Small Business

Shortly after Hurricane Hugo struck the U.S. Virgin Islands in September 1989, the Small Business Administration (SBA) set up temporary offices in St. Thomas and St. Croix to help homeowners and businesses obtain disaster assistance loans. A number of allegations were raised about improper hiring practices involving temporary employees and improper reimbursement of travel expenses. GAO found that some SBA hiring, supervision, promotion, and pay practices were inappropriately handled during the Hugo disaster operation. While SBA is undertaking steps to prevent a recurrence of these problems, SBA procedures for issuing temporary waivers of the automatic reduction in per diem paid to temporary employees still do not include documentation and periodic review requirements. In addition, because of a six-month limit on paying per diem to temporary disaster employees, SBA had to release or transfer some employees before their work was done, disrupting the work flow and making the SBA work force less efficient.

GAO found that: (1) in justifying an automatic reduction in per diem, SBA did not document that disaster employees could not obtain lodging or meals at reduced costs in part because it lacked information on what temporary employees had to pay for lodging; (2) during the 11 months the waiver was in effect, SBA did not review the waiver justification to determine if the subsistence costs associated with long-term stays in Puerto Rico or the Virgin Islands had changed sufficiently to warrant discontinuing the waiver or adjusting the per diem rates; (3) per diem amounts that exceed employee costs are not taxable; (4) to comply with a legislative limitation on the amount of time it could reimburse temporary employees for per diem expenses in connection with any single disaster declaration, SBA transferred temporary employees to other disaster declarations when work for which they were qualified remained to be done at their current location; (5) SBA efforts reduced the amount of time needed to obtain disaster assistance loan checks from the Treasury; and (6) an insufficient number of adequately trained employees and the lack of forms and manuals contributed to improper personnel practices during the Hugo operation.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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