Small Business: Development Centers Meet Counseling Needs of Most Clients

Published by the Government Accountability Office on 1990-04-18.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                           United States General Accounting Of&e
-   GAO

    For Release on         SMALL BUSINESS:  Development   Centers     Meet
    Delivery    Expected
    at 9:00 a.m. EDT       Counseling Needs of Most Clients
    April    18, 1990

                           Statement   of
                           John M. Ols, Jr.,   Director
                           Housing and Community Development       Issues
                           Resources, Community, and Economic      Development
                           Before the
                           Committee on Small Business
                           United States Senate

    GAO/T-RCED-90-65                                                   QAQ m     loo (U/n)
Mr.   Chairman         and Members of         the   Committee:

       I am pleased     to be here today to                   discuss    our report1    on the
Small Business Administration's         (SBA)                 Small Business      Development
Center     (SBDC) program , prepared    at the                  request   of this Committee.
We are glad to assist       the Committee    in                 its deliberations      on
reauthorizing     federal   funding  for this                  program.

          In    summary,    we found    the     following.

          --    Most clients    counseled    were satisfied    with the assistance
                they received.      In addition,   most clients     would use program
                services   again if they had similar        needs in the future    and
                would recommend the program to others.

          --    The SBDC program offered                a variety   of services   to clients,
                but the primary   emphasis              was given   to counseling   and, to a
                lesser extent,  training.

          --    Most clients     who received  program counseling               were white
                males with at least      some college   education.              Further,    most
                clients   were in business    when they contacted               the SBDC
                program,    and were in or planned    to be in the              retail   or
                service   industry.

          --    Federal     funding    from 1977 through         fiscal    year 1990 totaled
                about $298 million.           Funds increased         annually   from
                $360,000 for 9 centers           in fiscal    year 1977 to $50 million
                for 56 centers       in fiscal      year 1990.        For program years 1986
                through     1988, nonfederal        amounts represented        about 58
                percent     of the total      program funding         and were primarily
                contributed       by colleges      and universities.

lSmal1         Business:  Development     Centers Meet Counseling                Needs of Most
Clients         (GAO/RCED-90-38BR,   Nov.   22, 1989).

       --   To improve program administration                and operation,       SBA has
            initiated      action     to determine       the feasibility      of a
            multiyear      approval      process.      We believe      this change from
            annual approval         offers    the potential       to reduce
            administrative        costs.      Additionally,       SBA conducts     on-site
            reviews     at the centers,         which appear useful         to both SBA and
            center directors.

         Information         on client     counseling       came from responses       to
questionnaires            sent to a projectable           sample of 997 counseled
clients.          Information        on program operations,          including    general
characteristics,             staffing,     funding,      and administration,        came from
responses         to questionnaires          sent to all center         and subcenter
directors         responsible        for implementing         the program at the state and
local      level.       In addition      to using questionnaires,             we conducted
follow-up         interviews        with center     directors     in five states.        We also
interviewed          program officials         and obtained       funding     and other
program statistics              at SBA headquarters.


        The SBDC program was started   in 1977 to provide    business-
related    counseling,   training, and specialized assistance     to
strengthen     the small business  community and contribute    to the
economic growth of the communities       served.

       The program is implemented         at the state and local      level
through      a nationwide     network of Small Business Development         Centers
and Subcenters,        which are usually     operated     by colleges or
universities.         Centers    operate on the basis of annual cooperative
agreements      with SBA to deliver      services    within   a state or other
designated      geographical      area.  As of March 1990, the program
included      56 centers     and about 560 subcenters       operating in 49
states,     the   District    of Columbia,       Puerto   Rico,    and the    Virgin

        Centers   receive     program funding       from both federal       and
nonfederal      sources.      To be eligible      for federal    funds,     centers
must provide      an equal matching         amount from nonfederal         sources of at
least    50 percent      cash and not more than 50 percent            indirect     costs
and in-kind      contributions.         Centers   and subcenters     coordinate      their
efforts    with a wide range of other organizations                and programs that
address small business           needs.


