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Testimony: 

Before the Committee on Small Business and Entrepreneurship, U.S. 
Senate: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 11:00 a.m. EDT:
Wednesday, May 19, 2010: 

Small Business Administration: 

Continued Attention Needed to Address Reforms to the Disaster Loan 
Program: 

Statement of William B. Shear, Director: 
Financial Markets and Community Investment: 

GAO-10-735T: 

GAO Highlights: 

Highlights of GAO-10-735T, a testimony before the Committee on Small 
Business and Entrepreneurship, U.S. Senate. 

Why GAO Did This Study: 

After the Small Business Administration (SBA) was widely criticized 
for its performance following the 2005 Gulf Coast hurricanes, the 
agency took steps to reform its Disaster Loan Program. Congress also 
enacted the Small Business Disaster Response and Loan Improvements Act 
of 2008 (Act), which places new requirements on SBA to ensure it is 
prepared for catastrophic disasters. 

This testimony discusses (1) the extent to which SBA has addressed the 
Actís requirements, and (2) how SBAís response to major disasters in 
2008 aligned with key components of its June 2007 Disaster Recovery 
Plan (DRP). 

In completing this statement, GAO reviewed and updated, as 
appropriate, the July 2009 report, Small Business Administration: 
Additional Steps Should Be Taken to Address Reforms to the Disaster 
Loan Program and Improve the Application Process for Future Disasters 
(GAO-09-755). In that report, GAO recommended that SBA should fulfill 
the Actís region-specific marketing and outreach requirements; 
complete its annual report to Congress; issue an updated DRP; develop 
an implementation plan for remaining requirements; and develop 
procedures to further improve the application process for the Disaster 
Loan Program. 

What GAO Found: 

SBA has made some progress since GAOís July 2009 report in addressing 
provisions of the Act and continued attention to certain provisions 
will be important for sustained progress. As of May 2010, SBA met 
requirements for 15 of 26 provisions of the Act and partially 
addressed 6. Five provisions do not require any action at this time. 
Since July 2009 SBA has taken a number of actions. For example, SBA 
issued an updated DRP in November 2009. In addition, SBA issued 
regulations on coordinating with the Federal Emergency Management 
Agency on timely submission of disaster assistance applications. SBA 
also has taken steps to address the Actís requirements for region-
specific marketing and outreach. For example, SBA has begun a dialogue 
with the Small Business Development Center state directors in the Gulf 
Coast about disseminating disaster planning information in the five 
most hurricane-prone states before the hurricane season. However, 
these steps have not been discussed in public documents or venues, 
such as in the DRP or on the SBA Web site, which would make the 
information more transparent and easily accessible to the public and 
Congress. SBA officials told GAO the agency has not yet completely 
addressed some provisions because the agency must make extensive 
changes to current programs or implement new programs. In particular, 
for two requirements that will involve private lenders, SBA plans to 
implement pilots before finalizing regulations. SBA officials recently 
said that they had formed a cross-functional work group and began 
reaching out to lenders about the planned pilots. SBA has not yet 
developed an implementation plan with milestone dates for addressing 
the remaining requirements, but recently said it would provide a plan 
or report that included milestone dates for addressing the Actís 
requirements. 

SBAís initial response after the 2008 Midwest floods and Hurricane Ike 
aligned with certain components of its initial DRP, such as using 
technology and outreach efforts to better ensure timely assistance. 
The individuals GAO interviewed and results from SBAís 2008 Disaster 
Loan Program Customer Satisfaction Survey provided somewhat positive 
feedback about SBAís performance following the disasters. However, 
interviewees and survey results indicated areas for improvement; in 
particular, both indicated that application paperwork was burdensome 
and that the application process needed improvement. The agency did 
not appear to have a formal process for identifying problems in the 
application process and making needed improvements. SBA officials told 
GAO that they have been taking steps to improve the application 
process. However, SBA has not provided information to GAO on how it 
would implement a formal process to address identified problem areas 
in the disaster loan application process. 

View [hyperlink, http://www.gao.gov/products/GAO-10-735T] or key 
components. For more information, contact William Shear at (202) 512-
8678 or shearw@gao.gov. 

