Small Business Administration: Opportunities Exist to Build on Leadership's Efforts to Improve Agency Performance and Employee Morale
Published: 2008-09-24T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Over the past 6 years, the Small Business Administration (SBA) has sought to transform the agency and improve its operations. A major focus of transformation was to centralize the remaining loan functions performed by 68 district offices. SBA's implementation of early transformation efforts did not reflect key practices GAO recommended in a 2003 report as important for successful transformations. Consequently, its centralization of the guaranty purchase process for one of its loan programs resulted in backlogs and other problems reported by SBA's Inspector General. Some of SBA's actions also led to a reduction in staff at district offices and a decline in employee morale. GAO was asked to assess how SBA has (1) responded to GAO's 2003 recommendations, (2) addressed the impacts of transformation on employees, (3) defined the roles and responsibilities of district offices, and (4) assessed the centralization of loan functions. GAO reviewed documents related to SBA's transformation and reform efforts, interviewed SBA officials, and analyzed SBA employee survey data. GAO also visited 10 district offices and two centers and interviewed groups of employees.
section_title: What GAO Found
paragraphs: In the past 2 years, SBA has applied key practices that support successful transformations to improve agency operations and, thereby, has taken actions to address recommendations GAO made in its 2003 report, including improving communication, performance management, and employee involvement. The Administrator appointed in 2006 emphasized the importance of transparency in his reform agenda and took actions to improve communications across the agency. The development of a performance management framework was a key step in linking the agency's reforms with strategic goals and employee roles. The Administrator also made a concerted effort to engage SBA's employees in improving the agency, and meetings with employees affirmed that these efforts had a positive effect. Some employees continued to feel that management does not consider their ideas and concerns. SBA recently conducted focus groups to understand these concerns and plans to implement initiatives to address them. SBA senior officials also said that they are taking steps to institutionalize these improvements. SBA leadership's commitment will be important to ensure that the agency's transformation and reforms are successful. SBA took some actions to address its low employee morale, which had declined significantly following the centralization efforts, as shown in the 2004 and 2006 Federal Human Capital Surveys. SBA's 2007 survey results suggest that these recent actions, such as improving communication and training, have had a positive impact on employees. The creation of SBA University in 2007 was an important action since it provided training and also showed that the agency was willing to invest resources in the development of employees. SBA officials said they are developing a core training program. However, SBA has not developed a training plan that lays out goals, strategies, and milestones. Such a plan would help to establish priorities and could assure employees that SBA remains committed to developing its employees. SBA continues to define the roles and responsibilities of the district offices, as evidenced by its recent determination that district offices should retain a role in loan processes that have been centralized. District directors and employees made positive comments about the flexibility they had in using resources to meet office goals. But they also said that they still were adjusting to new responsibilities and the reduction of staff in their offices. SBA recently re-engineered its guaranty purchase process. Its measures to track progress have emphasized the timeliness of the process, completeness of packages lenders submit, and customer service. SBA reviews each purchase decision and is developing a new quality assurance review process, but has not yet developed performance measures to track the quality of its purchase reviews. SBA Inspector General audits have noted concerns about the quality of purchase reviews and found that the center's purchase reviews do not adequately prevent improper payments. Performance measures could provide more attention to the quality of reviews.

section_title: Letter
paragraphs: Over the past 6 years, the Small Business Administration (SBA) has sought  to transform the agency and improve its ability to fulfill its primary  mission—to promote small business development and entrepreneurship.  SBA’s transformation efforts also focused on improving the efficiency of  its business and loan processes to help mitigate budget constraints and  other resource issues, such as the impending retirement eligibility of a  large portion of its workforce. SBA carries out its mission of supporting  small businesses primarily with programs providing access to credit,  mostly by guaranteeing loans through its 7(a) and other loan programs and  by providing entrepreneurial assistance through partnerships with private  entities that offer small business counseling and technical assistance. SBA  also administers various small business procurement programs and its  8(a) Business Development program that are designed to assist small and  small disadvantaged businesses in obtaining federal contracts and  subcontracts. Additionally, SBA makes loans to businesses or individuals  trying to recover from a major disaster.
SBA’s approach to transformation evolved from restructuring the agency  to emphasizing agency performance. Initially, a major focus of  transformation was SBA’s intent to centralize loan functions and some of  its other small business programs. As centralization freed up employees in  the district offices, SBA also intended to better define the role of district  offices to focus on marketing and outreach to small businesses and  managing SBA’s relationships with lenders and other private-sector  partners. In 2003, we assessed SBA’s implementation of the initial phase of  its transformation strategy and made several recommendations to address  weaknesses that we found, such as SBA overlooking two-way  communication with and involvement of employees in the process. We  recommended that SBA follow key practices important to successful  organizational transformation involving leadership, setting goals and  timelines, communication, and employee involvement.
Following the issuance of our 2003 report, SBA created a new center—the  National Guaranty Purchase Center (NGPC)—for handling the guaranty  purchase of defaulted 7(a) loans guaranteed by SBA and loan liquidations.  SBA staffed the NGPC by requiring certain employees in district offices to  either take the reassignment and relocate to the new center in Herndon,  Virginia, or accept a buyout and lose their job with SBA. This action  contributed to a significant reduction in employee morale, as indicated in  employee survey results in the 2004 and 2006 Federal Human Capital  Survey (FHCS), which the Office of Personnel Management (OPM)  administers on behalf of federal agencies. The FHCS data are used to rank  agencies on a “Best Places to Work” index score, which measures  employee satisfaction. According to the Best Places rankings for 2007,  which are based on the 2006 employee survey results, SBA ranked lowest  among the 30 large federal agencies. In 2004, SBA’s Office of Inspector  General (OIG) also reported problems arising from SBA’s centralization  efforts at the NGPC and noted that the implementation of the center had  not been well planned. In addition, district offices lost staff as a result of  the centralization as employees moved to Herndon, lost their jobs, or  accepted the buyout. In 2006, SBA completed its loan centralization efforts  with the creation of the Standard 7(a) Loan Guaranty Processing Center  operating out of two locations in Citrus Heights, California, and Hazard,  Kentucky. This center has responsibility for processing 7(a) loan guaranty  applications for lenders who do not have delegated authority to make 7(a)  loans without SBA’s final approval.
In response to your request, we reviewed the status of SBA’s efforts to  transform and improve agency operations since our 2003 report and SBA’s  actions to address the impacts some efforts have had on employees and  morale. Specifically, this report examines (1) SBA’s progress in  transforming agency operations and addressing GAO’s recommendations  on key practices for successful transformation, (2) how SBA has  addressed the impacts of transformation on its employees, (3) how SBA  has defined the roles and responsibilities of its district offices, and (4) how  SBA’s approach for implementing centralization of its loan functions has  changed since transformation began and how it has assessed its  centralization efforts.
To respond to these objectives we reviewed agency planning and  implementation documents related to SBA’s efforts to transform and  improve agency performance, analyzed SBA employee survey data, and  interviewed key officials at SBA headquarters in Washington, D.C. We also  reviewed information documenting SBA’s actions to implement  recommended practices important to successful organizational  transformation. We conducted site visits at 10 district offices and the two  loan centers in Citrus Heights, California, and Herndon, Virginia, that were  created under SBA’s transformation efforts. To provide national coverage,  one district office was selected from each of SBA’s 10 geographical  regions. We conducted site visits in California, Georgia, Indiana, Iowa,  Montana, New Jersey, Oregon, Texas, Vermont, and Virginia. Additionally,  at these locations we met with employees to obtain their perspectives on  the implementation and results of SBA’s transformation efforts. While the  limited number of offices we visited is too small for generalizing the  information obtained to all district offices, the recurring nature of the  observations and perspectives expressed across these offices, along with  other material we examined, suggest that these views were not limited to  the offices we visited. To facilitate frank discussions, we met with district  and center directors and employees separately. We also analyzed  responses to certain questions in SBA’s 2004 and 2006 FHCS and its 2007  annual employee survey to identify issues related to transformation’s  impact on employees, including morale. Additionally, we met with  representatives of a lenders’ organization directly affected by SBA’s  transformation and SBA union officials to discuss the impact of  transformation on staff. Finally, we reviewed recent and ongoing OIG  audit work addressing SBA’s centralization initiative and also met with  representatives from that office to discuss their audit results, including  recommendations they made to the agency. In conducting our work, our  focus was on the transformation process itself and its impacts, rather than  on assessing SBA’s administration of its various programs.
We conducted this performance audit from August 2007 to September 2008  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. Appendix I provides a detailed  description of our objectives, scope, and methodology.
subsections: section_title: Background
paragraphs: In response to budget reductions in the 1990s, SBA streamlined its field  structure by downsizing the 10 regional offices, shifting its workload to  district or headquarters offices, eliminated most of the region’s role as  intermediate management layer between headquarters and the field  (district offices), and created the Office of Field Operations to assume the  intermediary role. Prior to this restructuring, SBA had changed its service  delivery model—moving from making loans directly to small businesses to  guaranteeing loans made by commercial lenders. SBA previously had  provided loans directly to small businesses largely through its district  offices. SBA’s 7(a) loan guaranty program exemplifies how the service  delivery model changed. The program has several delivery methods—such  as the certified and preferred lender programs—in which SBA has  delegated different functions to lenders. For instance, certified lenders  must perform a thorough credit analysis on the loan application packages  they submit to SBA so that SBA can heavily rely on that analysis in making  SBA’s  credit and eligibility decisions, thereby shortening the time for SBA  loan processing. Preferred lenders have delegated authority to make SBA- guaranteed loans, subject only to a brief eligibility review and assignment  of a loan number by SBA. SBA provides final approval for loans made  under the regular 7(a) program for loans made by lenders who have not  been approved as certified or preferred lenders.
