[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]




     ATTENTION NEEDED: MISMANAGEMENT AT THE SBA - THE GAO FINDINGS

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                            JANUARY 6, 2016

                               __________


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                             

            Small Business Committee Document Number 114-034
              Available via the GPO Website: www.fdsys.gov
              
              
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                         CHRIS GIBSON, New York
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        CARLOS CURBELO, Florida
                          MIKE BOST, Illinois
                         CRESENT HARDY, Nevada
               NYDIA VELAZQUEZ, New York, Ranking Member
                         YVETTE CLARK, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                       BRENDA LAWRENCE, Michigan
                       ALMA ADAMS, North Carolina
                      SETH MOULTON, Massachusetts
                           MARK TAKAI, Hawaii

                   Kevin Fitzpatrick, Staff Director
             Emily Murphy, Deputy Staff Director for Policy
            Jan Oliver, Deputy Staff Director for Operation
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Steve Chabot................................................     1
Hon. Nydia Velazquez.............................................     2

                                WITNESS

William B. Shear, Director, Financial Markets and Community 
  Investment, United States Government Accountability Office, 
  Washington, DC.................................................     3

                                APPENDIX

Prepared Statement:
    William B. Shear, Director, Financial Markets and Community 
      Investment, United States Government Accountability Office, 
      Washington, DC.............................................    21
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    None.
 
     ATTENTION NEEDED: MISMANAGEMENT AT THE SBA - THE GAO FINDINGS

                              ----------                              


                       WEDNESDAY, JANUARY 6, 2016

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 11:00 a.m., in Room 
2360, Rayburn House Office Building. Hon. Steve Chabot 
[chairman of the Committee] presiding.
    Present: Representatives Chabot, Luetkemeyer, Hanna, 
Huelskamp, Brat, Radewagen, Curbelo, Hardy, Kelly, Velazquez, 
Chu, Meng, Adams, and Moulton.
    Chairman CHABOT. Good morning. I call the Committee hearing 
appropriately titled ``Attention needed: Mismanagement at the 
SBA'' to order. I also want to welcome back a frequent witness 
before this Committee, Bill Shear, of the GAO, the General 
Accountability Office.
    Since 1946, federal agencies have been required to operate 
using rational decision-making procedures. That is the 
expectation of taxpayers whether it is the law or not. Congress 
made that sensible idea and the expectations of taxpayers the 
law when it enacted the Government Performance and Review Act 
back in 1993. To operate in the manner demanded by statute, 
agencies must make extensive efforts at strategic planning and 
actually carry that planning out.
    Today, the Committee will hear an assessment from the GAO 
on the SBA's--that is the Small Business Administration's 
efforts to deliver effective assistance to entrepreneurs in an 
efficient manner. With a $100 billion loan portfolio, $100 
billion, the taxpayer has too much invested in this agency to 
allow mismanagement to continue. Barriers to effective and 
efficient operation of the SBA include the failure to address 
longstanding management challenges, failure to develop a human 
capital plan, failure to institute sound acquisition methods, 
failure to revise outdated policy directives, and failure to 
assess the structure of the agency, among other things.
    The GAO's conclusions are clear; the SBA needs a complete 
overhaul of its operations. Finding a resolution to these 
problems will not be easy. GAO has taken the first step, 
identifying the problems at the SBA. The next steps are 
significantly harder. Meaningful solutions usually are. 
Problems that have existed for decades will not be resolved 
overnight. It will take the dedicated effort of agency 
officials and the watchful eye of those on this Committee to 
right those wrongs.
    This Committee's efforts will not end with the review of 
this report. We will convene multiple hearings over the next 
few months to examine SBA programs and their implementation by 
various branches of that Agency. The hearings may reveal other 
barriers to official and effective operations of the SBA that 
will require further examination by this Committee and by the 
GAO. If the report examined today, subsequent hearings, 
investigations by the Committee, and additional reports by GAO 
continue to reveal problems that the administration will not 
fix, the Committee will not hesitate to take legislative 
action.
    The SBA plays a significant role in providing assistance to 
America's entrepreneurs. The problems that have festered far 
too long must end so that small businesses and taxpayers can 
rely on an effective and efficient SBA. The taxpayers of this 
country deserve no less.
    I would now like to yield to the ranking member for her 
opening statement.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Of the many responsibilities this committee has, one of our 
most important, is overseeing and examining the Small Business 
Administration. It is absolutely critical that we conduct this 
oversight. Doing so ensures that tax dollars are spent 
efficiently and appropriately. GAO has been a long-term partner 
of this committee's oversight work and has helped us identify 
and solve a wide range of issues affecting the agency's 
programs.
    Today's hearing, however, does not focus on a particular 
program or initiative at the SBA; rather, it focuses on the 
overall management and strategic vision of the agency. I, along 
with prior Chairman Graves, requested this broad view of the 
SBA.
    GAO reported several key findings, many of which cite 
issues already raised by the SBA's own inspector general over 
the last decade. At the top of the list are organizational 
matters which are critical to the agency's ability to serve 
small businesses. GAO found the agency structure to be overly 
complex and that workforce planning was not up-to-date. Such 
redundancies and deficiencies can ultimately lead to poor 
service to entrepreneurs. In addition, GAO found that risk 
management and IT security are being inappropriately 
administered. Such co-activities and internal controls are 
central to the functioning of the SBA, and without adherence to 
federally-accepted standards, the agency is subjecting itself 
to unnecessary risks.
    Perhaps the most troubling issues raised by the GAO come 
into areas of procedural guidance and program evaluation. With 
regard to procedural guidance, GAO reported that as of March 
2015, SBA had determined that 74 of its 165 standard operating 
procedures needed to be revised and 31 needed to be canceled. 
An additional 9 needed to be issued. Without guidance, it is 
impossible for program participants or even the SBA to know how 
a program should operate. This makes it difficult for small 
firms to work with the agency, and given that these SOPs are 
not issued pursuant to notice and common rulemaking frustrates 
those that want greater transparency in how government works. 
The report shows that SBA has some work to do in improving its 
overall management of the agency. With that said, I was glad to 
see SBA has agreed with nearly all of the GAO's recommendations 
and has begun to take action to address these matters.
    Today, I am looking forward to hearing from GAO about 
whether or not they believe SBA is carrying through on this 
commitment. This committee stands ready to examine the SBA and 
its program so that small businesses and the taxpayers benefit 
more broadly. It is a vital role and one that I want to ask all 
committee members to take part in. I look forward to hearing 
the GAO's testimony, and I thank Mr. Bill Shear and his team 
for their continued work on our behalf.
    With that, Mr. Chairman, I yield back.
    Chairman CHABOT. Thank you very much. The gentlelady yields 
back.
    And we would ask that Committee members who have opening 
statements prepared, if they would submit them for the record.
    And just to explain very briefly our rules here and the 
time limits, which Mr. Shear is very familiar with, I am sure, 
we operate under the 5-minute rule where the witnesses get 5 
minutes to testify. In this case, we will give you a little bit 
longer than that if you need it. Since there is only one 
witness and we generally have four that does not mean we want 
you to take 20 minutes, but if you need a little bit more time 
that is okay, and we will limit ourselves to 5 minute at least 
in the first round, and then we will determine whether we think 
it is necessary to go into a second round at the appropriate 
time.
    We have a light system there, as you know. The yellow light 
comes on and lets you know you have a minute to wrap up. The 
red light will come on and I will let you go a little bit 
further than that as I indicated.
    And now a brief introduction. Mr. Shear, who is our 
witness, he is the director of Financial Markets and Community 
Investment Team at the Government Accountability Office. Most 
of us refer to it as the GAO around here, and we look very 
forward to your testimony. And you are recognized for 5 
minutes, or as I say, a little bit longer.
    Mr. SHEAR. Thank you. I will keep it under 5 minutes.
    Chairman CHABOT. Okay. Thank you.