[End of section] 

Madam Chair and Members of the Committee: 

I am pleased to be here today to discuss our work on reforms made to 
the Small Business Administration's (SBA) Disaster Loan Program. As 
you know, SBA plays a critical role in assisting the victims of 
natural and other declared disasters. SBA provides financial 
assistance through its Disaster Loan Program to help homeowners, 
renters, businesses of all sizes, and nonprofits recover from 
disasters such as earthquakes, hurricanes, and terrorist attacks. 
Since the agency's inception in 1953, SBA has approved more than $47 
billion in disaster loans for homeowners, businesses, and nonprofits. 

After the 2005 Gulf Coast hurricanes (Katrina, Rita, and Wilma), SBA 
faced an unprecedented demand for disaster loans, while also being 
confronted with a significant backlog of applications; therefore, 
hundreds of thousands of loans were not disbursed in a timely way. 
Many criticized SBA for what was perceived to be a slow and confusing 
response to the disasters and one that exposed many deficiencies in 
the agency's Disaster Loan Program and demonstrated the need for 
reform. As a result, Congress and SBA agreed that the program needed 
significant improvements. Since then, SBA has taken several steps to 
reform its Disaster Loan Program including creating an online loan 
application, increasing the capacity of its Disaster Credit Management 
System (DCMS), and developing a Disaster Recovery Plan (DRP).[Footnote 
1] In June 2008, Congress enacted the Small Business Disaster Response 
and Loan Improvements Act (Act) which places new requirements on SBA 
to ensure that it is prepared for future catastrophic disasters. 
[Footnote 2] 

My statement today is based on our 2009 report and updated information 
on SBA's progress in addressing the Act's requirements and our 
report's recommendations.[Footnote 3] Specifically, this statement 
focuses on (1) SBA's progress in addressing certain requirements of 
the Act, and (2) how SBA's response, following the major disasters of 
2008, aligned with key components of its June 2007 DRP. 

For our 2009 report, we identified and analyzed the requirements of 
the Act and related statutory deadlines; obtained information about 
SBA's completed, current, and planned reform efforts; reviewed 
documents and progress reports to determine if requirements had been 
addressed and deadlines were met; interviewed officials and obtained 
information on what, if any, challenges exist that may affect SBA's 
ability to meet certain requirements; and interviewed officials to 
obtain information about next steps and resources that the agency 
identified as needed to address any remaining requirements. We visited 
Iowa and Texas, and obtained information on SBA's performance in the 
aftermath of the 2008 Midwest floods and Hurricane Ike. We interviewed 
SBA and Small Business Development Center (SBDC) officials, state and 
local officials, and representatives of local Chambers of Commerce, 
economic development organizations, and affected small business owners 
about what worked well and what improvements to SBA's disaster loan 
processes they would suggest. Finally, we reviewed results from a 
survey of SBA loan applicants on their satisfaction with SBA's 
Disaster Loan Program in 2008. To update this information, we 
interviewed SBA officials and reviewed documents related to the 
disaster reform provisions and actions taken to implement our 
recommendations. 

We conducted our work for the July 2009 report between October 2008 
and July 2009 and updated information between March 2010 and May 2010 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

SBA's Office of Disaster Assistance (ODA) responds to disasters and 
administers the Disaster Loan Program. A Presidential disaster 
declaration puts into motion long-term federal recovery programs, such 
as the Disaster Loan Program, but SBA is not a "first responder" after 
a disaster. Rather, local government emergency services assume that 
role with help from state and volunteer agencies. For catastrophic 
disasters, and if a governor requests it, federal resources can be 
mobilized through the U.S. Department of Homeland Security's Federal 
Emergency Management Agency (FEMA). SBA typically responds to a 
disaster within 3 days by sending ODA field staff to the affected area 
to begin providing public information about SBA's services. 