SBA has 68 district offices that operate as the frontline provider or conduit  of SBA services and programs. Specifically, district offices provide  counseling and training services to individuals or businesses that aid in the  formation, management, financing, or operation of a small business  enterprise. District offices provide information on and promote SBA  products to lending partners, the small business community, and groups  such as chambers of commerce and trade associations. Finally, district  offices are charged with completing statutorily mandated reviews, such as  section 8(a) program participant reviews that ensure participants continue  to qualify for the program and are meeting program requirements.
When we reported on SBA in 2003, the agency had started or was planning  transformation efforts to better align resources and functions with the  changed organizational structure. The transformation effort was to be  done in three phases that included two key initiatives. We reported on the  first phase of these efforts. The first initiative focused on changing the role  of district offices (through a pilot in three district offices) to emphasize  outreach to small businesses about SBA’s products and services and  linking these businesses to the appropriate resources, including lenders.  For instance, SBA provided training to employees on marketing and  outreach, developed new job descriptions for its marketing and outreach  specialist positions, and reorganized staff in the offices. However, we  found that budget constraints impeded work on this initiative and could  continue to do so. We also found that the agency’s budget requests for  transformation were inconsistent and lacked a detailed plan that showed  priorities and linked resources to desired results.
The second initiative focused on centralizing loan functions to improve  efficiency and consistency of the loan approval, guaranty purchase, and  liquidation processes for SBA’s 7(a) loan program. In March 2003, the  liquidation center in Santa Ana, California, that typically worked on  disaster loans began a pilot program to process new 7(a) liquidations and  guaranty purchase cases from the three pilot district offices. According to  SBA, the centralization achieved processing efficiencies. In phases two  and three of its transformation, SBA had planned to establish a new 7(a)  liquidation and guaranty purchase center near Washington, D.C., and  expand the centralization initiative until all of the loan functions  performed by its 68 district offices were centralized. However, we found  that SBA’s centralization efforts also could be impeded by the challenge of  trying to ensure that job realignments and relocations from multiple field  offices would result in having experienced staff at the centralized  locations. We also noted that relocations could prove disruptive for  employees by decreasing morale and productivity and, thus, could  negatively affect SBA’s operations. Between 2004 and 2006, SBA created  two centers to conduct work that had been previously performed in the  district offices. As part of their respective missions, these centers provide  assistance and oversight, as necessary, to lenders. Specifically, the NGPC  in Herndon, Virginia, processes guaranty purchase requests and assists  lenders during loan liquidation and the Standard 7(a) Loan Guaranty  Processing Center (operating out of two locations in Citrus Heights,  California, and Hazard, Kentucky) has responsibility for processing 7(a)  loan guaranty applications for lenders who have not been approved as   preferred lenders.
SBA’s workforce has declined significantly since the 1990s. During the  restructuring in the 1990s, SBA’s workforce decreased from over 3,800  employees to about 3,100 employees—a decrease of about 19 percent.  Between 2000 and 2007, when additional restructuring occurred, SBA’s  workforce decreased further by about 26 percent. As of September 2007,  SBA had 2,166 employees.
Our 2003 report noted that transforming an organization is challenging. We  further concluded that while SBA had made progress with its endeavors,  weaknesses we identified in SBA’s approach could be mitigated by using  the key practices discussed in the report. Moreover, comprehensive and  strategic planning would minimize challenges, including problems with  employee morale and productivity. In particular, we said that more two- way communication, transparency, and employee involvement would  improve the effort as the agency moved forward with transformation.  Accordingly, we made recommendations related to how SBA could use the  key practices to increase the potential for a successful transformation. We  discuss our recommendations related to best practices, including actions  taken by SBA, in this report.
section_title: SBA Has Applied Key Practices to Implement Change and Has Begun Addressing Employee Concerns about Involvement and Continued Leadership Commitment
paragraphs: SBA has made progress in applying key practices to implement change and  has begun addressing remaining employee concerns about involvement  and continued leadership commitment. SBA’s current leadership has  emphasized transparency and communication. Additionally, it refocused  agency priorities with a new performance management system, which  prioritizes agency goals and links them to operating plans for offices,  performance scorecards, and employee performance plans. SBA also has  made efforts to solicit employees’ ideas and feedback and has begun to  examine employees’ continued concerns about their involvement in  decisions that affect their work. Finally, some SBA employees expressed  concerns about the commitment of future leadership to the current  initiatives, but senior career officials said that they planned to continue  positive efforts.
subsections: section_title: SBA Leadership Has Emphasized Transparency and Communication
paragraphs: SBA’s current leadership has emphasized transparency and communication,  addressing our prior recommendation that the agency improve its  communication strategy. In 2003, during the early stages of its transformation,  we made this and five other recommendations to SBA because we found the  agency’s transformation plans were not transparent enough to allow related  progress to be tracked and frequent two-way communication was lacking  within SBA (see table 1). In July 2006, 3 years after transformation began and  following the unsuccessful outcome of some transformation initiatives and  other agency challenges that we discuss elsewhere in this report, SBA  underwent a change in leadership with the appointment of a new  Administrator. Under its new Administrator, SBA’s leadership took steps to  increase transparency in the agency’s actions and improve its communication  efforts. For fiscal year 2008, SBA developed a comprehensive  communications plan that addressed challenges from the previous year with  regard to negative reports about its disaster program, primary loan program,  and other aspects of the agency. The plan included strategies for improving  internal and external communications and detailed steps for making these  improvements. It also assigned responsibility for each communication area  such as SBA’s Web site, marketing, and internal communications to specific  individuals within SBA’s communications office. Senior leaders at SBA  acknowledged that effective communication had become a key area of focus  when the Administrator began his term, and identified communication  deficiencies.
When we met with managers and staff in SBA’s district offices, many told  us that under new leadership, agencywide communication had improved  significantly and that employees were more informed about ongoing  agency initiatives. Both managers and staff attributed these improvements  to the Administrator’s commitment to transparency and communication,  noting that he had personally taken steps to directly communicate agency  plans and updates to all employees. In previous work reviewing practices  that empowered and involved federal employees, we noted that top  leadership commitment is crucial to instilling a common vision across the  organization and creating an environment that is receptive to innovation.  SBA officials told us that, early in his term, the Administrator had visited  the district offices and informed employees that they could contact him  directly by e-mail, and in two of the locations that we visited, district  directors told us that employees had communicated with the  Administrator. The Administrator also continued town hall meetings, as  the previous Administrator had done, and implemented video broadcast  meetings and messages that were accessible to all employees, including  those in the field.
In addition to the Administrator’s individual efforts, SBA has used e-mail  and conference calls to improve its internal communications. For  example, employees said that SBA distributes agencywide e-mails on  procedural notices. Regular conference calls also provide headquarters  and field employees with opportunities to share information. For example,  the Office of Field Operations—which acts as a liaison between  headquarters and the field—participates in a weekly conference call with  the district offices that various program offices in headquarters also  sometimes participate in, and the program offices hold conference calls  with field employees who work in those areas. On the local level, the  district offices also participate in weekly regional conference calls with  their respective regional Administrators.
As part of its efforts to improve communications specifically between  headquarters and the field, SBA also developed a 10-member field advisory  council (FAC), comprising one district director from each region, which  gives district office management an opportunity to communicate field  issues and concerns directly to headquarters. The FAC’s purpose is to  provide input and feedback directly to the Administrator and senior  management regarding the implementation of agency policy and programs  on operations in the field level and on SBA’s customers. District directors  serve on the FAC on a rotational basis for an initial period of 18 months  and can be reconfirmed for subsequent terms. The FAC participates in  weekly conference calls with senior leaders and meets with the  Administrator several times a year. During our visits to the district offices,  several district directors told us that the FAC was an effective tool for two- way communication between headquarters and the field, particularly for  sharing the field perspective with headquarters officials. For example, one  district director said that the FAC was useful for discussions related to  staff resources in the field, and several identified their regional  representatives or said that they could share issues with their regional  representatives to be raised in FAC meetings. SBA has also updated its  internal (intranet) and external (Internet) Web sites to provide more  useful information than provided in the past, such as program area  resources to its employees and revised program guidance to its customers.  Although some employees indicated that SBA’s Internet site was more  user-friendly than its intranet site in searching for information, others  provided examples of intranet improvements, such as resources to help  with conducting marketing and outreach with lenders—a major aspect of  the district offices’ role following centralization.
As noted, many district office employees we interviewed indicated that  SBA’s current leadership had improved agencywide communication  significantly. Employees said they were aware that communication was  now a priority for the agency and said that in the past, leadership’s actions  had been unclear or not communicated to them. Partly because of more  open communication from the top and because district directors were  more informed than in the past, some district office employees said that  communication had improved in their offices. Some also noted that  communication with other areas in the agency, such as the loan centers,  had improved. However, several district office employees said they  experienced challenges communicating with headquarters officials. For  example, they said that headquarters officials were not consistently  responsive to their communications or were unable to answer their  questions during scheduled conference calls.
section_title: SBA Leadership Has Refocused Agency Priorities with a New Performance Management System
paragraphs: In addition to a new Performance Management Office (PMO) and a  comprehensive performance management system, SBA also applied other  key transformation practices that we recommended the agency adopt,  including finalizing a transformation plan, identifying who would lead  transformation efforts, and developing a performance management system  that reflected agency goals and employees’ roles. As discussed above, SBA  came under new leadership in 2006, and with the appointment of a new  Administrator, SBA’s existing draft transformation strategy was never  approved. Instead, the Administrator introduced a strategy to carry out  remaining transformation objectives in a manner that addressed  deficiencies in past implementation efforts and focused on SBA’s mission  and priorities.
