SBA’s limited planning contributed  to insufficient DCMS user capacity, which restricted the number of staff  that could access the system and process the large volume of applications  in a timely manner. As table 2 shows, as of May  27, 2006, SBA had issued more than 2.1 million applications to victims  affected by the Gulf Coast hurricanes. Ineffective Technical Support Affected the Stability of DCMS and SBA’s Ability to Provide Timely Disaster Assistance

SBA experienced instability with DCMS during the initial months following  Hurricane Katrina, as users experienced outages, difficulties connecting to  the system, and slow response times in completing loan processing tasks. These backlogs  combined peaked at over 204,000 applications in late December 2005. As a result of the backlogs, victims of the Gulf Coast hurricanes  waited about 74 days on average for SBA to process their loan applications,  compared with the agency’s goal of within 21 days. For example, SBA increased the number of  concurrent users that could access DCMS by acquiring additional computer  hardware and adding a second work shift for loan processing staff to better  balance the system’s workload. SBA’s Processing Changes and Other Initiatives Had Varied Success

After the Gulf Coast hurricanes, SBA made several changes to its disaster  loan process and implemented other initiatives intended to improve its  response to victims. While some of these initiatives improved SBA’s ability  to process large numbers of disaster loan applications, others did not. For example, in November 2005, SBA implemented  the GO Loan Program. Moreover, SBA based the  maximum number of concurrent users for DCMS solely on its historical  experience rather than considering information available from catastrophe  risk modeling firms and disaster simulations, such as the likelihood and  severity of damages from potential catastrophes to help predict the volume  of applications that it might expect from such events. Recommendations for Executive Action

In order to provide more timely disaster assistance in the future, we  recommend that the Administrator of SBA direct the Office of Disaster  Assistance to take the following four actions:  reassess DCMS’s maximum user capacity and related loan processing  resource needs based on such things as lessons learned from the Gulf  Coast hurricanes, a review of information available from catastrophe  risk modeling firms and disaster simulations, and related cost  considerations;  conduct complete stress testing to ensure that DCMS can function at  planned for maximum user capacity levels;   improve management controls over assessing contractor performance  through inspections of all equipment purchased or leased to support  DCMS; and  expedite plans to resume business process reengineering efforts to  analyze the disaster loan process and identify ways to more efficiently  process loan applications including an evaluation of the feasibility of  implementing a secure Internet-based application feature for home loan  applicants. As we noted in our report, SBA planned the maximum user capacity  for DCMS based on the volume of applications it received from victims of  the Northridge earthquake—the single largest disaster SBA had previously  faced—and did not anticipate the likelihood of a single disaster or series of  disasters of the magnitude of the Gulf Coast hurricanes. Scope and Methodology

In this report, we evaluate: (1) what affected the Small Business  Administration’s (SBA) ability to provide timely disaster assistance and (2)  the actions SBA took after the disasters to improve its response to disaster  victims. This report focuses primarily on the Disaster Credit Management  System (DCMS) and the disaster loan process.
Why GAO Did This Study

Hurricanes Katrina, Rita, and Wilma (the Gulf Coast hurricanes) caused more than $118 billion in estimated property damages across the Gulf Coast region in 2005. The Small Business Administration (SBA) helps individuals and businesses recover from disasters through its Disaster Loan Program. GAO initiated work to determine how well SBA provided victims of the Gulf Coast hurricanes with timely assistance. This report, the first of two, focuses primarily on the Disaster Credit Management System (DCMS) and disaster loan process. Here, GAO evaluates (1) what affected SBA's ability to provide timely disaster assistance and (2) actions SBA took after the disasters to improve its response to disaster victims. In conducting this study, GAO analyzed data on loan applications and assessed key aspects of SBA's acquisition and implementation of DCMS.

What GAO Found

Although DCMS provided SBA with a number of benefits, several factors affected SBA's ability to provide timely disaster assistance to victims of the Gulf Coast hurricanes. First, the large volume of applications SBA processed greatly exceeded any previous disaster, including the 1994 Northridge earthquake--the largest single disaster SBA previously faced. Second, SBA primarily used this earthquake as the basis for planning the maximum user capacity for DCMS and did not consider information available from catastrophe risk modeling firms and disaster simulations, such as the likelihood and severity of damages from potential catastrophes, to help predict the expected application volume from such events. SBA's limited planning contributed to insufficient DCMS user capacity, which restricted the number of staff that could access the system and process the large volume of applications in a timely manner. SBA also did not receive the correct computer hardware from its contractor, and the agency did not completely stress test DCMS before implementation, which contributed to the system instability, outages, and slow response times initially experienced by SBA staff. As a result of these and other factors, SBA faced significant delays and backlogs in processing loan applications, as depicted in the figure below. This backlog peaked at more than 204,000 applications 4 months after Hurricane Katrina. As of May 27, 2006, SBA processed applications, on average, in about 74 days compared with its goal of within 21 days. Some of the actions SBA took after the Gulf Coast hurricanes helped to improve its response to disaster victims. For example, SBA addressed system-related issues by increasing the number of users that could access DCMS, and it plans to further increase the system's maximum user capacity. SBA implemented other initiatives that had limited success. For example, SBA made only a few loan guarantees under its Gulf Opportunity Pilot Loan Program for small businesses in communities affected by the disasters. SBA would benefit by expediting its planned business process reengineering efforts to analyze ways to more efficiently process loan applications, such as implementing a secure Internet-based application feature for home loan applicants.