Once a disaster is declared, SBA by law is authorized to make two 
types of disaster loans: (1) physical disaster loans, and (2) economic 
injury disaster loans. Physical disaster loans are for the permanent 
rebuilding and replacement of uninsured or underinsured disaster- 
damaged property, including personal residences and businesses of any 
size. That is, SBA provides loans to cover repair costs that FEMA or 
other insurance has not already fully compensated or covered.[Footnote 
4] Economic injury disaster loans provide small businesses, including 
agricultural cooperatives and private nonprofit organizations, with 
necessary working capital until normal operations can resume. 

The Act comprises 26 provisions with substantive requirements for SBA; 
some with specific deadlines and some needing appropriations, and 
includes requirements that SBA must meet for disaster planning and 
response, disaster lending, and reporting.[Footnote 5] For instance, 
the Act includes provisions to improve SBA's coordination with FEMA, 
require that the agency conduct biennial disaster simulations, create 
a comprehensive disaster response plan, and improve communication with 
the public when disaster assistance is made available. It includes 
requirements to improve ODA's infrastructure, appoint an official to 
oversee the disaster planning and responsibilities of the agency, and 
establish reporting requirements for various reports to Congress. The 
Act also creates new programs, such as the Immediate Disaster 
Assistance Program that would provide small dollar loans immediately 
following a disaster and the Expedited Disaster Assistance Loan 
Program that would provide expedited disaster assistance to businesses. 

SBA Continues to Make Progress in Addressing the Act's Provisions, but 
Has Not Yet Established Milestones for Implementing Remaining 
Requirements: 

As of May 2010, SBA fully addressed requirements for 15 of 26 
provisions of the Act; partially addressed 6; and took no action on 5 
that are not applicable at this time (see fig. 1). For the 15 
provisions SBA fully addressed, the agency's actions included putting 
in place a secondary facility in Sacramento, California to process 
loans when the main facility in Fort Worth, Texas is unavailable, 
making improvements to DCMS to track and follow up with applicants, 
and expanding its disaster reserve staff from about 300 to more than 
2,000 individuals. According to SBA and our review, 5 provisions 
require no action at this time because they are discretionary or 
additional appropriations are needed before SBA can satisfy the Act's 
requirements. 

Figure 1: SBA's Status in Addressing Requirements of the 2008 Small 
Business Disaster Response and Loan Improvements Act, as of May 2010: 

[Refer to PDF for image: illustrated table] 

Section: 12061; 
Description of requirement: SBA permitted to make economic injury 
disaster loans to nonprofits; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: [Empty]. 

Section: 12062[A]; 
Description of requirement: SBA must ensure its disaster assistance 
programs are coordinated to the maximum extent practicable with FEMA 
programs; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: Missed deadline. 

Section: 12063; 
Description of requirement: Better public awareness of disaster 
declaration, application periods, and creation of a marketing and 
outreach plan; 
Status (May 2010): Partially addressed; 
Deadline: Missed deadline. 

Section: 12064; 
Description of requirement: SBA must conduct a study looking at the 
consistency between standard operating procedures and regulations of 
the Disaster Loan Program; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: Missed deadline. 

Section: 12065; 
Description of requirement: SBA increased loan amounts from $10,000 to 
$14,000 without requiring collateral; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: [Empty]. 

Section: 12066; 
Description of requirement: SBA authorizes private contractors to 
process disaster loans and coordinate efforts with IRS to expedite 
loan processing; 
Status (May 2010): Partially addressed; 
Deadline: [Empty]. 

Section: 12067; 
Description of requirement: SBA must develop, implement, or maintain a 
centralized information system to track and follow up with disaster 
loan applicants; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: [Empty]. 

Section: 12068; 
Description of requirement: SBA is authorized to increase the 
deferment period of loans, but the deferment may not exceed 4 years; 
Status (May 2010): N/A; 
Deadline: [Empty]. 

Section: 12069; 
Description of requirement: SBA must put in a place a secondary 
facility for processing disaster loans in case the primary facility is 
unavailable; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: [Empty]. 

Section: 12070; 
Description of requirement: SBA can not require the borrower to pay 
any non-amortized amount for the first 5 years after repayment begins; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: [Empty]. 

Section: 12071; 
Description of requirement: SBA is authorized to make economic injury 
disaster loans in cases of ice storms and blizzards; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: [Empty]. 

