well the current structure

facilitates communication with both internal and external customers, (3)

how well the number and location of offices facilitates the agency meeting

its mission as efficiently and effectively as possible, and (4) the extent of

buy-in for the current structure from internal and external customers. SBA

managers would use this information to develop a prototype organization

structure. Next, SBA would present the proposal to the stakeholders,

obtain their input on the prototype, and revise it accordingly.

Use of this step-by-step approach could help increase acceptance of the

changes—a critical need for any restructuring effort. Without this

acceptance, restructuring is impeded. For example, we reported in 2000

 20Learning From the Leaders: Results-based Management at the Federal Emergency

Management Agency, Jerry Ellig, Ph.D., Senior Research Fellow, Mercatus Center at

George Mason University, Mar. 29, 2000.

21Department of Energy: A Framework for Restructuring DOE and Its Missions

(GAO/RCED-95-197, Aug. 1995).

22Small Business Administration: Steps Taken to Better Manage Its Human Capital, but

More Needs to Be Done (GAO/T-GGD/AIMD-00-256, July 20, 2000).
Page 21 GAO-02-17 Small Business Administration

that employee resistance to organizational changes was hampering

restructuring efforts at the Department of Agriculture.23 In another report,

we noted that Nuclear Regulatory Commission staff confusion over the

direction of their agency impaired their ability to focus on results or make

as full a contribution as they might otherwise make.24 Our work has shown

that many agencies continue to struggle with clearly understanding how

what they do on a day-to-day basis contributes to agency results. Some

agencies have begun to use performance agreements to strengthen the

alignment of daily operations with results-oriented performance goals.

Emerging benefits of results-oriented performance agreements are that

they (1) strengthened alignment of results-oriented goals with daily

operations; (2) fostered collaboration across organizational boundaries;

(3) enhanced opportunities to discuss and routinely use performance

information to make program improvements; (4) provided results-oriented

basis for individual accountability; and (5) maintained continuity of

program goals during leadership transitions.25

SBA’s current organizational alignment has some weaknesses that

contribute to challenges in delivering services to the small business

community. When budget constraints forced SBA to downsize, it

responded by significantly reducing but not eliminating the regions, and by

creating a headquarters office to handle field operations. While there is

considerable disagreement among senior SBA officials about which

structure is preferable, it is clear that by leaving remnants of the regions in

place and creating only a very small Office of Field Operations, SBA has

not enhanced communications along organizational lines. Instead,

organizational relationships, as shown in figure 6, are complicated. The

centralization of a majority of loan processing and the planned transition

of district staff from processing loans to working with small businesses

leaves unanswered questions for district managers whose performance is

still rated solely on aspects of loan activity. In addition, senior officials

believe that some SBA offices and centers are not located to best

accomplish the agency’s mission.

 23USDA Reorganization: Progress Mixed in Modernizing the Delivery of Services

(GAO/RCED-00-43, Feb. 2000).

24Management Reform: Elements of Successful Improvement Initiatives

(GAO/T-GGD-00-26, Oct. 15, 1999).

25Managing for Results: Emerging Benefits From Selected Agencies’ Use of Performance

Agreements (GAO-01-115, Oct. 30, 2000).

Observations
Page 22 GAO-02-17 Small Business Administration

Restructuring is admittedly a difficult endeavor and there is no perfect

organizational alignment. If SBA leadership decided to restructure the

agency, any plan would need to begin with examining key questions about

the organization to establish a framework for restructuring. Such a

framework would need to support SBA’s mission and strategic plan,

establish clear lines of accountability, facilitate communication, and offer

a rational justification for office location. Restructuring efforts would also

need to include getting buy-in from stakeholders and minimize the impact

of changes on SBA employees as much as possible. Congressional support

for SBA restructuring would be a necessary aspect of any changes SBA

proposes. Moreover, some changes may require legislation modifying

mandated structural elements specified in earlier laws.

