While SBA has taken some steps toward implementing the Act, the agency  still needs to take additional steps to completely address 8 provisions. According to SBA officials, 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––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. Moreover, as required by the Act, SBA has not issued an  update of its comprehensive DRP that reflects recent changes resulting  from the Act’s requirements, as well as SBA’s own reform efforts. Delays  in updates to the DRP limit the agency’s ability to adequately prepare for  and respond to disasters. Also, SBA has not fully addressed the  requirement for providing region-specific marketing and outreach and  ensuring the information is made available to SBDCs and other local  resources. 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. By taking such actions, SBA  could leverage the efforts and capacity of SBDCs, as well as state and local  emergency management agencies, and ensure that it and they will be  better prepared for future events, especially in disaster-prone areas. Furthermore, the Act established multiple new reporting requirements and  while SBA has addressed some of these, the agency has failed to comply  with the Act and issue a first annual report on disaster assistance––which  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. Failure to produce annual reports  on schedule can lead to a lack of transparency on the agency’s progress in  reforming the program. Additionally, 9 provisions set forth in the Act are  subject to deadlines, which the agency has had limited success in  meeting. The agency also has not developed a plan with expected time  frames for addressing the remaining requirements. SBA’s not providing  reports to Congress and 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, program improvement, and  capacity to reform the program, as well as its ability to adequately prepare  for and respond to disasters. SBA’s Response Following 2008 Disasters Aligned with Certain Components of its DRP, but SBA’s Response 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. Additionally,  individuals to whom we spoke affected by both disasters considered the  agency’s overall performance somewhat positive, but believed the disaster  loan process could be improved. As  discussed in our report, while SBA has made progress, the agency has  missed opportunities to further improve its Disaster Loan Program, and in  particular improve the application process for future applicants. Specifically, we recommended that the  Administrator of SBA:  (1) develop procedures for regional entities that would enable SBA to  meet all region-specific requirements of the Act and ensure regional  entities, such as SBDCs, have this information and other Disaster Loan  Program information readily available prior to the likely occurrence of a  disaster;  (2) complete the first annual report to Congress on disaster assistance and  adhere to the time frame for subsequent reports;  (3) expeditiously issue an updated DRP that reflects recent changes  resulting from the Act’s requirements, as well as SBA’s own reform efforts;  (4) develop an implementation plan and report to Congress on the  agency’s progress in addressing the requirements of the Act, including  milestone dates for completing implementation; and  (5) develop and implement a process to address identified problems in the  disaster loan application process for future applicants.
Why GAO Did This Study

This testimony discusses our work on reforms made to the Small Business Administration's (SBA) Disaster Loan Program and the impact those reforms had following recent disasters. 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 $46 billion in disaster loans for homeowners, businesses, and nonprofit organizations. 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. For example, as we stated in our February 2007 report, SBA did not engage in or complete comprehensive disaster plans before the Gulf Coast hurricanes, and this limited logistical disaster planning likely contributed to the initial challenges the agency faced in responding to the 2005 hurricanes. 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 which include creating an online loan application, increasing the capacity of its Disaster Credit Management System (DCMS), and developing a Disaster Recovery Plan (DRP). In June 2008, Congress enacted the Small Business Disaster Response and Loan Improvements Act (Act) to expand steps taken by SBA and require new measures to ensure that SBA is prepared for future catastrophic disasters.

What GAO Found

While SBA has taken some steps toward implementing the Act, the agency still needs to take additional steps to completely address 8 provisions. According to SBA officials, 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--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. Moreover, as required by the Act, SBA has not issued an update of its comprehensive DRP that reflects recent changes resulting from the Act's requirements, as well as SBA's own reform efforts. Delays in updates to the DRP limit the agency's ability to adequately prepare for and respond to disasters. Also, SBA has not fully addressed the requirement for providing region-specific marketing and outreach and ensuring the information is made available to Small Business Centers (SBDCs) and other local resources. 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. By taking such actions, SBA could leverage the efforts and capacity of SBDCs, as well as state and local emergency management agencies, and ensure that it and they will be better prepared for future events, especially in disaster-prone areas. Furthermore, the Act established multiple new reporting requirements and while SBA has addressed some of these, the agency has failed to comply with the Act and issue a first annual report on disaster assistance--which 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. Failure to produce annual reports on schedule can lead to a lack of transparency on the agency's progress in reforming the program. Additionally, 9 provisions set forth in the Act are subject to deadlines, which the agency has had limited success in meeting. The agency also has not developed a plan with expected time frames for addressing the remaining requirements. SBA's not providing reports to Congress and not having an implementation plan in place for addressing the remaining requirements can lead to a lack of transparencyabout the agency's Disaster Loan Program, program improvement, and capacity to reform the program, as well as its ability to adequately prepare for and respond to disasters. 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. Additionally, individuals to whom we spoke affected by both disasters considered the agency's overall performance somewhat positive, but believed the disaster loan process could be improved.