Small Business Administration
Opportunities Exist to Build on Leadership's Efforts to Improve Agency Performance and Employee Morale Gao ID: GAO-08-995 September 24, 2008Over 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.
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.
RecommendationsOur 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.
Director: Team: Phone:GAO-08-995, Small Business Administration: Opportunities Exist to Build on Leadership's Efforts to Improve Agency Performance and Employee Morale
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Report to the Chairman, Committee on Small Business and
Entrepreneurship, U.S. Senate:
United States Government Accountability Office:
GAO:
September 2008:
Small Business Administration:
Opportunities Exist to Build on Leadership's Efforts to Improve Agency
Performance and Employee Morale:
GAO-08-995:
GAO Highlights:
Highlights of GAO-08-995, a report to the Chairman, Committee on Small
Business and Entrepreneurship, U.S. Senate.
Why GAO Did This Study:
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.
What GAO Found:
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.
What GAO Recommends:
GAO recommends that SBA (1) develop a strategic training plan and (2)
develop measures to track and monitor quality assurance of its
centralized loan guaranty purchase process. In its comments, SBA agreed
with these recommendations.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-995]. For more
information, contact William B. Shear at (202) 512-8678 or
shearw@gao.gov
[End of section]
Contents:
Letter:
Results in Brief:
Background:
SBA Has Applied Key Practices to Implement Change and Has Begun
Addressing Employee Concerns about Involvement and Continued Leadership
Commitment:
Actions to Address Effects of Transformation on Employees Have Had Some
Success, but SBA's Plan for Training and Development Is Limited:
Focus of District Offices Is on Marketing and Outreach as Their Role
Continues to Evolve, and Challenges Include Decreased Staffing:
SBA Had Begun Assessing Centralization Efforts but It Has Not Yet
Developed Measures to Assess the Quality of Guaranty Purchase
Decisions:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the Small Business Administration:
Appendix III: GAO Contact and Staff Acknowledgments:
Table:
Table 1: SBA's Efforts to Apply Key Practices for Successful
Organizational Transformation:
Figures:
Figure 1: SBA's Performance Management Framework:
Figure 2: Percentage of SBA Employees Responding to Survey Question on
Satisfaction with Involvement in Decisions That Affected Their Work in
2004, 2006, and 2007:
Figure 3: Percentage of SBA Employees Responding to Employee Survey
Questions Related to Leadership and Communication by Management in
2004, 2006, and 2007:
Figure 4: Percentage of SBA Employees Responding to Employee Survey
Questions Related to Training in 2004, 2006, and 2007:
Figure 5: Sample District Office Organizational Chart and Position
Descriptions:
Figure 6: Example of Standard Compliance Requirements and Goals on
District Office Scorecards:
Abbreviations:
BPR: Brand Promises Restored Campaign:
CFO: Chief Financial Officer:
FHCS: Federal Human Capital Survey:
FAC: Field Advisory Council:
HUBZone: Historically Underutilized Business Zone:
NGPC: National Guaranty Purchase Center:
OIG: Office of Inspector General:
OMB: Office of Management and Budget:
OPM: Office of Personnel Management:
PART: Program Assessment Rating Tool:
PMF: Performance Management Framework:
PMO: Performance Management Office:
SCORE: formerly Service Corps of Retired Executives:
SBA: Small Business Administration:
SBDC: Small Business Development Center:
WBC: Women's Business Center:
United States Government Accountability Office:
Washington, DC 20548:
September 24, 2008:
The Honorable John F. Kerry:
Chairman:
Committee on Small Business and Entrepreneurship:
United States Senate:
Dear Mr. Chairman:
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.[Footnote
1] 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.[Footnote 2] 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.[Footnote 3]
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.[Footnote 4] 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.[Footnote 5] 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.[Footnote 6] 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.[Footnote 7]
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.[Footnote 8] 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.[Footnote 9] 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.
Results in Brief:
SBA has made progress in applying key transformation practices and has
begun addressing employee concerns about their involvement in decisions
that affect their work and the commitment of future leadership to
continue positive efforts. In 2003, we recommended that SBA apply key
practices for successful organizational transformation, including
improving communications with employees, identifying who would lead
transformation efforts, and developing a performance management system
that reflected agency goals and employees' roles. In July 2006, 3 years
after transformation began and following the unsuccessful outcome of
some transformation initiatives and other agency challenges, SBA came
under the leadership of a new Administrator. The new Administrator
shifted the focus of transformation efforts from organizational
restructuring to improving agency performance. In doing so, he
introduced a "reform agenda" that is generally consistent with key
transformation practices that we identified. The agenda focused on four
initiatives--meeting all compliance requirements, ensuring that all SBA
programs operated efficiently and effectively, improving communication,
and improving training. He also established a Performance Management
Office (PMO) to provide the infrastructure for SBA's performance
management efforts, including a new system that encompasses program
office priorities and compliance goals. In turn, the priorities and
goals have been reflected in new operating plans, streamlined
performance scorecards, and employees' personal business commitment
(individual performance) plans. Management and employees we interviewed
in 10 SBA district offices told us that, under the new leadership,
agencywide communication had improved significantly since
transformation first began, and they reported greater opportunities for
communication at the district office level and some improvement in
communication with other areas in the agency. While agency leadership
appears to have also been making efforts to involve employees in
decisions related to improving SBA's programs, operations, and
performance, officials from SBA's employee union told us that the union
had limited involvement in management decisions, and SBA's employee
survey results in 2007 showed that over 30 percent of the respondents
were unsatisfied with their involvement in decisions that affect their
work. SBA recently conducted focus groups with employees to better
understand their concerns and is planning to implement pilot
initiatives to address them. In June 2008, SBA's Administrator was
sworn in as the Secretary of Housing and Urban Development. Prior to
the announcement of his nomination, some SBA employees already had
expressed uncertainty about future leadership's commitment to progress
at SBA; however, senior officials told us that they were developing a
transition plan for the next administration. Furthermore, SBA officials
told us that a group of senior career officials were working together
to identify the practices and initiatives that had a positive impact
and determine how these officials could ensure that those efforts
continue. Steps such as these and leadership commitment will be
important in ensuring that SBA's transformation and agency reforms are
successful.
