Small Business Administration
Progress Continues in Addressing Reforms to the Disaster Loan Program Gao ID: GAO-12-253T November 30, 2011After the Small Business Administration (SBA) was widely criticized for its performance following the 2005 Gulf Coast hurricanes, the agency took steps to reform its Disaster Loan Program. Congress also enacted the Small Business Disaster Response and Loan Improvements Act of 2008 (Act), which places new requirements on SBA to better ensure it is prepared to respond to catastrophic disasters. This testimony discusses SBA's progress in addressing certain requirements of the Act and recommendations in a 2009 GAO report to improve the Disaster Loan Program. In completing this statement, GAO reviewed and updated, as appropriate, the July 2009 report, Small Business Administration: Additional Steps Should Be Taken to Address Reforms to the Disaster Loan Program and Improve the Application Process for Future Disasters (GAO-09-755). In that report, GAO recommended that SBA should fulfill the Act's region-specific marketing and outreach requirements; complete its annual report to Congress; issue an updated Disaster Recovery Plan; develop an implementation plan for remaining requirements; and develop procedures to further improve the application process for the Disaster Loan Program. SBA generally agreed with the recommendations and stated the agency's plan to incorporate them into its ongoing efforts to implement the Act and improve the application process.
SBA has continued to make progress in addressing provisions of the Act, although continued attention to certain provisions will be important for sustained progress. As of November 2011, SBA met requirements for 16 of 26 provisions of the Act and partially addressed 6. Four provisions do not require any action at this time. For example, SBA updated its Disaster Recovery Plan annually, most recently in June 2011, consistent with our prior recommendation. SBA also has taken steps to address the Act's requirements for region-specific marketing and outreach. The agency has begun a dialogue with the state directors of Small Business Development Centers in the Gulf Coast about disseminating disaster planning information in the five most hurricane-prone states before the hurricane season. Additionally, SBA officials told GAO they have issued some public service announcements in disaster-prone areas. SBA has issued annual reports to Congress on disaster assistance in 2009, 2010, and 2011, as required by the Act and as GAO recommended. However, to fully address statutory requirements the agency must make extensive changes to current programs or implement new programs. In particular, SBA plans to implement pilots before finalizing regulations for two programs that would involve private lenders making short-term loans to applicants awaiting assistance. As GAO reported in May 2010, SBA officials told GAO that they formed a work group to develop these pilots. SBA has taken steps to implement three of five recommendations from GAO's 2009 report. However, in 2009 GAO recommended the agency develop an implementation plan and report to Congress on its progress in addressing all of the Act's requirements. In November 2011 GAO met with SBA officials, but they did not provide evidence indicating that the agency had begun implementing this recommendation. In 2009, GAO also recommended that SBA develop and implement a formal process to identify problems in the disaster loan application process and make improvements for future applicants. SBA agreed with the recommendation to improve the application process and according to its 2011 annual report on disaster assistance, the loan process has been streamlined and the agency continues to enhance the electronic loan application so it has greater functionality with the Disaster Credit Management System. SBA officials told GAO that results in customer satisfaction surveys relating to the application process have improved over time, but SBA has not provided information on how it would implement a formal process to address identified problem areas in the disaster loan application process. In its 2009 report, GAO interviewed individuals and reviewed results from SBA's 2008 Disaster Loan Program Customer Satisfaction Survey which provided some positive feedback about SBA's performance following disasters such as the 2008 Midwest floods and Hurricane Ike. However, interviewees and survey results indicated areas for improvement such as reducing the paperwork burden. Agency officials told GAO they listened to customer feedback, but the agency still appears not to have a formal process for identifying problems in the application process and making needed improvements.
