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)

                           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
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
$202. The cost of the chartered flight does not seem excessive.
            tESTRICTED -    Not to be released outside the General
           Accounting Offlco *exept On the basis of specific approvel
  ($^~by           W_
                           WAInImSNer.   DA.L
                                                N    _

                                                             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


       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
    -- 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
    -- 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.


     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

                       - 3 -
                                                      ENCLOSURE I

                   REVIEW OF CLOSING OF THE


      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
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


     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.

                           Loans approved    processing
      District offices     per specialist       time

      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 -

 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
 region's personnel.


      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
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
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

     i-e-ocation                    63,000      63,000
     Ocher costs                        -       75 863      11 705
          Total                     63,-000          138
              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
                          - 4 -
                                                        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

                                  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-
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

 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
 furniture and office equipment.  SBA officials told us that they
 overlooked these additional costs when they prepared

     We estimated that SBA incurred costs of $138,863
the Marshall office, or $75,863 above                 to close
                                      SBA's estimate, as shown
                                        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

     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


     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

     The regional director justified
comparing it to the cost of regularly this  method of travel by
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
     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