Summary: The Small Business Administration (SBA) increasingly needs to monitor the activities of lenders that help deliver its programs. Annual loan approvals for the 7(a) General Business Loan Guarantee Program and the section 504 Certified Development Company Debenture Program have nearly doubled since 1992, and the loan portfolio for all its programs now exceeds $40 billion. During that same period, SBA cut its staff by 20 percent and shifted to lenders the responsibility for key loan origination, servicing, and liquidation functions. Lenders now originate about 75 percent of new loans with little or no SBA involvement in the eligibility and credit approval processes. To improve its ability to monitor loans and lenders, SBA has proposed a loan monitoring system to help manage its loan portfolios, identify and mitigate the risks incurred through loans guaranteed by SBA, implement oversight of internal and external operations, and calculate subsidy rates. GAO reported in June 1997 that SBA had not undertaken the essential planning needed to develop the proposed system. (See GAO/AIMD-97-94.) Congress later required SBA to perform eight planning actions that would serve as the basis for funding the system's development and implementation. This testimony (1) examines SBA's progress in completing the mandated actions, (2) evaluates SBA's products completed so far, (3) discusses the processes used to develop these products and manage key activities, and (4) outlines steps that the agency needs to take to manage risks.