The new strategy, which shifted SBA from organizational restructuring to  improving performance, emphasized four specific priorities that made up  the Administrator’s reform agenda: (1) meeting all compliance  requirements, (2) ensuring that all SBA programs operated efficiently and  effectively, (3) improving communication, and (4) providing effective  employee training. This agenda is generally consistent with key  transformation practices that we identified. Several SBA officials with  whom we spoke pointed out that some of the negative impacts of past  transformation efforts—including a significant reduction in SBA’s overall  workforce and directed reassignments of district office employees to a  new centralized loan center—had caused transformation to take on a  negative tone across the agency. Our discussions with employees in many  of the district offices confirmed this. Thus, the Administrator replaced  “transformation” with the term “reform agenda” to describe SBA’s efforts  to move forward, although it still aimed at accomplishing important  transformation objectives. For example, transformation objectives  included (1) focusing on SBA’s customers, (2) empowering employees,  and (3) becoming more results-driven and performance-based. Similarly,  the reform agenda was created on the foundation of SBA being (1)  outcomes-driven; (2) customer-focused; (3) employee-enabled; and (4)  accountable, efficient, and transparent. While we found that SBA’s earlier  transformation strategy remained a draft plan, the new strategy, which has  been presented as its performance management framework (PMF)  (discussed below), has been implemented.
To provide the infrastructure for SBA’s performance management efforts,  including overseeing SBA’s strategic plan and goals, in January 2007, the  Administrator established a new office, the Performance Management  Office (PMO) and a new position, the Associate Administrator for  Performance Management. At SBA, the Chief Financial Officer (CFO)  serves concurrently in this new position. The PMO serves as an internal  resource for SBA’s program offices, assisting them with data analysis,  project management, and operational improvement. It reports on agency  performance internally and externally (for example, performance and  accountability and Program Assessment Rating Tool (PART) reporting).  It also oversees and tracks SBA’s implementation and progress on the  President’s Management Agenda initiatives and recommendations. In a  report discussing action steps proposed by selected performance  management experts for improving performance management in federal  agencies, such experts stated that creating an office such as the PMO  increases the focus on performance as an organizational priority.  Additionally, the report lists “performance tracking and dialogue,” for  which the PMO is responsible, as one of eight management practices that  contribute to a performance culture. Moreover, the PMO is in line with  recent efforts by the Office of Management and Budget (OMB) to promote  program performance across the federal government.
SBA further encouraged a collaborative approach to performance  accountability by designating managers at various levels to lead initiative  teams as “champions” or “project owners” of specific activities, thereby  allowing them the opportunity to participate in leadership’s vision for SBA  and addressing employees’ concerns about being uninformed and  uninvolved in past transformation efforts. In our report on practices that  empowered employees, we also note that using employee teams to help  accomplish agency missions and involving employees in planning and  sharing performance information with them are effective tools. In some  instances, SBA designated employee champions to oversee improvements  in specific programs or agency functions, and some initiatives had  champions in headquarters and the field. For example, for initiatives  involving staff support and training and SBA’s work with small businesses  in underserved markets, program managers served as headquarters  champions, while regional Administrators or district directors served as  field champions.
Following this approach, at the district office level, district directors also  designated individual employees as champions of local initiatives related  to the district offices’ mission and goals. District office initiatives are  separate from output-related goals that SBA establishes for the district  offices, such as loan volume. Instead, SBA considers initiatives to be  “value-added” activities, such as leveraging resource partner services to  serve small businesses and outreach to faith-based and community  organizations, women, veterans, and other groups. District directors told  us that SBA requires each office to submit a plan each fiscal year to  accomplish the initiatives that are key to its local market and allocate  resources from its existing budget. In some cases, district office  employees had responsibility for initiatives that were related to their  primary roles.
SBA’s new PMF is the core component of its efforts to improve agency  performance. According to SBA, the objectives of the PMF are to (1)  prioritize objectives, (2) manage existing resources to meet priorities, (3)  target items that produce measurable impacts, (4) discontinue activities  not critical to success, (4) improve accountability, and (5) foster agency  collaboration to achieve collective priorities. SBA documents state that  the PMF allows SBA and its program offices to be more accountable,  performance-oriented, transparent, and customer-focused—in line with  the reform agenda—and provides the agency with flexibility by allowing  prioritization of limited resources to best fit the needs of SBA’s customers.
In the PMF, SBA’s priorities—including the reform agenda and other  Administrator priorities, program office priorities, and goals and  initiatives—form the basis for major area (program and district office)  operating plans (see fig. 1). In developing its operating plans, SBA looks at  the resources available to accomplish the metrics or milestones for each  activity (compliance requirement, goal, or value-added initiative)  performed in a given area. For example, district office operating plans  include metrics for loans made to certain groups or communities that SBA  targets, as well as the staff and budget allocation for achieving the loan  goal. In turn, the agency assesses operations by using performance  scorecards that include metrics and other measures for tracking the  progress of goals and other activities. The scorecard then provides  detailed information on the progress made toward achieving each metric  within the operating plan.
For fiscal year 2007, SBA developed new operating plans and streamlined  scorecards to show fewer, higher-impact items, making 100 percent  compliance with statutory requirements a priority. For the district offices,  the number of scorecard items decreased from about 40 to less than 10.  District office employees said that they preferred having fewer scorecard  goals that they could work toward and that they had greater autonomy to  achieve. In the past, district office scorecard items included some goals for  which the district offices depended on local resource partners such as  SCORE (formerly the Service Corps of Retired Executives), Small  Business Development Centers (SBDC), and Women’s Business Centers  (WBC) to achieve. For example, while the district offices have goals for  training and counseling that they provide to small businesses, they  previously also had goals for training and counseling that their resource  partners provided to small businesses. Although some employees viewed  the new scorecard as an improvement, others noted that some of their  current responsibilities were not reflected in the new scorecard and that  the district office did not receive credit for work on these additional  responsibilities. For example, since SBA centralized its loan functions, the  scorecard does not account for any of the assistance that district offices  provide to the loan centers. Because district office staff resources were  limited, the employees felt that they should receive credit for all the work  they performed.
As figure 1 indicates, the priorities set within the PMF also are reflected in  SBA’s staffing decisions, employee roles and responsibilities, employee  training, and personal business commitment plans that serve as individual  performance contracts for employees.
Scorecards then help measure performance on goals and objectives  related to these functions and documents. For example, the personal  business commitment plans of senior officials link their performance to  goals in the scorecards for their respective areas.
Finally, accountability for achieving results related to agency priorities is a  key aspect of the PMF. SBA senior officials track the progress of PMF  priorities monthly, and program managers are required to prepare monthly  reports on scorecard metrics and meet with the Administrator and Deputy  Administrator to discuss targets that have been met and action plans for  addressing outstanding targets. (We provide an example of district office  scorecard compliance requirements and goals in our discussion of the  district offices’ roles and responsibilities.) Additionally, SBA holds regular  progress review meetings at various levels in the agency, in part to create a  culture of peer-based accountability and facilitate performance  improvements agencywide. Several SBA employees with whom we spoke  said that they understood the PMF, and others noted that it clarified the  agency’s goals. One program office official added that SBA had made  progress with the PMF by helping managers to make the connection  between agency goals and their individual program offices.
section_title: SBA Has Made Some Efforts to Solicit Employees’ Ideas and Feedback and Has Begun to Examine Employees’ Continued Concerns about Their Involvement
paragraphs: SBA’s current approach to organizational change offers some avenues for  employee involvement, but some employees, including union  representatives, expressed concerns about limited involvement or about  providing input and seeing results. SBA has taken steps to involve district  offices and solicit their feedback and ideas, but most of these initiatives  involve district directors who may not always reflect district employees’  concerns or ideas. As noted above, district directors have an opportunity  to serve on the FAC and communicate field issues and concerns to SBA  headquarters. Additionally, in 2007, SBA implemented an informal “district  director in residence” effort that allows district directors to work on  temporary assignments in headquarters, where they can be exposed to  headquarters operations and provide a field perspective on initiatives and  activities that affect the field. Similarly, some headquarters managers have  served in temporary field positions, such as acting district director, where  they can manage field employees and provide feedback on the impact of  headquarters directives on field personnel. For example, we met with a  district director and an assistant district director who had worked in  headquarters on initiatives that incorporated technology to make  improvements to the 8(a) Business Development program. In both  instances, the officials were able to provide practical input for these  initiatives because the district offices are responsible for monitoring and  assisting more than 9,600 firms in SBA’s 8(a) program and for  communicating with other federal agencies that contract with these firms.
Some district office employees with whom we met acknowledged that  headquarters generally sought more input from the field regarding  policies, procedures, and new program initiatives than in the past. SBA’s  intranet also has a comments and suggestions tool that all employees can  use to submit their ideas to the agency. In one location, the district  director pointed out that two district office employees had submitted ideas  that headquarters accepted for implementation—one for pursuing an  initiative with the state to coguarantee SBA loans and encourage local  lenders to make more SBA loans.
However, district office employees remained concerned that they had little  input in decisions that directly affected their work, and employees  generally agreed that they were not certain that management incorporated  their input when final decisions were made. For example, several recalled  providing input for procedure revisions and developing new loan programs  but said that the programs that headquarters had ultimately implemented  were less attractive to (that is, cost-effective for) local lenders, making it  challenging for district offices to market the programs and meet their loan  goals.
In addition, results from an OPM survey of SBA’s employees reflect an  ongoing concern employees have about their involvement in decisions that  affected their work. As shown in figure 2, about 32 percent of employees  surveyed in 2004, 2006, and again in 2007 had negative responses regarding  their involvement in decisions that affected their work. Similarly, the rate  of positive employee responses has shown little change over the years, and  SBA’s 2007 positive employee response of 45 percent was notably lower  than the 2006 governmentwide positive response of 54 percent.
