Small Business Administration:

Response to September 11 Victims and Performance Measures for Disaster Lending

GAO-03-385: Published: Jan 29, 2003. Publicly Released: Jan 29, 2003.

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Davi M. Dagostino
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The September 11 terrorist attacks and subsequent federal action had a substantial impact on businesses in both the declared disaster areas and around the nation. In the aftermath of the attacks, the Congress, among other actions, appropriated emergency supplemental funds to the Small Business Administration (SBA) to aid September 11 victims. Given the uniqueness of this disaster and changes in the program, GAO analyzed SBA's lending to September 11 victims, as well as the loan program's performance goals and measures.

As part of its response to the September 11 terrorist attacks, SBA modified several aspects of its Disaster Loan Program and its processes. For example, SBA increased the maximum loan amounts available and decreased the amount of documentation required for certain loans. By the end of fiscal year 2002, approximately $1 billion in loans had been approved for victims of the attacks. On average, SBA processed business loans to September 11 victims in an average 13 days compared with 16 days for business loans to other disaster victims in fiscal year 2001. Like other federal programs, SBA has developed a multiyear strategic goal for the Disaster Loan Program--helping families and businesses recover from disasters--and has developed annual goals and measures to assess its yearly progress toward attaining their strategic goals. GAO reviewed the measures and found that they have numerous limitations. For instance, these measures do not capture the notable progress the program has made in improving its loan processing--progress that ultimately affects disaster loan applicants and borrowers. The inadequacies of SBA's measures are especially evident when considered in light of the agency's performance in responding to the September 11 terrorist attacks. GAO attributes some of these limitations to the nature of the measures SBA uses to describe the performance of the Disaster Loan Program, while others can be attributed to the description of the program's performance. Without better performance measures and plans, the Congress does not have an accurate description of SBA's annual progress toward helping Americans recover from disasters.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: SBA took the following actions in response to GAO's recommendation. SBA's ODA revised its strategic plan, which is incorporated into SBA's overall plan. Both strategic plans include expanded, long-term performance goals and measures, as well as outcome measures for the short and long term. According to the ODA Strategic Plan, timely response to a business's request for assistance is paramount in the recovery process. SBA developed one new tool (the Disaster Credit Management System, DCMS), and is developing another tool (Business Expedited Loan Officer Report, BELOR), that it anticipates will enable it to better measure outcome and to assess more significant outputs. DCMS has improved automation of the loan application process; loans can be processed and closed from any location in the U.S. thereby reducing travel and personnel costs. DCMS will allow ODA to meet its outcome and performance goals more quickly and with fewer resources. The BELOR will allow for an abbreviated financial analysis, resulting in quicker loan decisions.

    Recommendation: In order to better demonstrate program performance, the Administrator of SBA should direct the Office of Disaster Assistance to revise the performance measures for disaster lending to (1) include more outcome measures; (2) assess more significant outputs, such as service to applicants or loan underwriting; (3) report achievements that can be compared over several years, such as percentages; and (4) include performance targets that encourage process improvement rather than maintaining past levels of performance.

    Agency Affected: Small Business Administration

  2. Status: Closed - Implemented

    Comments: In 2003, ODA partnered with the Federal Consulting Group and the American Customer Satisfaction Index (ACSI) to measure customer satisfaction by surveying applicants who they approved or declined for disaster loans. ACSI assisted ODA in (1) the development of relevant empirical data available to establish valid baselines, (2) the development of the survey format, questions, and methodology so that the survey document could accurately measure results of the SBA's disaster program goals and outcomes, and (3) the compiling and reporting of the results of the survey. The results assessed whether or not SBA assistance is meeting the needs and expectations of disaster victims. Information from the survey will enable ODA to make improvements in its disaster loan processes. Disaster loans are instrumental in making small businesses operational after a disaster, spurring employment, and helping to stabilize the economy. In addition, among other uses, SBA intends to use the survey results to prioritize future efforts to improve the quality of customer service.

    Recommendation: In order to better demonstrate program performance, the Administrator of SBA should revise and expand its current research to improve its measures and evaluate program impact. To improve its current measures SBA should conduct research, such as surveying Disaster Area Office staff and reviewing the disaster, lending, and performance literature, to identify and test new outcome measures. To evaluate its program impact, SBA needs to revise its survey approach to survey all disaster loan applicants and to employ other methods, such as periodic analyses of regional statistics, to assess the economic impact of the program on local communities.

    Agency Affected: Small Business Administration

  3. Status: Closed - Implemented

    Comments: SBA took the following actions in response to GAO's recommendation. The Office of Disaster Assistance (ODA) created its own strategic plan, which was incorporated in SBA's overall strategic plan. ODA's plan--section three of SBA's strategic plan--is intended to measure the effectiveness with which SBA is able to make disaster recovery loans to businesses and homeowners affected by disasters. The 2005 performance budget establishes linkages between each output and outcome, and the associated performance. In support of each outcome measure, ODA has set performance based output measures, as well as incremental goals for fiscal year (FY) 2004 and 2005, which provide interim targets for meeting the long term outcome goals. SBA's 2005 Performance Budget provides for each performance indicator, a definition, source, validity and verification statement and discussion of limitations. As ODA developed its 5-year strategic plan, ODA elected not to use "proxy measures"; instead it chose to use actual measures--both outcome and output as they would be more reflective of effectiveness and efficiency. These outcomes are measured using a survey administered by an outside third party. ODA's new GPRA goals are outcome goals for FY 2004. ODA made these goals to be outcome, results-oriented goals, not merely production or put goals. ODA's goals now reflect both outcome and output measures. All of the outcome measures are new and detailed in the strategic plan. Finally, these new measurements were made a part of the strategic plan because they are results oriented goals which illustrate the effectiveness of the disaster loan program.

    Recommendation: In order to better demonstrate program performance, the Administrator of SBA should revise the disaster section of the performance plan to (1) establish direct linkages between each output and outcome and the associated performance measure; (2) accurately describe proxy measures as either an outcome or output measures; (3) accurately describe the validation and verification of performance measures; and (4) explain additions, deletions, or changes in the current goals or measures used from the previous year.

    Agency Affected: Small Business Administration


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