Although SBA has taken actions, such as improving communication and
training, to address low employee morale and the impact of
transformation, the agency has not yet developed a comprehensive plan
for future training efforts. Following the 2003 centralization of loan
liquidation and purchase guaranty functions, employee morale declined
significantly, as indicated in results from a 2004 OPM survey. Around
the time a new Administrator was appointed in 2006, SBA received the
results of the 2006 survey, which continued to indicate low morale. The
2004 and 2006 results showed a lack of trust in leadership and a
concern about training opportunities. According to SBA officials, the
new Administrator made employee morale a priority. He strengthened
communication in the agency and personally solicited feedback from
employees and shared his priorities through visits to district offices
and "town hall" meetings. SBA's 2007 survey and our interviews with SBA
staff show some improvements in morale since 2006, suggesting that the
Administrator's efforts had some impact. For example, there was a 21
percentage point increase between 2007 and the previous year's survey
in SBA employees agreeing with the statement, "I have a high level of
respect for my organization's senior leadership." In 2007, SBA also
began SBA University, a training program for managers and employees.
SBA held three sessions in 2007 for more than 1,300 district office
employees whose roles and responsibilities had been affected by
transformation. District office employees and management with whom we
spoke generally were positive about SBA University and employees'
positive responses on satisfaction with training increased by 12
percentage points in the 2007 survey compared to 2006. SBA continued
SBA University in 2008 with training for supervisors and managers.
According to an SBA official, the agency is developing a core
curriculum that will identify courses for the agency's mission-critical
positions. However, SBA has not yet documented a comprehensive plan for
future training efforts. Without a plan that links core competencies
and positions with goals, strategies and, milestones, SBA lacks some
accountability for ensuring the continuity of training efforts. In
addition, without a plan, employees may not be able to anticipate
future training opportunities and, thus, judge agency efforts
negatively.
SBA continues to clarify and refine the district office role. While
district offices have the flexibility to determine how they will
achieve their office goals, some offices said they face challenges
adjusting to reductions in staffing that accompanied the centralization
of loan functions they used to perform. Since our 2003 report, the
roles and responsibilities of SBA district offices have shifted from
performing loan processing, purchase, and liquidation functions, to
promoting SBA programs and services through marketing and outreach,
training lenders, providing support to SBA resource partners,
developing small businesses, and conducting annual reviews under SBA's
8(a) Business Development program. District office employees,
particularly those who used to process loans, reported that their roles
had changed substantially as a result of transformation. Many of the
employees indicated that their work had become less structured and some
had less regular interaction with lenders now than they did prior to
transformation. However, the key roles in a district office, such as
lender relations specialist, continue to be refined. For example,
designated district office employees received training on SBA's
guaranty purchase process to help lenders prepare requests for SBA to
purchase, or honor, its guaranteed portion of a defaulted loan, and
district offices also are involved in an agencywide customer service
and marketing initiative to engage the top SBA lenders in their local
markets. Moreover, district offices have a more formalized support role
in processing disaster loans than they did previously and will be
required to help process loans and coordinate local media outreach and
resources during the next large-scale disaster. SBA defines district
office roles and responsibilities through a variety of mechanisms,
including a district office scorecard that outlines key compliance
requirements and goals. SBA gives district offices the flexibility to
determine the actions they need to take to achieve these goals.
However, some district offices told us that it can sometimes be a
challenge to meet goals and carry out SBA's mission, given limited
staffing resources. For example, the business development specialists
responsible for conducting annual reviews to ensure that participants
are still eligible for the 8(a) Business Development program reported
that the time and resources devoted to these reviews has lessened their
ability to conduct business development activities, which are also part
of their current job duties. District office employees also said that
they have to take on multiple responsibilities for which they do not
necessarily receive training due to decreased staffing levels.