Representatives from SBA’s employee union reported insufficient  interaction with agency leadership and limited involvement in  management decisions. For example, the representatives said that  changing leadership within SBA’s human capital office made it difficult to  establish relationships and that SBA’s senior leadership had not been  responsive to the union’s efforts to collaborate. They also said that the  union had not had opportunities to provide input for and negotiate on  agency initiatives that affected employees, such as the new field staffing  model, and they felt that SBA unilaterally changed agreements without  seeking the union’s input. However, SBA officials said that federal union  contracts typically allow management some discretion with regard to  union involvement. Specifically, they told us that decisions affecting the  agency’s mission, budget, and staff resources were made at the  management level and did not involve the union. For example, they stated  that SBA management would not negotiate with the union on SBA’s  development of its field staffing model. In addition, they said that there  was some misunderstanding among union representatives in this regard.
We have previously reported that employee involvement strengthens the  transformation process by including frontline perspectives and  experiences. Specifically, employee involvement helps to create the  opportunity to establish new networks and break down existing  organizational silos, increase employees’ understanding and acceptance of  organizational goals and objectives, and gain ownership for new policies  and procedures. More specifically, in relation to eliciting feedback, OPM  suggests that federal agencies could increase the usefulness of employee  surveys by combining survey results with other personnel information or  with additional feedback tools such as focus groups. In doing so,  agencies could better determine the rationale behind employee survey  responses and more accurately assess their human capital environment.
SBA’s employee survey results and comments from employees with whom  we met suggest that some employees were still not satisfied with the  extent of their involvement in work-related decisions. In line with OPM’s  suggestion, SBA officials said that they had begun efforts to examine  several employee issues that they identified from human capital surveys  for fiscal years 2005 through 2007. The officials said that they had followed  up on questions that had the highest negative responses, including the  question on employees’ satisfaction with their level of involvement in  decisions that affected their work. SBA employees in headquarters and the  field participated in focus groups in April and June 2008 and SBA plans to  issue a report summarizing the focus group results on its intranet and  develop pilot initiatives to address the issues it determines to be most  critical.
section_title: Employees Also Were Concerned about Continued Leadership Commitment, but Senior Leaders Have Initiated Steps to Continue Positive Agency Efforts
paragraphs: In June 2008, SBA’s Administrator, Steve Preston, was sworn in as  Secretary of Housing and Urban Development. Prior to his nomination in  April 2008, SBA managers and staff had expressed uncertainty about  whether positive actions would continue under the next Administrator.  When we spoke with managers and staff at SBA prior to the nomination,  many said that under Administrator Preston, SBA’s approach to leadership  had improved significantly, and some expressed concerns about the  commitment of future leadership to progress at SBA. In particular, some  employees were uncertain about whether positive actions would continue  under the next Administrator and anticipated that a new Administrator  might take the agency in a different direction, which could lead to the  dismantling of many improvements. Some who were optimistic said that  successful initiatives currently in place would continue if other SBA  leaders shared the Administrator’s vision for improving the agency.
In discussing efforts to institutionalize the positive initiatives that  Administrator Preston had begun at SBA, the Associate Administrator for  Performance Management (CFO) told us that she and other senior career  officials had met to discuss how they could ensure that the positive  changes and practices that had been put in place in the previous 2 years  could be continued under a new Administrator. She said that while a new  Administrator would have new ideas, she felt that it would be important to  sustain practices and initiatives that had led to noticeable improvements in  the agency’s capacity to implement a new vision or priorities. In particular,  she pointed out that SBA’s efforts, such as the PMF, and improved  communication, had improved its capacity to operate more effectively and  efficiently, which would help any new programs or policies under a new  Administrator. Additionally, the Chief of Staff told us that as the officials  develop a transition plan for the next administration, they would include  support for the positive actions that Administrator Preston implemented.  Our previous work on key practices that support transformations noted  that frequent turnover of political leadership in the federal government  often made it difficult to sustain and inspire attention to make needed  changes. Therefore, it is important that SBA’s leadership—career and  political—remain committed to sustaining these efforts under existing and  future administrations.
section_title: Actions to Address Effects of Transformation on Employees Have Had Some Success, but SBA’s Plan for Training and Development Is Limited
paragraphs: After the centralization of loan liquidation and purchase guaranty  functions in 2003, employee morale at SBA declined significantly, as  indicated by employee survey results in 2004 and 2006. The SBA  Administrator’s actions to improve communication and transparency were  meant, in part, to assure employees that they would be better informed  about what the agency was doing. In 2007, SBA administered another  employee survey to measure whether these actions had improved  employee morale and found that employee perceptions of leadership  improved considerably. Employees also told us that they thought they  were getting better information, which was corroborated in the 2007  employee survey. SBA also embarked on a major training initiative in  2007—SBA University—to provide core training to field employees and  address concerns about training expressed in employee surveys.  Employees told us that they appreciated SBA University because it  showed that the agency recognized that employees needed training for  their new roles and responsibilities. However, SBA has not yet developed a  comprehensive and strategic training plan that includes specific goals,  strategies, and milestones for developing and implementing core courses.  Without such a plan, SBA lacks some accountability for ensuring that the  training efforts would continue to be implemented.
subsections: section_title: Administrator’s Actions Have Helped to Improve Employee Perceptions of Leadership
paragraphs: Following the notice of directed reassignments associated with the 2003  centralization of the 7(a) liquidation and purchase guaranty functions,  employee morale declined significantly, as indicated in SBA’s 2004  employee survey results. Around the same time a new Administrator was  appointed in 2006, SBA received the results of its 2006 employee survey,  which continued to indicate low morale. The employee survey results in  2004 and 2006 showed a lack of respect for and trust in SBA leadership  and a concern about training opportunities. According to SBA officials, the  new Administrator made improving employee morale a priority.
As discussed earlier, SBA leadership sought to improve communication  and transparency across the agency. The new SBA Administrator’s efforts  to communicate with employees included soliciting information from  employees and visiting field locations to obtain their input on how to  improve agency operations and morale. For example, during his first year  at SBA, the Administrator attended 32 employee meetings and visited 23  district offices. At these meetings, he would ask managers to leave the  room and tell employees that the discussions would remain confidential  and individual employees’ comments would not be shared outside the  meetings. According to employees with whom we met, the new  Administrator’s positive and open management style generally improved  morale within the agency. Many employees told us that they believed they  were provided with more information on agency initiatives and the  Administrator’s priorities. The results of the 2007 survey of employees  showed an improvement in positive perceptions of leadership compared  with 2004 and 2006 survey responses. For example, as shown in figure 3,  there was a 21 percentage point increase between 2007 and previous years’  surveys in SBA employees agreeing with the statement, “I have a high level  of respect for my organization’s senior leadership.” Furthermore, SBA’s 54  percent positive response for this question was higher than the  governmentwide positive response level of 49 percent in 2006. Likewise, in  2007, 52 percent of SBA employees provided a positive response to a  question about satisfaction with the information received from  management. This response was an increase of nearly 20 percentage  points from 2004 and at a level that also was higher than the  governmentwide positive response of 47 percent in 2006.
Other responses from the 2007 survey showed that employees still had  concerns. As noted previously, a large percentage of employees felt that  they were not sufficiently involved in decisions that affected their work.  Also, 39 percent of SBA employees responded negatively when asked how  satisfied they were with their opportunities to get a better job in the  organization. While this level of negative response was an improvement  from 2006, when 47 percent of SBA employees responded negatively, it  was still notably worse than the 31 percent of governmentwide employees  in 2006, who provided a negative response to this item on the 2006 OPM  survey.
section_title: Employees Reacted Positively to Recent Training Efforts, but the Lack of a Documented Strategic Training Plan Could Decrease Accountability for Continuity of Efforts
paragraphs: SBA officials told us that the 2006 employee survey results clearly showed  that employees wanted more and better training. We have noted in  previous work that training and development can play a key role in helping  agencies address the challenge of transformation and cultural change and  help ensure that their workforces possess the knowledge, skills, and  competencies needed to work effectively in a rapidly changing and  complex environment.
Prior to the arrival of SBA’s new Administrator in July 2006, the range of  training available to SBA staff was limited, in part because SBA had not  invested in training due to budget constraints. Most training was on the job  or offered online. Recognizing that many employees had taken on new  roles and responsibilities, the Administrator supported the need to  develop a training program. This program—SBA University—started in  2007. The first sessions were for field office employees, with the goal of  training them in the new roles and responsibilities incurred as part of  transformation. SBA held three sessions of week-long training during late  July and August 2007, with more than 1,300 employees from field offices  across the country. The agency organized the sessions around seven  modules of instructor-led training—(1) lender relations, (2)  entrepreneurial development, (3) government contracting and business  development, (4) public communications, (5) administration, (6) servicing  centers, and (7) government contracting representatives. Within each  module, some courses were program-specific, such as 8(a) annual reviews,  while other courses were skill-specific, such as customer service. The  agency offered another round of training under the SBA University in April  2008 for SBA managers (including managers in district offices and  headquarters). Additional training is scheduled in 2008 for managers and  headquarters employees. District office employees and management  officials with whom we met generally were positive about SBA University.
In addition, the positive reaction to the new emphasis on training was  reflected in the 2007 employee survey results. For example, as shown in  figure 4, employee response to an item asking about satisfaction with  training shows a 13 percentage point increase in positive responses in 2007  compared to the 2006 survey. However, SBA’s positive response of 49  percent was lower than the 2006 governmentwide positive response of 54  percent and about a quarter of employees continue to express  dissatisfaction with their training. Some employees told us that though  they believed SBA University was a positive gesture to show that the  agency would invest in training, they felt that many of the courses did not  adequately prepare them to carry out their job responsibilities. Other  employees told us that they were overqualified for some of the courses  and would have benefited from more advanced training.
