United States Government Accountability Office

GAO Report to Congressional Addressees

SMALL BUSINESS 

ADMINISTRATION 

Additional Steps 

Needed to Enhance 

Agency Preparedness 

for Future Disasters 

February 2007 

 

GAO-07-114 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

February 2007

SMALL BUSINESS ADMINISTRATION

Additional Steps Needed to Enhance 

Agency Preparedness for Future 

Disasters 

Highlights of GAO-07-114, a report to 

congressional addressees

 

The Small Business Administration

(SBA) is the federal government’s 

primary provider of disaster loans 

to businesses, homeowners, and 

renters. In a previous report (GAO06-860), GAO found that SBA’s 

limited information systems 

planning contributed to delays in 

processing disaster loans for the 

victims of the 2005 Gulf Coast 

Hurricanes (Katrina, Rita, and 

Wilma). To provide further insight

into how SBA’s disaster

preparedness could be enhanced,

this second report, initiated under

the Comptroller General’s 

authority, assesses other logistical 

issues (e.g., staffing and space 

acquisition) that may have affected 

the efficiency of the agency’s 

response to the hurricanes.

Specifically, this report (1) 

assesses SBA’s logistical planning

efforts prior to the Gulf Coast 

hurricanes and current planning 

efforts and (2) discusses SBA’s 

outreach services to hurricane

victims. 

GAO reviewed disaster planning 

reports, interviewed SBA officials,

and visited the Gulf Coast region. 

What GAO Recommends

To help ensure that SBA is better 

prepared to provide disaster 

assistance, GAO recommends that 

the agency (1) establish time 

frames for completing key 

elements of its disaster

management plan and (2) assess 

whether use of disaster simulations 

and models could enhance disaster 

planning efforts. SBA agreed with 

these recommendations. 

SBA engaged in limited logistical disaster planning prior to the Gulf Coast 

hurricanes, which, in retrospect, likely contributed to the initial challenges 

that the agency faced in processing the related surge in disaster loan

applications on a timely basis. GAO reports, reports by other investigative 

agencies, and disaster management experts have stated that comprehensive

planning and the supplementary use of sophisticated techniques (e.g., 

simulations of varying disaster scenarios) can help organizations prepare for 

potential disasters and mitigate their effects. However, SBA did not engage 

in or complete comprehensive disaster plans prior to the Gulf Coast 

hurricanes, in part, due to the view by headquarters agency officials that 

such planning yielded limited benefits and that local agency officials were in 

the best position to estimate logistical requirements. With better planning, 

available evidence suggests the agency could have been better positioned to 

provide initial disaster assistance to hurricane victims in an organized and 

efficient manner. In particular, SBA faced challenges in training and 

supervising thousands of temporary employees hired to process loan 

applications, had not taken steps to help ensure additional trained staff 

would be available, and encountered difficulties in obtaining suitable office 

space for the expanded workforce. 

In the wake of the Gulf Coast hurricanes, SBA officials said that they 

recognized the importance of disaster planning and have initiated a planning 

process designed to address key areas, which includes cross-training other 

agency staff to provide disaster assistance and recruiting and training a

reserve of potential temporary employees. SBA has also taken steps to 

expedite the process for disbursing approved disaster loans. However, GAO 

continues to have concerns about several limitations in SBA’s current

planning process, including the lack of a timetable for competing key

elements of its disaster management plan and the fact that the agency has

not assessed whether its disaster plan would benefit from the supplemental 

use of disaster simulations or catastrophe models.

SBA took a variety of steps under trying conditions to inform victims of the 

Gulf Coast hurricanes about its assistance programs, but several factors may 

have limited the effectiveness of these outreach efforts. SBA staff members 

reached out to disaster victims by speaking at about 600 organized events 

and advertising. However, the effectiveness of SBA’s outreach efforts may 

have been reduced by, among other things, both the extensive damage and 

victim relocations associated with the hurricanes. According to SBA 

officials, the agency has initiated an internal review of the outreach that it 

provided to victims of the Gulf Coast hurricanes and is developing a plan to 

better provide such outreach in future disasters. 

www.gao.gov/cgi-bin/getrpt?GAO-07-114.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact William B. 

