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Mr. MONTGOMERY. I am going to yield to staff and allow Mr. McDonell to ask a question.

Mr. McDONELL. Mr. Cox, in testimony that you submitted for the record, you state that the VA central office directed all local VA offices to be alert to task report X of the SBA veteran project and that the VA would cooperate with SBA and implement items three, four, and five of that report. These three items generally call for SBA and VA personnel to work more closely in providing each other with basic benefits information.

Could you go into some detail on this and let the committee know how successful you have been in dealing with the SBA, and also, your timeframe for implementing the three items in final form.

Mr. Cox. That is ongoing at the present time, and I can report that in a recent survey, that's in the past 10 days, VA has initiated 167 contacts with SBA for the purpose of accomplishing these particular objectives.

We have had 79 contacts from SBA. VA attendance at SBA meetings, 27 of our offices report participation in SBA meetings. At the VA meetings, 37 SBA representatives have attended.

We have had joint sessions. SBA attendance at training sessions, there were 29 appearances. There were 32 VA and SBA joint attendances at meetings outside of the agency where they were working together in a community effort.

I think in the last 6 months, there has been an accelerated effort in bettering relationships.

Mr. McDONELL. Thank you. One more, if I may, Mr. Chairman. Recognizing that SBA is a relatively small agency which serves business needs of a wide group of individuals, do you feel that a separate small business loan program for veterans administered by the VA would be appropriate?

Mr. Cox. I would defer that question to Mr. Kane since he has worked on the legislation, and the preparation of it.

Jim, would you address that?

Mr. MONTGOMERY. You might address a bill I've introduced, H.R. 1139. Is that what you are alluding to?

Mr. McDONELL. Yes.

Mr. KANE. We have prepared a report on H.R. 1139, Mr. Chairman. As of yesterday morning, we do not have clearance. I called OMB; they promised to get clearance for me, if possible, but then, of course, in confusion resulting from the President being shot, we never got it.

At this point, I can only speak for my personal impression of informal conversations, and that personal impression would be that under the present resource restrictions, it would seem the wiser course of action to leave the program in SBA where the expertise is. Where they have the people in place who know these business loan programs. It would seem the better course of action would be to put the emphasis, or renew the emphasis in the SBA. It would be a whole new program for VA to undertake.

Mr. Cox. I would contribute some other information. We do a trend analysis, Mr. Chairman, finding out what types of inquiries are called in, or what persons visit our offices seeking information, and about 60 percent of our callers, writers, and visitors are inter

ested in compensation and pension from VA. Regarding housing loans, about 5 percent, and business loans would be less than 2 percent of the numbers of inquiries that we receive from beneficiaries.

So, it is a rather small volume activity, at least from the point of view of VA.

Mr. MONTGOMERY. I am going to ask Mr. Fleming to explain to the committee members what H.R. 1139 actually does, so we can set the stage to talk about it later on in this hearing.

Mr. FLEMING. H.R. 1139, Mr. Chairman, is a bill that would establish a small business loan program within the Veterans' Administration, the theory being that it would parallel the program that's now administered by SBA.

One can look at the testimony from last year and see that the record of SBA in approving small business loans for veterans has not been very effective. This bill would establish a SBA program in VA for disabled and Vietnam era veterans to be administered by the Administrator of Veterans' Affairs. It would provide an authorization of $25 million from which these loans could be made. It's a simple bill. Mr. Kane from the Veterans' Administration is very familiar with it. As a matter of fact, in the drafting of the legislation, the Veterans' Administration, as a technical service, provided some assistance although officially the agency has taken no position on the bill.

Mr. MONTGOMERY. Any questions from Mr. Mica?

Mr. MICA. I have no questions, Mr. Chairman.

Mr. MONTGOMERY. Thank you for being here this morning. We certainly appreciate your coming in this morning and giving us this information.

[The prepared statement of Mr. Cox appears on p. 27.]

Mr. MONTGOMERY. We have the new nominee for Administrator of Small Business, Mr. Michael Cardenas. We would like to ask him to come forward this morning. We hope he is confirmed. Also, the Acting Administrator, Mr. Roger Jones, we'd like for him to come forward.