SBA officials acknowledged that SBA University was a first step in  developing a training program. They told us that SBA had not developed a  training curriculum in recent years because of limited budgetary resources  but that the agency was in the process of developing a curriculum focusing  on core competencies needed for SBA’s mission-critical positions. As  noted in SBA’s 2007 Human Capital Plan, SBA has identified six mission- critical occupations including (1) leadership (such as members of the  Senior Executive Service and district directors); (2) lender relations and  business development specialists; (3) contracts specialists, procurement  analysts, and contracting officers; (4) loan specialists; (5) human  resources specialists; and (6) information technology specialists.  According to SBA officials, SBA has begun to develop core courses for the  leadership and acquisition-related occupations. For example, SBA has  developed a plan for leadership succession, including strategies for  developing leaders, an implementation schedule, and an evaluation  monitoring plan. They said that they started developing curriculums for  these two occupations first partly because courses were available through  external training resources. SBA officials stated that they planned to  develop core curriculums to address the skills for the other mission- critical occupations. SBA officials told us that they have been working  with the Office of Field Operations and subject matter experts in the  district offices to identify the core competencies for the mission-critical  occupations in the district offices. In addition, they plan to review  individual development plans prepared by employees to identify training  needs. Officials said that one of the challenges of developing and  delivering training is ensuring that competent instructors with the right  skills are available to teach courses—especially because vendors with the  appropriate subject matter expertise may not be available to deliver the  training. They added that while they started with acquisition-related and  leadership curriculums, the next core courses probably would be for  business development specialists.
SBA also has created an Executive Development Council that provides  direction, oversight and support for the development of leaders within  SBA and development of employees at all levels of the organization.  According to the council’s February 2008 charter, it will create a vision of  development for SBA and design a developmental strategy that supports  SBA’s mission and strategic goals.
Though SBA has taken several positive steps related to training and  development, SBA has not yet documented a comprehensive and strategic  approach to training in a training plan. SBA’s Human Capital Plan  describes the agency’s training and development initiatives—specifically,  it describes the SBA University initiative as designed to advance and  integrate employee learning with other critical business functions—but it  does not provide any details on how and when training would be  delivered. And while SBA’s Fiscal Year 2009 Performance Plan notes that  the agency will design and institutionalize its long-term plan for the SBA  University, this effort is still under way. Our previous work has shown that  adequate planning allows agencies to establish priorities and determine  the best ways to leverage investments to improve performance. For  instance, a documented training plan would link the core competencies  and mission-critical positions with specific goals, strategies, and  milestones for developing and implementing core courses. A training plan  can also present a business case for proposed training and development  investments, including linkages with the agency’s strategic objectives,  anticipated benefits, and projected costs. Without a plan for the rest of  SBA’s core curriculum, SBA lacks some accountability for ensuring that  the training efforts would continue to be implemented. In addition,  without a plan, employees may not be able to anticipate future training  opportunities and consequently judge agency efforts negatively.
section_title: Focus of District Offices Is on Marketing and Outreach as Their Role Continues to Evolve, and Challenges Include Decreased Staffing
paragraphs: Since 2003, the roles and responsibilities of SBA district offices have  shifted from processing loans and performing other loan-related functions  to marketing SBA programs and services; conducting outreach to lenders,  small businesses, and other organizations; and ensuring compliance with  federal laws and regulations. The roles and responsibilities of the district  offices have continued to evolve as SBA further refines what they should  be. For example, select district office employees have begun assisting the  loan centers with their loan and customer service functions, such as  helping lenders prepare guaranty purchase requests. District offices also  now have a formal role in providing disaster assistance. SBA defines  district office roles and responsibilities through the annual compliance  goals and requirements on the district office scorecards, but district  offices can determine what actions they need to take to meet their goals,  particularly in marketing and outreach. However, the district office  employees still are adapting to their new roles, particularly those who  used to process loans. Employees we interviewed said some aspects of  their work had changed following the centralization of loan functions.  For  example, employees found that their work had become less structured and  that it resulted in fewer tangible accomplishments.  Due to decreased  staffing levels, they also find themselves taking on multiple  responsibilities, which affected their ability to conduct some activities.
subsections: section_title: Focus of District Office Has Shifted to Marketing and Outreach, but Recent Refinements to Role Include Assisting Loan Centers, and Employees Continue to Adjust to Evolving Roles
paragraphs: Since our 2003 report, the roles and responsibilities of SBA district offices  have shifted from performing loan functions to conducting marketing and  outreach for SBA programs and services and ensuring compliance with  laws and regulations; these roles and responsibilities continue to evolve.  Specifically, the loan processing, liquidation, and guaranty purchase  functions that district offices used to perform were transferred to  centralized facilities, leaving district offices to focus on    promoting SBA programs and services through conducting marketing  training lenders,    providing support to and coordinating with SBA resource partners, identifying contracting opportunities for small businesses and  developing them, and    conducting annual eligibility reviews under the 8(a) business  development program and other compliance functions.
While a key component of centralization has been the removal of loan  functions from the district offices, recent agency actions indicate that SBA  continues to further amend the role of district offices vis-à-vis the loan  centers. More specifically, SBA has created discrete roles for district  offices to assist the loan centers in working with lenders. For example, as  part of an SBA initiative to address problems arising from its centralization  efforts at the NGPC, in February 2008, designated district office employees  received training on the guaranty purchase process so that they could help  lenders prepare complete and high-quality packages. (We discuss the  changes related to centralized loan processing in more detail later in this  report.)
SBA also has established a joint marketing and customer service initiative  between the Office of Capital Access and the district offices to develop a  targeted and focused approach to marketing and outreach to the top  lenders nationwide and in each district. According to SBA, the purpose of  this initiative is to engage the top lenders, ensure that their purchase  request packages and other loan paperwork are being processed in a  timely manner and that SBA is responsive to their concerns, and identify  opportunities to increase SBA lending activities. According to SBA, the  guaranty purchase training and joint marketing and customer service  initiatives are not new roles but are in line with the district office’s current  roles and responsibilities. These initiatives have provided district offices  with regular and concrete interactions with lenders, which the district  office employees we interviewed said they had lost as a result of  centralization.
District offices also now have a more formalized support role in providing  disaster assistance than they did previously. Under SBA’s 2007 Disaster  Recovery Plan, district offices will provide “surge capacity” for large  disasters (on scales approaching or exceeding the 2005 Gulf Coast  hurricanes, which was the highest level of catastrophic disaster activity  that SBA has faced to date) by helping process loan applications.  According to the plan, district offices also would be responsible for  conducting local media outreach and coordinating local resources. All of  the district offices we visited had employees who received disaster  assistance training. Some of the employees in these offices found this  training informative. However, some employees expressed concern about  the availability of future training and refresher courses because it might be  several years before the next large-scale disaster occurred. Prior to the  creation of the plan, district office employees volunteered to help process  disaster loans on an ad hoc basis, and some employees we interviewed  indicated that they had volunteered to work on the backlog of applications  from victims of the Gulf Coast hurricanes Katrina, Rita and Wilma.  However, we previously found that during the Gulf Coast hurricanes, SBA  did not have a centralized and coordinated strategy for drawing upon  district office staff resources, which contributed to the large backlog of  disaster loan applications the agency experienced.
As the overall function of the district offices has changed, the roles of  individual employees also have changed and some employees continue to  face challenges adjusting to their revised responsibilities. In the shift from  loan-related functions to marketing and outreach, SBA removed the loan  officer and loan servicing specialist positions from the district offices. The  agency reclassified these employees primarily into one of two positions:  lender relations specialist or business development specialist (see fig. 5).  Lender relations specialists are responsible for conducting outreach to  lenders through visits and training on SBA’s programs. Business  development specialists are responsible for marketing SBA’s programs;  conducting outreach to businesses and other economic development and  community organizations, such as local chambers of commerce;  conducting training, counseling, and technical assistance; and performing  compliance activities. As part of their primary responsibilities, business  development specialists also might have specific collateral duties in  support of the office’s oversight, such as conducting annual reviews of  8(a) firms, and coordination of SBA’s programs and resource partners. The  position descriptions contain a checklist of these duties, such as lead  contact positions for SBA’s resource partners. For example, in one office  we visited, one business development specialist also served as the 8(a)  business development and point of contact for the Historically  Underutilized Business Zone (HUBZone) program. Another business  development specialist was the point of contact for the WBC and was also  responsible for lender training. In some of the district offices we visited,  employees who had been public information or information technology  officers prior to transformation had been reclassified as business  development specialists, even though they still retained these previous  functions.