Shear at (202) 512-8678 or shearw@gao.gov. 
Contents 

Letter 1

Results in Brief 3

Background 7

SBA’s Limited Planning Likely Contributed to Initial Delays in

Processing Gulf Coast Hurricane Disaster Loan Applications, 

and Announced Disaster Planning Improvements Also Have 

Potential Limitations 11 

SBA Utilized a Variety of Outreach Approaches during the Gulf

Coast Hurricanes, but Several Factors May Have Limited Their 

Effectiveness 25

Conclusions 29

Recommendations for Executive Action 30 

Agency Comments and Our Evaluation 30 

Appendix I: Objectives, Scope, and Methodology 34

Appendix II: Comments from the Small Business Administration 37 

Appendix III: GAO Contact and Staff Acknowledgments 41

Figures 

Figure 1: SBA’s Realigned Disaster Loan Operation as of June 1, 

2006 10

Figure 2: SBA Ft. Worth Loan Processing Staffing Levels 17 

Figure 3: Example of an SBA Print Ad for Hurricane Katrina 

Victims 27

Page i GAO-07-114 SBA Disaster Preparedness
Abbreviations 

ACP Association of Contingency Planners 

AIR Applied Insurance Research 

DCMS Disaster Credit Management System 

DHS Department of Homeland Security 

FEMA Federal Emergency Management Agency 

GSA General Services Administration 

IHP Individuals and Households Program 

SBA Small Business Administration 

USGS U.S. Geological Survey 

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Page ii GAO-07-114 SBA Disaster Preparedness
United States Government Accountability Office

Washington, DC 20548 

February 14, 2007 

Congressional Addressees 

While the Small Business Administration (SBA) is generally known for the 

financial support it provides to small businesses, the agency also plays a 

critical if less publicized role in assisting the victims of natural and other 

disasters. Specifically, SBA provides financial assistance through its 

Disaster Loan Program to help homeowners, renters, and businesses of all 

sizes recover from disasters such as earthquakes, hurricanes, and terrorist 

attacks. In 2005 and 2006, SBA faced unprecedented demand for its 

disaster loan assistance services in the wake of Hurricanes Katrina (which 

made landfall in late August 2005), Rita, and Wilma, which battered the 

U.S. Gulf Coast region. The Gulf Coast hurricanes caused more than $80 

billion in estimated insured and uninsured property damages and over 

1,400 deaths.

1

 Nine months following Hurricane Katrina, SBA had 

approved more than 148,700 disaster assistance loans totaling $9.7 billion

to individuals and businesses that suffered losses from the Gulf Coast 

hurricanes. However, Congress and press reports expressed concerns that 

SBA’s response to the hurricanes was slow, leaving many disaster victims 

without the timely assistance that they needed. In fact, as we previously 

reported, as of late May 2006, SBA took, on average, about 74 days to 

process disaster loan applications as compared with the agency’s goal of

processing all disaster loan applications within 21 days.2

While the Small Business Administration (SBA) is generally known for the 

financial support it provides to small businesses, the agency also plays a 

critical if less publicized role in assisting the victims of natural and other 

disasters. Specifically, SBA provides financial assistance through its 

Disaster Loan Program to help homeowners, renters, and businesses of all 

sizes recover from disasters such as earthquakes, hurricanes, and terrorist 

attacks. In 2005 and 2006, SBA faced unprecedented demand for its 

disaster loan assistance services in the wake of Hurricanes Katrina (which 

made landfall in late August 2005), Rita, and Wilma, which battered the 

U.S. Gulf Coast region. The Gulf Coast hurricanes caused more than $80 

billion in estimated insured and uninsured property damages and over 

1,400 deaths.