Mrs. Lewis, we certainly welcome you to the committee. You've been an old friend of ours, and we are glad to see you on the Hill. If the new Administrator is ready to take over, we're ready to work on him some.

Mr. CARDENAS. Well, something like that.

STATEMENT OF MICHAEL CARDENAS, NOMINEE FOR
ADMINISTRATOR OF SMALL BUSINESS

Mr. CARDENAS. Mr. Chairman, I'm Michael Cardenas, the Administrator of SBA, the new Administrator. This is my second day on the job.

Mr. MONTGOMERY. You've brought quite a bit of excitement with you, too.

Mr. CARDENAS. I wanted to come today partly as a courtesy to the committee and perhaps more because I need to know more directly and personally of your concerns. I thought that there could not be a better way than to be here personally.

I shall be setting the policy for SBA and working with Congress in this and many other areas.

80-467 - 81 - 2

I have had no opportunity as yet to become familiar with this aspect of SBA's business, and Mr. Jones, who has been the Acting Administrator until yesterday will proceed to offer SBA's testimony. I felt there was little need in my reading the statement since I am not that familiar with the program as yet. It was prepared before my assumption of office.

However, if the Chair will permit, I would like to remain and listen.

Mr. MONTGOMERY. Fine.

Will you give us your background, where you're from?

Mr. CARDENAS. I'll be glad to.

I was born and raised in Fresno, Calif. which is in the San Joaquin Valley between San Francisco and Los Angeles.

I have spent 19 years in the public accounting field. I became a CPA in 1965, established my own practice, which was a small business in public accounting and a few years ago, I merged with a national firm of Fox & Co. For the past 8 years I've served as a member of SBA's Advisory Council, most of those out of the San Francisco regional office, where I served 3 years as the chairman of the council. The last year and a half, I've participated in the newly formed council in Fresno, and I have been the chairman of that council also, and other added community affairs. I served 8 years as trustee of a State center community college district. That was two elected offices-two elected terms.

I served three terms on the community hospital which was the largest hospital in the San Joaquin Valley. I served on the San Jaoquin Law School as trustee. That pretty well gives you an idea of my community activity in Fresno, and I certainly look forward to serving, and continuing my community services on a national level with Small Business Administration.

Mr. MONTGOMERY. Thank you very much.
Mr. Jones.

STATEMENT OF ROGER JONES, ACTING ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION

Mr. JONES. Mr. Chairman, I'd like to introduce my associates this morning, Mr. John R. Cox immediately to the right of Mr. Cardenas. Mr. Cox is presently the person who is acting in the capacity of coordinator for Veterans Affairs in the Agency and Acting Associate Administrator for Field Services.

Also, Mr. Robert S. Rovin who is associated with Mr. Cox.

I appreciate the opportunity to appear before you today to discuss with you the current status of the Small Business Administration's implementation of Public Law 93-237 as it pertains to veter

ans.

Public Law 93-237 was enacted on January 2, 1974, and provides, in part, that the Small Business Administration shall give special consideration to veterans of the Armed Forces of the United States and their survivors or dependents.

At previous hearings before this subcommittee, this agency had acknowledged certain problem areas in implementing Public Law 93-237.

We also, at that time, committed the agency to improving our outreach and delivery systems to veterans and in particular to Vietnam veterans.

We believe that a review of the progress made by the agency since those early hearings will show that our commitment has not gone unanswered.

Through improved working relationships with national, State and local veterans groups, we have been able to reach out to more veterans with our wide selection of programs. As an example of these efforts, the National Commander of the American Legion, has accepted our invitation to be a member of our National Advisory Council. His involvement with SBA on a national level will certainly assist in providing input on assistance to veterans. We intend to continue this outreach effort.

Our management assistance personnel specially designed a workshop curriculum for veterans. These workshops, 123 of them, were held in every State in the last 8 months of 1980 and allowed 5,853 veterans, 1,784 of them Vietnam era veterans, to obtain a broad perspective of business entrepreneurship. This program has been extended and workshops will be held again in every State in 1981. In addition, we provided ongoing management counseling to over 20,000 veteran owned firms in fiscal year 1980 and another 6,600 in the first quarter of fiscal year 1981.