        Our survey showed that SBDC clients              received   counseling       on a
variety    of topics.        Seventy-six    percent    received    counseling      on
general    planning     assistance,      48 percent    on technical      matters,     and
40 percent      on financial      matters.     (See attachment      I.)     Overall,    69
percent    of the clients       were satisfied      with the counseling         they
received     and 17 percent       were not.     In addition,      76 percent
indicated     they would contact         the program for future         help if needed,
and 82 percent       would recommend the program to others.                 (See
attachment      II.)

        Results     of our survey also showed that 63 percent                 of the
counseled      clients    received      all or most of the assistance             they
wanted.       (See attachment       III.)    Most clients     received       relatively
few hours of actual          counseling.      For example,     60 percent         spent 3
hours or less working           with program staff.        Further,      clients       were
satisfied      with the time required         to arrange    their    first      meeting
with program staff,          and with the overall       time taken to get

       Sixty-four     percent   of the counseled clients             indicated      that
they   were satisfied      with the kinds of assistance              received.        Most
considered     the assistance       they received  to be useful   in meeting
their   business-related        needs and believed   that the assistance
increased    their    business-related      skills and knowledge.


       Center directors     reported     to us that their     programs provided        a
wide range of services        to clients     such as counseling,        training,
market analysis,      and library     resources.     However, almost all of the
centers    gave their   greatest     emphasis to counseling.          In 1986
through    1988, centers    and subcenters       on average applied        about $3 to
counseling     for every $1 they applied         to client  training--the         area
which received     the second greatest        emphasis.    The median counseling
cost per client      was about $300.

         Most client      counseling-was      protided    by in-2ouse        staff,
faculty,     and students       and, to a lesser       extent,     by private        sector
consultants.         Centers    and subcenters       employ professional            and
support     staff    on both a full-time         and part-time      basis.        The average
number of staff         was 20 for centers         and 5 for s Jb centers.           Center
and subcenter        directors     were most often male, white,              and 31 to 50
years old.        Most    had attained     a professional       or graduate degree and
had several       years prior      experience      in business-related          activities:
the most frequent          type of experience        was in private        industry.

        While    mostcenters and subcenters   used private    sector
consultants    to some extent,   they were used to counsel      20 percent    or
less of their clients.       Many centers   and subcenters    had an upper
dollar   limit   that could be paid to consultants.        The average dollar
limit    per    hour    was between   $30 and $40.


        Client survey       results  showed that 62 percent of clients were
male    and 81 percent        were white.  Nearly half were from 31 to 40
years old and about 83 percent             had some college    experience    or a
college    degree.      In addition,     about half were in business        when they
contacted     the program and about two-thirds           were in business     at the
time we contacted         them.     Most clients   were in or planned     to be in
the retail     or service       sector.   Of those in business      when we
contacted    them, about three-fourths           had one to four full-time
employees.       Few clients      wanted or received    assistance     in obtaining
government     contracts.        Of those who received     this assistance,      about
a third    were minorities.


        Centers   receive    program funding      from SBA through        annual
cooperative     agreements.         In addition,    they receive     funding     from
state    and local     sources.      Through fiscal     year 1990, federal         funds
made available       for the SBDC program totaled           about $298 million:
funding     has increased       annually   from $360,000     for 9 centers       in
fiscal    year 1977 to $50 million           for 56 centers     in fiscal    year 1990.

        In program years 1986 through            1988, nonfederal     amounts
represented     about 58 percent         of the total     program funding     and were
primarily     contributed       by colleges    and universities.       During the
same period,      contributions       from states     represented   about 14 to 17
percent    of total     program funding,       increasing     from $8.5 million    to
$13.8 million.

         To obtain    federal      SBDC program funding,           SBA requires        centers
to annually       submit detailed         proposals      describing     their     programs for
the coming year.          SBA and the Association             of Small Business
Development       Centers     believe     that the current         annual approval
process     is a time-consuming           administrative        effort,     particularly        for
established       centers     whose programs do not change significantly                      from
year to year.         To reduce centers'          annual administrative             burden
associated      with applying         for funds,      SBA is considering          the
feasibility       of using a multiyear          approval      process     that would allow
SBA to approve      proposals     covering     a 3-year    rather    than   a l-year
period     for long-established      centers:     funding    would remain subject
to annual appropriations         being provided.         We believe    the multiyear
approval      process offers    potential     for reducing      the administrative
burden associated        with an annual proposal         process,   thus making
additional       staff time available      to serve clients.