STATEMENT OF WILLIAM B. SHEAR, DIRECTOR, FINANCIAL MARKETS AND 
 COMMUNITY INVESTMENT, UNITED STATES GOVERNMENT ACCOUNTABILITY 
                             OFFICE

    Mr. SHEAR. Chairman Chabot, Ranking Member Velazquez, and 
Members of the Committee, I am pleased to be here this morning 
to discuss our management review of the Small Business 
Administration. My testimony is based on our September 2015 
report and related updates on the status of recommendations. 
Rather than focusing on individual SBA programs, we conducted a 
comprehensive assessment of SBA's structure, processes, and 
systems, including its efforts to address its management 
challenges.
    In September, we reported that SBA had not resolved many of 
its longstanding management challenges due to a lack of 
sustained priority attention over time. Many of the management 
challenges that we and the Office of Inspector General had 
identified over the years remained, including some related to 
program implementation and oversight, contracting, human 
capital, and IT. SBA has generally agreed with prior GAO 
recommendations that were designed to address these issues. As 
we state in our report, the agency had made limited progress in 
addressing most of these recommendations but had recently begun 
to take some steps to address them. For example, as of July 
2015, SBA had implemented four of six recommendations from the 
2010 GAO Report on its 8(a) Business Development Program.
    In our report, we made eight new recommendations designed 
to improve SBA's program evaluations, strategic and workforce 
planning, training, organizational structure, enterprise risk 
management, procedural guidance, and oversight of IT 
investments. SBA generally agreed with these recommendations. 
We also maintained that the 69 recommendations we made in prior 
work have merit and should be fully implemented.
    As of December 2015, SBA had implemented 7 of the 69 
recommendations from prior reports that were identified in our 
September report. For example, with respect to disaster 
assistance, SBA revised its planning documents to adjust 
staffing and resources available for future disasters by 
considering the potential effect of early application 
submissions for disaster loans as we had recommended. In 
addition, SBA officials told us about actions the agency had 
initiated in response to the eight new GAO recommendations. For 
example, the SBA officials told us that the agency had 
established an Economic Impact Evaluation Working Group, which 
according to the SBA officials was developing evaluation plans 
for several program offices.
    Chairman Chabot and Ranking Member Velazquez, this 
concludes my prepared statement. I would be happy to answer any 
questions.
    Chairman CHABOT. Thank you very much, and you definitely 
kept it under 5 minutes. Thank you.
    I will now recognize myself to begin the questioning.
    Mr. Shear, in the last year, we have seen the Federal 
Government hacked in a whole series of breaches. OPM, the 
Office of Personnel Management, had millions of fingerprint 
records stolen, Social Security numbers, addresses, health 
records, financial and biometric data were all taken. We have 
seen the IRS hit, the State Department, even the White House. 
Now, in your review of the SBA, the Small Business 
Administration, you have listed a whole range of deficiencies, 
areas where the SBA has fallen short, just not cutting it. And 
the one that worries me the most is in the area of IT security. 
First of all, the information that they keep on individuals and 
on small businesses can be pretty sensitive information. Is 
that right? Information you might not want a rival business, or 
your neighbors, or the Chinese government to have access to. 
Would you agree with that and would you like to comment?
    Mr. SHEAR. Chairman Chabot, you raise a very good point. 
And one of the things I just want to say procedurally, that 
when you take such an extensive operational view of an agency 
like this, we certainly partnered with SBA's Office of 
Inspector General, and we greatly appreciate the interactions 
we had. And you see in our report that we refer to the IG's 
work quite liberally and some of the issues raised by the IG. 
The issue of IT security is one where we relied on and we 
reported on the IG's findings. So basically, there are issues 
identified by the IG that require attention. It is a very 
serious issue, and it is one of the issues----
    Chairman CHABOT. Let me interrupt you for a second, if I 
can.
    Mr. SHEAR. Yes.
    Chairman CHABOT. Despite the logical concern that 
individuals or small businesses who deal with the SBA might 
have, the SBA has failed to implement more than 30 of the 
Office of the Inspector General's recommendations related to IT 
security; is that correct?
    Mr. SHEAR. That is what we report based on what was 
available in September. We note that information technology 
security has been identified for well over a decade as a 
longstanding management challenge. In its most recent report 
which came out recently, there was not a report of the number, 
but it certainly is one of the longstanding management 
challenges, so I cannot attest to exactly what the number is at 
this time.
    Chairman CHABOT. Okay. I have got 2 minutes left, so let me 
move to a couple other areas that are in your review and that I 
also find disturbing. I will again quote from the review, and I 
quote, ``In our September 2015 report, we found that the SBA 
has not resolved many of its longstanding management challenges 
due to lack of sustained priority attention over time.'' And 
you went on to say, ``This raises questions about the SBA's 
sustained commitment to addressing management challenges to 
keep it from effectively assisting small businesses.''
    Now, the principal purpose of even having an SBA is to 
assist small businesses, and it is our responsibility as the 
Committee of oversight, to make sure that the SBA is living up 
to their responsibilities to small businesses. So would you 
like to comment on the fact that they lacked the long-term 
attention to this issue that it deserved?
    Mr. SHEAR. It is very disturbing when an agency, we have 
been here, with you Chairman Chabot and with Ranking Member 
Velazquez, and previously with Representative Graves, and it is 
very disturbing to us that these challenges still remain. And 
they go down to some very basic functions. And with all the 
program audits that we have done at SBA, one of the reasons why 
we even suggested to the Committee the idea of undertaking such 
a review is that we saw certain recurring themes happen over 
and over again when you look across the agency that affect all 
aspects of its operations and its programs. And so we think 
that there is some work to be done here, and we are looking for 
some commitment to deal with many of these issues, many of 
which have an internal control type of issue which we pay very 
close attention to.
    Chairman CHABOT. Thank you. I have got more questions but 
in order to impose the same 5 minutes on myself as everybody 
else, I will stop there and I will now yield to the ranking 
member, Ms. Velazquez.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman, and thank you, Mr. 
Shear, for being here.
    In the report, GAO found that the SBA still has not 
implemented disaster program reforms which this committee 
authored when I was chair in 2008. What are the major reasons 
why SBA has not established the needed Disaster Assistance 
Program?
    Mr. SHEAR. When we have done work, repeated work, and 
appeared before this Committee on the Disaster Loan Program, 
there seemed to be some positive movement in the period after 
the act was passed, the establishment of a Office of Disaster 