SBA improved the communication and transparency of its centralization
initiatives, addressed problems following the centralization of its
guaranty purchase and liquidation functions at the NGPC between 2003
and 2004, and developed some performance measures to assess its
operations. However, it still needs to develop measures to ensure that
its decisions to purchase, or honor, SBA's guaranteed portion of a
defaulted loan comply with SBA policies, procedures, and legal
requirements. Between 2006 and 2007, SBA centralized the processing of
its 7(a) loan guaranty applications, which represents SBA's most recent
centralization effort. Based on our meetings with SBA staff and review
of agency documentation, the 7(a) loan processing centralization was
better planned and implemented than the NGPC centralization. SBA
conducted the 7(a) loan processing centralization in phases, and it did
not use any directed reassignments or forced relocations to staff the
center as it did for the NGPC. Moreover, SBA's approach to
centralization has changed to employ greater transparency and
communication, which was evident in the most recent loan
centralization, as well as in the ongoing reforms at the NGPC. In
contrast, the 2003 to 2004 implementation of the NGPC was problematic.
In 2004, the SBA OIG identified several key problems with the planning
and implementation of the NGPC centralization, which resulted in
inadequate staffing, backlogged purchase requests, and the inadequate
handling and review of files. The actions SBA has taken to address the
problems at the NGPC include the re-engineering of NGPC's operations to
streamline and standardize processes. One key aspect of the re-
engineering effort is the Brand Promise Restored (BPR) Campaign, which
aims to restore the SBA product reputation with lenders that had been
frustrated by delays in purchase decisions.[Footnote 10] Specifically,
the campaign goals are to reduce the center's backlog of guaranty
purchase requests and improve turnaround times, the completeness of
purchase packages submitted to the center, and customer service. In
addition, SBA has established performance measures focused on
timeliness, lender submissions, customer service and volume to assess
the progress of its re-engineering efforts at the NGPC, including the
number of files reviewed, number of backlogged files, and a 45-day
turnaround deadline for all new files received since 2007. It has also
reported progress on key milestones to the Administrator. SBA has
developed certain quality controls for its purchase process, such as
establishing a review process for each purchase decision and basing
individual loan officer performance ratings on the number of purchase
decisions they make that do not require substantial revisions. While
SBA has developed a process to reduce lender errors--thereby improving
the completeness of the purchase packages that lenders submit to the
NGPC--and implemented certain quality controls, it has yet to establish
an overall quality assurance process and performance measures to ensure
that its purchase decisions are made in accordance with its policies
and procedures. SBA's review of guaranty purchase requests is an
important tool for assessing lender compliance on individual loans and
protecting SBA from making erroneous payments. The OIG has found in
past audits that SBA inadequate purchase reviews have resulted in
improper payments and has noted concerns that SBA's improper payment
rate may be higher than reported. SBA indicated that an initiative to
establish a new quality assurance process is under way, but is still in
the initial stages. Without measures that track the quality of its
purchase decisions, SBA lacks an important tool to help it ensure the
appropriateness, quality, and effectiveness, of its purchase decisions
on loan guarantees, as well as to measure the overall effectiveness of
its centralization efforts.
This report includes two recommendations to the Administrator of SBA.
First, to support SBA's development of a core curriculum for SBA
University and to communicate SBA's training development efforts to
employees, SBA should develop a strategic training plan with specific
goals, strategies, and milestones. Second, 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.
We provided a draft of this report to SBA for review and comment. SBA
agreed with our recommendations and provided information on how they
planned to address each of them. For example, SBA stated that it will
develop measures that focus on the quality of purchase reviews by
building 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. SBA also 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 and uses information
from these actions to identify areas for training. 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 that 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's comments are
reprinted in appendix II.
Background:
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.[Footnote 11] 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.[Footnote 12] 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.[Footnote 13]
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.[Footnote 14]
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.
SBA Has Applied Key Practices to Implement Change and Has Begun
Addressing Employee Concerns about Involvement and Continued Leadership
Commitment:
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.
SBA Leadership Has Emphasized Transparency and Communication:
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.[Footnote 15] 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.
Table 1: SBA's Efforts to Apply Key Practices for Successful
Organizational Transformation:
GAO recommendation: Develop a communication strategy that facilitates
and promotes frequent and two-way communication between senior managers
and employees and between the agency and its stakeholders, such as
Congress and SBA's lenders;
Examples of actions taken: * Comprehensive communications plan;
* Direct updates from Administrator, including video broadcast
messages;
* District directors' field advisory council provides input and
feedback directly to Administrator and senior management;
* Regular conference calls within regions, between field and
headquarters managers, and within program areas;
* Intranet employee comments and suggestions tool.
GAO recommendation: Finalize the draft transformation plan that clearly
states SBA's strategic goals for transformation and includes
implementation goals, timeline, and resource requirements and share the
plan with stakeholders and employees.[A];
Examples of actions taken: * Use of operating plans with milestone
dates to report on and track initiatives;
* Program offices meet monthly with Administrator to discuss progress;
* Operating plans are accessible to all employees on SBA's intranet
site.
GAO recommendation: Clarify for employees, congressional, and other
stakeholders the leadership and implementation team members who are
guiding transformation;
Examples of actions taken: * Agencywide outreach by Administrator,
including to field employees;
* Creation of Performance Management Office (PMO) and appointment of
Associate Administrator for Performance Management;
* Initiative teams with employee "champions".