GAO-12-253T, Small Business Administration: Progress Continues in Addressing Reforms to the Disaster Loan Program
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United States Government Accountability Office:
GAO:
Testimony:
Before the Committee on Small Business, House of Representatives:
For Release on Delivery:
Expected at 1:00 p.m. EST:
Wednesday, November 30, 2011:
Small Business Administration:
Progress Continues in Addressing Reforms to the Disaster Loan Program:
Statement of William B. Shear, Director:
Financial Markets and Community Investment:
GAO-12-253T:
GAO Highlights:
Highlights of GAO-12-253T, a testimony before the Committee on Small
Business, House of Representatives.
Why GAO Did This Study:
After the Small Business Administration (SBA) was widely criticized
for its performance following the 2005 Gulf Coast hurricanes, the
agency took steps to reform its Disaster Loan Program. Congress also
enacted the Small Business Disaster Response and Loan Improvements Act
of 2008 (Act), which places new requirements on SBA to better ensure
it is prepared to respond to catastrophic disasters.
This testimony discusses SBA‘s progress in addressing certain
requirements of the Act and recommendations in a 2009 GAO report to
improve the Disaster Loan Program.
In completing this statement, GAO reviewed and updated, as
appropriate, the July 2009 report, Small Business Administration:
Additional Steps Should Be Taken to Address Reforms to the Disaster
Loan Program and Improve the Application Process for Future Disasters
(GAO-09-755). In that report, GAO recommended that SBA should fulfill
the Act‘s region-specific marketing and outreach requirements;
complete its annual report to Congress; issue an updated Disaster
Recovery Plan; develop an implementation plan for remaining
requirements; and develop procedures to further improve the
application process for the Disaster Loan Program. SBA generally
agreed with the recommendations and stated the agency‘s plan to
incorporate them into its ongoing efforts to implement the Act and
improve the application process.
What GAO Found:
SBA has continued to make progress in addressing provisions of the
Act, although continued attention to certain provisions will be
important for sustained progress. As of November 2011, SBA met
requirements for 16 of 26 provisions of the Act and partially
addressed 6. Four provisions do not require any action at this time.
For example, SBA updated its Disaster Recovery Plan annually, most
recently in June 2011, consistent with our prior recommendation. SBA
also has taken steps to address the Act‘s requirements for region-
specific marketing and outreach. The agency has begun a dialogue with
the state directors of Small Business Development Centers in the Gulf
Coast about disseminating disaster planning information in the five
most hurricane-prone states before the hurricane season. Additionally,
SBA officials told GAO they have issued some public service
announcements in disaster-prone areas. SBA has issued annual reports
to Congress on disaster assistance in 2009, 2010, and 2011, as
required by the Act and as GAO recommended. However, to fully address
statutory requirements the agency must make extensive changes to
current programs or implement new programs. In particular, SBA plans
to implement pilots before finalizing regulations for two programs
that would involve private lenders making short-term loans to
applicants awaiting assistance. As GAO reported in May 2010, SBA
officials told GAO that they formed a work group to develop these
pilots.
SBA has taken steps to implement three of five recommendations from GAO‘
s 2009 report. However, in 2009 GAO recommended the agency develop an
implementation plan and report to Congress on its progress in
addressing all of the Act‘s requirements. In November 2011 GAO met
with SBA officials, but they did not provide evidence indicating that
the agency had begun implementing this recommendation. In 2009, GAO
also recommended that SBA develop and implement a formal process to
identify problems in the disaster loan application process and make
improvements for future applicants. SBA agreed with the recommendation
to improve the application process and according to its 2011 annual
report on disaster assistance, the loan process has been streamlined
and the agency continues to enhance the electronic loan application so
it has greater functionality with the Disaster Credit Management
System. SBA officials told GAO that results in customer satisfaction
surveys relating to the application process have improved over time,
but SBA has not provided information on how it would implement a
formal process to address identified problem areas in the disaster
loan application process. In its 2009 report, GAO interviewed
individuals and reviewed results from SBA‘s 2008 Disaster Loan Program
Customer Satisfaction Survey which provided some positive feedback
about SBA‘s performance following disasters such as the 2008 Midwest
floods and Hurricane Ike. However, interviewees and survey results
indicated areas for improvement such as reducing the paperwork burden.