Another 11,000 veterans received one time Counseling last fiscal year with an additional 3,426 being served in the first 3 months of this fiscal year.

Financial assistance, through our bank guaranty program, provided in fiscal year 1980, financial support to 3,282 veteran owned businesses for approximately $371 million. Of the 3,282 veteran owned firms receiving assistance, 1,471, or 45 percent, were owned by Vietnam veterans. Those same Vietnam veterans received $134 million, which accounts for 36 percent of total loans to veterans. Veterans benefited in 13.2 percent of all guaranty loans, and 12.3 percent of the dollars loaned in the last fiscal year.

This participation rate improved considerably in the first 4 months of this fiscal year. A manual tabulation by each field office shows that veterans participated in 17.9 percent of the dollars loaned under our guaranty program and 17.1 percent of the number of loans. This amounted to 1,913 loans for $257 million. In fiscal year 1980, our limited direct loan funds assisted 761 veteran-owned businesses with $42.5 million. This amounted to 11.9 percent of the total direct loans approved. During the same period, 451 Vietnam veterans were provided with $23.4 million. In the first 4 months of this fiscal year, our field offices have reported that veterans received 13.5 percent of all direct outlays. Veterans participated in 12.8 percent of the direct loans approved. We believe that the veteran is now afforded every credit consideration from SBA that is consistent with sound lending practices. To insure that this continues, we have directed our field review personnel to sample loans declined to veterans on their periodic review of all field offices.

The agency has also included as eligibility criteria for all lenders participating in our certified lenders program and our preferred lenders program a statement that the lender must demonstrate to

SBA's satisfaction that it will extend assistance to credit-worthy small business concerns owned or operated by members of groups which are on SBA's priority lists. Veterans are included on the priority list. We believe this will significantly improve veterans' participation in these programs.

Veterans, through our procurement assistance program are able to secure Federal contracts. At the time of our last testimony before this subcommittee in June 1980, there were 1,705 veteranowned concerns in our procurement automated source systems, referred to as PASS. This had increased 240 percent to 5,809 firms by December 31, 1980.

We believe employee awareness, which was once a major in delivering our services to veterans, has also shown improvement. A marked decrease in the number of inquiries and complaints into the central office has been noted. Also, our interactions with the Veterans' Administration and major veteran groups seem to indicate heightened awareness by SBA employees and a concurrent reduction of complaints.

As reported in previous testimonies, SBA entered into a contract with a consulting firm to review SBA's programs and make recommendations for improving our services to veterans.

Some of those recommendations were implemented at once, while others are under careful consideration by our various program areas.

Incidentally, Mr. Cox will be available to discuss the implementation in any detail.

There are a few which we feel cannot be implemented given the parameters of good personnel utilization and budget considerations.

In order to improve the visibility of this program both inside and outside of the agency, and to provide for increased staffing and independence in pursuing the goals of the program, I have requested the orderly transfer of the national coordination of veteran activities to the Office of the Chief Counsel for Advocacy.

Obviously, Mr. Chairman, Mr. Cardenas will have an opportunity to review all of the organizational considerations within the

agency.

Mr. Chairman, I feel we have taken great steps toward achieving our goals since our last meeting. While we have not fully achieved all of our goals, or all the goals veterans would like to see achieved, given budgetary and personnel constraints, we have delivered those services within our capacity. Notwithstanding these constraints, we shall continue to demonstrate a commitment to providing a program of assistance to our Nation's veterans.

Mr. Chairman, that concludes my prepared statement, and I'll be happy to try to answer any questions.

[The prepared statement of Mr. Jones appears on p. 32.] Mr. MONTGOMERY. I'll start the questions.

Thank you very much for your testimony. I believe that I am correct in saying that the 1981 budget submitted earlier by the Carter administration did show in effect, a set-aside of 15 percent of all loans funds would be for veteran-owned businesses. In other words, that is not in the budget that was submitted by the Reagan administration.

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