The employees in the district offices we visited, particularly those who  used to process loans, indicated that the nature of their work changed  substantially as a result of transformation and that they were still adapting  to these changes. Some of the employees said that they had performed  marketing and outreach to some degree prior to centralization but that  these functions were now their primary focus. Employees we interviewed  indicated that since the loan functions had been centralized, their work  had become less structured, provided fewer tangible accomplishments,  and provided less regular interaction with lenders. Their new  responsibilities also required them to travel more than they had  previously. These changes have challenged some employees more than  others, particularly those employees who used to process loans. However,  SBA officials in the Office of Field Operations indicated that the new roles  were meant to encompass more than one function and some district office  employees concurred that they were now expected to be generalists rather  than specialists. Moreover, SBA’s recent initiatives to refine the district  office roles might provide district office staff with more tangible  accomplishments and interaction with lenders. However, the business  development specialists who conduct the 8(a) annual reviews said that  their roles had not changed as a result of transformation, but that for  some, the number of firms for which they were responsible had  increased. Moreover, because of the emphasis on compliance  requirements in the PMF, the significant amounts of time they spent  meeting goals for annual reviews left them little time to work with clients  to develop their businesses. However, SBA indicated that it has an  initiative under way to automate the annual review process to help free up  time for business development.
section_title: SBA District Offices Have Flexibility on How to Meet Annual Performance Goals, but Some Face Challenges Due to Decreased Staffing Levels
paragraphs: SBA defines district office roles and responsibilities, including those for  marketing and outreach, through the goal scorecards for district offices  and other mechanisms. However, SBA still gives the district offices  flexibility to determine how they would meet their goals. District office  scorecards outline key annual compliance requirements and loan volume  goals (see fig. 6), but as we noted earlier, meeting compliance  requirements (such as completing 8(a) annual reviews) that are required  by statute is a priority in SBA’s PMF. However, the district directors in the  district offices we visited generally indicated that SBA gives them the  flexibility to determine the actions they need to take to achieve their  scorecard goals and tailor activities to their local markets. For example,  district directors indicated that they can determine the number and types  of events their employees should attend to market SBA’s programs. SBA  also provides a range of marketing materials, including program literature,  templates for marketing materials, and talking points for new loan  programs on its intranet site that district offices can customize with local  information. Some district office employees we interviewed found the  agency’s marketing materials to be helpful in providing professional and  consistent information to lenders on SBA programs, while still giving them  the flexibility to tailor the information to their local market conditions.
SBA further defined the roles and responsibilities of district office  employees through the development of position descriptions and personal  business commitment plans. The position descriptions outline current  responsibilities as well as collateral duties for district office employees.
While the district offices we visited have flexibility over how they carry  out their responsibilities, some offices told us that they faced challenges in  meeting their goals due to decreased staffing levels. Most of the offices we  visited indicated that their staffing levels had decreased substantially after  the transformation began due to factors such as reassignments, attrition,  buyouts, and retirements and that these decreased staffing levels, at times,  strained their ability to carry out their mission. According to SBA data on  staff, by 2009, 34 percent of staff will be eligible to retire in fiscal year  2009, and according to an SBA official, half of those are in the district  offices. However, the views on whether office staffing levels were  adequate enough to meet district office goals and other responsibilities  were mixed. Some district directors believed that they had enough staff  resources to carry out their responsibilities, while others believed they  could use additional employees. SBA uses a field staffing model that is  based on factors such as market size and the number of 8(a) firms in a  district to staff district offices. District directors in several offices  appreciated the greater transparency the current model provided over the  old one, in which a board met in closed sessions to make staffing  decisions. However, some district directors believed that the model was  not fully in tune with their resource needs. For example, several district  directors said that while they had some flexibility in assigning specific  responsibilities to staff to meet local market needs, they could not control  the actual staffing process or ensure that positions were staffed  effectively. In several locations, employees we interviewed noted that the  agency did not have a succession plan for the district offices. As a result of  operating with fewer staff, individual employees at district offices  indicated that their workloads had increased and that they often found  themselves taking on multiple responsibilities for which they did not  always receive training because there were not enough individuals  available to do any one function. In addition, fewer individuals were  available to travel to fulfill the office’s marketing and outreach  responsibilities in some of the geographically larger districts or single- district states.
section_title: SBA Had Begun Assessing Centralization Efforts but It Has Not Yet Developed Measures to Assess the Quality of Guaranty Purchase Decisions
paragraphs: Since our 2003 report, SBA has completed the centralization of its loan  functions. Based on district office and lender input, the transparency and  communication surrounding SBA’s centralization activities had improved.  This was evident in the most recent centralization of 7(a) loan guaranty  processing for standard 7(a) loans and ongoing reforms at the National  Guaranty Purchase Center (NGPC), the first centralization that took place  under the transformation. SBA is now focused on re-engineering the NGPC  to streamline and standardize processes and procedures. It also  established a campaign to improve SBA’s image among lenders by  decreasing turnaround times on purchase requests and improving overall  customer service. SBA has established process-oriented measures to  improve the timeliness of purchase reviews, as well as measures to assess  the completeness of files that the centers receive from lenders. SBA has  been developing a new quality assurance review process to assess the  quality of its purchase decisions and ensure that it is following its own  policies and procedures. However, the SBA OIG has found in past audits  that inadequate purchase reviews by SBA employees have resulted in  improper payments and continues to express concern about the quality of  SBA purchase reviews. Moreover, though SBA has measures in place to  track the timeliness of its purchase decisions, it has not yet developed  performance measures to track quality assurance that would help to  ensure that the focus on process efficiency does not come at the expense  of the quality of the purchase reviews.
subsections: section_title: SBA Changed Its Approach to Centralization, Resulting in Better Communication with Employees
paragraphs: SBA’s centralization efforts under transformation began with the  centralization of the 7(a) loan guaranty purchase and liquidation functions  at the NGPC in Herndon, Virginia, in 2003 to 2004. SBA’s centralization of  7(a) loan processing for standard 7(a) loan guaranty applications starting  in September 2006 in Citrus Heights, California, completed SBA’s  centralization of its loan functions. The circumstances at the time of the  NGPC and 7(a) loan guaranty processing centralizations, including  budgetary pressures and leadership, were dissimilar in some respects.   However, based on our meetings with SBA and review of documentation,  it appears that SBA’s standard 7(a) loan guaranty processing centralization  was better planned and implemented than the NGPC centralization. First,  there was greater transparency and communication about the 7(a) loan  guaranty processing centralization across the agency. SBA sent all  employees a notice of this centralization, as well as an implementation  schedule. In contrast, district office staff in some offices we visited  indicated that there had been limited communication regarding the  implementation of the NGPC centralization. Second, the 7(a) loan  guaranty processing centralization took place in phases—with the transfer  of loan files from district offices to the center occurring between  December 2006 and March 2007—unlike the NGPC centralization, in  which all district offices sent their files to NGPC at once. Third, SBA  appears to have based staffing levels for the 7(a) loan guaranty processing  center on workload analyses and did not use directed reassignments to  staff the center, as it did with the NGPC, which helped mitigate negative  employee morale issues. Both lenders and district office employees have  indicated that they have had positive experiences with the Standard 7(a)  Loan Guaranty Processing Center.
While the initial implementation of the NGPC lacked transparency,  communication regarding the activities at the NGPC—including the  ongoing re-engineering reforms (to be discussed later in this section)—has  improved since the center was first formed. The Office of Financial  Assistance, which manages SBA’s loan programs, holds monthly  conference calls with employees across the agency to discuss the NGPC  re-engineering efforts, participates in Office of Field Operations  conference calls, briefs field managers at agencywide management  conferences, and reports weekly to the Administrator on the center’s  progress. The NGPC also has a Campaign Advisory Board that includes  district office and regional representatives to provide input and feedback  on the re-engineering efforts. For example, according to SBA, the field  representatives on the Campaign Advisory Board suggested the customer  support role, in which employees of district offices now help lenders  prepare their guaranty purchase applications. While some district office  employees and lenders continue to experience communication issues with  NGPC in terms of responsiveness, they indicated that overall  communication with NGPC has improved.
section_title: SBA Has Started to Assess Its Centralization Initiatives and Re-engineer Center Operations but Has Not Yet Developed Measures to Track the Quality of Its Purchase Reviews
paragraphs: Since SBA completed its centralization efforts, the agency has shifted its  focus to re-engineering the operations of its centers, beginning with the  NGPC. Through its re-engineering efforts—which have been designed to  enhance workflow, redesign processes, and streamline procedures—SBA  has taken actions to improve many of the problems that occurred as a  result of the implementation of the NGPC centralization in 2004, such as  the backlogs of files and inadequate staffing levels for loan specialist  positions, which delayed the NGPC decisions on lender’s requests for  guaranty purchases on defaulted loans. One key aspect of the re- engineering effort is the Brand Promise Restored (BPR) Campaign, which  seeks to restore SBA’s reputation with lenders who have been frustrated  by these delays and a lack of responsiveness on the part of NGPC staff to  their concerns. The BPR’s key objectives, based on the recommendations  of an outside consulting firm and input from various stakeholders within  SBA, including district offices, are to reduce the center’s backlog of more  than 4,000 loans; improve purchase review and decision turnaround times;  and reduce lender errors in submitting applications (thereby improving the  completeness of loan packages so that files are not sent back to lenders  due to errors); and improve customer service.
Furthermore, SBA has established performance measures to assess the  progress of its re-engineering effort at the NGPC. In a weekly report to the  Administrator and senior management officials, the NGPC provides  information on measures such as reductions in backlogs, production  targets for new purchase requests, and turnaround times. The NGPC also  tracks measures related to district office assistance to lenders in preparing  purchase requests and improving the completeness of files that the center  receives, including the rate at which purchase applications can be  reviewed without having to be sent back to lenders for revisions. SBA said  that its other loan centers have similar performance measures, but the  performance measures may differ in certain respects due to differing  functions. For example, the Standard 7(a) Loan Guaranty Processing  Center has a separate set of measures that are similar, including cycle  times for completing processing functions and monthly production  outputs, but that have different targets, such as a processing turnaround  goal of 6 days rather than 45 days for the NGPC. Finally, because  reforming NGPC was such a key priority within SBA, the center  established weekly milestones that included steps such as pilot testing the  new guaranty purchase manual, which were reported to the Administrator.
The SBA OIG indicated that the NGPC has improved the efficiency of its  guaranty purchase process as a result of its re-engineering and BPR effort.  In its 2007 audit of the guaranty purchase process, the OIG made six  recommendations, including that the center develop a plan to improve the  quality of the purchase reviews and ensure adequate supervisory review  and require loan officers to document their purchase decisions. According  to the OIG, SBA has closed all but one recommendation, which relates to  the recovery of certain improper purchase payments. Moreover, SBA  indicated that it had increased the staffing levels for the NGPC from about  40 to about 100 (including contractors) based on a staffing model the  agency developed to address the OIG’s recommendation that the agency  fully staff the NGPC at the appropriate level.  Finally, SBA indicated that is  has cleared the backlog or pre-purchase reviews and most of its backlog of  secondary market purchases since the BPR campaign began.