Preparedness within SBA. There appeared, up until I would say 
2010, some collaboration that was going on between the Office 
of Disaster Preparedness, the Office of Disaster Assistance, 
and the Office of Capital Access, to try to stand up a pilot 
program for IDAP as a first step to try to move into these 
areas to better serve the needs of disaster victims. I use the 
expression ``the ball was dropped'' by SBA. When we did our 
work on Sandy, this collaboration just seemed to fall apart, 
and we have not seen any evidence that there is really a 
collaborative effort, which I think is what is necessary here, 
for SBA to try to develop these three programs, including IDAP.
    Ms. VELAZQUEZ. To what degree do you think these reasons 
may be symptomatic of some of the more general operational 
challenges you found in your management review?
    Mr. SHEAR. I think that it is a great question because one 
of our concerns, and sometimes we use a simple word like ``silo 
effect.'' SBA has a complex organizational structure, and you 
have reporting relationships that differ from working 
relationships. And you have different parties that are involved 
here. And the idea that with disaster assistance, it involves a 
number of parties, and it just seems like what I will call a 
silo effect, as far as the inability to work across the 
organization, it is relevant to the work we did on enterprise 
risk management. The failure to identify risks that are common 
to the agency and working on those risks across the agency, it 
just does not seem like that collaboration is there. And I 
really have to be critical about our first interview dealing 
with the three private loan programs when we were doing the 
Sandy work where we were told that there was a conference call 
after Sandy occurred with three lenders, and the three lenders 
could not even be named. It was not a documented interview, but 
the three lenders did not like IDAP. Well, that was a case I 
had to direct to SBA the people that had been involved earlier 
that were part of this collaborative effort to try to stand up 
IDAP, and that never came to the table. So it even seemed 
almost like if it was something that was developed, or there 
was work on such development by previous people in those 
positions, that had also kind of fallen off the table.
    Ms. VELAZQUEZ. So since the Tri-State area was affected by 
Hurricane Sandy, would you tell us that based on what you have 
seen, that if there is another large-scale disaster, such as 
Hurricane Sandy, that the SBA, will be prepared to tackle the 
challenges that we saw during Sandy?
    Mr. SHEAR. I do not think SBA has a real plan for 
addressing it, and especially when you have a congressional 
mandate to create three private loan programs, there was a 
rationale to those programs. Much of it, like, for example, 
with IDAP, there is certainly in the Gulf Coast with Katrina, 
and based on our work on the ground with constituents in the 
Tri-State area with Sandy, there certainly appeared to be 
demand for things like a bridge loan type of program and things 
like that, and I do not think SBA has really put itself in a 
position to serve those needs.
    Ms. VELAZQUEZ. Have you conducted any other management 
review with any other federal agency?
    Mr. SHEAR. As an agency, we did a lot of broad management 
reviews in basically the 1980s and 1990s, and now this was one 
time where we thought SBA was an agency, because of these 
recurring problems, that would require one. We currently have 
an ongoing general management review of HUD, and so that is 
one. We have done other things that would not be called general 
management reviews but are pretty broad looks at agencies, 
including one that we did a number of years ago at SBA.
    Chairman CHABOT. The gentlelady's time is expired.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Chairman CHABOT. The gentleman from Missouri, Mr. 
Luetkemeyer, who is vice chairman of this Committee is 
recognized for 5 minutes.
    Mr. LUETKEMEYER. Thank you, Mr. Chairman.
    Mr. Shear, your report is quite damning and quite 
concerning from the standpoint that it looks like we have an 
agency that is mismanaged from top to bottom. You know, I 
represent the district in Missouri that just got hardest hit in 
our state with regards to flooding these past 2 weeks. And so 
when I look at the Office of Disaster Assessment and then, 
because it could not really figure out what to do, they created 
the Office of Disaster Planning, and now because they cannot 
coordinate those two with anybody else, they are going to 
create an Office of Disaster Interagency Affairs. This is an 
example of government run amuck. We have one agency that cannot 
do the job, so we create a second agency that cannot do the 
job, and now we have got a third agency. Am I misreading what 
is going on here, the ineptness of the agency caused it to 
create more agencies which continue to be inept? Yes or no 
works for that.
    Mr. SHEAR. Okay, thanks. I see your concerns. You raise a 
very good point, and basically, what we look for generally with 
the way SBA operates, including assessing the risk of meeting 
its mission that you just need more thorough plans on how to do 
this and just creating additional entities is not necessarily 
the way to do that. You really need to develop a plan and think 
strategically about how to deliver this assistance.
    Mr. LUETKEMEYER. Well, through your discussion in your 
report you talk about GAO had--their own IG had 11 different 
challenges, and after 10 years only seven of them still 
existed. And some of them, as the chairman alluded to here, one 
of them is extremely important, which is, you know, the 
security of the data that this agency holds. Other ones in 
there, improper payments. This is a pretty basic function of 
the agency I would assume. Do you know off the top of your head 
what the past due rate is of the portfolio?
    Mr. SHEAR. I am sorry, the what?
    Mr. LUETKEMEYER. The past due rate for the SBA loan 
portfolio?
    Mr. SHEAR. No. If you want to make a question for the 
record----
    Mr. LUETKEMEYER. That is fine. I was just curious if you 
knew off the top of your head----
    Mr. SHEAR. No, I do not.
    Mr. LUETKEMEYER.--whether it was going up or down. That is 
always an indication of management problems when you have that 
as well as economic times.
    Also, you know, you are talking about they developed 
strategic plans, and yet, when they get the plan done, nobody 
goes in and is able to review it. Am I reading that right 
within your report? They develop strategic plans but yet there 
is no follow up as to seeing if the strategic plan is followed 
and whether there is an evaluation of its effectiveness, 
whether it was accurate.
    Mr. SHEAR. The strategic planning, the deficiency we 
identified--and it is consistent with other work we have done 
on individual programs--has been the lack of evaluations of its 
programs for effectiveness consistent with what the chairman 
brought up with GPRA. And here I refer to the GPRA 
Modernization Act, and state that there is a lack of 
evaluations, and the evaluations are not really being 
incorporated into strategic planning, and it is hard to really 
have an effective strategic plan if you do not have a concept 
of how well the various programs are working.
    Mr. LUETKEMEYER. Well, coming from the private sector, you 
need to have a strategic plan, know where you are headed. You 
need to have a review of that strategic plan on a regular basis 
so you know what you did right, what you did wrong, and how you 
can improve. And having a plan is fine, but if there is no 
follow-up action it is worthless. It is a waste of time. It is 
an exercise in futility.
