DOCUOENT RBSU!E 01153 - [a0590912] (Restricted) Closing of Small Business Administration 'n Marshall, Texas. B-114835; CED-77-22. January 6, 1977. 3 pp. 4 enclosure (7 pp.). Report to Rep. Sam B. Hall, Jr.; by Elmer B. Staats, Comptroller General. Contact: Community and Economic Development Div. Budget Function: Commerce and Transportation: Other Advancement and Regu;ation of Commerce (403). Organization Concerned: Small Business Administration. Congressional Relevance: Rep. Sam B. Hall, Jr. The closing of the Small Business Administration's district office in Marshall, Texas, was reviewed. Findings/ConclusioDs: The area forcerly served by the Marshall district office is nov served by the Dallas, New Orleans, and Little Rock district offices. The production per staff meaber of the three major units in the Harshall office was generally not lower than their counterparts at the SBA district offices to which marshall's workload was redistributed. The SBA overestimated gross savings from the closing of the Marshall office by $3,022, and underestimated costs by $75,863. It is estimated that closing the office will cost $8,488 in the first year instead of saving $70,397 as claimed by SBA. Savings in the second and succeeding years would be S118,670. The Marshall office was renovated in 1975 at a cost of $21,783. only the draperies, which cost S150, can be used in other SBA offices. The director of the Dallas region and two other officials chartered a plane for a flight to and from Marshall at a cost of $202. The cost of the chartered flight does not seem excessive. (RRS) tESTRICTED - Not to be released outside the General Accounting Offlco *exept On the basis of specific approvel ($^~by W_ WAInImSNer. DA.L N _ AT=e_ B-114835 JAN 6 1977 The Honorable Sam B. Hall, Jr. House of Representatives Dear Mr. Hall: Your letter of July 16, 1976, expressed concern over the closing of the Small Business Administration's district office an Marshall, Texas, and inquired about whether it would be appropriate for us to review this closing. In accordance with discussions with your office on July 30, 1976, ae agreed to -- obtain data on the workload of the Marshall office and otner district offices and -- review the reasonableness of savings the Small Business Administration estimated would result from the change. We also looked into whether the Marshall district office was renovated shortly before the decision to close it was made and whether the director of the Small Business Administration's region VI (which includes Marshall) had chartered a plane at Government expense. We reviewed records and interviewed officials at the Washington, D.C., headquarters of the Small Business Adminis- trationt at its region VI (Dallas) and Marshall offices; and at the General Services Administration regional office, Fort Worth, Texas. The following summarizes what we found. -- The Small Business Administration closed its Marshall district office on September 12, 1976. The area formerly served by the Marshall district office--20 counties in Texas, 7 parishes in Louisiana, 3 counties in Arkansas--are now served by (1) the Dallas district office with the as- sistance of a newly opened, limited-service station in Marshall, (2) the New Orleans CED-77-22 B-114835 district office with the assistance of a newly opened limited-service station in Shreveport, and (3) the Little Rock district office. -- The production per staff member of three major units within the Marshall office was generally not lower than their counterparts at the Smaell Business Administration district offices to which Marshall's workload was redistributed. -- We reviewed the reasonableness of the Small Business Administration's estimate of savings resulting from the closing of the Marshall office in terms of gross savings and costs. We found that the Small Business Administration overestimated gross savings by $3,022 and underestimated costs by $75,863. As a result, we estimated that closing the office would cost $8,488 in the first year rather than save $70,397 as claimed by the Small Business Administration. We estimated that savings in the second and succeeding years following the office's closing would be $118,670. Our estimate of sav:ngs assumes that the Small Business Administration will fully implement its plans for reducing salary costs in the Dallas region. -- The Marshall office was renovated in calendar year 1975 at a cost of $21,782. Renovations in- cluded work on walls and telephone and electrical outlets as well as purchasing new drapes. Closing the office will mean the loss of renovations cost- ing $21,632. Only the drapes, which cost $150, can be used in other Small Business Administration offices. -- The director of the Small Business Administration's Dallas region chartered a plane for a flight from Dallas to Marshall and return at a cost of $202. He was accompanied by two other regional office officials. The cost of the chartered flight does not seem excessive in view of the time and cost of alternative methods of travel. -2- B-114835 A more detailed discussion of these matters is contained in the enclosure to this letter. We discussed the information obtained with the Dallas regional director and included his comments where appropriate. Sinq y yours, Comptroller General of the United States Enclosure - 3 - ENCLOSURE I ENCLOSURE I REVIEW OF CLOSING OF THE SMALL BUSINESS ADMINISTRATION'S MARSHALL, TEXAS, DISTRICT OFFICE BACKGROUND The Small Business Administration's (SBA's) Marshall, Texas, was 1 of 10 district offices office in VI (Dallas), which includes