Small Business Administration

This report evaluates efforts by the Small Business Administration (SBA) to develop a risk management database and a loan-monitoring system. GAO reviews (1) the status of SBA's development and implementation of the risk management database, (2) whether SBA has established adequate processes and controls to ensure that the database will contain complete and accurate loan data, and (3) whether SBA has performed the planning steps needed to serve as a basis for funding the development phase of the proposed loan-monitoring system.

GAO noted that: (1) at the time of its review, SBA had completed development of a database structure and taken action to capture data and establish reporting capabilities to comply with the requirements of the Small Business Programs Improvement Act of 1996; (2) SBA officials expect that the system will be capturing the required data and that the reporting capabilities will be developed before the June 30, 1997, deadline mandated by the act; (3) while SBA expects the system to be operational on time, it has not yet established and implemented the controls needed to ensure that the risk management database contains timely and accurate data which are also required by the act; (4) at this time, the database has missing or incorrect data for about half the guaranteed loans because SBA has not yet effectively implemented controls over lender reporting; (5) SBA also has not yet established controls to identify missing or incorrect underwriting characteristics data on defaulted loans; (6) until it implements effective controls, SBA has no means of ensuring that the risk management database will be sufficiently timely and accurate for program management and decisionmaking purposes; (7) finally, SBA has not yet performed essential planning needed to serve as a basis for funding the development of the proposed loan monitoring system; (8) to implement the information systems investment requirements of the Clinger-Cohen Act of 1996, the Office of Management and Budget (OMB) established criteria that major information systems investments should meet for funding in the fiscal year (FY) 1998 budget; (9) SBA has not performed the planning needed to demonstrate that the loan monitoring system will meet three of the eight criteria, such as simplifying or redesigning work processes and demonstrating a positive return on investment; and (10) without performing essential planning, SBA increases the risk that the loan monitoring system will not effectively meet the agency's goals or provide the best return on investment.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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