From the U.S. Government Accountability Office, www.gao.gov Transcript for: Small Business Administration Management Challenges Description: Audio Interview by GAO staff with Bill Shear, Director, Financial Markets and Community Investment Related GAO Work: GAO-15-347: Small Business Administration: Leadership Attention Needed to Overcome Management Challenges. Released: October 2015 [ Background Music ] [ Narrator ] Welcome to GAO's Watchdog Report, your source for news and information from the U.S. Government Accountability Office. It's October 2015. The Small Business Administration operates almost 20 programs that help small businesses obtain capital, participate in federal contracting, and receive counseling and training necessary for business success. A team lead by Bill Shear, a director in GAO's Financial Markets and Community Investment team, recently reviewed SBA's management and operations to see how well the agency is serving its mission. GAO's Jacques Arsenault sat down with Bill to discuss what they found. [ Jacques Arsenault: ] From its name, I can tell that the Small Business Administration works to help small businesses, but can you tell me a bit more about what that means in practice? [ Bill Shear: ] SBA administers programs that fall into three general areas. One are loan guarantee programs, which help small businesses that might not be able to get suitable credit from the private sector to get loans that are guaranteed by SBA. Second, SBA has counseling and training programs where there's these non-profits that SBA calls resource partners that provide assistance to individuals who are starting and trying to grow their small businesses. And third, SBA administers programs that help small businesses compete for federal contracts. For example, certain contracts can be set aside for competition only among small businesses. And SBA administers programs that determine the eligibility of small businesses and what are called "socioeconomic categories" of small businesses to participate in these programs. [ Jacques Arsenault: ] Now, your report highlights a number of challenges that seem to prevent SBA from doing that job effectively. Can you talk about some of these? [ Bill Shear: ] Jacques, we looked at a wide variety of challenges. Let me mention three of them. First, we looked at challenges the agency has had in incorporating program evaluation into its strategic planning. And the problem with this is without an evaluation component, it's hard for SBA to say what among its many programs, what programs are working effectively and which ones aren't. Second, organizationally, SBA has 10 regional offices and 68 district offices in addition to its headquarters. Much of the day-to-day work is conducted by district office staff. With this organizational structure, lines of reporting are not always clear. And as a result, certain functions such as determining small businesses eligible to participate in SBA programs have not been effectively and consistently administered. Third, SBA has not conducted regular reviews of its operational IT investments to ensure that they continue to meet agency needs. Therefore, the agency has made IT investments that may not be in line with agency goals. [ Jacques Arsenault: ] Let me ask you then, to what extent are these longstanding challenges for SBA versus newer problems that have come up more recently? [ Bill Shear: ] With the three examples I provided you, Jacques, human capital and IT management have been present for over a decade. During the course of our evaluation, we identified a number of new concerns that are consistent with these longstanding management challenges. For example, SBA provides staff, resource partners, and program participants procedural guidance through its standard operating procedures. Many of these SOPs are out of date and compromise SBA's efforts to deliver program services in an effective manner and in accordance with laws and regulations. [ Jacques Arsenault: ] So then, can you talk about the recommendations that GAO has made to SBA? [ Bill Shear: ] First, we identified over 60 recommendations made by GAO in prior work that we maintain have merit and should be fully implemented. In this report, we also make eight new recommendations designed to improve, among other things, SBA's program evaluations, its strategic and workforce planning, its training efforts, its procedural guidance, and its oversight of IT investments. For example, to improve SBA's human capital management, we recommend completion of a complete workforce plan that includes key principles such as a competency and skill gap assessment and long-term strategies to address its skill imbalances. [ Jacques Arsenault: ] And finally, for small business owners and for taxpayers, what would you say is the bottom line of this report? [ Bill Shear: ] Small businesses comprise a large share of the U.S. economy. And they're often looked upon as an engine for our economic growth and economic well-being. Sustained leadership commitment is needed at SBA to address management challenges that could keep SBA from effectively and efficiently assisting small businesses. [ Background Music ] [ Narrator: ] To learn more, visit GAO.gov and be sure to tune in to the next episode of GAO's Watchdog Report for more from the congressional watchdog, the U.S. Government Accountability Office.