GAO recommendation: Develop performance goals that reflect the
strategic goals for transformation and more clearly link the strategic
goals of transformation to existing performance goals. In addition,
develop budget requests that clearly link resource needs to achieving
these strategic and performance goals;
Examples of actions taken: * New performance management framework
(PMF);
* Streamlined scorecards that reflect the PMF;
* Major area operating plans.
GAO recommendation: Ensure that the new performance management system
is clearly linked to well-defined goals to help individuals see the
connection of their daily activities and organizational goals and
encourage individuals to focus on their roles and responsibilities to
help achieve those goals;
Examples of actions taken: * New PMF;
* Streamlined scorecards that reflect the PMF;
* Major area operating plans;
* Employee personal business commitment plans;
* Employee individual development plans.
GAO recommendation: Facilitate employees' involvement by soliciting
ideas and feedback from its union and staff, ensuring that their
concerns and ideas are considered;
Examples of actions taken: * Initiative teams with employee
"champions";
* Intranet employee comments and suggestions tool.
Source: GAO analysis of SBA information.
[A] While SBA did not finalize a plan for transformation SBA officials
stated that transformation, as defined in 2002, had ended, and the
Administrator's reform agenda was an effort to refocus the entire
agency on its mission and priorities. Therefore, we assessed how SBA
has tracked the implementation of the reform agenda.
[End of table]
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.[Footnote 16] 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.
SBA Leadership Has Refocused Agency Priorities with a New Performance
Management System:
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).[Footnote 17] 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.[Footnote 18] 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.[Footnote 19]
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.[Footnote 20] 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.[Footnote
21] 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.[Footnote 22] 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.[Footnote 23] The scorecard then provides detailed
information on the progress made toward achieving each metric within
the operating plan.
Figure 1: SBA's Performance Management Framework:
This figure is a diagram of SBA's performance management framework.
[See PDF for image]
Source: GAO analysis of SBA data.
[End of figure]
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.
SBA Has Made Some Efforts to Solicit Employees' Ideas and Feedback and
Has Begun to Examine Employees' Continued Concerns about Their
Involvement:
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.[Footnote 24]
Figure 2: Percentage of SBA Employees Responding to Survey Question on
Satisfaction with Involvement in Decisions That Affected Their Work in
2004, 2006, and 2007:
This figure is a table showing percentage of SBA employees responding
to survey question on satisfaction with involvement in decisions that
affected their work in 2004, 2006, and 2007.
Year: 2004;
Q34: How satisfied are you with your involvement in decisions that
affect your work?;
Negative response: 32%;
Neutral response: 23%;
Positive response: 46%.
Year: 2006;
Q34: How satisfied are you with your involvement in decisions that
affect your work?;
Negative response: 32%;
Neutral response: 20%;
Positive response: 48%.
Year: 2007;
Q34: How satisfied are you with your involvement in decisions that
affect your work?;
Negative response: 31%;
Neutral response: 24%;
Positive response: 45%.
[See PDF for image]
Source: SBA data.
[End of figure]
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.[Footnote 25] 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.[Footnote 26] 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.[Footnote 27]
Employees Also Were Concerned about Continued Leadership Commitment,
but Senior Leaders Have Initiated Steps to Continue Positive Agency
Efforts:
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.[Footnote 28] Therefore, it is important that SBA's leadership-
-career and political--remain committed to sustaining these efforts
under existing and future administrations.
Actions to Address Effects of Transformation on Employees Have Had Some
Success, but SBA's Plan for Training and Development Is Limited:
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.
Administrator's Actions Have Helped to Improve Employee Perceptions of
Leadership:
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.
Figure 3: Percentage of SBA Employees Responding to Employee Survey
Questions Related to Leadership and Communication by Management in
2004, 2006, and 2007:
This figure is a table showing percentage of SBA employees responding
to employee survey questions related to leadership and communication by
management in 2004, 2006, and 2007.
Year: 2004;
Q25: I have a high level of respect for my organization's senior
leaders;
Negative response: 43%;
Neutral response: 23%;
Positive response: 33%.
Year: 2006;
Q25: I have a high level of respect for my organization's senior
leaders;
Negative response: 45%;
Neutral response: 22%;
Positive response: 33%.
Year: 2007;
Q25: I have a high level of respect for my organization's senior
leaders;
Negative response: 25%;
Neutral response: 21%;
Positive response: 54%.
Year: 2004;
Q26: In my organization leaders generate high levels of motivation and
commitment to workforce;
Negative response: 47%;
Neutral response: 25%;
Positive response: 27%.
Year: 2006;
Q26: In my organization leaders generate high levels of motivation and
commitment to workforce;
Negative response: 49%;
Neutral response: 24%;
Positive response: 26%.
Year: 2007;
Q26: In my organization leaders generate high levels of motivation and
commitment to workforce;
Negative response: 33%;
Neutral response: 23%;
Positive response: 43%.