       SBA is required       by law to conduct          on-site     reviews   of centers'
operations      at least    every 2 years.         The on-site        review process
requires     each center     to prepare     a written       self-study      of its
operations      prior    to arrival     of a review team, which is composed of
one or two SBA representatives             and one or two SBDC personnel              from
other    centers.      Using the completed         self-study       as a guide,    the
review    team performs      an on-site     evaluation        of the center's
operations,       prepares   a written     report,      and, where appropriate,
develops     recommendations        for program improvements.              As of March
1990, all of the centers            had been reviewed         at least once.

        SBA, the Association,      and center     directors    believe      that on-
site    reviews    are generally   useful.      They believe     these reviews
provide     a means of exchanging       ideas and provide      data on program
operations      not otherwise    available.      Further,    center    directors
advised     us that recommendations         made by the review teams are useful
and are generally       implemented.

      SBA and Association   officials    and some center   directors      also
told us that programs that have been operating        for several      years
do not change significantly       from year to year: therefore,      they
questioned     the need for conducting      on-site    reviews   every 2 years.
SBA preferred     a system that based frequency         on factors    such as the
age of center     operations   or indications       of problems.     Others
suggested    reviews   be conducted   once every 3 to 4 years for centers
that have been operating       for several     years.
       We believe      that on-site     reviews   are serving     a useful   purpose
for SBA and center         directors   even though both have questioned           the
frequency,of      these reviews.       We believe    on-site     reviews provide     SBA
with details      on individual      centers'   operations     that are not
otherwise    available      and also provide      an effective      forum for the
exchange of ideas among those responsible                for implementing     the
SBDC program.

         In summary, Mr. Chairman,            we found that Small Business
Development      Centers   are meeting          the counseling     needs of most
clients.       A high percentage        of    clients   are satisfied     with the help
they received       and believe     they      were assisted     quickly.     They also
believe     that they received        the     kind and amount of assistance        they
wanted,     and most would use the            program again if they had similar
needs in the future.          Also,     the     improvements    being considered     by
SBA should further       enhance the          services   provided     by centers.

        Mr. Chairman, this concludes  my statement.   I would be pleased
to   respond to any questions   you or Members of the Committee  may


ATTACHMENTI                                                                    ATTACHMENTI
                                     Counseling Requested And
                                     Received By SBDC Clients
                                                                   Percent of clientsa
                                                                 Assistance   Assistance
Topic                                                                 wanted     received
General       planning:                                                                 76
General       business          advice                                    56            54
Starting       a business                                                 57            47
Changing       a business                                                  5                3
Advertising/marketing/developing                             a
product/service      overseas                                              7                4
Advertising/marketing/developing                         a
product/service      in the United                   States               35            25
Financial:                                                                              40
Fillin         out loan applications/
other      4 orms                                                         19            11

Applying       for     government           contracts/
grants                                                                    16                7
Requesting           a loan from the center                               18                4
Identifying           sources      of money/capital                      32             17
Help with       accounting          or bookkeeping                       24             17

Technical:                                                                              48
Legal      advice                                                        15                 9
Tax information                                                          20             16
Use of computers/special                     equipment                     8                5
Business       training                                                   13                9
Referrals       to other          sources      for
assistance                                                               33             26
Business-related            publications                                 17             15
Other                                                                      6                4
apercentages   exceed 100 because some clients                     wanted and/or   received
assistance   in more than one category.
ATTACHMENTII                                      ATTACHMENTII

               Clients Had Positive   Attitudes
                      About SBDC Counselinq












ATTACHMENTIII                                           ATTACHMENTIII

                  Clients Generally   Received
                The Amount of Assistance Wanted