    Also, you talk about the standard operating procedures here 
in rules and regulations, which seem to be either ignored or 
they just create them and they just kind of go off on their own 
tangent. There is no coordination. Can you elaborate just a 
little bit on that?
    Mr. SHEAR. Yes. It is in and of itself that the standard 
operating procedures are so out-of-date and are not kept up-to-
date, and they might be being relied upon too heavily because 
there is a lack of specificity to begin with for operating 
programs. But if you put the different pieces together from 
what we have done, you have staff that are in the district 
offices. They are referred to as the ``boots on the ground,'' 
so you have staff in district offices that are not being well 
trained to conduct their functions. When you have that, when 
you do not have clear guidance, we found it with individual 
program audits, clear guidance for how those regulations are 
supposed to be carried out, and then you are doing things in a 
makeshift manner that the SOPs do not reflect current 
practices, you are going to have what we have observed, which 
is a lot of inconsistency and incomplete oversight of SBA 
programs.
    Mr. LUETKEMEYER. I appreciate that. And just one moment of 
indulgence by the chairman, you know, it would seem to me that 
if we have this kind of, to me, reckless regard for the reports 
that are sent out, reckless regard for the recommendations, 
there needs to be some sort of punitive action taken by us, Mr. 
Chairman, against this agency, starting with freezing of their 
funds and freezing of all future rules and regulations and 
SOPs. If they cannot do the job with what they have got now, 
they do not need to be doing anything further. So I certainly 
will want to work with you on something along those yields, and 
I yield back.
    Chairman CHABOT. Thank you. The gentleman's time is 
expired.
    The gentlelady from California, Ms. Chu, who is the ranking 
member of the Economic Growth, Taxation, and Capital Access 
Subcommittee is recognized for 5 minutes.
    Ms. CHU. Mr. Shear, from this report it seems that there is 
some general agreement between SBA and GAO on the 
recommendations that GAO has made to address important problems 
that the agency is facing. It is of concern that of the 69 
recommendations, that only seven have been met. However, it is 
also clear that SBA has taken steps to address at least some of 
the issues at hand. In preparing this report, did you find 
disagreement between SBA and GAO on what GAO recommendations 
should be considered completed or fully implemented by the 
agency?
    Mr. SHEAR. Over the past year, I would say roughly since 
last April or May, there has been a lot more focus at SBA in 
looking at our open recommendations, which is a long list. And 
it has been reported to this Committee before. SBA's track 
record over the years in addressing our open recommendations 
has not been very good. The comptroller general actually in 
November sent a letter to the administrator like he did to 
other heads of agencies, and in this case, SBA's implementation 
rate, the way we calculate that rate is around 58 percent and 
most of the government is around 80 percent. So this has been a 
concern of ours.
    We have seen some attention and movement on this, and there 
has been, I think, a push from senior management, I would say 
roughly since last summer, and we have had multiple meetings at 
SBA, including senior leadership over our open recommendations, 
so it is a positive sign. So the idea was this actually 
represents an improvement. As you see in my statement that 
seven were implemented since issuance of our report is a 
positive change from what had occurred before, and there were a 
few that were implemented I would say roughly last summer, for 
example. I made reference in my statement to some 
recommendations we made in a report on the 8(a) program in 
2010. So there is more attention to this.
    There are certain times when we get information from SBA 
and it says, ``Here it is. We think we have implemented the 
recommendation.'' That requires a lot of follow-up, and there 
are certain times where we just do not agree. There are certain 
times we explain in excruciating detail why we do not agree 
that a recommendation is implemented. Sometimes there is a back 
and forth. I will give an example. On disaster loans, the one 
dealing with the early submission of applications, that is one 
where it required some back and forth but I would say, James 
Rivera and his team worked very well with us in saying, okay, 
``What do we have to do to convince you that we are addressing 
your recommendation?'' And we went through the different pieces 
of what we needed to understand. So it is a very collaborative 
process between us and SBA. There is more attention at SBA to 
make this process work now, but the agency is still very 
challenged in terms of addressing these recommendations.
    Ms. CHU. There were seven recommendations that went to full 
completion. Can you tell me why you believe SBA chose to 
prioritize these over the others and what was it that made 
these recommendations rise to the forefront?
    Mr. SHEAR. I think that there was one of the things that 
was always present here, the chief of staff said there was an 
emphasis in looking at the 8(a) program. And I would say the 
associate administrator that is relatively new to the position 
certainly reached out to us with the idea that she was taking 
these recommendations seriously and wanted to better understand 
what those recommendations were. And, they are somewhat dated, 
but they are still, we think, very relevant. So we were 
explaining the context--why were the recommendations the nature 
of what they were? And it had to do with how the program was 
operated, when we were writing the report. So there was a fair 
amount of back and forth and, as we stated, that just prior to 
issuance of our report four of the six recommendations from the 
2010 report, were implemented. So I think there was a focus on 
8(a) by both senior management at SBA and also, likewise by the 
associate administrator herself of the program.
    Ms. CHU. Okay. And if there is disagreement, how do you 
move forward if there is disagreement between the SBA and the 
GAO?
    Mr. SHEAR. A lot of times it is not disagreement but it is 
kind of a question, does this do it for us? And sometimes the 
focus becomes very much we need documented evidence that you 
have actually conducted a change. Like, for example, there are 
many times where we stated that district office staff needed 
better guidance for the 8(a) program and other programs for how 
to carry out their responsibilities, and they would provide us 
dates where they are stating that training occurred, and we 
just say that, okay, so tell us what the training entailed. We 
have to see some substance as far as what is happening here. So 
it tends to be a back and forth process, and sometimes we reach 
resolution. A lot of it is just having a focus on these issues. 
Many of these issues, there is a real focus and a 
determination. They are not simple issues. They will take time 
to address. But without the focus on the issues, it is not 
going to happen, and I think you see a situation here where 
many of these issues have not had that focus.
    Chairman CHABOT. Thank you. The gentlelady's time has 
expired.
    The chair would just note that if you had a teenager and 
you told them to clean up their room, they had 69 things 
sitting around the room and they cleaned up seven of them, that 
might be in a positive direction, but I do not think most 
parents would be satisfied with that, and I certainly would not 
be inclined to give them an increase in their allowance.