Year: 2004;
Q33: In my organization leaders generate high levels of motivation and
commitment to workforce;
Negative response: 47%;
Neutral response: 21%;
Positive response: 33%.
Year: 2006;
Q33: In my organization leaders generate high levels of motivation and
commitment to workforce;
Negative response: 42%;
Neutral response: 21%;
Positive response: 37%.
Year: 2007;
Q33: In my organization leaders generate high levels of motivation and
commitment to workforce;
Negative response: 26%;
Neutral response: 21%;
Positive response: 52%.
[See PDF for image]
Source: SBA data.
[End of figure]
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.
Employees Reacted Positively to Recent Training Efforts, but the Lack
of a Documented Strategic Training Plan Could Decrease Accountability
for Continuity of Efforts:
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.[Footnote 29]
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.
Figure 4: Percentage of SBA Employees Responding to Employee Survey
Questions Related to Training in 2004, 2006, and 2007:
Year: 2004;
Q38: How satisfied are you with training you receive for your present
job?;
Negative response: 37%;
Neutral response: 29%;
Positive response: 35%.
Year: 2006;
Q38: How satisfied are you with training you receive for your present
job?;
Negative response: 37%;
Neutral response: 28%;
Positive response: 36%.
Year: 2007;
Q38: How satisfied are you with training you receive for your present
job?;
Negative response: 26%;
Neutral response: 25%;
Positive response: 49%.
Year: 2004;
Q14: My training needs are assessed;
Negative response: 33%;
Neutral response: 29%;
Positive response: 36%.
Year: 2006;
Q14: My training needs are assessed;
Negative response: 31%;
Neutral response: 26%;
Positive response: 42%.
Year: 2007;
Q14: My training needs are assessed;
Negative response: 27%;
Neutral response: 22%;
Positive response: 49%.
[See PDF for image]
Source: SBA data.
[End of figure]
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.[Footnote 30] 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.[Footnote 31] 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.
Focus of District Offices Is on Marketing and Outreach as Their Role
Continues to Evolve, and Challenges Include Decreased Staffing:
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.
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:
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 and
outreach,
* 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.[Footnote 32]
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.)[Footnote 33]
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.[Footnote 34]
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.[Footnote 35] 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.[Footnote 36]
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).[Footnote 37] 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.[Footnote 38] 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.
Figure 5: Sample District Office Organizational Chart and Position
Descriptions:
This figure is a combination of the district office organizational
chart and position descriptions.
[See PDF for image]
Source: GAO analysis of SBA data.
[End of figure]
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.[Footnote 39]
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.
SBA District Offices Have Flexibility on How to Meet Annual Performance
Goals, but Some Face Challenges Due to Decreased Staffing Levels:
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.
Figure 6: Example of Standard Compliance Requirements and Goals on
District Office Scorecards:
This figure is a chart of the example of standard compliance
requirements and goals on district office scorecards.
Status designations applied to each measure:
At or ahead;
Up to 10% behind;
More than 10% behind.
Scorecard measures: Compliance requirements: 8(a) reviews;
Description: Annual reviews to determine continued eligibility for 8(a)
program.
Scorecard measures: Compliance requirements: HUBZone examinations;
Description: Examinations to determine continued eligibility as a
HUBZone-certified business and the accuracy of information submitted on
eligibility.
Scorecard measures: Compliance requirements: Quality service reviews;
Description: Peer-to-peer assessments of district office performance,
in which teams of district office staff review the key operational,
financial, and customer service functions of other district offices.
Scorecard measures: Compliance requirements: Women‘s Business Center
examinations;
Description: Semiannual programmatic and financial examinations to
ensure that Women‘s Business Centers are in compliance with program
requirements.
Scorecard measures: District office goals: Total number of loans;
Description: Total number of 504 and 7(a) loans approved.
Scorecard measures: District office goals: Total dollar amount of
loans;
Description: Total dollar amount of 504 and 7(a) loans approved.
Scorecard measures: District office goals: Number of Veteran Loans;
Description: Total number of Veteran 504 and 7(a) loans approved.
Scorecard measures: District office goals: Number of Underserved
Market Loans;
Description: Total number of 504 and 7(a) loans approved in federally
designated target areas: Low median income; HUBZone; and Empowerment
Zone/Economic Community/Renewal Community.
Scorecard measures: District office goals: District office/network
training and assistance;
Description: Number of clients served (counseling or training) either
directly by the district office or in cooperation/cosponsorship with a
resource partner other than SCORE, SBDC, and WBC.
Scorecard measures: District office goals: Success stories;
Description: Success stories that recognize SBA‘s contribution to small
businesses.
[See PDF for image]
Source: GAO analysis of SBA data.
[End of figure]
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.
SBA Had Begun Assessing Centralization Efforts but It Has Not Yet
Developed Measures to Assess the Quality of Guaranty Purchase
Decisions:
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.
SBA Changed Its Approach to Centralization, Resulting in Better
Communication with Employees:
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.
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:
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.[Footnote 40]
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.[Footnote 41] 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).[Footnote 42] 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.[Footnote 43] 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.[Footnote 44] 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.[Footnote 45] 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.