Agency officials told GAO they listened to customer feedback, but the
agency still appears not to have a formal process for identifying
problems in the application process and making needed improvements.
View [hyperlink, http://www.gao.gov/products/GAO-12-253T]. For more
information, contact William Shear at (202) 512-8678 or shearw@gao.gov.
[End of section]
Chairman Graves, Ranking Member Velazquez, and Members of the
Committee:
I am pleased to be here today to discuss our work on reforms made to
the Small Business Administration's (SBA) Disaster Loan Program. As
you know, 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.
After the 2005 Gulf Coast hurricanes, 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 a
slow and confusing response to the disasters--one that exposed many
deficiencies in the agency's Disaster Loan Program and demonstrated
the need for reform. 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 including creating
an online loan application, increasing the capacity of its Disaster
Credit Management System, and developing and updating a Disaster
Recovery Plan (DRP).[Footnote 1] In June 2008, Congress enacted the
Small Business Disaster Response and Loan Improvements Act (Act),
which places new requirements on SBA to ensure that it is prepared for
future catastrophic disasters.[Footnote 2] SBA has continued to face
additional demand for disaster loans following major disasters,
including Hurricane Ike and the Midwest floods in 2008, and major
floods and tornadoes affecting several states in 2011.
My statement today is based on new information that updates our 2009
report and May 2010 testimony, which updated information on SBA's
progress in addressing the Act's requirements and implementing our
2009 recommendations.[Footnote 3] Specifically, this statement focuses
on SBA's progress in addressing certain requirements of the Act and
recommendations in our 2009 report to improve the Disaster Loan
Program.
For our 2009 report, we identified and analyzed the Act's requirements
and related statutory deadlines; obtained information about SBA's
reform efforts; reviewed documents and progress reports to determine
if requirements had been addressed and deadlines met; interviewed
officials and obtained information on what, if any, challenges existed
that might affect SBA's ability to meet certain requirements and about
next steps and resources the agency identified as needed to address
any remaining requirements. We visited Iowa and Texas, and obtained
information on SBA's performance after the 2008 Midwest floods and
Hurricane Ike. We interviewed SBA and Small Business Development
Center (SBDC) officials, state and local officials, and
representatives of local Chambers of Commerce, economic development
organizations, and affected small business owners about what worked
well and what improvements to SBA's disaster loan processes they would
suggest. Finally, we reviewed results from a survey of SBA loan
applicants on their satisfaction with the Disaster Loan Program in
2008. To update information for this statement, in November 2011 we
interviewed SBA officials and reviewed documents related to the
disaster reform provisions and actions taken to implement our
recommendations. Additional information on our scope and methodology
is provided in our 2009 report.
This statement summarizes our July 2009 report and May 2010 testimony
that were based on work conducted between October 2008 and July 2009
and between March and May, 2010, respectively. We updated our work in
November 2011. All of these performance audits were conducted in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Background:
SBA's Office of Disaster Assistance (ODA) responds to disasters and
administers the Disaster Loan Program. A Presidential disaster
declaration puts into motion long-term federal recovery programs, such
as the Disaster Loan Program, but SBA is not a "first responder."
Rather, local government emergency services assume that role with help
from state and volunteer agencies. For catastrophic disasters, and if
a governor requests it, the Federal Emergency Management Agency (FEMA)
can mobilize federal resources. SBA typically responds to a disaster
within 3 days by sending ODA field staff to the affected area to begin
providing public information about SBA's services.
Once a disaster is declared, SBA can make physical disaster loans and
economic injury disaster loans. Physical disaster loans are for the
permanent rebuilding and replacement of uninsured or underinsured
disaster-damaged property, including personal residences and
businesses of any size. That is, SBA provides loans to cover repair
costs that FEMA or other insurance has not already fully compensated
or covered.[Footnote 4] Economic injury disaster loans provide small
businesses, including agricultural cooperatives and private
nonprofits, with necessary working capital until normal operations can
resume.