We received written comments on a draft of this report from SBA. SBA

did not disagree with our findings and offered technical comments, which

we have incorporated where appropriate. SBA’s comments appear in

appendix IV.

Unless you publicly announce its contents earlier, we plan no further

distribution of this report until 15 days after the date of this report. At that

time, we will send copies of this report to the Chairman of the Senate

Committee on Small Business and Entrepreneurship, the Ranking Minority

Member of the House Committee on Small Business, other interested

congressional committees, and the Administrator of the Small Business

Administration. We will make copies available to others on request. This

report will also be available on our homepage at http://www.gao.gov.

Please contact me at (202) 512-8678 if you or your staff have any questions.

Major contributors to this report were Susan Campbell, David Lewis, and

Alexandra Martin-Arseneau.

Davi M. D’Agostino, Director

Financial Markets

 and Community Investment

Agency Comments
Appendix I: Legislatively Mandated Programs

and Offices in SBA

Page 23 GAO-02-17 Small Business Administration

Public law Program/office established

Small Business Act Amendments of 1961, P.L. No. 87-

305, 75 Stat. 666 (1961)

• Added 8(d) Subcontracting Program

Housing and Urban Development Act of 1970, P.L. No.91-

609, 84 Stat. 1770 (1970)

• Surety bond guarantees

Small Business Investment Act Amendments of 1972, P.L.

No. 92-595, 86 Stat. 1314 (1972)

• Loans to the handicapped

Small Business Amendments of 1974, P.L. No. 93-386, 88

Stat. 742 (1974)

• Capital ownership development program (7(j))

Small Business Investment Act Amendments of 1976, P.L.

No. 94-305, 90 Stat. 663 (1976)

• Pollution control facilities

• Office of Advocacy

Small Business Act and Small Business Investment Act of

1958 Amendments, P.L. No. 95-89, 91 Stat. 553 (1977)

• Loans to finance residential or commercial construction for sale

Small Business Energy Loan Act, P.L. No. 95-315, 92

Stat. 377 (1978)

• Loans to enable small business concerns to design, engineer,

manufacture, distribute, market, install, or service certain energy

measures

Small Business Act and Small Business Investment Act

Amendments of 1978, P.L. No. 95-507, 92 Stat. 1757

(1978)

• Governmentwide procurement goals

Small Business Act Amendment, P.L. No. 95-510, 92 Stat.

1780 (1978)

• Service Corps of Retired Executives transferred to SBA

Small Business Administration Authorizations, P.L. No. 96-

302, 94 Stat. 833 (1980)

• External economic database

• Preferred Lenders Program

• Loan guarantees for qualified employee trusts

• State of Small Business report

• Small Business Development Centers

• Development company debentures

Small Business Export Expansion Act of 1980, P.L. No.

96-481, 94 Stat. 2321 (1980)

• Office of International Trade

Small Business Innovation Development Act of 1982, P.L.

No. 97-219, 96 Stat. 217 (1982)

• Small Business Innovation Research program

Small Business Secondary Market Improvements Act of

1984, P.L. No. 98-352, 98 Stat. 329 (1984)

• Secondary market for sale of guaranteed loans

Small Business Computer Security and Education Act of

1984, P.L. No. 98-362, 98 Stat. 431 (1984)

• Cosponsorship authority

Continuing Appropriations, 1985, P.L. No. 98-473, 98 Stat.

1837 (1984)

• Disaster loans for small businesses affected by El-Nino-related ocean

conditions

Omnibus Trade and Competitiveness Act of 1988, P.L. No.

100-418, 102 Stat. 1107 (1988)

• Guaranteed loans for small business concerns engaged in or

adversely affected by international trade

Women’s Business Ownership Act of 1988, P.L. No. 100-

533, 102 Stat. 2689 (1988)

• Certified Lenders Program

• National Women’s Business Council

Small Business Administration Reauthorization and

Amendment Act of 1988, P.L. No. 100-590, 102 Stat. 2989

(1988)

• Deferred participation loans for pollution control facilities

• Preferred surety bond guarantee program

Business Opportunity Development Reform Act of 1988,

P.L. No. 100-656, 102 Stat. 3853 (1988)

• Guaranteed loans to 8(a) participants

• Small Business Competitiveness Demonstration Program

Departments of Commerce, Justice, State, the Judiciary,

and Related Agencies Appropriations Act, 1991, P.L. No.