1

 Nine months following Hurricane Katrina, SBA had 

approved more than 148,700 disaster assistance loans totaling $9.7 billion

to individuals and businesses that suffered losses from the Gulf Coast 

hurricanes. However, Congress and press reports expressed concerns that 

SBA’s response to the hurricanes was slow, leaving many disaster victims 

without the timely assistance that they needed. In fact, as we previously 

reported, as of late May 2006, SBA took, on average, about 74 days to 

process disaster loan applications as compared with the agency’s goal of

processing all disaster loan applications within 21 days.2

In July 2006, we reported, that while the unprecedented volume of disaster 

loan applications contributed substantially to the challenges that the 

agency faced in providing disaster relief on a timely basis, limited 

information technology planning also played a significant role.

3

 In 

particular, we concluded that SBA had not fully planned for the 

implementation of its new disaster loan processing system—the Disaster 

Credit Management System (DCMS), which the agency implemented in 

January 2005. For example, SBA planning was limited for the maximum 

In July 2006, we reported, that while the unprecedented volume of disaster 

loan applications contributed substantially to the challenges that the 

agency faced in providing disaster relief on a timely basis, limited 

information technology planning also played a significant role.

3

 In 

particular, we concluded that SBA had not fully planned for the 

implementation of its new disaster loan processing system—the Disaster 

Credit Management System (DCMS), which the agency implemented in 

January 2005. For example, SBA planning was limited for the maximum 

SBA Disaster Pr A Disaster Preparedness

 

07-114

 1

In this report, we refer to Katrina, Rita, and Wilma collectively as the Gulf Coast 

hurricanes.

2

See GAO, Small Business Administration: Actions Needed to Provide More Timely

Disaster Assistance, GAO-06-860 (Washington, D.C.: July 28, 2006). 

3

GAO-06-860. 

Page 1 GAO-07-114
number of staff that would need to concurrently use DCMS during a 

disaster situation. In planning for the maximum user capacity of DCMS, 

we found that SBA relied on data on the volume of disaster loan 

applications it had received from victims of the most severe disaster in the 

agency’s experience—the Northridge, California, earthquake of 1994—and 

other agency historical data. If SBA had considered information available

from disaster simulations and risk modeling firms (particularly potentially

more severe disaster scenarios than the Northridge earthquake), we 

concluded that the agency may have acquired additional capacity for 

DMCS that would have allowed it to process Gulf Coast hurricane-related

applications on a timelier basis.4

 We recommended, among other things, 

that SBA reassess DCMS’s maximum user capacity based on lessons 

learned from the Gulf Coast hurricanes and information from catastrophe 

risk modeling firms, among other sources. Although SBA took issue with 

some of our analysis that supported this recommendation, the agency 

generally agreed to implement it. 

We have prepared this second report under the Comptroller General’s 

authority to conduct evaluations on his own initiative as part of a 

continuing effort to assist Congress in reviewing how SBA’s preparedness 

for future disasters can be enhanced. This report generally focuses on 

SBA’s disaster planning and preparations prior to the Gulf Coast 

hurricanes for logistical areas other than DCMS, such as hiring of 

additional staff necessary to process applications in large disaster 

situations, space acquisition, obtaining telecommunication and other 

necessary technologies, and efforts to inform disaster victims of the 

agency’s relevant loan programs. Specifically, our objectives were to (1) 

assess SBA’s logistical planning efforts prior to the Gulf Coast hurricanes 

and current disaster planning efforts and (2) discuss outreach efforts that 

SBA provided to Gulf Coast hurricane victims. 

 4

Federal agencies and other organizations have developed assessments of the potential 

destructive consequences of varying disaster scenarios, which are intended to help federal, 

state, and local agencies enhance their disaster planning. Moreover, many insurance 

companies and state entities that provide catastrophe insurance coverage currently use 

computer programs offered by several modeling firms to estimate the financial 

consequences of various natural catastrophe scenarios. As described in this report,

estimates from disaster simulations and catastrophe models completed prior to August 

2005, when Hurricane Katrina made landfall, indicated that there were potentially more 

destructive disaster scenarios than SBA had contemplated through its disaster planning

process. 