The Act comprises 26 provisions with substantive requirements for SBA;
some with specific deadlines and some needing appropriations, and
includes requirements that SBA must meet for disaster planning and
response, lending, and reporting.[Footnote 5] For instance, the Act
includes provisions to improve SBA's coordination with FEMA, require
that the agency conduct biennial disaster simulations, create a
comprehensive disaster response plan, and improve communication with
the public when disaster assistance is made available. It includes
requirements to improve ODA's infrastructure, appoint an official to
oversee the disaster planning and responsibilities of the agency, and
establish reporting requirements for various reports to Congress. The
Act also creates new programs, such as the Immediate Disaster
Assistance Program that would provide small-dollar loans immediately
following a disaster and the Expedited Disaster Assistance Loan
Program that would provide expedited disaster assistance to businesses.
SBA Continues to Improve Its Disaster Loan Program:
As of November 2011, SBA has continued to make progress addressing
requirements of the Act (see fig. 1). In addition, SBA provided us
with evidence in November 2011 that the agency has taken steps to
implement three of the five recommendations from our 2009 report. As
of November 2011, SBA met requirements for 16 of 26 provisions of the
Act and partially addressed 6. Four provisions do not require any
action at this time. As we recommended and the Act requires, SBA has
updated its DRP annually--most recently in June 2011 (section 12075).
The current plan is more complete than the previous plan, providing
updated information on actions SBA has taken on disaster recovery
planning.[Footnote 6] As we reported in May 2010, SBA also issued
regulations on coordinating with FEMA to better ensure that disaster
assistance applications are submitted in a timely manner (section
12062). In addition, SBA must revise the regulations annually and
report on the revisions when submitting its annual report to Congress.
More recently, in January 2011, SBA issued final rules to implement
the authority provided by the Act for issuing surety bond guarantees
for contracts and orders related to a major disaster (section 12079).
Figure 1: SBA's Status in Addressing Requirements of the 2008 Small
Business Disaster Response and Loan Improvements Act, as of November
2011:
[Refer to PDF for image: illustrated table]
Section: 12061;
Description of requirement: SBA permitted to make economic injury
disaster loans to nonprofits;
Status (November 2011): Addressed (initial or ongoing);
Deadline: [Empty].
Section: 12062[A];
Description of requirement: SBA must ensure its disaster assistance
programs are coordinated to the maximum extent practicable with FEMA
programs;
Status (November 2011): Addressed (initial or ongoing);
Deadline: Missed deadline.
Section: 12063;
Description of requirement: Better public awareness of disaster
declaration, application periods, and creation of a marketing and
outreach plan;
Status (November 2011): Partially addressed;
Deadline: Missed deadline.
Section: 12064;
Description of requirement: SBA must conduct a study looking at the
consistency between standard operating procedures and regulations of
the Disaster Loan Program;
Status (November 2011): Addressed (initial or ongoing);
Deadline: Missed deadline.
Section: 12065;
Description of requirement: SBA increased loan amounts from $10,000 to
$14,000 without requiring collateral;
Status (November 2011): Addressed (initial or ongoing);
Deadline: [Empty].
Section: 12066;
Description of requirement: SBA authorizes private contractors to
process disaster loans and coordinate efforts with Internal Revenue
Service to expedite loan processing;
Status (November 2011): Partially addressed;
Deadline: [Empty].
Section: 12067;
Description of requirement: SBA must develop, implement, or maintain a
centralized information system to track and follow up with disaster
loan applicants;
Status (November 2011): Addressed (initial or ongoing);
Deadline: [Empty].
Section: 12068;
Description of requirement: SBA is authorized to increase the
deferment period of loans, but the deferment may not exceed 4 years;
Status (November 2011): N/A;
Deadline: [Empty].
Section: 12069;
Description of requirement: SBA must put in a place a secondary
facility for processing disaster loans in case the primary facility is
unavailable;
Status (November 2011): Addressed (initial or ongoing);
Deadline: [Empty].