Conclusions:
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.
Recommendations for Executive Action:
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.
Agency Comments and Our Evaluation:
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 days
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 [hyperlink, 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.
Sincerely yours,
Signed by:
William B. Shear:
Director, Financial Markets and Community Investment:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
Our objectives were to review the status of the Small Business
Administration's (SBA) transformation efforts and related initiatives
since our 2003 report.[Footnote 46] 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.[Footnote 47] 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.[Footnote 48] 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.[Footnote 49]
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.[Footnote 50] 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;
* district-office developed guidance;
* 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;
* the reform agenda;
* strategic plan, human capital plans, and transformation plans;
* SBA memorandums, policies, and procedures related to transformation;
and:
* 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,
* SBA briefing reports and:
* 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.
[End of section]
Appendix II: Comments from the Small Business Administration:
U.S. Small Business Administration:
Washington, D.C. 20416:
Office Of The Administrator:
September 11 , 2008:
Mr. William Shear
Director, Financial Markets and Community Investment:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Mr. Shear:
Thank you for the opportunity to comment on the Government
Accountability Office's (GAO) draft report "Opportunities Exist to
Build on Leadership's Efforts to Improve Agency Performance and
Employee Morale". We are pleased that you have pointed out the Agency's
success in improving agency operations and employee morale through the
new Reform Agenda. In particular, we appreciate the recognition of our
efforts and initiatives that we feel make a large impact on the U.S.
Small Business Administration's (SBA) ability to serve small businesses
and entrepreneurs and ensure our employees are equipped with the tools
and the support they need, including:
* The Performance Management Framework,
* Improved agency communication and transparency,
* The creation of SBA University and additional training,
* Improvements at the National Guarantee Purchase Center resulting from
Brand Promise Restored Campaign.
While we applaud you for recognizing the improvements that have been
made with regard to the transformation efforts, we would like to
clarify some of the points made within the draft report.
The draft report, in part, reviewed how SBA has assessed the
centralization of loan functions. Quality assurance and consistency is
a main goal of centralization and transformation. Consolidating work
once performed in 68 distinct offices and geographic areas into one
location has helped create greater consistency in review processes and
procedures that serve as the baseline for evaluating quality. As
documented in the draft report, SBA has implemented and continues to
develop a number of quality assurance measures. SBA agrees with the GAO
recommendation that it "develop measures to track and monitor quality
assurance of its centralized loan guaranty purchase center."
To that end, the National Guaranty Purchase Center (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
which will be implemented during fiscal year 2009. At the same time,
SBA is currently planning to strengthen its program-wide Risk
Management framework and activities, which will extend additional
oversight and attention to quality assurance functions in all lending
centers.
SBA's quality measures currently in place include measures embedded in
its processes for reviewing, recommending, and approving guaranty
purchases. Loan specialists are accountable for producing high quality
and accurate guaranty purchase reviews and recommendations consistent
with the NGPC Operations Manual guidelines. NGPC tracks the number of
work items returned for substantial revision and provides training to
reduce the number of items returned. NGPC also uses Improper Payment
Improvement Act (IPIA) information to measure and improve the quality
of guaranty purchase transactions, through randomly sampling processed
guaranty purchase disbursements from NGPC and testing them for
accuracy. Feedback from the improper payment reviews is used in the
NGPC for training purposes to enhance the quality of the reviews and
make adjustments to internal procedures where possible to prevent the
errors from occurring in future purchase reviews.
Additionally, SBA agrees with GAO's recommendation to "develop a
strategic training plan." SBA shares GAO's position that training and
investment in employees is critical to the success of the agency. SBA
has provided a copy of our draft plan for future training. SBA
continues to work to institutionalize the progress that has been made
to ensure employees have access to the training and tools provided
through the development of SBA University. We recognize that the
investment in our personnel is reflected in enhanced agency
performance.
SBA is committed to continuing to build upon the success achieved and
will continue to focus on employee morale and agency performance and
operations. We continue to be mindful of SBA's mission, to provide
access to capital, training and technical assistance, and to provide
federal procurement opportunities for the nations small businesses and
entrepreneurs. Thank you for the opportunity to comment on the draft
report and the remaining recommendations. We look forward to reporting
back to GAO on our continued progress.
Sincerely,
Signed by:
Molly Wilkinson:
Chief of Staff:
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
William B. Shear, (202) 512-8678 or shearw@gao.gov:
Staff Acknowledgments:
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.
[End of section]
Footnotes:
[1] The 7(a) Loan Program is SBA's largest loan program for small
businesses. The loan program guarantees loans made by commercial
lenders to small businesses and assures lenders that they will receive
from 50 to 85 percent of the outstanding loan balance if a borrower
defaults.
[2] SBA's 8(a) program provides eligible socially and economically
disadvantaged small businesses with a range of business development
assistance to help them gain access to federal contracting
opportunities and compete in the U.S. economy.
[3] GAO, Small Business Administration: Progress Made, but
Transformation Could Benefit from Practices Emphasizing Transparency
and Communication, GAO-04-76 (Washington, D.C.: Oct. 31, 2003).
