Rep. criticizes SBA's loan monitoring system plan

The chairman of a House subcommittee this month said the Small Business Administration's plans for its proposed $20 million loan monitoring system are incomplete and unacceptable.

As required, SBA submitted a report to Congress June 2 detailing its progress in carrying out an eight-step action plan to develop an automated loan monitoring system to track the $45 billion in loans made by lenders to small businesses participating in the 7(a) program. The plan was a condition for SBA receiving $8 million in funding for the project.

Although SBA maintains that its plan met the requirements laid out in the Small Business Reauthorization Act of 1997, Congress and the General Accounting Office said more work needs to be done.

Rep. Roscoe Bartlett (R-Md.), chairman of the House Small Business Committee's Subcommittee on Government Programs and Oversight, said the plan is incomplete. "It had been hoped that the SBA would have completed the mandated planning...by June 2, 1998, the date the statutes required SBA to report its progress to Congress," Bartlett said in his testimony. Instead, six months after the law was enacted, SBA has only submitted "a plan to do a plan," he said.

Joel Willemssen, director of civil agencies information systems at GAO's Accounting and Information Management Division, said that although SBA formed a team last December to work on the new automated loan monitoring system, it had not completed any of the eight mandated planning actions. "The SBA should complete all of the eight actions mandated by the [act] before buying hardware or systems," Willemssen said.

However, John Gray, SBA's associate deputy administrator, said in written testimony that the report the agency submitted to Congress on June 2 "satisfied the language of the act." SBA and contractor Electronic Data Systems Corp., developed a detailed plan showing how the agency would accomplish the eight directives. SBA did not interpret the act to mean the action items themselves had to be completed by June 2, Gray said. Completion of the items, which include fully defining the system requirement and identifying an acquisition strategy, will occur in August 1999.

Despite different interpretations of the act, there is consensus on the need for the system. "Both [House Small Business Committee] Chairman Jim Talent and I have expressed our support for SBA's requirement to get its financial house in order," Bartlett said. "There is also support in Congress for the administrator's efforts to modernize SBA's systems and outlook."

Modernization of SBA's computerized loan monitoring system "is critical to SBA's goal of becoming a 21st-century, leading-edge financial institution," said Lawrence Barrett, chief information officer at SBA. As SBA's role shifts from monitoring loans to monitoring lenders, "we must have a computerized loan monitoring system that enables us to manage that change," he said in written testimony.

Features of the new system will include the ability to collect loan and lender information, analyze loans, enable SBA to recognize trends in who uses loans and integrate SBA's systems with private-sector lenders. SBA expects to deploy the system by May 2001.

While developing the plan is a good start, there are challenges ahead. "SBA must still successfully execute it to complete" the eight actions, Willemssen said. "In executing the plan, SBA will face formidable technical and management challenges and risks." These include rolling out a loan monitoring system without having an information technology architecture in place and using new methodologies for the first time.

"In early conversations with GAO, we didn't have that infrastructure in place to manage those planning steps," Barrett said. "We think we can move ahead now at a much more rapid pace."