Section: 12070;
Description of requirement: SBA can not require the borrower to pay
any non-amortized amount for the first 5 years after repayment begins;
Status (November 2011):
Deadline:
12071 SBA is authorized to make economic injury disaster loans in
cases of ice storms and blizzards;
Status (November 2011): Addressed (initial or ongoing);
Deadline: [Empty].
Section: 12072;
Description of requirement: SBA must develop and implement a major
disaster response plan and conduct a disaster simulation exercise at
least once every 2 years;
Status (November 2011): Addressed (initial or ongoing);
Deadline: Addressed (initial or ongoing).
Section: 12073;
Description of requirement: SBA must assign an individual the disaster
planning responsibilities and report to Congress;
Status (November 2011): Addressed (initial or ongoing);
Deadline: Addressed (initial or ongoing).
Section: 12074;
Description of requirement: SBA should ensure that the number of full-
time equivalent ODA employees is not fewer than 800 and in the
disaster cadre not fewer than 1,000;
Status (November 2011): Addressed (initial or ongoing);
Deadline: [Empty].
Section: 12075;
Description of requirement: SBA must develop, implement, or maintain a
comprehensive written disaster response plan and update the plan
annually;
Status (November 2011): Addressed (initial or ongoing);
Deadline: Partially addressed[B].
Section: 12076;
Description of requirement: SBA must develop long-term plans to secure
sufficient office space to accommodate an increased workforce in times
of disaster;
Status (November 2011): Addressed (initial or ongoing);
Deadline: [Empty].
Section: 12077;
Description of requirement: SBA may not rely solely on the loan
applicant's status as a major source of employment prior to the
disaster to qualify for disaster loans beyond the current statutory
limit;
Status (November 2011): Addressed (initial or ongoing);
Deadline: [Empty].
Section: 12078;
Description of requirement: Maximum disaster loan amount increased
from $1.5 to $2 million;
Status (November 2011): Addressed (initial or ongoing);
Deadline: [Empty].
Section: 12079;
Description of requirement: SBA may guarantee any surety against loss
on a bid, payment, performance, or ancillary bond on any work order or
contract that at the time of the bond execution does not exceed $5
million;
Status (November 2011): Addressed (initial or ongoing);
Deadline: [Empty].
Section: 12081;
Description of requirement: If the President declares a major
disaster, SBA may declare eligibility for additional disaster
assistance;
Status (November 2011): N/A;
Deadline: [Empty].
Section: 12082;
Description of requirement: SBA permitted to make economic injury
disaster loans to eligible small business concerns located anywhere in
the United States (including outside the disaster area) when the SBA
declares eligibility for additional disaster assistance;
Status (November 2011): N/A;
Deadline: [Empty].
Section: 12083[A];
Description of requirement: SBA must establish and implement a Private
Disaster Assistance Program. SBA may guarantee timely payment of
principal and interest on private disaster loans issued to eligible
small businesses and homeowners within an eligible disaster area;
Status (November 2011): Partially addressed;
Deadline: Missed deadline.
Section: 12084;
Description of requirement: SBA must establish an Immediate Disaster
Assistance Program to provide immediate small-dollar loans through
private lenders;
Status (November 2011): Partially addressed;
Deadline: [Empty].
Section: 12085[A];
Description of requirement: SBA must establish an Expedited Disaster
Assistance Business Loan Program;
Status (November 2011): Partially addressed;
Deadline: Missed deadline.
Section: 12086;
Description of requirement: SBA is allowed to institute a program to
refinance Gulf Coast disaster loans resulting from Hurricanes Katrina,
Rita, or Wilma up to an amount no greater than the original loan;
Status (November 2011): N/A;
Deadline: [Empty].
Section: 12091[C];
Description of requirement: SBA must submit reports to Congress on
disaster assistance;
Status (November 2011): Partially addressed;
Deadline: Partially addressed.