Page 2 GAO-07-114 SBA Disaster Preparedness
To address the first objective, we reviewed our previous reports and 

reports from other organizations that have investigated the federal 

response to the Gulf Coast hurricanes, including the Association of 

Contingency Planners and the Office of Inspector General of the 

Department of Homeland Security.5

 We also interviewed disaster 

management experts, SBA officials in headquarters and agency field 

offices, and state officials in Mississippi and Louisiana. Further, we 

reviewed SBA documents that pertain to the agency’s disaster planning 

process. For the second objective, we reviewed SBA documentation that 

describes the agency’s outreach efforts during the Gulf Coast hurricanes 

and discussed these outreach efforts with SBA officials. Further, we 

discussed SBA’s current plans to evaluate its disaster outreach program 

with agency officials. Appendix I explains our objectives, scope and 

methodology in greater detail. 

We conducted our work in Washington, D.C., at SBA’s headquarters and at 

agency field offices that played a role in the agency’s response to the Gulf

Coast hurricanes, including the disaster loan processing center in Ft. 

Worth, Texas, the satellite loan processing facility in Sacramento, 

California, the disaster loan customer service call center in Buffalo, N.Y., 

and the Atlanta field office, which along with the Sacramento office, is 

responsible for disaster services outreach, among other duties. 

Additionally, we visited the DCMS operations center in Virginia, and SBA’s

Georgia District Office. We also visited state and local disaster response 

offices in Louisiana and Mississippi. Our work was conducted from 

November 2005 to January 2007 in accordance with generally accepted 

government auditing standards. 

SBA engaged in limited logistical disaster planning prior to the Gulf Coast 

hurricanes, which, in retrospect, likely contributed to the initial challenges

that the agency faced in processing the related surge in disaster loan 

applications on a timely basis. Our reports, including the report on SBA’s 

limited planning for the implementation of DCMS, other investigative 

reports, and disaster management experts have stated that comprehensive 

planning, to include detailed staffing plans, and the supplementary use of 

sophisticated techniques as appropriate (e.g., using the results of disaster 

Results in Brief 

 5

The Association of Contingency Planners is a nonprofit trade organization that is

dedicated to fostering continued professional growth and development in effective 

business continuity and continuity of operations planning. 

Page 3 GAO-07-114 SBA Disaster Preparedness
simulations and catastrophe models), can help organizations better 

prepare for potential disasters and thereby mitigate their effects. However, 

SBA did not engage in or complete comprehensive disaster plans prior to 

the Gulf Coast hurricanes, in part due to the view by headquarters officials 

that such centralized planning yielded limited benefits and that local 

agency officials were in the best position to estimate logistical

requirements. While SBA had developed some estimates of staffing and 

other logistical requirements, it largely relied on the expertise of agency 

staff and previous disaster experiences (none of which reached the 

magnitude of the Gulf Coast hurricanes) in doing so and had not leveraged 

other resources, including the results of disaster simulations or 

catastrophe models. As a result, available evidence suggests that SBA 

could have been better positioned to provide initial disaster assistance to 

Gulf Coast hurricane victims in an organized and efficient manner as 

described below: 

• SBA faced challenges in establishing a workforce to process the surge in 

disaster loan applications, which could potentially have been mitigated 

through better planning. For example, during the immediate aftermath of 

Hurricane Katrina, SBA had to move urgently to hire more than 2,000 

temporary staff, largely through newspaper and other advertisements, at 

its Ft. Worth disaster loan processing center, which previously had a 

permanent and temporary staff of about 325 on board including 40 

supervisors. SBA officials said that ensuring the training and supervision 

of this large influx of temporary staff proved very difficult. Prior to the 

Gulf Coast hurricanes, SBA had not taken steps to help ensure the 

availability of additional trained and experienced staff such as (1) crosstraining agency staff not normally involved in disaster assistance to 