Section: 12072; 
Description of requirement: SBA must develop and implement a major 
disaster response plan and conduct a disaster simulation exercise at 
least once every 2 years; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: Addressed (initial or ongoing). 

Section: 12073; 
Description of requirement: SBA must assign an individual the disaster 
planning responsibilities and report to Congress; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: Addressed (initial or ongoing). 

Section: 12074; 
Description of requirement: SBA should ensure that the number of full-
time equivalent ODA employees is not fewer than 800 and in the 
disaster cadre not fewer than 1,000; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: [Empty]. 

Section: 12075; 
Description of requirement: SBA must develop, implement, or maintain a 
comprehensive written disaster response plan and update the plan 
annually; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: Partially addressed[B]. 

Section: 12076; 
Description of requirement: SBA must develop long-term plans to secure 
sufficient office space to accommodate an increased workforce in times 
of disaster; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: [Empty]. 

Section: 12077; 
Description of requirement: SBA may not rely solely on the loan 
applicantís status as a major source of employment prior to the 
disaster to qualify for disaster loans beyond the current statutory 
limit; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: [Empty]. 

Section: 12078; 
Description of requirement: Maximum disaster loan amount increased 
from $1.5 to $2 million; 
Status (May 2010): Addressed (initial or ongoing); 
Deadline: Empty]. 

Section: 12079; 
Description of requirement: SBA may guarantee any surety against loss 
on a bid, payment, performance, or ancillary bond on any work order or 
contract that at the time of the bond execution does not exceed $5 
million; 
Status (May 2010): N/A; 
Deadline: [Empty]. 

Section: 12081; 
Description of requirement: If the President declares a major 
disaster, SBA may declare eligibility for additional disaster 
assistance; 
Status (May 2010): N/A; 
Deadline: [Empty]. 

Section: 12082; 
Description of requirement: SBA permitted to make economic injury 
disaster loans to eligible small business concerns located anywhere in 
the US (including outside the disaster area) when the SBA declares 
eligibility for additional disaster assistance; 
Status (May 2010): N/A; 
Deadline: [Empty]. 

Section: 12083[A]; 
Description of requirement: SBA must establish and implement a Private 
Disaster Assistance Program. SBA may guarantee timely payment of 
principal and interest on private disaster loans issued to eligible 
small businesses and homeowners within an eligible disaster area; 
Status (May 2010): Partially addressed; 
Deadline: [Empty]. 

Section: 12084; 
Description of requirement: SBA must establish an Immediate Disaster 
Assistance Program to provide immediate small dollar loans through 
private lenders; 
Status (May 2010): Partially addressed; 
Deadline: Missed deadline. 

Section: 1285[A]; 
Description of requirement: SBA must establish an Expedited Disaster 
Assistance Business Loan Program; 
Status (May 2010): Partially addressed; 
Deadline: [Empty]. 

Section: 12086; 
Description of requirement: SBA is allowed to institute a program to 
refinance Gulf Coast disaster loans resulting form Hurricanes Katrina, 
Rita, or Wilma up to an amount no greater than the original loan; 
Status (May 2010): N/A; 
Deadline: Missed deadline. 

Section: 12091[C]; 
Description of requirement: SBA must submit reports to Congress on 
disaster assistance; 
Status (May 2010): Partially addressed; 
Deadline: Partially addressed. 

Source: GAO analysis of the Act and SBA documents. 

[A] The Act requires SBA to issue regulations for these provisions. 

[B] SBA provided the first updated DRP on November 15, 2009, several 
months past the expected update in June 2009. 

[C] 12091(f) includes requirements for a loan approval rate report, 
which is to provide a "detailing of how [SBA] can improve the 
processing of applications under the disaster loan program." SBA 
officials told us that they had covered the requirement in the 2007 
DRP. However, it is not clear to us whether information in the 2007 
DRP meets the congressional intent of the requirement. 