N/A: Not applicable because no action is needed to be taken by SBA at
this time, due to provisions' discretionary nature.
Source: GAO analysis of the Act and SBA documents.
[A] The Act requires SBA to issue regulations for these provisions.
[B] SBA provided the first updated DRP on November 15, 2009, several
months past the expected update in June 2009. Since then, SBA updated
the DRP on July 31, 2010, and in June 2011.
[C] Section 12091(f) includes requirements for a loan approval rate
report, which is to provide a "detailing of how [SBA] can improve the
processing of applications under the disaster loan program." SBA
officials told us that they had covered the requirement in the 2007
DRP.
[End of figure]
SBA has taken some steps to address the marketing and outreach
provision of the Act (section 12063). SBA officials told us the agency
has (1) begun an ongoing dialogue with the directors of SBDCs in the
Gulf Coast about disseminating disaster planning and preparation
information in the five most hurricane-prone states before the
hurricane season; (2) detailed an SBA employee who works with the
SBDCs to the Office of Entrepreneurial Development to help the agency
develop a strategic approach for its disaster role; (3) issued some
public service announcements tailored to specific regions; and (4)
provided disaster preparedness presentations in conjunction with
regional administrators and SBDCs. In November 2011, SBA told us that
while the agency had not yet developed a written marketing plan, it
had plans to do so.
According to SBA officials, as of May 2010, the agency had not yet
completely addressed some provisions because to do so, SBA would have
to make extensive changes to current programs or implement new
programs--such as the Immediate and Expedited Disaster Assistance
Programs (sections 12084 and 12085). These programs, which require
participation of private lenders, would be designed to provide
businesses with access to short-term loans while they were waiting for
long-term assistance. As we reported in 2009, SBA plans to conduct
pilots of these programs before fully implementing them. For our May
2010 testimony, SBA officials told us they had established a work
group jointly chaired by officials from ODA and the Office of Capital
Access to address these requirements and develop the pilots. ODA
officials said they drafted regulations and received subsidy and
administrative cost funding in the 2010 budget to allow them to pilot
test about 600 loans under the Immediate Disaster Assistance Program
(section 12084). In May 2010, SBA officials had told us that their
goal was to have the pilot for the Immediate Disaster Assistance
Program in place by September 2010. As of November 2011, SBA has not
provided evidence indicating that the agency has made progress on this
initiative.
While SBA has addressed most of the multiple new reporting
requirements established in the Act, such as submitting annual reports
to Congress on disaster assistance for the past 3 years, the agency
has not met some statutory deadlines (section 12091). For example, as
required by the Act and as we recommended in our 2009 report, the
agency issued its first annual report on disaster assistance in
November 2009 but the report 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.
[Footnote 7] Since our May 2010 testimony, SBA provided us its fiscal
year 2010 and 2011 annual reports on disaster assistance that were
issued in June 2011 and November 2011, respectively.
In our 2009 report, we recommended that SBA develop an implementation
plan and include milestone dates for completing implementation and any
major program, resource, or other challenges the agency faces as it
continues to address requirements of the Act. As of November 2011, the
agency did not provide evidence it had implemented this
recommendation. 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, its capacity to
reform the program and make program improvements, and its ability to
adequately prepare for and respond to disasters.
In 2009, we also recommended that SBA develop and implement a process
to address identified problems in the application process for disaster
loans. We reported in 2009 that while SBA's initial response following
the 2008 Midwest floods and Hurricane Ike aligned with major
components of its DRP in terms of its use of infrastructure and staff,
information technology, and communications, both the individuals we
interviewed and survey results indicated the loan application process
could be improved. For example, individuals we interviewed and survey
responses pointed to concerns about the amount of paperwork required
to complete applications and the timeliness of loan disbursements. To
address these concerns, the individuals we interviewed suggested
eliminating the requirement that business loan applicants provide
copies of federal tax records; providing partial disbursements earlier
in the process; using bridge loans to help ensure disaster victims
receive timely assistance; and involving SBA, SBDCs, and state and
local officials in joint pre-planning and disaster preparedness
efforts.