    The gentleman from Mississippi, Mr. Kelly, is recognized 
for 5 minutes.
    Mr. KELLY. Thank you, Mr. Chairman. And thank you, Mr. 
Shear, for being here.
    It is my understanding that doing any interviews with their 
employees, that they require that their general counsel be 
present during this. In your experience, has that been the same 
routine with other organizations or other agencies when these 
investigations are conducted?
    Mr. SHEAR. No. The idea of having district counsel present 
when we are interviewing nonmanagement district employees, it 
is an experience we have not had with other agencies.
    Mr. KELLY. As a former prosecutor, generally, when people 
lawyer up, so to speak, that was kind of--when they did not 
have any reason to, when it was a routine just talking-to, 
there was generally something behind that.
    It is so important when you have an SOP to understand an 
SOP. And putting on my military side of experience, we have 
SOPs in every military unit for every single thing that we do. 
And if you do not understand and use that SOP, it is really not 
a SOP because that stands for standard operating procedure. And 
if you do not know and understand it and use it, it is not an 
SOP; it is just a bunch of guidelines that you are not using. 
In your experience, is the SOP that the SBA has basically just 
a bunch of guidelines, or do they actually use and understand 
and update and continue to update their SOP?
    Mr. SHEAR. You have asked a few questions, and the easiest 
one to answer is have they been in the process of updating SOPs 
and bringing them up to what their current practices are and 
trying to create the guidance that the district office staff 
need. This lack of procedural guidance is one of the major 
deficiencies, one of the major, I would call it, rather new 
deficiencies, that we identified in this report. With the SOPs, 
there is an issue of how specific they are. So, for example, no 
matter how good the SOP is, because they are pretty general, 
the idea that when we had district staff saying to us, I was 
made a business opportunity specialist and I was handled the 
SOP and that was my training. I might be reporting anecdotal 
evidence from one or two people but, the point is that within 
itself the SOP is not sufficient to really prepare somebody to 
carry out their job duties.
    Mr. KELLY. And now I want to talk about something else that 
is really important to the military side, which I do not see in 
the SBA, but that is risk management. And to understand risk, 
obviously, you have to understand risk, first of all. And it is 
my understanding they do not have any strategic plan. They do 
not have a risk management program which is ample to determine 
what the risks are, and do you know of any way, or do you think 
they are capable of, first of all, understanding their risk, 
and second of all, if they do understand it, are they capable 
of addressing the risk that they have experienced?
    Mr. SHEAR. It is a great question. As far as to strategic 
planning, I think we did find many elements of a positive 
strategic planning process. The part that we really see as 
deficient is the inclusion of evaluation in a strategic plan.
    With respect to enterprise risk management, it is almost 
like, well, they have identified the pieces of what would go 
into enterprise risk management, but it requires a very cross-
cutting approach across the agency. They have created a board 
which is to say that at least in principle should be addressing 
these issues, but at first, there was unofficially a risk 
officer named. At the time it was a general counsel in 2009, 
and here we are years later and you just do not have the 
elements of a robust enterprise risk management system to 
really identify the risks not only from a financial standpoint 
but the risks having to do with carrying out the agency's 
mission. Like, for example, in disaster assistance and the 
other pieces of the agency. So sometimes you can look at 
enterprise risk management and say, even before it was invented 
there were some basic common sense business practices where you 
could find similar types of language. But in terms of the 
enterprise risk management that is becoming looked upon more by 
the Office of Management and Budget, it just is that it is at a 
very premature stage.
    Mr. KELLY. And just a final comment. I find it kind of 
funny that for the personal risk, they made sure they had 
counsel present at all interviews with employees, but they do 
not pay that kind of attention to the organizational risk and 
risk management plan.
    I yield back, Mr. Chairman.
    Chairman CHABOT. Thank you. The gentleman's time has 
expired.
    The gentlelady from New York, Ms. Meng, who is the ranking 
member of the Agriculture, Energy, and Trade Subcommittee is 
recognized for 5 minutes.
    Ms. MENG. Thank you, Mr. Chairman.
    The GAO identified several longstanding changes at the 
agency. Of course, of those that you have delineated, which are 
the most important when it comes to service delivery and more 
tangible and immediate resources for our small businesses, if 
you had to?
    Mr. SHEAR. As far as the longstanding business challenges, 
I would really focus on human capital and the need to really 
assess skills gaps to identify training that might be 
necessary. And all these different pieces fit together. For 
example, there are certain issues that are associated with, 
say, contracting programs that require participation across the 
agency and the various parts of the agency. So they all kind of 
fit together in a certain way. But if I had to identify one 
that really stands out it would be the human capital challenges 
as far as a longstanding challenge. Another one that has come 
up here, which whether you call it longstanding or not, is the 
need to be able to document decisions and to evaluate how well 
your programs are working and to document those decisions. So 
these are some of the things that really stand out based on our 
work.
    Ms. MENG. The report notes that the SBA has made 
significant progress when it comes to the loan guaranty 
process. Do you believe that the SBA in addressing human 
capital has helped it begin to turn the corner on some of those 
concerns?
    Mr. SHEAR. The concerns with loan guaranty. I am sorry, 
just----
    Ms. MENG. Developing and implementing a quality control 
program for the loan centers to verify and document like 
compliance with the loan process?
    Mr. SHEAR. I do not know whether I can link it to human 
capital or not, but among the work that we cite from the 
inspector general, there have been certain actions to address 
those longstanding challenges. I do not know whether it can be 
linked to any particular type of training or not. I just do not 
have an answer for that question.
    Ms. MENG. I was just curious. Thank you. I yield back.
    Chairman CHABOT. The gentlelady yields back.
    The gentleman from Florida, Mr. Curbelo, is chairman of the 
Subcommittee on Agriculture, Energy, Trade, and Hoverboards is 
recognized for 5 minutes.
    Mr. CURBELO. Thank you for recognizing my unfortunate 
injury over the holiday break. I will reserve all my comments 
about hoverboards.
    Thank you very much for coming in today. There are a lot of 
specific questions that have been asked, and I think they are 
all very important. But I want to ask you more broadly, I mean, 
is this just a cultural issue that is going to have to be 
addressed beyond the specific fixes that you may recommend? Is 
there just a cultural structural issue here that we should 
really focus on? I mean, I do not think Congress is 
particularly well equipped to get into the details of how an 
organization is operating, but we can certainly lay out a 