[End of figure] 

When we issued our report in July 2009, SBA had fully addressed 13 of 
the 26 provisions. Since then, SBA has fully addressed two additional 
provisions. As we recommended and the Act requires, SBA issued an 
updated DRP. SBA also issued regulations on coordinating with FEMA to 
ensure that disaster assistance applications are submitted in a timely 
manner. In addition, SBA must revise the regulations annually and 
report on the revisions when submitting its annual report to Congress. 
The annual requirements associated with the provision on FEMA 
coordination will help SBA, FEMA, and Congress to determine whether 
the regulations are effective. 

SBA still has to take additional steps to completely address 6 
provisions. For example, SBA officials told us that the agency has 
taken additional steps to address the marketing and outreach 
provision, including that they (1) began an ongoing dialogue with the 
SBDC state directors in the Gulf Coast about disseminating disaster 
planning and preparation information in the five most hurricane-prone 
states before the hurricane season, (2) detailed an SBA employee who 
works with the SBDCs to the Office of Entrepreneurial Development to 
help the agency develop a strategic approach for its disaster role, 
and (3) issued some public service announcements tailored to specific 
regions. In our 2009 report, we recommended that SBA should fulfill 
the region-specific marketing and outreach requirement, including 
making this information readily available to regional entities prior 
to the likely occurrence of a disaster. However, the steps recently 
taken by SBA have not been discussed in public documents or venues, 
such as in the DRP or on the SBA Web site, which would make the 
information more transparent and easily accessible to the public and 
Congress. As we reported in 2009, we consistently heard from regional 
entities, such as SBDCs and emergency management groups, about the 
need for more up-front information on SBA's Disaster Loan Program and 
their expected roles and responsibilities in disaster response efforts. 

According to SBA officials, the agency has not yet completely 
addressed some provisions because to do so, the agency would have to 
make extensive changes to current programs or implement new programs--
such as the Immediate and Expedited Disaster Assistance Programs--to 
satisfy requirements of the Act. These programs, which require 
participation of private lenders, would be designed to provide 
businesses with access to short-term loans while they are waiting for 
long-term assistance. As we reported in 2009, SBA plans to conduct 
pilots of these programs before fully implementing them. SBA officials 
recently told us they have established a cross-functional work group 
jointly chaired by officials from ODA and the Office of Capital Access 
to address these requirements and develop the pilots. ODA officials 
said they drafted regulations and received subsidy and administrative 
cost funding in the 2010 budget to allow them to pilot test about 600 
loans under the Immediate Disaster Assistance Program (section 12084). 
Additionally, SBA officials told us that they performed initial 
outreach to lenders--such as those who have participated in their Gulf 
Opportunity Pilot Loan Program--to obtain their reaction to and 
interest in the programs. They believe such outreach will help SBA 
identify and address any issues that may arise and determine the 
viability of the loan programs. SBA officials told us that their goal 
is to have the pilot for the Immediate Disaster Assistance Program in 
place by September 2010. 

The Act establishes multiple new reporting requirements and while SBA 
has addressed most of these, the agency has not met some statutory 
deadlines. For example, as required by the Act and as we recommended, 
the agency issued its first annual report on disaster assistance in 
November 2009 but the report was due in November 2008. Specifically, 
the Act requires that SBA report annually on the total number of SBA 
disaster staff, major changes to the Disaster Loan Program (such as 
changes to technology or staff responsibilities), a description of the 
number and dollar amount of disaster loans made during the year, and 
SBA's plans for preparing and responding to possible future disasters. 
[Footnote 6] In 2009, we reported that failure to produce annual 
reports on schedule can lead to a lack of transparency about the 
agency's progress in reforming the program. The agency has had limited 
success in meeting nine additional provisions in the Act that have 
deadlines associated with them.[Footnote 7] The agency also has not 
developed a plan with expected time frames for addressing the 
remaining requirements. Not having an implementation plan in place for 
addressing the remaining requirements can lead to a lack of 
transparency about the agency's Disaster Loan Program, capacity to 
reform the program and program improvements, as well as its ability to 
adequately prepare for and respond to disasters. In our 2009 report, 
we recommended that SBA develop an implementation plan and include 
milestone dates for completing implementation and any major program, 
resource, or other challenges the agency faces as it continues efforts 
to address requirements of the Act. Recently, SBA officials told us 
that they would provide a plan or report that included milestone dates 
for addressing the Act's requirements. 

