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OIG Reports

Fiscal Year 2006 Report on the Most Serious Management and Performance Challenges Facing the Small Business Administration

Date Issued: 
Friday, October 14, 2005
Report Number: 


TO: Hector V. Barreto

FROM: Peter L. McClintock
Acting Inspector General

SUBJECT: SBA’s Top Management Challenges for Fiscal Year 2006

In accordance with the Reports Consolidation Act of 2000, we are providing the Office of Inspector General’s (OIG) Report on the Most Serious Management Challenges Facing the Small Business Administration (SBA) in Fiscal Year (FY) 2006. This document represents our current assessment of Agency programs or activities that pose significant risks, including those that are particularly vulnerable to fraud, waste, error, mismanagement, or inefficiencies. The Challenges
are not presented in order of priority, as we believe that all are critical management issues facing the Agency.

Our report is based on specific OIG, Government Accountability Office (GAO), or other official
reports, as well as our general knowledge of SBA’s programs and operations. Our analysis considers actions reported by the Agency as of September 16, 2005, as well as certain actions brought to our attention as of September 30, 2005.

The OIG has eliminated two Challenges from the FY 2005 Report. These two Challenges are:
former Challenge #1—“SBA needs to improve its managing for results processes and performance data;" and former Challenge #8—“SBA needs to enforce its rules to deter firms receiving small business set-aside, 8(a), or small disadvantaged business price evaluation
preference contracts from passing through large portions of the procurement to other firms."

This year’s report contains one new Challenge—Challenge #1—that states that "Flaws in the
procurement process allow large firms to receive small business awards and agencies to receive small business credit for contracts performed by large firms." This Challenge was published in February 2005 as Challenge #12. Challenge #11 from last year’s report, entitled “The current practices of the SBIC program place too much risk on taxpayer money” has been renumbered as Challenge #8.

For FY 2006 the OIG has implemented a fourth score color—“orange”—which denotes that the
Agency has made some progress on a particular "action needed” item in a Challenge. For example, if the challenge involves establishing a new process, a "red" score indicates no progress in developing the document (e.g., an SOP procedure); an "orange" signifies that a credible document had been drafted; and a "yellow" indicates that the document has been cleared and
issued. To achieve "green," the Agency would need to show that it is effectively implementing the process. For some "actions needed" this means that the Agency has moved up from a "red" score to an "orange" one. In other cases where the prior color was “yellow,” the “orange” color reflects a more accurate status for the action. In these cases, the status will not show downward
arrows if a “yellow” score has been reclassified.
While Agency progress on a number of the challenges has been encouraging, much more remains to be done. By their nature, these challenges require continued long-term commitment and effort by the Agency.

We would like to extend our appreciation to SBA’s management and staff for their courtesy and
cooperation in providing us with the information needed to complete this report in a timely manner.

This report will be incorporated into the SBA’s FY 2005 Performance and Accountability Report, as required by law. Please contact me at (202) 205-6586, should you have any questions.