vision and at least suggest a structure. And I am wondering if 
you can give us some guidance in that regard.
    Mr. SHEAR. You ask a great question, so I am going to stand 
back from what I will call the detailed auditing here and 
discuss how pieces fit together, and some of them fit in with 
enterprise risk management and some of the other matters we 
have talked about. I used the word earlier, and it has been 
used over the years with SBA of it being siloed, and the idea 
that you can have certain reporting relationships and working 
relationships that are different. And part of that is you do 
not have the collaboration needed across the agency. So whether 
you are trying to implement enterprise risk management or 
simply just manage, how do you put together an operation that 
has this many pieces to it? There has to be a way of having 
collaboration across the agency. You have to have more of a 
culture where bad news can flow to the top. I really think the 
idea that over the years that there has not been that much 
focused attention on either our recommendations, or I think I 
can say that for the IG as well, that there has to be an 
ability for information to flow up and across the agency. And 
to some degree, if you step back from enterprise risk 
management, that is what part of this is.
    In terms of the concerns that SBA had with us interviewing, 
the question came up of interviewing nonmanagement district 
office staff. SBA officials raised a concern that we were 
giving a platform for people to complain. Now, this might just 
come from one or two people in SBA but I just say I do not get 
the sense that employees at SBA feel that they can offer honest 
feedback to leadership. And I know from all the efforts we have 
at GAO, to really embrace employee feedback, that such feedback 
is important. All these pieces kind of fit together, and they 
fit together with issues associated with the organizational 
structure. So stepping back from basically this very detailed 
audit work, these are some of the observations that I would 
make.
    Mr. CURBELO. And I thank you because we are focusing on a 
lot of symptoms and, of course, that is important, but I think 
the root cause, and I agree with you, is a breakdown in 
communications at SBA. And I look forward to having the 
administrator in here tomorrow and figuring out with her and 
with all of my colleagues what we can do to promote a culture 
of communication where people feel free expressing how they 
feel, what their frustrations are, and how they think the 
organization can work better. Thank you.
    Mr. SHEAR. Can I make one more point?
    Mr. CURBELO. Please.
    Mr. SHEAR. One of the things that--we did not do a general 
management review, but earlier in President Bush's 
administration, we evaluated something called Agency 
Transformation. It did not work out real well. Then Steve 
Preston came in as administrator, he implemented something he 
called business process reengineering, and there were certain 
actions there. And a lot of that stretched toward the end of 
that administration. And so one of the things that we were very 
conscious of when we reported on those efforts was that there 
is really a need for someone or some group of people in senior 
positions, because by its very nature, political appointments 
change with each administration even when you do not have 
changes in party. So the idea here is that we were kind of 
looking at what senior executive service career people might be 
in a position to kind of take hold of some of these efforts and 
to expand them? And I think that is one of the issues that this 
Committee should be thinking about and that SBA should be 
thinking about, because there is about a year left in this 
administration.
    Mr. CURBELO. Thank you.
    Chairman CHABOT. Thank you. The gentleman's time is 
expired.
    The gentlelady from North Carolina, Ms. Adams, who is the 
ranking member of the Investigations, Oversight, and 
Regulations Subcommittee is recognized for 5 minutes.
    Ms. ADAMS. Thank you, Mr. Chair. I am from North Carolina. 
It was a mistake.
    Thank you, Ranking Member Velazquez, as well, and Mr. 
Shear, thank you for being here and for your testimony.
    As an enthusiastic supporter of the work that SBA performs 
for our nation's small businesses, it is critically important 
that the agency is run both efficiently and effectively. I am 
sure you would agree to that. But the GAO report noted that SBA 
is considering expanding SBA-1, an expedited application 
process, to include the 8(a) program, which is critical for 
minorities to gain a foothold in the Federal Procurement 
Marketplace. Do you believe that this is a move in the right 
direction?
    Mr. SHEAR. It is a move that can be a promising move. From 
the basis of our audit work, on the use of technology, in this 
case, for the 8(a) program, I will emphasize the following. The 
Office of Management and Budget has very specific requirements 
that we have used in our audit work, our IT team that has 
worked with us on this, used, as far as analyzing existing IT, 
and in terms of requirements for investing in new IT. And SBA 
is engaged in a number of activities which SBA states that, 
might be sufficient for their IT outlook. But these very 
specific OMB requirements are there for a purpose, and we think 
that if SBA really wants to use technology to improve program 
delivery, which is a good thing to be thinking about, that it 
should have a more rigorous method for following the 
requirements that OMB has for IT investments and for the 
operational analysis of existing investments.
    Ms. ADAMS. Thank you. GAO found that SBA had not conducted 
regular interviews of its operational IT investments to ensure 
that they continue to meet agency needs. Why is this 
significant?
    Mr. SHEAR. For example, over time you might have certain 
systems that you have in place that become redundant with new 
investments, so that is part of the forward looking that I just 
mentioned in answering your question about SBA-One. And it is 
significant that way. And it is important to know, especially 
when you have systems that have been in place for a long time, 
whether they still are effectively meeting the needs of the 
agency in delivering its programs. So you are running a little 
bit blind if you do not go through these steps.
    Ms. ADAMS. Thank you. And in its report, GAO found several 
issues that SBA has not resolved. So what are the key actions 
or management changes that SBA needs to take to address these 
challenges?
    Mr. SHEAR. I think that we reiterated that at the time it 
was 69 recommendations from earlier reports and now it is down 
to 62, but we had eight new recommendations. We think they are 
very substantive recommendations that are really necessary to 
be addressed to try to improve the operations of the agency.
    Ms. ADAMS. Okay. Let me quickly ask. The review found that 
SBA field office employees are primarily evaluated on 
quantitative measures, not qualitative. GAO also found that 
employees have reported technical problems with aspects of the 
electronic performance system. As a result, many field office 
employees feel that they are not being properly evaluated. So 
what is SBA doing to correct this problem?
    Mr. SHEAR. I think it is a good question to ask the 
administrator because I really think that among these issues, a 
lot of it comes down to having, in terms of our work, it falls 
into the pieces of the human capital planning, the training 
that is involved, and the appraisal system where we do note 
that the system seems to be heavily dependent on quantity, like 
how many events did you hold rather than the quality of those 
events. And the development of performance standards really 