SBA's Response Following 2008 Disasters Aligned with Some DRP 
Components, but Its Responses to Disaster Victims' Feedback on the 
Application Process Could Be Improved: 

SBA's initial response following the 2008 Midwest floods and Hurricane 
Ike aligned with major components of its DRP, such as infrastructure, 
human capital, information technology, and communications. For 
example, according to SBA, following both disasters the agency used 
its organizational infrastructure and key staff in each of its core 
functions to provide disaster assistance. ODA also utilized available 
operational and technological support, and communications and 
outreach, to help ensure that the agency would be able to provide 
timely financial assistance to the disaster victims. Additionally, 
individuals affected by both disasters with whom we spoke considered 
the agency's overall performance somewhat positive, but believed the 
disaster loan process could be improved. 

In May 2008, floods devastated 85 counties in Iowa (one of several 
states affected) and in September 2008, Hurricane Ike devastated 50 
counties in Texas. SBA and SBDC officials, state and local 
representatives, private-entity officials, and business owners in Iowa 
and Texas told us that in the days immediately following the 
disasters, ODA staff reported to the affected areas and began 
providing needed disaster assistance. These individuals also said that 
SBA staff provided outreach and public information about the Disaster 
Loan Program; distributed application information; assigned 
knowledgeable customer service representatives to various Disaster and 
Business Recovery Centers; and helped applicants by answering 
questions, providing guidance, and offering one-on-one help--as 
outlined in SBA's DRP. In addition, our review of SBA's 2008 Disaster 
Loan Program Customer Satisfaction Survey also showed that respondents 
were somewhat satisfied with the assistance SBA provided during other 
recent disasters. 

However, both the individuals we interviewed and survey results 
indicated areas for improvement and opportunities to increase 
satisfaction. For example, individuals we interviewed and survey 
responses pointed to concerns about the amount of paperwork required 
to complete SBA's disaster loan application and the timeliness of loan 
disbursements. Also, some business owners said they had to provide 
copies of 3 years of federal income tax returns, although they had 
signed an Internal Revenue Service (IRS) form 8821--Tax Information 
Authorization--which allows SBA to get tax return information directly 
from IRS. To address these concerns, the individuals we interviewed 
suggested several changes to the program, such as eliminating the 
requirement that business loan applicants provide copies of IRS tax 
records; providing partial disbursements earlier in the process; using 
bridge loans to help ensure disaster victims receive timely 
assistance; and involving SBA, SBDCs, and state and local officials in 
joint pre-planning and disaster preparedness efforts. 

Although SBA officials told us they have been improving the 
application process, they had not documented the improvement efforts. 
In addition, we found that while SBA conducts an annual customer 
satisfaction survey, the agency does not appear to incorporate this 
feedback mechanism into its formal efforts to continually improve the 
application process. Furthermore, SBA does not appear to have a formal 
process for addressing identified problem areas and using the 
information gained to improve the experience of future applicants. By 
establishing such a process to address identified problem areas, SBA 
could better demonstrate its commitment to improving the Disaster Loan 
Program. Because the agency has missed opportunities to further 
improve its Disaster Loan Program, and in particular improve the 
application process for future applicants, we recommended in our July 
2009 report that SBA develop and implement a process to address 
identified problems in the disaster loan application process. In 
response to our recommendation, SBA cited ongoing efforts since 2005, 
such as the electronic loan application, and said the agency has plans 
to continue its improvement efforts and make them an ongoing priority. 
However, SBA has not provided information to us on how it would 
implement a formal process to address identified problem areas in the 
disaster loan application process. 

As you know, we have reported on a variety of issues related to the 
federal government's response to the 2005 Gulf Coast hurricanes. 
[Footnote 8] As part of this committee's efforts to assess the level 
and success of federal efforts to help Gulf Coast small businesses 
recover from the 2005 hurricanes, we are conducting work at your 
request that focuses on small business recovery efforts in four states 
impacted by Hurricanes Katrina and Rita: Alabama, Louisiana, 
Mississippi, and Texas. This summer, we will report to this committee 
on: (1) assistance small businesses in the Gulf Coast received from 
the SBA, the Department of Housing and Urban Development, and the 
Economic Development Administration; (2) federal contract funds 
received by small businesses; and (3) the small business economy in 
the Gulf Coast region. 