While SBA has established process-oriented measures, it is still developing  its quality assurance process and has not established measures  management routinely track to assess the effectiveness of its guaranty  purchase process and resulting decisions. The measures the center does  use relate to the front-end completeness of files lenders submit to the  NGPC, rather than the quality of purchase decisions. SBA officials told us  they have a quality assurance initiative under way that should address  some of the deficiencies in their quality assurance process but that this  effort is still in its initial stages. The NGPC currently controls for quality by  using the “rule of 3,” in which the recommendation for each purchase  decision made by a loan specialist is reviewed by an “approver” and legal  counsel before it is finalized. To encourage quality purchase reviews, SBA  officials said its performance review process for loan specialists includes  standards that measure how well loan specialists conduct reviews, with  respect to accuracy, for example, by tracking how often their  recommendations have to be substantially revised. The center also uses a  “triage process” to ensure that the most complex cases are handled by the  most experienced loan specialists. According to SBA, the goal of its quality  assurance review initiative is to create a system that routinely examines all  parts of the loan process to identify where in the loan process most errors  occur. SBA officials also said they hope to remove the variability out of the  purchase process, though there will always be some level of employee  judgment involved. SBA officials said that its efforts under the Improper  Payments Information Act of 2002 established a baseline on its error rate  for improper payments for 7(a) guaranty purchases and that this  information is used to measure and improve the quality of guaranty  purchase reviews.
While the OIG has noted improvements in the NGPC’s operations, it also  has expressed to us ongoing concerns about the quality of purchase  decisions at the NGPC, particularly with respect to the incidence of  improper purchase payments. SBA’s review of lender requests for guaranty  purchases on defaulted loans is an important tool for assessing lender  compliance on individual loans and protecting SBA from making  erroneous purchase payments. According to the OIG’s 2008 management  challenges report, past OIG audits of early defaulted loans and SBA’s  guaranty purchase process have shown that SBA has not consistently been  able to detect lenders’ failures to administer SBA loans in compliance with  SBA requirements and prudent lending practices, resulting in improper  payments. For example, in a May 2007 audit of the guaranty purchase  process, the OIG estimated that the rate of improper payments for all 7(a)  loans that received a purchase review at the NGPC from October 1, 2004,  through May 31, 2005, could be 17 percent (approximately $36 million).  This estimated rate is substantially higher than the 1.56 percent that SBA  reported for the 7(a) program in fiscal year 2006. SBA disagreed with the  OIG’s estimate because it covered a different time period and because it  did not believe that the sample used by the OIG was representative of  SBA’s entire 7(a) loan portfolio. In general, both estimates are difficult to  compare because they covered different time periods and employed  different sampling methods. Additionally, neither estimate incorporates  reviews of purchase decisions completed under the recently re-engineered  guaranty purchase process. The OIG has an ongoing audit of SBA’s  compliance with the Improper Payment Information Act that it expects to  complete in February 2009 and continues to express concern that SBA  may underreport its improper payment rate. In 2006, the OIG surveyed the  NGPC’s existing quality assurance review  process, which was designed to  provide SBA with valid reviews, independent of the purchase approval  process, to ensure the proper interpretation and consistent  implementation of policies and procedures and consistent and accurate  guaranty purchase decisions, thereby minimizing losses from improper  payments. The OIG found that under SBA’s quality assurance review  process at the time, SBA reviewed a number of loan purchase decisions,  that may have been sufficient to assess compliance with the Improper  Payments Information Act of 2002 but did not adequately cover the high- risk loan categories identified in their former quality assurance review  plan. As a result, the OIG found that the NGPC was unable to ensure with  any degree of reliability that guaranty purchase decisions made by the  NGPC staff were complete, consistent, and accurate. We also previously  found that this type of management challenge could increase the risk of  improper payments. The NGPC does not have this quality assurance  review process at this time because of SBA’s ongoing effort to replace and  improve its quality assurance review process for all of its centers.
SBA has efforts under way to improve its quality assurance review process  but without measures focused on the quality of its purchase review  process that management tracks regularly, SBA will not be able to assess  whether its re-engineered process is also successful in producing  appropriate purchase decisions that are in compliance with laws and  regulations. According to the Government Performance and Results Act of  1993, agencies should develop a range of performance indicators, such as  quantity, quality, timeliness, cost, and outcome, to help managers balance  their priorities among several agency goals. Moreover, the creation and  review of performance indicators help strengthen an agency’s internal  control standards, which help to ensure both the effectiveness and  efficiency of an agency’s operations. Reliance on any single type of  measure could create a perverse incentive for managers to achieve one  subgoal at the expense of the others. For example, without a measure that  reflects the quality assurance, managers and employees at the NGPC could  focus more on the turnaround time measures, and consequently, the  quality of the purchase reviews could suffer leading to improper payments.
section_title: Conclusions
paragraphs: SBA’s earlier efforts to restructure or transform agency operations have  had some associated adverse effects on SBA employee morale and  operations. However, in the past 2 years SBA has made progress in  addressing these negative effects—by applying key practices that support  successful transformations to improve agency operations and taking  actions to address the recommendations we made in our 2003 report. The  Administrator appointed in 2006 emphasized the importance of  transparency in his reform agenda, made a concerted effort to improve  communications across the agency, and engaged employees in improving  the agency. Our meetings with employees affirmed that these efforts had a  positive effect on many employees. We also found that though SBA had  also taken some actions to obtain feedback and ideas from employees,  many employees we interviewed, including union officials, continued to  feel that SBA’s management did not sufficiently consider their ideas and  concerns. SBA recently conducted focus groups to better understand  employee concerns, specifically explored the concerns about employee  involvement, and plans to implement pilot initiatives to address them.  Such actions are important because a feeling of lack of involvement can  affect employee productivity and job satisfaction and could hinder SBA’s  ability to meet goals and improve its operations. We also note that many  employees were concerned about the continuation of key efforts  undertaken under Administrator Preston. Senior SBA career officials  stated that continuing positive efforts was important to the agency and  have taken steps to identify such efforts and institutionalize them. Such  long-term commitments by senior leaders are important for ensuring that  transformation and agency reforms are successful.
SBA’s 2007 employee survey results suggest that recent actions, such as  improving communication and training, have had a positive impact on  employees, but also point to continuing concerns about these issues. SBA  has recognized the need to provide better training—another area of  continued concern for employees—to support employees whose roles and  responsibilities changed as a result of transformation. Specifically, the  creation of SBA University in 2007 was an important action not only in  terms of providing training and demonstrating that the agency was willing  to commit resources to invest in the development of employees. SBA  officials also have been developing a training program that includes core  curriculums for different staff positions. However, SBA has not developed  a strategic training plan that lays out goals, strategies, and milestones. In  an environment of constrained budgets and reduced staff resources,  training is a key means to maximize or leverage the talents and skills of  employees. A strategic plan would help to establish priorities and  determine the best ways to leverage training investments to improve  performance. In addition, a plan that is shared with employees could  assure them that SBA continues to be committed to developing its  employees.
The most dramatic effects of transformation occurred in SBA’s district  offices. In some ways, transformation still is occurring in the district  offices as their roles and responsibilities continue to evolve. For instance,  SBA recently determined that district offices still could have a role in the  guaranty purchase review process, despite the centralization of this  function. But the recent changes have introduced other concerns. In  particular, district office employees continue to experience some  frustration as they adjust to their new responsibilities and work toward  achieving their goals with fewer resources. As SBA continues to adjust  priorities and operations to achieve its goals, employing key practices  relating to communications and employee involvement will position the  agency in good stead in this area, as well.
The centralization of the remaining loan functions previously performed  by district offices was another key aspect of SBA’s transformation and  those initiatives have been completed. But the functioning of the centers— particularly the NGPC—represents a work in progress. SBA recently has  re-engineered the guaranty purchase process and center operations and  developed measures to track progress. The emphasis has been on  improving the efficiency of the guaranty process because of the need to  reduce significant backlogs and the desire to provide good customer  service to lenders. SBA said that it has been developing a new quality  assurance review process and that its performance reviews of loan  specialists also rates them on the accuracy of their reviews, but it has not  yet developed any performance measures that management uses regularly  to track the quality of its purchase reviews. However, performance  measures focused on timeliness and volume, without a similar focus on  quality in the purchase review process, could provide the wrong incentives  for managers and employees and ultimately could result in improper  payments and increased costs to the program. The OIG also has noted  concerns about SBA’s purchase reviews and believes that SBA’s improper  payment rate for its purchased guaranties may be much higher than what  SBA currently reports. By focusing on the quality of purchase reviews and  developing measures that track the quality of purchase decisions, SBA  could help better ensure that the process produces decisions that are well  supported, defensible, and balance the needs of lenders with the need to  enforce requirements that protect the integrity of the loan guaranty  process and prevent improper payments.
section_title: Recommendations for Executive Action
paragraphs: We are making two recommendations to the Administrator of SBA:    To support SBA’s development of a core curriculum for SBA University  and communicate SBA’s training development efforts to employees, SBA  should develop a strategic training plan with specific goals, strategies, and  milestones.