provide backup support or (2) maintaining the status of a reserve of 

potential temporary employees trained in the agency’s disaster policies 

and systems (SBA officials said that the disaster reserve corps had shrunk 

from about 600 individuals in 2001 to less than 100 in August 2005).6

• SBA had not thoroughly planned for the office space requirements that 

would be necessary in a disaster the size of the Gulf Coast hurricanes. For 

example, SBA only had the capacity to house about 500 employees at its 

facility in Ft. Worth, so it had to identify another facility in the city after 

 6

SBA’s disaster reserve corps consists of volunteers, including retirees and students, who

have backgrounds in the agency’s disaster programs (e.g., loan officers and customer 

support) and who are willing to work on a temporary basis for the agency in an emergency 

situation. Such individuals must agree to relocate within 48 hours of notification of a 

disaster situation where their services are required by SBA. 

Page 4 GAO-07-114 SBA Disaster Preparedness
Hurricane Katrina made landfall (which had not been configured with 

technology to meet the agency’s needs) with the assistance of the General 

Services Administration (GSA) to house the remaining approximately 

2,000 employees.7 Fortunately, SBA was also able to quickly reestablish its 

satellite loan processing facility in Sacramento, which was in the process 

of being closed under an agency reorganization initiative, to help to reduce 

the application backlog.8

In the wake of the Gulf Coast hurricanes, SBA officials said that they 

recognized the importance of enhanced disaster planning and have 

planned or implemented several measures to better prepare for and 

respond to potential disasters. For example, SBA officials said the agency 

is developing enhanced systems, largely based on previous agency

experiences including the Gulf Coast hurricanes, to estimate staffing and 

other logistical requirements when particular disasters occur. SBA is also 

developing procedures to help ensure additional experienced and trained 

staff are available to respond to a disaster, which include cross-training 

other agency staff, reestablishing the disaster reserve corps, and reaching 

agreements with private lenders to provide disaster loan processing 

capacity. Additionally, SBA has significantly revised its approach for 

disbursing approved disaster loans, which agency officials said 

substantially reduced the disbursement backlog associated with Gulf 

Coast hurricane-related applications and should be similarly effective in 

future catastrophes.9

 However, we have also identified several apparent 

limitations in SBA’ disaster planning process, including that the agency has 

not: (1) established a time frame for implementing key elements of its 

disaster management plan such as cross-training other SBA staff to 

provide backup support, (2) assessed whether the agency’s disaster 

planning process could benefit from the supplemental use of available 

resources—such as the results of disaster simulations or catastrophe 

 7

GSA, among other responsibilities, provides office space and other logistical support 

services to federal agencies. 

8

As described in this report, SBA’s Office of Disaster Assistance initiated a consolidation 

initiative (referred to as “workforce transformation”) in 2004 to better structure its 

operations. SBA’s Sacramento field office disaster loan processing center had been slated 

for closure in October 2005, but the facility was still available at the time Hurricane Katrina

made landfall because its lease had not yet expired. 

9

According to SBA, as of August 2006, the agency had approved approximately 93,000 loans 

in which funds had not been disbursed to loan applicants. SBA officials said that figure had

been reduced to about 35,000 as of November 2006 as a result of changes made to the loan 

review process.

Page 5 GAO-07-114 SBA Disaster Preparedness
models—to help develop estimates of its logistical requirements under 

varying disaster scenarios (particularly worse case scenarios), and (3) 