Louisiana, in SHA's region Arkansas, Oklahoma, Texas, and New Mexico. Marshall is located about 150 miles from Dallas. The district in eastern Texas, had a staff of 23 people. office in Marshall Or, July ' 1976, the SBA Administrator approved a recomr Jy the Dallas regional director that offic. yLvb&ed and that smaller offices, known as the Marshall stauions, be established in Marshall, Texas, post-of-duty and in Shreveport, Louisiana, a city formerly served Post-of-duty stations are offices by the Marshall district office. with limited authority; they can promote SPA'S loan programs and receive loan applications, but they car. not approve them. The Administrator July 9, 1576, letter to Congressman Hall indicated in a that these changes were being made to "better serve the small region VI by managing its financial andbusiness community in personnel resources more efficiently and effectively." On September 12, 1976, SBA closed the Marshall office and established post-of-duty stations district a staff of two people and in Shreveport in Marshall with people. New office space was secured in with a staff of three Marshall for the post- of-duty station. The area formerly served by the Marshall was composed of 20 counties in eastern Texas. district office northwestern Louisiana, and 3 counties 7 parishes in in southwestern Arkansas. The counties in Texas are now served by the Dallas district office with the assistance of the post-of-duty Marshall; the parishes in Louisiana are station in served district office with the assistance of the by the New Orleans lc-st-of-duty station in Shreveport; the counties in Arkansas are now under the juris- diction of the Little Rock district office. - 1 - ENCLOSURE I ENCLOSURE I COMPARISON OF PRODUCTION AT MARSHALL AND OTHER DISTRICT OFFICES The AdministraLor of SBA said the Marshall office was being closed to increase the efficiency and effectiveness of the Dallas region by reassigning most of Marshall's responsi- bilities and staff. We compared the fiscal year 1976 produc- tion per staff merber of Mar3hall's Financing, Portfolio Management, and Management Assistance Divisions with similar production of the district offices to which Marshall's work- load was redistributtd. This comparison does not demonstrate that personnel at the Marshall office were less productive than personnel at these other offices. Financing Division The function of the Financing Divisions at SBA district offices is to process loan applicaticns. SBA's Management Information System measures the output of these divisions by computing the number of loans which they approve. The following chart shows for fiscal year 1976 the average number of loans approved by each loan specialist in the Financ- ing Divisions at Marshall and at the district offices which assumed Marshall's loan processing functions. It also shows how long, on the average, it took the four offices to process loan applications. Average Loans approved processing District offices per specialist time (days) Marshall 66 21 Dallas 65 27 New Orleans 84 18 Little Rock 64 22 Loan applications which would have been processed at the Marshall district office will now be handled initially by the post-of-duty stations at Marshall and Shreveport. The Marshall station will send applications to the Dallas district office for final approval and the Shreveport station will send them to the New Orleans district office. According to an official of the Marshall office, the mailing required by the new arrangement may increase processing time. - 2 - ENCLOSURE I ENCLOSURE' Portfolio Management Division The Portfolio Management Divisions at SBA district offices are responsible for servicing loans in the districts' loan portfolios. The following chart shows average loan portfolio as of June 30, 1976, (excluding disaster icing specialist at the four loans) per loan eerv- offices and the percent of at each office that were in loans a current status. Percent of District offices Loans per loans in servicing specialist current status Marshall 328 Dallas 90 258 88 New Orleans 165 90 Little Rock 208 87 Management Assistance Division The Management Assistance provide counseling to SBA Divisions at SBA district borrowers offices use of SBA's own business and other small businesses management specialists, outside by ants, and volunteer groups consult- such as the Service Corps Executives (SCORE). of Retired The following chart shows, counseling actions by business for fiscal year 1976, the management average Marselall and Little Rock Offices specialists at the by other management assistance and the resources total counseling (e.g., SCORE).j/ actions Counseling action Counseling actions by outside District offices per speccialist m Marshall 115 Little Rock 1,061 172 1,046 l/Comparable data could not be obtained for Dallas and New Orleans. ENCLOSURE I ENCLOSURE I We discussed the above data with the Dallas regional director who acknowledged that the Marshall office had been a good producer. Bowever, he repeated, without being specific, SBA's justification for closing the office: better use of the region's personnel. ESTIMATED SAVINGS AND COSTS RESULTING FROM CLOSING THE MARSHALL OFFICE In a July 9, 1976, letter to Congressman Hall, the Administrator of SBA provided an estimate, which was developed by the Dallas region, that closing the Marshall office would save $85,268 a year. Officials in the Dallas region provided us with more current estimates. They calculated that the clos- ing would produce gross annual savings of $133,397 and result in one-time costs of $63,000. The