The Small Business Administration handed out $100 million so far this hurricane season, and while some might see that as good government, SBA acting Inspector General Hannibal “Mike” Ware sees a caution sign.
SBA approved more than $1 billion in disaster loans for people impacted by hurricanes Harvey, Irma and Maria, Ware told Federal News Radio. He added that any time money goes out that quickly, it increases the chances for improper payments and fraudulent activity.
“The disaster program always has to balance competing priorities of getting assistance out as fast as possible to people who really need it, while ensuring the right type of controls are in place to prevent improper payments,” Ware said. “It’s important to know that our office is poised to address these challenges in real time, but this will be a huge priority going forward.”
The disaster assistance program is just one of the challenges SBA faces as part of its fiscal 2018 management and performance challenges report, prepared by its Office of Inspector General.
The latest report includes eight challenges which range from IT leadership to 8(a) business development to acquisition.
Ware said it’s important to remember that a challenge doesn’t necessarily mean there’s an ongoing issue being ignored or neglected.
“What it means is that the agency has major programmatic areas that need to continuously improve,” Ware said. “For example, even if the agency implemented every single recommendation, we would still designate key areas as challenges. The agency can never lose sight of the importance of the level of oversight that will always be necessary to ensure that its programs are indeed meeting their specified purposes.”
Ware said the major takeaways from this year’s report are that SBA took “major steps” to address its challenge areas, however, “they still have quite a ways to go in terms of accurately reporting contract and goal achievements.”
Among those major steps is SBA’s oversight of the disaster assistance program.
Ware said there’s an office in Dallas, Texas that deals only with disaster oversight. He said the committee hit the ground running right after Hurricane Harvey, and within 30 days of the first loan issuance, had an audit team mobilized to watch how SBA ramped up the program.
“We committed 120 days after that to put out our first quick response report on their disaster response to Harvey, and in addition to that, I realigned some of my disaster agents,” Ware said. “I put one in Florida, I put one in Georgia, and assigned one to Houston to start building the type of coalition that we need when it comes to fraud deterrence and uncovering fraud in a disaster program. So we’re a member of the disaster fraud working group, and we’re full speed ahead on this.”
Another challenge where SBA made dramatic improvements is in acquisition management.
“This might be one of those that we are able to get rid of actually,” Ware said.
Ware credited SBA’s chief financial officer who several years ago called for a study of the gaps in SBA’s acquisition practices.
Since that study’s publication, SBA’s followed a roadmap of actions to locate and address gaps in its acquisition program.
“To their credit, this was a lot in response to our work, and during 2017, they implemented all the actions to address the acquisition deficiencies, such as revising and issuing their new standard operating procedures … [and] streamlining the hiring process for contracting officers.” Ware said. “They also made some significant improvements to their information systems. They also hired a senior procurement executive and that person is responsible for managing and directing their acquisition system, and all the information that they provided to us. They are committed to continue conducting the annual internal control reviews of that program.”
Ware also credited SBA with recognizing the importance of IT leadership.
But the report does highlight some areas where SBA can make improvements in 2018.
Ware pointed out several new actions for its 8(a) business development program, including implementing new controls to ensure eligibility of firms admitted to the program, developing and implementing a system to help program officials monitor participant progress, and providing business development needs on an individual basis.
“The reason we made that recommendation was because SBA currently lacks an enterprise-wide system that SBA program personnel can use to better monitor program participants, development and compliance,” Ware said. “They have made several attempts in the past to develop such a system, but they just have not been successful.”
Ware said his office also believes SBA can improve in the area of lendor oversight and its risk management program.
“There are huge risks inherent in delegated lending and SBA needs to effectively identify and track the loan agent involvement in its loan portfolios,” Ware said. “One of the areas we have continued to identify across SBA’s programs — and I think it comes out as a major challenge for us — is its ability to provide assistance while ensuring that only eligible firms are admitted and remain in their programs, and the big spin off from all of that is that SBA needs more outcome-based performance measures across those programs.”