101-515, 104 Stat. 2101 (1990)

• Tree Planting Program

• Central European Enterprise Development Commission

Appendix I: Legislatively Mandated Programs

and Offices in SBA
Appendix I: Legislatively Mandated Programs

and Offices in SBA

Page 24 GAO-02-17 Small Business Administration

Public law Program/office established

SBA Reauthorization and Amendments Act of 1990, P.L.

No. 101-574, 104 Stat. 2814 (1990).

• Small Business Technology Transfer demonstration program

• Pilot Technology Access Program

• Office of Rural Affairs

• Pilot Rural Development Loan Program

• Tourism demonstration program

• Expanded duties of SBDCs to include assisting rural small business

White House Conference on Small Business Authorization

Act, P.L. No. 101-409, 104 Stat. 885 (1990).

• Planning and administration of conferences at state and local levels

Appropriations for Departments of Commerce, State and

the Judiciary and related agencies for 1992, P.L. No. 102-

140, 105 Stat. 782 (1992).

• Pilot technology access program expanded to Small Business

Development Centers

• Microloan demonstration program

Women’s Business Development Act of 1991, P.L. No.

102-191, 105 Stat. 1589 (1991).

• Women’s demonstration projects program

Small Business Credit and Business Opportunity

Enhancement Act of 1992

P.L. No. 102-366, 106 Stat. 986 (1992).

• Defense economic transition assistance program under 7(a)

• Transfers examination of Small Business Investment Companies from

Inspector General to Investment Division

• Extended Small Business Development Center Program to include

helping small businesses affected by base closings

Small Business Research and Development Enhancement

Act of 1992, P.L. No. 102-564, 106 Stat. 4249 (1992).

• Small Business Technology Transfer pilot program

• Small Business Innovation Research program expanded

Small Business Administration Reauthorization and

Amendments Act of 1994, P.L. No. 103-403, 108 Stat.

4175 (1994).

• Export working capital financing

• Accredited Lenders Program

• Premier Certified Lenders pilot program

• Pilot program for very small business concerns

• Mobile Resource Center pilot program

• Office of Women’s Business Ownership

• Prepayment of development company debentures

• Deferred participation loan pilot of Microloan program

Small Business Regulatory Enforcement Fairness Act of

1996, P.L. No. 104-121, 110 Stat. 857 (1996).

• Oversight of regulatory enforcement

Small Business Programs Improvement Act of 1996, P.L.

No. 104-208, 110 Stat. 3009-725 (1997).

• Risk management database

• Preferred lender standard review program

• Private sector disaster loan servicing demonstration program

• Loan liquidation pilot program for development companies

Small Business Reauthorization Act of 1997, P.L. No. 105-

135, 111 Stat. 2592 (1997).

• Welfare-to-work microloan initiative

• Criminal background checks on loan applicants

• Women’s Business Centers

• SBA review of bundled contracts

• Small Business Technology Transfer outreach program

• Service disabled veterans program

• Trade assistance for small business concerns adversely affected by

NAFTA

• Small business export promotion

• HUBZone program

• Defense Loan and Technical Assistance Program

Department of Transportation and Related Agencies

Appropriations Act, 1999, P.L. No. 105-277, 112 Stat.

2681 (1999).

• Drug-free Workplace demonstration program

Small Business Year 2000 Readiness Act, P.L. No. 106-8,

113 Stat.13 (1999).

• Year 2000 Computer Problem program
Appendix I: Legislatively Mandated Programs

and Offices in SBA

Page 25 GAO-02-17 Small Business Administration

Public law Program/office established

A bill to authorize the establishment of a disaster

mitigation pilot program in the Small Business

Administration, P.L. No. 106-24, 113 Stat. 39 (1999).

