EDA did not receive a supplemental appropriation for postdisaster  recovery assistance following Hurricanes Katrina and Rita. SBA Provided Gulf Coast Small Businesses with Assistance to Repair Disaster-Damaged Property and Address Economic Losses

SBA provided about $1.4 billion in loans to Gulf Coast businesses of all  sizes following Hurricanes Katrina and Rita through its Disaster Loan and  GO Loan programs to assist with the repair or replacement of disaster- damaged property, mitigate economic losses that small businesses  incurred as a result of the hurricanes, and provide working capital loans to  businesses in severely distressed areas. SBA approved about 96 percent of these loans in fiscal year 2006. SBA awarded Mississippi small businesses the greatest number of these  loans, but Louisiana small businesses received the greatest amount of  funds. Under this program, the state has assisted small businesses  that applied for conventional or SBA loans but either had not received  them or still needed additional assistance. The state targeted $3 million in CDBG disaster  relief funds for this program. Two small business owners told us that their commercial  insurance rates at least doubled after the hurricanes. However, we found  that the Corps and DOD could not demonstrate that they were consistently  monitoring subcontracting accomplishment information as required for 13  of the 43 construction contracts awarded directly to large businesses for  Katrina- and Rita-related recovery efforts during that time. 2). The Corps  and DOD use these reports to monitor contractor performance under  subcontracting plans. Without monitoring, the Corps and  DOD are limited in their ability to determine the extent to which their prime  contractors are following their subcontracting plans. Economic Conditions Have Varied Across the Gulf Coast Region Following Hurricanes Katrina and Rita and Appear to Be Related in Part to the Level of Damage Sustained in Different Areas

Indicators of economic conditions in the Gulf Coast—including population  estimates, the number of small businesses, unemployment rates, and  housing prices—suggest that the effects of Hurricanes Katrina and Rita on  local economies have varied across the region. Housing Prices in Selected Heavily Damaged Areas Have Shown Some Steady Increases

From 2005 to 2008, the Federal Housing Finance Agency’s housing price  index—a nationally recognized housing price index—increased in four  metropolitan statistical areas (MSA) heavily damaged by the hurricanes. Impact of Deepwater Horizon Oil Spill on Gulf Coast Economy Is Uncertain

Representatives of state and local organizations and organizations that  assist small businesses, as well as small business owners with whom we  met, expressed uncertainty regarding the impact on the small business  economy that will result from the recent oil spill in the Gulf of Mexico. 9). For example, many of the heavily  damaged areas saw substantial losses in population and in the number of  businesses after the hurricanes, while less damaged areas saw an increase  in the population and business levels. Gulf Coast small businesses were awarded almost  $3 billion in prime contracts for hurricane recovery efforts. Recommendation for Executive Action

For contracts awarded by the Corps and other DOD departments, the  Secretary of Defense should take steps to ensure that contracting officials  consistently comply with requirements to monitor the extent to which  contractors are meeting subcontracting plan goals, including requirements  for contractors with subcontracting plans to submit subcontracting  accomplishment reports. The Acting Director of the DOD Office of Small Business Programs stated  that DOD nonconcurred with the implication that DOD contracting  personnel do not enforce requirements. Appendix I: Objectives, Scope, and Methodology

Our objectives were to describe (1) the amount of assistance provided to  Gulf Coast small businesses as a result of Hurricanes Katrina and Rita  through the Small Business Administration’s (SBA) Disaster and Gulf  Opportunity (GO) Pilot Loan programs, state-administered business  assistance programs funded by the Department of Housing and Urban  Development (HUD) Community Development Block Grants (CDBG), and  the Economic Development Administration’s (EDA) Revolving Loan Fund  (RLF) Program; the benefits and challenges experienced by participants in  these programs; and the performance of loans extended to small  businesses using assistance from these programs; (2) the extent to which  Gulf Coast small businesses received federal contract funds for recovery  efforts; and (3) the current state of and improvements in the region’s  economy since the hurricanes, with a focus on the small business  economy.
Why GAO Did This Study

Hurricanes Katrina and Rita wreaked havoc on small businesses in the Gulf Coast, and much federal assistance has been provided to help these businesses. GAO was asked to describe (1) the amount of assistance provided to Gulf Coast small businesses through the Small Business Administration's (SBA) disaster and Gulf Opportunity (GO) loans, state-administered business assistance programs funded by the Department of Housing and Urban Development's (HUD) Community Development Block Grants (CDBG), and the Economic Development Administration's (EDA) Revolving Loan Fund (RLF) program; (2) the extent to which Gulf Coast small businesses received federal contract funds; and (3) the current state of and improvements in the region's economy. GAO analyzed data on SBA and EDA loans and states' use of supplemental CDBG appropriations, data on prime and subcontracts awarded for hurricane recovery activities, and economic indicators both before and after the hurricanes.

What GAO Found

Several federal programs provided assistance to Gulf Coast small businesses after the 2005 hurricanes; however, despite this assistance, some small businesses still face recovery challenges. Of the programs we reviewed, SBA provided the greatest amount of assistance to small businesses. SBA approved about $1.4 billion in loans through its Disaster Loan and GO Loan programs to assist with the repair or replacement of damaged property and to address economic losses suffered after the hurricanes. In addition, Louisiana expended about $179 million and Mississippi targeted $3 million in CDBG disaster relief funds for small business assistance grant, loan, and other programs to further assist businesses that in some or all cases, may not have been eligible for SBA loans. EDA did not receive supplemental appropriations after the hurricanes, but Gulf Coast small businesses did receive about $36 million in loans from EDA's RLF grantees, which provide gap financing to small businesses to start or expand their business. Even with federal assistance, however, some small business owners with whom GAO met have encountered recovery challenges. For example, a few of these small business owners told GAO that they had problems applying for SBA loans because the hurricanes destroyed needed financial records. Other owners face higher expenses, especially the cost of commercial insurance and added debt from these loan programs, which has made recovering difficult. Gulf Coast small businesses received almost $2.9 billion in federal contracts awarded in response to the hurricanes. The Federal Acquisition Regulation requires that agency contracting officials monitor prime contractors' performance under subcontracting plans. However, the U.S. Army Corps of Engineers (Corps) and the rest of the Department of Defense (DOD)--two of four agencies that awarded the most in federal contracts for hurricane recovery--could not demonstrate that they were consistently monitoring subcontracting accomplishment data for 13 of the 43 construction contracts for which subcontracting plans were required. Without such monitoring, the Corps and the rest of DOD are limited in their ability to determine the extent to which contractors are following their subcontracting plans. Indicators--including population estimates, number of small businesses, unemployment rates, and housing prices--suggest that the hurricanes' effects on local economies varied across the Gulf Coast. From 2005 to 2006, some heavily damaged areas experienced steep declines in population and number of small businesses, while less-damaged areas experienced steady increases in these indicators. Since that time, the population and number of small businesses in heavily damaged areas have increased, but they both still remain below prehurricane levels. House prices have shown some steady increases from 2005 to 2008 in heavily damaged metropolitan areas. The impact of the recent oil spill in the Gulf of Mexico on small businesses is uncertain.

What GAO Recommends

GAO recommends that the Secretary of Defense should take steps to ensure that contracting officials with the Corps and other DOD departments consistently comply with requirements to monitor the extent to which contractors are meeting subcontracting plan goals. DOD did not concur with the implication that its contracting personnel do not enforce requirements.