More recently, SBA reported they have been improving the application
process. For example, SBA's 2011 annual report on disaster assistance
states the loan process has been streamlined and that the agency
continues to enhance the electronic loan application so it has greater
functionality with the Disaster Credit Management System. While SBA
officials told us that they listened to customer feedback and results
from the customer satisfaction survey related to the application
process have improved, SBA has not provided information on how it
would implement a formal process to address identified problem areas
in the disaster loan application process, as we recommended in 2009.
By establishing such a process, SBA could better demonstrate its
commitment to improving the Disaster Loan Program and the application
process for future applicants.
In conclusion, SBA has taken important steps to address three of our
five recommendations. These include progress made in improving
marketing and outreach to various regional entities, submitting its
annual reports to Congress, and updating its DRP annually.
Chairman Graves, Ranking Member Velazquez, and Members of the
Committee, this concludes my prepared statement. I would be pleased to
respond to any questions that you may have at this time.
GAO Contacts and Acknowledgments:
For further information on this testimony, please contact William B.
Shear at (202) 512-8678 or shearw@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this statement. Individuals making key contributions
to this testimony include Marshall Hamlett, Assistant Director; Anna
Carbino, William Chatlos, Beth Faraguna, John Forrester, John McGrail,
Marc Molino, and Barbara Roesmann.
[End of section]
Footnotes:
[1] SBA's use of "disaster recovery plan" differs from the general use
of the term to refer to an information technology-focused plan
designed to restore operability of a system, application, or computer
facility following an emergency.
[2] Pub. L. No. 110-246, Title XII, subtitle B, 122 Stat. 2168 (2008).
[3] See GAO, Small Business Administration: Continued Attention Needed
to Address Reforms to the Disaster Loan Program, [hyperlink,
http://www.gao.gov/products/GAO-10-735T] (Washington, D.C.: May 19,
2010) and Small Business Administration: Additional Steps Should Be
Taken to Address Reforms to the Disaster Loan Program and Improve the
Application Process for Future Disasters, [hyperlink,
http://www.gao.gov/products/GAO-09-755] (Washington, D.C.: Jul. 29,
2009).
[4] SBA can lend individuals up to $200,000 for their primary
residence and $40,000 for household goods and personal effects and can
lend businesses up to an aggregated $2 million for physical and
economic injury disaster loans, before the individuals receive their
insurance recovery. In these cases, the loan recipient must use the
insurance recovery funds to reduce the balance of the SBA disaster
loan. Even individuals or business owners who believe they have full
insurance coverage are encouraged to apply for an SBA loan because
their insurance recovery may turn out to be only partial, or their
damage may exceed insurance policy limits.
[5] In June 2008, as part of the Food, Conservation, and Energy Act
(also commonly known as the Farm Bill), Pub. L. No. 110-246, 122 Stat.
1651, Congress passed the Small Business Disaster Response and Loan
Improvements Act of 2008. This law repealed and replaced a duplicative
enactment of May 22, 2008. However, the Farm Bill contains a provision
that generally preserved the prior act's date of enactment if it would
provide an earlier effective date than that in the Farm Bill. Although
the Act became law on June 18, 2008, the enactment date for purposes
of determining the effective date is May 22, 2008. We calculated all
statutory deadlines in our July 2009 report from May 22, 2008.
[6] Small Business Administration, Disaster Recovery Plan, June 2011.
[7] The Act also states the annual report must include information on
some requirements under certain provisions, such as (a) the
regulations on coordination with FEMA to assure that applications for
disaster assistance are submitted as quickly as practicable as
required under section 12062; (b) disaster simulation exercises
conducted by the agency under section 12072; (c) updates to the
comprehensive DRP required under section 12075; and (d) updates to
SBA's plans for securing office space to accommodate an expanded
workforce required under section 12076.
[End of section]
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