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: Published: Jul 29, 2009. Publicly Released: Jul 29, 2009.

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After the Small Business Administration (SBA) was widely criticized for its performance following the 2005 Gulf Coast hurricanes, the agency took steps to reform the Disaster Loan Program and Congress enacted the Small Business Disaster Response and Loan Improvements Act of 2008 (Act). GAO was asked to determine (1) the extent to which SBA addressed the Act's requirements, and (2) how SBA's response to major disasters in 2008 aligned with key components of its June 2007 Disaster Recovery Plan (DRP). GAO reviewed the Act, as well as SBA information on requirements addressed and steps taken, including the DRP, various reports to Congress, and policy memoranda. GAO also conducted site visits to areas affected by major 2008 disasters, reviewed SBA's customer satisfaction survey, and obtained the opinions of relevant stakeholders.

As of June 2009, SBA met 13 of 26 requirements of the Act, partially addressed 8, and did not take action on 5 which are not applicable at this time. SBA officials told GAO the agency has not yet completely addressed some provisions that require new regulations because to do so, the agency must make extensive changes to current programs or implement new programs. For two requirements that will involve private lenders, SBA plans to implement pilots before finalizing regulations. SBA has not yet addressed the Act's requirements for region-specific marketing and outreach and ensured that Disaster Loan Program information is readily available to regional entities, such as Small Business Development Centers (SBDC). By doing so, SBA could leverage the efforts and capacity of local resources and emergency management groups, and ensure that it and they will be better prepared for future disasters. Also, as of June 2009, SBA had not met deadlines to issue an annual report to Congress or an updated DRP. Failure to do so can lead to a lack of transparency on the agency's progress in reforming the program and limit its ability to adequately prepare for and respond to disasters. Furthermore, SBA did not have an implementation plan for addressing the remaining requirements. SBA's 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 ensure timely assistance. The individuals GAO interviewed and results from SBA's 2008 Disaster Loan Program Customer Satisfaction Survey provided some positive feedback about SBA's performance following recent 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. SBA officials told GAO that they have been taking steps to improve the application process, but did not provide documentation of such efforts. As a result, it did not appear to have any formal process for identifying problems in the application process and making needed improvements.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To facilitate SBA's progress in meeting and complying with requirements of the Act and improve the Disaster Loan Program, the Administrator of SBA should develop procedures for regional entities that would enable SBA to meet all region-specific requirements of the Act. Specifically, building on the lessons learned from previous disasters, SBA should include likely scenarios for certain regions prone to disasters and regional marketing information for SBDCs, other local resources, and local emergency management groups. In addition, SBA should make this information and other Disaster Loan Program information readily available to these regional entities prior to the likely occurrence of a disaster.

    Agency Affected: Small Business Administration

    Status: Closed - Implemented

    Comments: During 2012, SBA completed a marketing and outreach plan that includes strategies for identifying regional stakeholders (including Small Business Development Centers, local emergency management agencies, and other local groups such as business and civic organizations) and identifying regional disaster risks. SBA's plan states that it will develop webinars for specific regional risks and promote these before the traditional start of the season for certain types of disasters such as hurricanes, flood, and fires. SBA's plan also states that it will establish recurring schedule for outreach with stakeholders when no disaster is occurring.

    Recommendation: To facilitate SBA's progress in meeting and complying with requirements of the Act and improve the Disaster Loan Program, the Administrator of SBA should complete the first annual report to Congress on disaster assistance, and adhere to the required time frames for subsequent annual reports.

    Agency Affected: Small Business Administration

    Status: Closed - Implemented

    Comments: SBA provided the first annual report to Congress on disaster assistance in November 2010, as required by the act, and has also issued subsequent reports in November 2011 and 2012.

    Recommendation: To facilitate SBA's progress in meeting and complying with requirements of the Act and improve the Disaster Loan Program, the Administrator of SBA should expeditiously issue an updated DRP that reflects recent changes resulting from the Act's requirements, as well as SBA's own disaster reform efforts.

    Agency Affected: Small Business Administration

    Status: Closed - Implemented

    Comments: SBA's Disaster Response plan was originally issued in November 2009. SBA was responsive to our recommendation and issued the first update in July 2010 and the second update in June 2011.

    Recommendation: To facilitate SBA's progress in meeting and complying with requirements of the Act and improve the Disaster Loan Program, the Administrator of SBA should develop an implementation plan and report to Congress on the agency's progress in addressing all requirements within the Act--including creating and implementing new programs, such as the Immediate and Expedited Disaster Assistance Programs--and include milestone dates for completing implementation and any major program, resource, or other challenges the agency faces as its continues efforts to address requirements and meet deadlines in the Act.

    Agency Affected: Small Business Administration

    Status: Open

    Comments: As of February 2013, SBA has implemented most of the requirements of the act and has informed GAO that the only remaining requirements to implement are the guaranteed disaster loan programs. Since GAO issued this report, SBA has not provided an implementation plan for the remaining requirements. As of February 2013, SBA has described to GAO that it is implementing a pilot program for one of the remaining requirements--the Immediate Disaster Assistance Program (IDAP), published regulations, and developed operating procedures for the program. According to SBA, once IDAP is fully operational, it take steps to implement the other two programs required by the Act.

    Recommendation: To facilitate SBA's progress in meeting and complying with requirements of the Act and improve the Disaster Loan Program, the Administrator of SBA should develop and implement a process to address identified problems in the disaster loan application process for future applicants.

    Agency Affected: Small Business Administration

    Status: Closed - Implemented

    Comments: To address identified problems in the disaster loan application process, SBA developed and updated a continuous improvement process by developing a framework through which the Office of Disaster Assistance (ODA) can receive, review and recommend ideas for improving the disaster loan program. This framework includes a process for receiving suggestions for improvement internally from ODA employees and externally from an online suggestion box and dedicated email address. In addition, ODA will collect customer feedback at the Customer Service Center through a telephone survey, which it will pass on to the Continuous Improvement Process team for review. This updated process was communicated to SBA's Office of Disaster Assistance staff through a March 2012 memorandum with the Continuous Improvement Process charter.

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