Madam Chair, this concludes my prepared statement. I would be pleased 
to respond to any questions you or other Members of the Committee may 
have. 

GAO Contacts and Acknowledgments: 

For further information on this testimony, please contact William B. 
Shear at (202) 512-8678 or shearw@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this statement. Individuals making key contributions 
to this testimony include Kay Kuhlman, Assistant Director; Beth 
Faraguna, Alexandra Martin-Arseneau, Marc Molino, Linda Rego and 
Barbara Roesmann. 

[End of section] 

Footnotes: 

[1] SBA's use of the term "disaster recovery plan" differs from how it 
is generally used in referring to an information technology-focused 
plan designed to restore operability of a system, application, or 
computer facility following an emergency. 

[2] Pub. L. No. 110-246, subtitle B, 122 Stat. 2168 (2008). 

[3] GAO, Small Business Administration: Additional Steps Should Be 
Taken to Address Reforms to the Disaster Loan Program and Improve the 
Application Process for Future Disasters, [hyperlink, 
http://www.gao.gov/products/GAO-09-755] (Washington, D.C.: Jul 29, 
2009). 

[4] SBA can lend individuals amounts up to $200,000 for their primary 
residence and $40,000 for household goods and personal effects and can 
lend businesses up to an aggregated $2 million for physical and 
economic injury disaster loans, before the individuals receive their 
insurance recovery. In these cases, the loan recipient must use the 
insurance recovery funds to reduce the balance of the SBA disaster 
loan. Even individuals or business owners who believe they have full 
insurance coverage are encouraged to apply for an SBA loan because 
their insurance recovery may turn out to be only partial, or their 
damage may exceed insurance policy limits. 

[5] In June 2008, as part of the Food, Conservation, and Energy Act 
(also commonly known as the Farm Bill), Pub. L. No. 110-246, 122 Stat. 
1651, Congress enacted the Small Business Disaster Response and Loan 
Improvements Act of 2008. This law repealed and replaced a duplicative 
enactment, which had been enacted on May 22, 2008. However, the Farm 
Bill contains a provision that generally preserved the prior act's 
date of enactment if it would provide an earlier effective date than 
the date of enactment of the Farm Bill. Although the Act became law on 
June 18, 2008, the enactment date for purposes of determining the 
effective date is May 22, 2008. Therefore, all statutory deadlines 
presented in our July 2009 report were calculated from May 22, 2008. 

[6] The Act also states the annual report must include information on 
some requirements under certain provisions, such as (a) the 
regulations on coordination with FEMA to assure that applications for 
disaster assistance are submitted as quickly as practicable as 
required under section 12062; (b) disaster simulation exercises 
conducted by the agency under section 12072; (c) updates to the 
comprehensive DRP required under section 12075; and (d) updates to 
SBA's plans for securing office space to accommodate an expanded 
workforce required under section 12076. 

[7] In July 2009 we reported that SBA had met some deadlines for four 
provisions, missed one deadline by 27 days, and missed deadlines for 
four remaining provisions by many months. 

[8] For example, GAO, Small Business Administration: Actions Needed to 
Provide More Timely Disaster Assistance, [hyperlink, 
http://www.gao.gov/products/GAO-06-860] (Washington, D.C.: Jul 28, 
2006); Catastrophic Disasters: Enhanced Leadership, Capabilities, and 
Accountability Controls Will Improve the Effectiveness of the Nation's 
Preparedness, Response, and Recovery System, [hyperlink, 
http://www.gao.gov/products/GAO-06-618] (Washington, D.C.: Sept. 6, 
2006); and Small Business Administration: Additional Steps Needed to 
Enhance Agency Preparedness for Future Disasters, [hyperlink, 
http://www.gao.gov/products/GAO-07-114] (Washington, D.C.: Feb. 14, 
2007). 

[End of section] 

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