developed a long-term strategy to help ensure its capacity to obtain 

suitable office space in a disaster situation.10

SBA took a variety of steps under trying conditions to inform victims of 

the Gulf Coast hurricanes of the agency’s assistance programs, but several 

factors may have limited their effectiveness. SBA staff members reached 

out to disaster victims (many of whom had relocated to other parts of the 

country) by speaking at about 600 organized events, advertising through 

the media, staffing disaster recovery centers, and making follow-up phone 

calls. However, SBA officials said that informing and educating the public

about the agency’s disaster services can be challenging because (1) it is 

not normally associated with providing such services and (2) the federal 

government’s disaster relief programs are complex (e.g., both SBA and the 

Federal Emergency Management Agency [FEMA] provide financial 

assistance to disaster victims). Further, due to the extent of the disasters, 

SBA lacked the resources necessary to comply with an informal agency

policy of conducting follow-up phone calls with all disaster victims to 

whom they mailed loan applications and, therefore, could not reach 

approximately 800,000 individuals.11 According to SBA officials, the agency 

has initiated an internal review of the outreach that it provided to victims 

of the Gulf Coast hurricanes and is developing a plan to better provide 

such outreach in future disasters. 

To help ensure that SBA is better prepared to provide critical assistance to 

victims of future disasters, this report recommends, among other steps, 

that the agency (1) establish a time frame for completing key elements of

its disaster management plan and a long-term strategy to help ensure its 

capacity to obtain suitable office space and (2) assess whether available 

resources—such as the results of disaster simulations or catastrophe 

models—could enhance its disaster planning efforts. 

 10As described in this report, in December 2006, SBA contacted FEMA regarding a model 

that agency has developed to estimate the financial and other consequences of 

earthquakes, floods, and hurricanes. SBA officials contacted FEMA to help determine 

whether the model would enhance SBA’s disaster planning process.

11SBA’s field management officials told us they had established an informal policy of 

contacting disaster victims to whom the agency had sent loan applications, but had not

returned completed applications within a specified time frame. This practice was 

established and implemented before the occurrence of the Gulf Coast hurricanes.

Page 6 GAO-07-114 SBA Disaster Preparedness
We provided a draft of this report to SBA for its review and comment. In 

its written responses, SBA described a number of measures that the 

agency has initiated to better respond to a future disaster. SBA also agreed 

to implement the recommendations in the report, including (1) 

establishing time frames for completing key disaster planning initiatives 

and (2) assessing whether available disaster simulations and external 

catastrophe models could enhance the agency’s disaster planning process. 

Additionally, SBA officials said the agency has taken steps to help ensure 

the availability of additional office space configured to meet its 

requirements in a future disaster. 

The Gulf Coast hurricanes formed a catastrophe that was one of the most 

devastating natural disasters in U.S. history. In August 2005, Hurricane 

Katrina struck first on the East Coast of Florida before hitting the northern 

Gulf Coast region, including Louisiana and Texas, resulting in a substantial 

loss of life and widespread devastation. The storm also caused substantial 

damage in the Florida panhandle, Georgia, and Alabama. In September 

2005, Hurricane Rita caused substantial devastation and deaths near the 

Texas and Louisiana border. In October 2005, Hurricane Wilma made 

landfall in Florida, and also caused fatalities and created a significant 

amount of damage and destruction there. 

The federal government provides funding and assistance to individuals and 

businesses after disasters, primarily through FEMA and SBA. FEMA is 

responsible for coordinating response and recovery efforts under 

presidential disaster declarations. FEMA works with other federal, state, 

and local agencies to assist victims after major disasters, and volunteer 

organizations such as the American Red Cross also participate in these 

efforts. Following a presidential disaster declaration, FEMA will open 

Disaster Recovery Centers where disaster victims can meet with 

representatives, obtain information about the recovery process, and 

register for federal disaster assistance. Victims may also register with 

FEMA by telephone or via FEMA’s Internet site. FEMA provides housing 

assistance to disaster victims through the Individuals and Households 

Program (IHP).12 Under the IHP, FEMA can make grants available to repair

or replace housing damaged in a disaster that is not covered by insurance. 

However, the IHP is a minimal repair program that is designed to make the

victim’s home habitable and functional, not to restore the home to its 

Background 

 12FEMA also refers to the IHP program as Individual Assistance. 