gets at the quality issue--all government agencies have a 
challenge in this area--but I think SBA has a way to go this 
way, and I hope that they are developing responses to that.
    Ms. ADAMS. Thank you. I am out of time.
    I yield back, Mr. Chair.
    Chairman CHABOT. Thank you. The gentlelady yields back.
    The gentleman from New York, Mr. Hanna, who is chairman of 
the Subcommittee on Contracting and Workforce is recognized for 
5 minutes.
    Mr. HANNA. Thanks. I appreciate that.
    I do not know where to go with this. There is so much to 
talk about, especially the new American dream and the old one, 
right, that people are saying is disappearing. It was always 
built by small business, and according to Walter Mead, who has 
written widely about this, that it is the key to the future, 
and small business plays such a critical role in this.
    We are going to have the administrator here tomorrow to 
talk about this. It sounds like they are just ignoring you; 
that they do not regard you as either your agency either 
knowing what you are talking about or they do not consider it 
important because it does not feel like there is any urgency to 
this. And yet, we know that about 2 to 3 percent of business 
loans in this country flow through them and that number is 
growing. And we have authorized more money to go into those 
programs. But what do we really do about this? It sounds like 
we are going to have this same meeting again next year.
    Mr. SHEAR. I think oversight is important, and I would say 
there has been a slight change at SBA. I do not know how 
extensive the change is. We will see over time. But the idea 
that last summer, certain efforts were initiated by GAO and 
SBA. It was not just by me and our team. It included my 
managing director. It also included the new chief of staff at 
SBA convening meetings to go over open recommendations.
    Mr. HANNA. Do they take you seriously? Or do you believe 
that they agree with you or that they want to implement what 
you are asking? It sounds like they are just stonewalling you.
    Mr. SHEAR. It is one area where we see some positive 
movement. So unlike all the other times that I have been here 
and said, well, SBA seems to always agree but then it is very 
rare that actions are fallen. It is just in certain pockets and 
certain programs where we might have an associate administrator 
who is really in tune with our recommendations that an action 
is taken. There seems to be some movement, but I think time 
will tell, and I would hope----
    Mr. HANNA. Is it just the case you have no levers to pull 
to make them do and follow your recommendations? All it is is 
polite conversation?
    Mr. SHEAR. So let me go back to what we do as an agency. 
Just recently, the Comptroller General, Gene Dodaro, testified 
about the importance of agencies implementing our 
recommendations and how doing such can improve the functioning 
of government. And this was all tied in again with him sending 
letters to the heads of agencies on recommendation 
implementation rates. We do get a lot of movement in the sense 
that government-wide, 80 percent of our recommendations are 
implemented. We just do not have that track record at SBA. We 
have not had it. There has been some positive movement----
    Mr. HANNA. You said they are at a 50 percent productivity 
level compared to other agencies that are closer to 80 or more.
    Mr. SHEAR. Yes.
    Mr. HANNA. So the proof is in those numbers, that they are 
not highly functioning. So what would you ask Administrator 
Sweet tomorrow when she is here? I can imagine, but----
    Mr. SHEAR. What would I ask? Many of the questions that you 
are asking me today are probably good questions to ask. But 
part of this is the areas where we are looking for in a sense 
of some of the bigger issues. For example, for SBA to come back 
to us and say during the course of this, which is saying, have 
you assessed your organizational structure? Because our 
analysis indicates that there are a lot of challenges 
associated with it. So either you have to change the structure 
or you have to do things to address the challenges.
    Mr. HANNA. What you are saying is that they just do not 
care.
    Mr. SHEAR. But then we get a response at the agency comment 
period, and then we get response now in a 60-day letter saying 
we have evaluated organizational structure. So really, the idea 
of really establishing very firm plans that would extend into 
the next administration is important. What plans does she have 
for what she wants to achieve.
    Mr. HANNA. So the long-term structural changes that are 
permanent and not based on the changes in command?
    Mr. SHEAR. Yes. I think that to really focus on some of the 
organizational structure issues and the associated--a lot of 
these things fall together. The human capital issues, the 
training needs, all those different pieces. I think, what is 
your plan for getting the agency to be a more highly 
functioning agency?
    Mr. HANNA. My time is expired.
    Chairman CHABOT. Yes, the gentleman's time is expired.
    The gentleman from Massachusetts, Mr. Moulton, who is the 
ranking member of the Health and Technology Subcommittee, is 
recognized for 5 minutes.
    Then we will go to Ms. Radewagen, who is American Samoa, 
and she is also the chair of the Subcommittee on Health and 
Technology.
    Ms. RADEWAGEN. Thank you, Mr. Chairman. Welcome, Mr. Shear.
    During the GAO's investigation of mismanagement of SBA, did 
you find that any regional offices took on more responsibility 
than other regional offices? For instance, there are two U.S. 
territories that do not seem to have regional representation, 
let alone a district office. Would it be accurate to say that 
SBA has neglected certain regions while perhaps overserving 
other regions?
    Mr. SHEAR. You ask a great question and I wish that I could 
say that we did audit work to see what representation there was 
of regional and district offices in a specific outreach, but we 
did not try to geocode the different activities of the various 
district offices in particular. It is a very good question but 
our audit work just does not address it.
    Ms. RADEWAGEN. Thank you, Mr. Chairman. I yield back.
    Chairman CHABOT. The gentlelady yields back.
    The gentleman from Virginia, Mr. Brat, is recognized if he 
has any questions.
    Mr. BRAT. Thank you, Mr. Chairman, I have no questions.
    Chairman CHABOT. Okay. If not, I think the ranking member 
has another question, and we now yield to her.
    Ms. VELAZQUEZ. Mr. Shear, you know, I cannot help but feel 
frustrated because we have been in this predicament for so many 
years. I have been sitting on this committee for 23 years, and 
the Disaster Loan Program has been one that I care about 
because it has impacted New York City. We have worked on 
legislation since Katrina and here we are today passing a new 
law that I authored to reopen the Disaster Loan Programs 
because the percentage of decline in loan applications were so 
high. I am happy to see that the administration is moving to 
provide the assistance people deserve, particularly the victims 
of Hurricane Sandy. But tomorrow we are going to have the 
administrator before us. We are going to have to ask the tough 
questions that need to be asked based on the review you just 
conducted. My question to you, after listening to my colleagues 
and the answers that you have provided, is that it looks like 
someone needs to be in charge of watching the store, right? And 
it goes to the issue of the organizational structure that could 
survive the fact that pretty soon we are going to be looking at 
a new administration in the White House. How can we address 
that? Who do we hold accountable in terms of making sure? 