net savings for the first year following the closing would therefore amount to $70,397. We estimate that closing the Marshall office could result in net first year costs of about $8,488 instead of the $70,397 savings calculated by the SBA Dallas regional office. The difference occurred because the regional office had overestimated its gross savings by $3,022 and underestimated the cost of clos- ing the office by $75,863. SBA GAO 1st year 2-d year only and after Gross savings: Salary a/$104,531 $104,531 $104,531 Other savings 28 866 25 844 25 844 Total ' _3 35 _375 Costs: i-e-ocation 63,000 63,000 Ocher costs - 75 863 11 705 Total 63,-000 138 ,635 Savings (Costs) $70,397 $ 8, ) $118,670 a/SBA has developed a staffing plan which, if fully followed, would reduce salaries by $104,531. Our estimate is based on strict adherence by SBA to this plan. At the completion of our review, it could not Le determined whether this plan would be fully implemented and whether personnel costs would be permanently reduced. The savings and costs estimates are described in more detail below. - 4 - ENCLOSURE I ENCLOSURE I Savings to be derived Over ;104,000 of the annual savings depends on reductions in salaries resulting from the eliminationplanned positions in the Dallas region (Marshall district of three district counsel, and loan specialist) and from director, replacement of Marshall staff with employees at the proposed These savings are subject to offsetting costs lower grades. and retirement pay, which are discussed in the for severance tion. following sec- If the region's staff plan is fully implemented, believe the savings could be realized. At the we field work, we could not determine the amount completion of our of salary savings which would finally be achieved because the staff plan had not been fully implemented. SBA estimated annual savings of $28,866 in salary savings. We estimated these additional addition to $25,844, or $3,022 below SBA's figure, as shown savings to be below. Savings SBA GAO Office rental $12,894 $11,368 Telephone 11,795 11,795 Telecopier 552 552 Reproduction 3,000 1,504 Subscriptions 625 625 $28,866 $23,84 We reduced the the General Services office rent savings Administration told estimated by SBA after us that rent for the post-of-duty stations at Marshall and Shreveport that SBA calculated. We reduced SBA's estimate would be higher savings because they included some amounts which of reproduction borne by SBA offices to which the Marshall work will now be was redistri- buted. Costs to be incurred Regional office officials told us that closing office would cost $63,000--the amount necessary the Marshall Marshall employees to new SBA offices. We added to move 10 to their -5- ENCLOSURE I ENCLOSURj. I estimate several additional costs: the penalty lease for the Marshall office, the severance and for breaking the retirement pay for employees who chose not to be relocated, the travel costs of Marshall employees temporarily assigned to other during the transition, and the expenses of moving offices Marshall's furniture and office equipment. SBA officials told us that they overlooked these additional costs when they prepared their estimate. We estimated that SBA incurred costs of $138,863 the Marshall office, or $75,863 above to close SBA's estimate, as shown below. Costs SBA ' o-- Relocation $63,000 $ 63,000 Penalty for breaking lease 22,870 Severance and retirement pay - 47,626 Temporary assignments - Mioving furniture and 3,021 office equipment - 2,346 $63,000 $138,863 RENOVATION OF THE MARSHALL DISTRICT OFFICE The Marshall district office was renovated 1975 at a cost of $21,782. Renovations included in calendar year removing walls, installing a new glass wall and telephone and electrical and purchasing drapes. The closing of the office outlets, will result in a loss of about $21,632 of the renovations since only one item (drapes) costing $150 can be used in other SBA offices. The regional director told us that he did not know Marshall office would be closed when the decision that the was made. to renovate CHARTERED FLIGHT BY REGIONAL DIRECTOR On June 30, 1976, the director of regional officials chartered a plane at region VI and two other a cost of $202.80 for a trip from Dallas to Marshall and return. The trip was made to inform the Marshall staff of the closing of the office. - 6 - ENCLOSURE I ENCLOSURE I The regional director justified comparing it to the cost of regularly this method of travel by scheduled tion. There are no direct sche6uled flights air transporta- Marshall. According to the regional director, from Dallas to been necessary for the three regional officials it world have Dallas to Shreveport and complete the trip t- iy from rental car at a total round trip cost of to Marshall by $222.40. We estimated that the cost of the trip about $30 if made by a General would have been Services Administration car and about $51 if made by privately owned vehicle. director said that the chartered flight The regional of the Government Decause a half-day's was in the best interests work would have been lost if the trip had been made by automobile. voucher indicates that he left the regionalThe director's travel and returned at 1:10 p.m. office at 9:05 a.m. The cost of the chartered flight excessive in view of the time and cost does not seem to be of travel. of alternative methods -7-
Closing of Small Business Administration in Marshall, Texas
Published by the Government Accountability Office on 1977-01-06.
Below is a raw (and likely hideous) rendition of the original report. (PDF)