Page 7 GAO-07-114 SBA Disaster Preparedness
predisaster condition. When disaster victims register for FEMA assistance, 

they are asked to provide their approximate household income. If the 

applicant’s income exceeds certain thresholds, FEMA automatically refers

them to SBA’s Disaster Loan Program.13

SBA’s Disaster Loan Program is the primary federal program for funding 

long-range recovery for private sector, nonfarm disaster victims and the 

only form of SBA assistance not limited to small businesses. The Small 

Business Act authorizes SBA to make available the following two types of 

disaster loans: 

• Physical disaster loans—These loans are for permanent rebuilding and 

replacement of uninsured or underinsured disaster-damaged property. 

They are available to homeowners, renters, businesses of all sizes, and 

nonprofit organizations. These loans are intended to repair or replace the 

disaster victims’ damaged property to its predisaster condition. 

• Economic injury disaster loans—These loans provide small businesses 

with necessary working capital until normal operations resume after a 

disaster declaration. They cover operating expenses the business could 

have paid had the disaster not occurred. The act restricts economic injury 

disaster loans to small businesses only. 

A key element of SBA’s loan program is that the disaster victim must have 

repayment ability before a loan can be approved. If SBA determines that a 

victim cannot afford a loan, SBA will automatically refer the individual 

back to FEMA where they may be eligible for other grant assistance. 

FEMA may be able to provide funds for “other than housing” needs, 

however, this additional help is not available to businesses.14 FEMA’s

additional help is intended to meet necessary expenses and serious needs 

not met by any other form of help, including insurance and SBA disaster 

loans. 

 13SBA provides the income thresholds to FEMA, which vary based on the applicant’s

household size and are adjusted annually for inflation. For example, SBA’s minimum 

income threshold for fiscal year 2005 was $13,965 for a household size of one; the threshold

increased to $14,355 for fiscal year 2006. If the applicant’s household income falls below 

the income thresholds, FEMA will automatically refer them to its Other Needs Assistance 

Program. This program provides financial assistance to individuals and households who

have other disaster-related necessary expenses or serious needs, such as medical expenses. 

14Funds are available for necessary expenses and serious needs caused by the disaster. This 

includes medical, dental, funeral, personal property, transportation, moving and storage, 

and other expenses that are authorized by law.

Page 8 GAO-07-114 SBA Disaster Preparedness
In 2004, SBA began a process to realign its Office of Disaster Assistance’s 

organizational structure (referred to as “workforce transformation”) that 

was designed to allow the agency to better provide disaster assistance, 

leverage technology such as DCMS, and reduce operating costs. 

Previously, SBA maintained four area offices nationwide that generally

operated independently of one another. For example, each area office had 

its own customer service duties and loan processing functions, and 

provided administrative support within a geographic area. As a result of its 

transformation effort, SBA centralized its Disaster Loan Program’s 

customer service function in its Buffalo office and its loan processing 

function in its Ft. Worth office. Additionally, SBA established two field 

operations centers in both Sacramento and Atlanta that are responsible for 

all disaster field operations, public information, and congressional 

relations functions. The centers also provide space for SBA’s Field 

Inspection Team, which conducts property inspections in order to verify 

loan applicants’ losses. SBA collocated its administrative and personnel 

support center in Herndon, Va., with the DCMS operations center. Figure 1 

shows SBA’s revised structure as of June 2006. 

Page 9 GAO-07-114 SBA Disaster Preparedness
Figure 1: SBA’s Realigned Disaster Loan Operation as of June 1, 2006 

Sources: GAO, based on SBA’s Workforce Transformation Blueprint (data); MapArt (map).