[4] OPM analyzes the results of the FHCS that are reported biennially.
The results are reported for nearly the entire federal government
(about 97 percent of executive branch agencies), as well as by
individual agencies.
[5] The Partnership for Public Service and the Institute for Study of
Public Policy Implementation created a statistical model to transform
raw FHCS data into specific measures of workplace satisfaction,
including an index score for "Best Places to Work." The 2007 rankings
include 283 federal organizations (30 large federal agencies, 31 small
agencies, and 222 subcomponents).
[6] Small Business Administration, Office of Inspector General,
Management Advisory Report on the Transfer of Operations to the
National Guaranty Purchase Center, Herndon, Virginia, Report No. 4-39
(Washington, D.C., Aug. 31, 2004).
[7] SBA delegates authority to lenders who meet certain standards. For
example, some lenders, referred to as "preferred" lenders, have
authority to make SBA-guaranteed loans, subject only to a brief
eligibility review and assignment of a loan number by SBA. In contrast,
SBA provides final approval for loans made under the standard 7(a)
program for loans made by lenders who do not have delegated authority
to make SBA loans.
[8] For more information on key practices, see GAO, Results Oriented
Cultures: Implementation Steps to Assist Mergers and Organizational
Transformations, GAO-03-669 (Washington, D.C.: July 2, 2003).
[9] We randomly selected eight district offices for site visits. For
two of the regions, we purposefully selected an office in each based on
its proximity to a GAO office where staff assigned to this review were
located. We conducted site visits to these two offices first for the
purposes of developing and field testing our interview questions and
site visit procedures.
[10] When borrowers default on SBA-guaranteed loans, SBA honors its
guaranty by purchasing the guaranteed portion of the outstanding loan
balance from lenders.
[11] At the time we completed our 2003 report, SBA largely had
completed centralization of servicing and processing functions for its
loan programs.
[12] Loan approval, guaranty purchase, and liquidation processes for
SBA's 504 program were also part of the second initiative with the
preferred lender program loan processing center in Sacramento,
California, processing new 504 loan origination applications from the
pilot district offices. Under the 504 program, SBA provides its
guaranty through certified development companies--private nonprofit
corporations--that sell debentures that are fully guaranteed by SBA to
private investors and lend the proceeds to qualified small businesses
for acquiring real estate, machinery, equipment, and for building or
improving facilities.
[13] SBA also operates the Sacramento Loan Processing Center, created
in 1994 prior to the transformation efforts discussed in this report,
that processes 7(a) loans for preferred lenders.
[14] The SBA employee numbers from the 1990s to 2007 do not include
employees in SBA's Office of Disaster Assistance because these numbers
fluctuate year to year and include temporary employees, depending on
the disaster assistance workload. These numbers also do not include
employees in SBA's OIG.
[15] Steve Preston was sworn in as the 22nd Administrator on July 11,
2006. He was officially appointed to this position in April 2006 when
former Administrator Hector Barreto resigned with 29 months remaining
in his term.
[16] GAO, Human Capital: Practices That Empowered and Involved
Employees, GAO-01-1070 (Washington, D.C.: Sept. 14, 2001).
[17] The Office of Management and Budget's (OMB) Program Assessment
Rating Tool (PART) is a questionnaire designed to help assess the
management and performance of federal programs. It is used to evaluate
a program's purpose, design, planning, management, results, and
accountability to determine its overall effectiveness.
[18] Howard Risher and Charles H. Fay, IBM Center for The Business of
Government, Managing for Better Performance: Enhancing Federal
Performance Management Practices. (New Jersey, 2007).
[19] Executive Order 13450: Improving Government Program Performance,
Nov. 13, 2007. In response to the executive order, OMB established a
Performance Improvement Council comprising individuals appointed as
Performance Improvement Officers of federal agencies. Individuals in
this role are responsible for developing and improving their agencies'
strategic plans, annual performance plans, and annual performance
reports, as well as ensuring the use of such information in agency
budget justifications. Among other tasks, the council will establish
program performance standards and evaluation criteria and exchange
information among agencies. As Associate Administrator for Performance
Management, SBA's CFO serves on this council.
[20] GAO-01-1070.
[21] District office annual loan-related goals are for the number and
dollar amount of new loans approved based on their marketing and
outreach efforts.
[22] SBA partners with SCORE (formerly the Service Corps of Retired
Executives), Small Business Development Centers (SBDC), Women's
Business Centers (WBC), and other small business resources to provide
training, counseling, and other assistance to small businesses.
[23] SBA scorecards track the status of goals and other activities
designed to support the implementation of performance management
efforts.
[24] Governmentwide survey data are not available for 2007. Therefore,
we compared SBA's 2007 survey responses to the most recent
governmentwide data available from 2006.
[25] GAO-03-669.
[26] Office of Personnel Management, Ensuring the Federal Government
Has an Effective Civilian Workforce, [hyperlink,
http://www.fhcs2006.opm.gov(accessed July 23, 2008)].