To ensure that its streamlined purchase guaranty process also provides an  incentive to focus on quality and thereby results in good purchase  decisions, SBA should develop performance measures that will provide  information on the quality of its guaranty purchase reviews.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to SBA for review and comment.  In  written comments (see app. II), SBA generally agreed with the report and  recommendations.  SBA stated that the report recognized the agency’s  efforts and initiatives leading to improvements in agency operations and  employee morale and that it is committed to continuing to build upon the  success achieved.  In addition to agreeing to our recommendation to  develop measures that focus on the quality of purchase reviews, SBA  stated that the NGPC will continue to build on the quality processes in  place and is developing new quality assurance review plans for NGPC and  other processing centers that will be implemented during fiscal year 2009.   Specifically, SBA provided additional information on how it measures  quality in its processes for reviewing, recommending, and approving  guaranty purchases.  For example, NGPC tracks the number of work items  of its loan specialists returned for substantial revision and randomly  samples processed guaranty purchase disbursements to test them for  accuracy.  SBA stated that this information helps to identify areas where  training is needed and ultimately contributes to improving the quality of its  reviews.  Though these actions were not reflected in the NGPC weekly  management reports provided to us and therefore it is unclear to what  extent these measures are regularly tracked by SBA management, we  agree that these actions help SBA improve the quality of its purchase  reviews.  Additionally, SBA stated it will continue to ensure employees  have access to the training and tools provided through the development of  SBA University and has begun developing a draft plan for future training.
SBA also provided technical comments that we incorporated as  appropriate.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 dyas from the  report date.  At that time, we will send copies of this report to the Ranking  Member, Senate Committee on Small Business and Entrepreneurship; the  Chair and Ranking Member, House Small Business Committee; other  interested congressional committees; and the Administrator of SBA. We  will make copies available to others upon request. In addition, the report  will be available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. Key contributors to this report are listed in  appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our objectives were to review the status of the Small Business  Administration’s (SBA) transformation efforts and related initiatives since  our 2003 report. Specifically, we focused on (1) SBA’s progress in  transforming agency operations and addressing GAO’s recommendations  on key practices for successful transformation, (2) how SBA has  addressed the impacts of transformation on its employees, (3) how SBA  has defined the roles and responsibilities of its district offices, and (4)  SBA’s efforts to assess its initiatives for centralization of its loan functions  and how its approach for implementing centralization has changed since  transformation began.
To respond to these objectives overall, we reviewed agency planning and  implementation documents related to SBA’s transformation and  interviewed key officials at SBA headquarters in Washington, D.C., to  obtain information about their roles and experiences with SBA  transformation initiatives. SBA officials we met with included the SBA  Acting Administrator (formerly Deputy Administrator), Chief of Staff, and  senior officials representing the Office of Human Capital Management, the  Office of Field Operations, the Office of Capital Access, and the  Performance Management Office. In conducting our work, we focused on  the transformation process itself and its impacts, rather than on making  assessments of SBA’s administration of its various programs. To obtain  documentary and testimonial information about district office involvement  and experiences with various SBA transformation initiatives, we  interviewed district directors and groups of employees from 10 of SBA’s 68  district offices. To provide national coverage, one district office was  selected from each of SBA’s 10 geographical regions. These district offices  were located in California, Georgia, Indiana, Iowa, Montana, New Jersey,  Oregon, Texas, Vermont, and Virginia. In addition, we conducted site visits  to the National Guaranty Purchase Center in Herndon, Virginia, and the  Standard 7(a) Loan Processing Center in Citrus Heights, California, to  observe and collect information and experiences about SBA’s  centralization initiatives. We visited the National Guaranty Purchase  Center because it was the first centralization effort completed under  transformation and the Standard 7(a) Loan Processing Center because it  was SBA’s most recent (and last) centralization completed under  transformation to be able to compare and contrast SBA’s approaches to  the two efforts. During both our district office and loan center site visits  we held two meetings—-one with the offices’ directors followed by a  group interview with office employees. All office employees were eligible  to participate in the meetings. We requested that the employee meeting be  open to all staff based on availability and also that the office director could  recommend staff for participation. We further requested that the group  interview with employees be conducted without the presence of  management. We also met with officials from SBA’s Office of Inspector  General (OIG) to discuss any audit results or major challenges related to  the agency’s transformation initiatives. Finally, we discussed the effect of  transformation on lenders and staff with, respectively, representatives of a  lenders’ organization and SBA union officials. Questions prepared for the  interviews, as well as the information obtained from them, were used to  address issues related to each of our reporting objectives.
To determine SBA’s progress on its transformation initiatives since 2002,  its actions to implement key practices that are important to successful  organizational transformation, and how the agency’s emphasis evolved  over time, we reviewed and analyzed past GAO reports, SBA’s responses  to GAO report recommendations, agency documents, and SBA OIG  reports. In particular, we looked at differences and similarities between  the new Administrator’s reform agenda and the prior Administrator’s  transformation initiatives. In addition to examining district offices’  involvement and implementation of transformation activities, we reviewed  the approaches SBA took on its transformation, management’s leadership  of transformation efforts, positive and negative consequences of  transformation, internal coordination, communication, performance  management, and training. We reviewed documentation such as SBA  rosters identifying the transformation leadership and implementation team  members and their specific responsibilities; relevant SBA transformation  policy and procedures; examples of communication modes used (type and  frequency); and employee surveys. In particular, we reviewed agency  documents and interviewed SBA management officials and employees to  determine whether SBA has implemented the recommendations made in  GAO’s October 2003 transformation report noted above, which was based  on best practices for mergers and transformation identified by GAO. In  addition, we obtained and analyzed    SBA documents related to its new performance management system;   current and previous scorecards that track the performance of agency  components relative to the specific goals on which they are measured;    operating plans that lay out strategies to achieve goals; information illustrating lines of communication and areas covered (for  example, press, marketing, Web development, speechwriting, strategic  alliances with external parties such as trade groups, and multimedia);  and  the agency’s communications plan that discusses its approach for  addressing internal and external communication, along with  descriptions of the responsibilities of its Office of Communication and  Public Liaison, Office of Management and Administration, the Office of  the Congressional Liaison, and the intergovernmental group.
We analyzed the information we obtained from these document reviews  and interviews to determine    what actions SBA has taken to incorporate key practices and  implementation steps for organizational transformations,    whether SBA’s transformation laid out goals for the transformation,   what communication strategies SBA used to promote frequent two-way  communication at all levels of the agency and with stakeholders,    what actions SBA has taken to involve employees and ensure that their  concerns and ideas are considered,    how SBA has aligned its transformation activities to achieve agency  performance and strategic goals, and    how SBA’s performance management system linked overall agency  goals to individual goals.
To assess how SBA has addressed the impacts of its transformation  activities on employees, we discussed this matter in interviews with  officials from the various headquarters officers, the district office  directors, and groups of employees at the 10 district offices we selected.  The number of participants in our employee group interviews ranged from  5 to 12 (and represented from about 21 percent to 100 percent of the  employees assigned to the various locations). While the limited number of  offices we visited is too small for generalizing the information obtained to  all district offices, the recurring nature of the observations and  perspectives expressed across these offices, along with other material we  examined, suggest that these views were not limited to the offices we  visited. To distinguish specific activities affecting employees as a result of  transformation, we reviewed materials that included SBA’s fiscal year 2007  Human Capital Plan, Information and Technology Strategic Plan, fiscal  year 2007 Annual Performance Report, fiscal year 2009 congressional  submission (for budget), the performance management framework, and  the SBA OIG’s Most Serious Management Issues Reports for fiscal years  2005, 2006, and 2007. We also analyzed results from the Office of  Personnel Management’s (OPM) 2004 and 2006 Federal Human Capital  Surveys of SBA staff and SBA’s 2007 Annual Employee Survey to help  identify specific impacts of transformation on employees and the effect of  actions SBA had taken to address those impacts. In particular, we  examined such areas as employee morale, training, communication, and  employee involvement in decisionmaking—to the extent they were  relevant to our prior 2003 report’s recommendations. To assess the  reliability of the OPM survey data and SBA’s 2007 survey, we discussed the  conduct of these surveys with knowledgeable OPM officials. We also  obtained a copy of SBA’s 2007 survey data set and replicated selected  survey results. We determined that these survey data were sufficiently  reliable for purposes of this report.
For determining how and to what extent SBA has defined the roles and  responsibilities of district offices, we used information from the interviews  we conducted. We also obtained and reviewed documentation related to  the roles and responsibilities of district office staff before and after  transformation and reform agenda activities. This included material on job  descriptions and district office staffing information, such as the Field  Staffing Model and office structure by position. We also examined relevant  parts of  training materials that related to district office responsibilities;  implementation plans specifying what individual staff responsibilities  should be;    SBA’s district office scorecard and other performance management  materials that discuss the functions and roles on which district offices  and staff are evaluated;    strategic plan, human capital plans, and transformation plans;   SBA memorandums, policies, and procedures related to    performance management assessments and measures.
To determine how SBA has assessed the progress of its centralization  efforts and how its approach for implementing centralization has changed  since transformation began, we used information from our interviews with  officials from SBA headquarters and our site visits. We also obtained and  analyzed documentation from SBA regarding its centralization efforts,  including    decision memorandums and implementation schedules,   centralization performance and progress reports,   documentation on specific initiatives related to centralization.
We also relied on recent OIG audit reports and its ongoing audit work  addressing both the progress and deficiencies of SBA’s centralization  initiatives. In particular, we met with representatives from that office to  discuss their audit results, including recommendations they made to the  agency, as well as management challenges faced by SBA. We also  compared SBA’s efforts to assess the progress of its centralization efforts  against Government Performance and Results Act guidance and GAO’s  Standards for Internal Control in the Federal Government.
We conducted this performance audit from August 2007 to September 2008  in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
section_title: Appendix II: Comments from the Small Business Administration
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Kay Kuhlman (Assistant Director),  Meghana Acharya, Johnnie Barnes, Thomas Beall, Bernice Benta, Tania  Calhoun, Alexandra Martin-Arseneau, Marc Molino, Barbara Roesmann,  and Sarah Veale made key contributions to this report.