Because you said that in terms of the 8(a) program, well, there 
is an associate administrator that cares about making sure that 
the suggested recommendations are implemented to make the 
program better. Nevertheless beyond the administrator, is there 
anything that could be done at the organizational structure of 
the agency that will be accountable in making sure all these 
recommendations are implemented?
    Mr. SHEAR. At the organizational structure level, one of 
the most basic things that we said was there is nothing magical 
about having the 10 regional offices and the 68 district 
offices and different lines of reporting, in terms of working 
relationships and reporting relationships. There are other ways 
the agency could structure itself. We do not feel that we have 
the basis for saying this is what the organizational structure 
should be, but we certainly identify that there are these 
challenges. And you know, when we reported on the 8(a) program, 
it is a symptom of a situation where you have district staff 
that are not necessarily sure what their jobs are in terms of 
continued eligibility and things like that and the oversight 
that is needed. But from a standpoint of organizational 
structure, there was a consultant's report, and when it was not 
given to us, we did not feel that was very important because 
the important thing is what are you doing SBA to address, if 
you are going to keep your organizational structure largely 
intact, how are you going to address these issues that are 
associated with it? And we still have not seen anything. When 
we followed up with them last month, we still do not see 
anything in terms of what are you going to do about the 
structure of this agency, or if you are not making structural 
changes, how are you making changes to make sure that people 
are accountable and that people are trained to do their jobs 
and they understand what their jobs are? And I think those are 
some of the more fundamental issues that we really have here. 
You can put all these other things aside and you say that is 
some of the more fundamental issues that have been around for 
years. There are a lot of things we have talked about over the 
years with individual programs and even looking more broadly 
across the programs that now fall under the rubric of 
enterprise risk management. But that actually gives a pretty 
good rubric as far as saying how do you really define what the 
mission of the agency is and how you put the pieces together. 
And then the other piece that we would certainly discuss, with 
this Committee and we have discussed with you over the years, 
we think of the GPRA Modernization Act and the need to 
collaborate across agencies, whether it be USDA Rural 
Development or these working groups that the Office of 
Management and Budget have set up for collaboration in 
delivering assistance, things like that, a more collaborative 
approach would be the other things that really stand out when I 
just step back from all these individual recommendations.
    Ms. VELAZQUEZ. Thank you. Thank you, Mr. Chairman. I yield 
back.
    Chairman CHABOT. Thank you. Thank you very much. The 
gentlelady yields back. Her time is expired.
    Just one quick question, Mr. Shear. What is your assessment 
of the SBA's response to the GAO report that was submitted to 
Chairman Chaffetz and the Committee on Oversight and Government 
Reform?
    Mr. SHEAR. Oh, boy. You asked for a short answer.
    One of the things that it does note and I think that I 
would expect in a 60-day letter, because I have read enough 60-
day letters and comments in our draft reports from SBA to know 
certain common themes, such as we agree and we are taking 
action. Some of the things that reflect something positive that 
is in my statement was even though it might be a small number 
of recommendations, a relatively small number over the last 
year, that there is at least some focus on those 
recommendations, and I hope it is not viewed as just a fire 
drill within SBA that they are trying to do this over a short 
period of time, but they are trying to create a culture and a 
management structure that can work over time, even into the 
next administration on working on those issues.
    So as far as there is a lot of activity going around, and a 
lot of what we found in doing this work and that we found in 
looking at other programs, particularly the contracting 
programs over the years, there is always a lot of activity 
around things that are somehow related to certain things that 
we are finding, but the idea of going the extra mile is not 
quite there. There are a lot of initiatives and activities that 
have occurred but it is a matter of taking it to the next 
level.
    Let me just mention two things that are in the letter where 
I just say that raises a little bit of concern. One is that I 
have already referred to, that the agency has conducted an 
assessment of its organizational alignment. It is not just for 
the purpose of documentation or for our audit work that we see 
documented evidence of a thorough evaluation. It should be an 
important living document over time that its current leadership 
and future leadership can rely on in terms of addressing the 
issues of the agency--it is not as important as to whether we 
see the assessment or not. What is important is that there is 
documented evidence of a thorough examination of the 
organizational structure. And then the other one, there was 
reference made to doing the operational analyses of the IT. 
This is one where the requirements that OMB has are very 
specific and our IT team relies on the OMB guidance. And this 
is one where there is a statement in there that, we and our IT 
team take some exception to that, we have not seen documented 
evidence that the required operational analyses have been done. 
So there might be good things going on in the agency in terms 
of oversight of its IT, but we just do not see documented 
evidence that meet these very specific requirements that OMB 
has.
    Ms. VELAZQUEZ. Would the gentleman yield?
    Chairman CHABOT. I yield.
    Ms. VELAZQUEZ. On the IT issue, you say that there has to 
be oversight, OMB, do they conduct any oversight?
    Mr. SHEAR. I would like to follow up with the Committee on 
that and really get the full input. I know that my colleague, 
Dave Powner, our director in the IT team has testified before 
this Committee, and I would want to follow up with him on 
specifically the oversight of OMB. My simple answer to your 
question is yes; OMB is involved in conducting oversight. 
Whether it is a question for the record or whether, with 
Committee staff of following up with Dave and his team, who 
have collaborated with us so much on this work, I think that 
could give a more complete answer than what I could give you.
    Ms. VELAZQUEZ. Okay.
    Chairman CHABOT. Okay. Reclaiming my time.
    Ms. VELAZQUEZ. Thank you. I yield.
    Chairman CHABOT. I would just note that we have heard the 
shortcomings, the deficiencies. I could use a lot of other 
words, too, but the problems that are going on at the SBA at 
this time, the administrator will have an opportunity tomorrow 
to address the Committee and then to take questions as well, 
and we would invite members on both sides of the aisle and the 
public to attend and hear the response tomorrow as well. It is 
at 11 o'clock in the morning.
    I would ask unanimous consent that members have 5 
legislative days to submit statements and supporting materials 
for the record. Without objection, so ordered.
    If there is no further business to come before the 
Committee, we are adjourned. Thank you very much.
    [Whereupon, at 12:15 p.m., the Committee was adjourned.]
    
    
    
    
    
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