[27] SBA's Annenberg Fellows led this focus group effort. Following the
results of the 2006 employee survey and concerns the SBA Administrator
had heard from employees, SBA supported the participation of five SBA
employees to be selected as Annenberg Fellows in an initiative
sponsored by the Annenberg Leadership Institute. The institute, which
is part of the Partnership for Public Service, supports the development
of midlevel leaders across the federal government. The initiative for
SBA's fellows is to assess factors affecting employee engagement and
develop a set of solutions that would increase workplace satisfaction.
[28] GAO-03-669.
[29] GAO, Human Capital: A Guide for Assessing Strategic Training and
Development Efforts in the Federal Government, GAO-04-546G (Washington,
D.C.: Mar. 1, 2004) and Department of Homeland Security: Strategic
Management of Training Important for Successful Transformation, GAO-05-
888 (Washington, D.C.: Sept. 23, 2005).
[30] Small Business Administration Strategic Human Capital Plan
(September 2007).
[31] GAO-04-546G.
[32] SBA conducts annual reviews to determine the continued eligibility
of participants in the 8(a) program.
[33] Lenders make a purchase request when they want SBA to pay the
guaranteed portion of a loan that has defaulted. As part of the
request, lenders must submit the necessary documentation to SBA, such
as the date of default and the lender's account of the situation.
[34] In addition to providing assistance to small businesses, SBA,
through its Office of Disaster Assistance's Disaster Loan Program,
provides low-interest, long-term loans to homeowners, renters, and
businesses of all sizes to assist them with disaster recovery.
[35] Under SBA's 2007 Disaster Recovery Plan, a large-scale disaster
that would require district offices to provide "surge capacity" is one
in which SBA anticipates the volume of loan applications to be at least
250,000 based on forecasts. Thus, SBA would initiate surge capacity
well below the volume of applications SBA received in response to the
Gulf Coast hurricanes--420,000 applications.
[36] GAO, Small Business Administration: Additional Steps Needed to
Enhance Agency Preparedness for Future Disasters, GAO-07-114
(Washington, D.C.: Feb. 14, 2007).
[37] Below the deputy director level, in addition to business
development and lender relations specialists, district offices might
also have administrative officers, who manage the day-to-day office
functions, and program support assistants, who assist the specialists
in their work. Some district offices also have attorneys, but these
individuals do not report to the district director.
[38] SBA's HUBZone program is designed to stimulate economic
development and create jobs in economically distressed urban and rural
areas. We recently reported on this program. See GAO, Small Business
Administration: Additional Work Needed to Certify and Monitor HUBZone
Businesses and Assess Program Results, GAO-08-643 (Washington, D.C.:
June 17, 2008).
[39] We have an ongoing audit engagement on issues related to the
ability of federal agencies to meet their small business goals, SBA's
administration of the 8(a) business development program, and the
certification of small disadvantaged businesses that will also address
some of the issues related to the 8(a) business development program
that are described in this report.
[40] Improper payments are payments that should not have been made or
that have been made in an incorrect manner and include payments to
ineligible recipients or for ineligible services, duplicate payments,
payments for services not received, and payments that do not account
for credit for applicable discounts. Improper Payments Information Act
of 2002, Pub. L. No. 107-300, § 2, 116 Stat. 2350 (2002).
[41] Small Business Administration, Office of Inspector General, Fiscal
Year 2008 Report on the Most Serious Management Challenges Facing the
Small Business Administration (Washington, D.C., Oct. 16, 2007)
[42] Small Business Administration, Office of Inspector General, Audit
for the Guaranty Purchase Process for Section 7(a) Loans at the
National Guaranty Purchase Center, Report Number: 7-23 (Washington,
D.C., May 8, 2007).
[43] Small Business Administration Office of Inspector General,
Advisory Memorandum No. 6-26, (Washington, D.C., July 12, 2006)
[44] GAO, Improper Payments: Status of Agencies' Efforts to Address
Improper Payment and Recovery Auditing Requirements, GAO-08-438T
(Washington, D.C.: Jan. 31, 2008).
[45] GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: Nov. 1,1999).
[46] GAO, Small Business Administration: Progress Made, but
Transformation Could Benefit from Practices Emphasizing Transparency
and Communication, GAO-04-76 (Washington, D.C.: Oct. 31, 2003).
[47] In particular, the Office of Field Operations, the Performance
Management Office (which oversees the field staffing model) and the
Office of Human Capital Management (which oversees all employee-related
issues) all have key responsibilities that affect the district offices.
[48] For 8 of the 10 SBA regions, we randomly selected one district
office from each region. For two of the regions, we purposefully
selected an office based on its proximity to the two GAO offices where
staff assigned to this review were located. We conducted site visits to
these two offices first for the purposes of developing and field
testing our interview questions and site visit procedures.
[49] SBA attorneys located at district offices technically are
considered staff of the Office of General Counsel, rather than district
office staff. However, they also participated in several meetings with
SBA district office and center staff.
[50] For more information on key practices, see GAO, Results Oriented
Cultures: Implementation Steps to Assist Mergers and Organizational
Transformations, GAO-03-669 (Washington, D.C.: July 2, 2003).
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