• Disaster Mitigation pilot program

Veteran’s Entrepreneurship and Small Business

Development Act of 1999, P.L. No. 106-50, 113 Stat. 233

(1999).

• Office of Veterans Business Development

• Repayment deferral for active duty reservists

• Disaster assistance for military reservists’ small businesses

• Entrepreneurial assistance to veterans and active duty reservists

Program for Investment in Microenterprises Act of 1999,

P.L. No. 106-102, 113 Stat. 1471 (1999).

• Program for Investment in Microentrepreneurs

Women’s Business Center Sustainability Act of 1999, P.L.

No. 106-165, 113 Stat. 1795 (1999).

• Women’s business centers sustainability pilot program

Appropriations for the Departments of Labor, Health and

Human Services, Education and related agencies, 2001,

P.L. No. 106-554, 114 Stat. 2763A-653 (2000).

• New Markets Venture Capital Program
Appendix II: Legislatively Mandated Staff

Positions at SBA

Page 26 GAO-02-17 Small Business Administration

The following list shows legislatively mandated staff positions at SBA:

• Section 4(b)(1) of the Small Business Act establishes that the management

of SBA is vested in an administrator who is appointed by the President and

confirmed by the Senate. The President also may appoint a deputy

administrator who is to serve in the event of the administrator’s absence

or disability.

• Section 21(h) of the act provides that the administrator shall appoint an

associate Administrator for Small Business Development Centers who is

to report to an official who is not more than one level below the Office of

the Administrator.

• Section 26(a) of the act provides for a director of the Office of Rural

Affairs.

• Section 29(g) of the act provides for an assistant administrator for the

Office of Women’s Business Ownership to be appointed by the

administrator. This position is a Senior Executive Service position. The

assistant administrator for Women’s Business Centers is a noncareer

appointee.

• Section 30(b) of the act requires that the administrator appoint a Small

Business and Agriculture Regulatory Enforcement Ombudsman, who is to

report directly to the administrator.

• Section 32(b) of the act provides for an associate administrator for

Veterans Business Development, who is to be an appointee in the Senior

Executive Service and is to report to and be directly responsible to the

administrator.

• Section 201 of the Small Business Investment Act provides for an associate

administrator for the Small Business Investment Division. The associate

administrator is appointed by the administrator and is compensated at the

rate provided by law for other associate administrators.

• Sections 4, 7(j)(10), and 8(a)(8) of the act provide for the associate

administrator for Minority Small Business and Capital Ownership

Development to manage the small business and capital ownership

development program. The associate administrator is to be responsible to

and report to the administrator and is to be a career appointee in the

Senior Executive Service.

• Section 7(j)(11)(E) establishes a Division of Program Certification and

Eligibility as part of the Office of Minority Small Business and Capital

Ownership Development to be headed by a director who is to report

directly to the associate administrator for Small Business and Capital

Ownership Development.

• 15 U.S.C. 634a provides for a Chief Counsel for Advocacy.

Appendix II: Legislatively Mandated Staff

Positions at SBA
Appendix III: SBA Field Locations Visited

Page 27 GAO-02-17 Small Business Administration

Washington, D.C.

Miami, FL

Kansas City, MO

Cedar Rapids, IA

Minneapolis, MN

San Francisco, CA

Los Angeles, CA

Fresno, CA

Sacramento, CA

Kansas City Regional Office

Kansas City Preferred Lenders Program Review Branch

Sacramento Low Doc Processing Center

Sacramento Preferred Lenders Program Processing Center

Fresno Loan Servicing Center

Sacramento Disaster Area Office

Minneapolis United States Export Assistance Center

Minneapolis Business Information Center

Appendix III: SBA Field Locations Visited

District Offices

Regional Offices

Other Field Locations
Page 28 GAO-02-17 Small Business Administration

Appendix IV: Comments From the U.S. Small

Business Administration

(250037)
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