Sacramento, CA

• Field Operations Center West

• Field 

 Inspection

 Team staff

Buffalo, NY

• Disaster loan

 customer

service call 

 center

Washington, DC

• Office of Disaster

 Assistance

 Headquarters

Herndon, VA

• DCMS 

 operations center

• Administration 

and personnel

support center

• Field Inspection

 Team operations

 center

Atlanta, GA

• Field Operations

 Center East

• Field Inspection

 Team staff

Dallas/Ft. Worth, TX

• Disaster loan

 processing center

Western region Eastern region

Prior to Hurricane Katrina, SBA’s Office of Disaster Assistance had a staff 

of approximately 800 individuals, including about 350 to 400 permanent 

staff and about 400 temporary staff (who had generally been hired to 

process disaster loan applications associated with the four hurricanes that 

struck Florida in 2004). However, due to the volume of disaster loan 

applications associated with the Gulf Coast hurricanes, SBA had increased

the size of its disaster loan staff to more than 4,300 employees by January

2006, primarily through hiring temporary employees. SBA largely hired 

Page 10 GAO-07-114 SBA Disaster Preparedness
these temporary employees through advertisements in newspapers and on

local radio stations. 

Our previous reports and reports of others as well as disaster experts have

stated that advance contingency planning is a crucial element in helping 

organizations function and respond to large-scale disasters. However, we 

found that prior to the Gulf Coast hurricanes, SBA had generally not 

engaged in such comprehensive planning efforts in either headquarters or 

in field offices. SBA had not (1) taken practical steps to help ensure that 

there would be additional trained and experienced staff available to 

process applications, (2) established plans to secure additional office 

space configured to meet the needs of the agency, and (3) established 

adequate telecommunications support for the customer call center in 

Buffalo. While SBA partnered with GSA on an ad hoc basis to help address 

these challenges, in some cases it was fortunate to obtain the necessary 

logistical capacity. In the wake of the Gulf Coast hurricanes, SBA officials 

said that they had initiated steps to better plan and prepare for potential 

disasters, including developing more advanced disaster forecasting 

techniques and establishing measures to help ensure the availability of 

additional trained and experienced staff. SBA has also taken steps to 

expedite the process for disbursing approved disaster loans. However, 

SBA’s planning approach appears to be limited in that the agency has not 

established a time frame for completing key aspects of its comprehensive 

disaster management plan, such as cross-training other agency staff to 

provide backup support in a disaster and has not assessed whether it 

could leverage outside resources—such as the results of disaster 

simulations or catastrophe models—to enhance its disaster planning 

processes. Further, SBA has not developed a strategy to help strengthen 

its long-term ability to obtain suitable office space in the event of a major 

disaster. 

SBA’s Limited 

Planning Likely 

Contributed to Initial 

Delays in Processing 

Gulf Coast Hurricane 

Disaster Loan 

Applications, and 

Announced Disaster 

Planning 

Improvements Also 

Have Potential 

Limitations 

Page 11 GAO-07-114 SBA Disaster Preparedness
As we have stated in a previous report and in testimony, the ability of the 

United States to prepare for, respond to, and recover from catastrophic 

disasters can be enhanced through strong advance contingency planning, 

both within and among organizations responsible for responding to such

disasters.15 Our work has also identified instances where advance 

planning allowed federal agencies to respond effectively to the Gulf Coast 

hurricanes.16 For example, we found that the Coast Guard, Social Security 

Administration, and the National Finance Center were able to continue 

their services to Gulf Coast disaster victims with minimal interruptions 

because of their disaster planning initiatives.17 In contrast, our work 

identified other federal agencies, which did not engage in comprehensive 

planning prior to the Gulf Coast hurricanes, and thereby faced significant

challenges in fulfilling their disaster response and recovery obligations.18

For example, as discussed previously, our July 2006 report found that 

SBA’s limited information technology planning prior to the Gulf Coast 

hurricanes negatively affected the agency’s capacity to process disaster 

loan applications.19 SBA based its information technology processing 

requirements primarily on the Northridge earthquake experience of 1994, 

which was the largest disaster that the agency had previously experienced, 

and did not evaluate the consequences of other potentially more severe 

disaster scenarios that were available from existing disaster simulations or 

Various Sources Cite 

Planning as a Critical 

Element in Helping 

Organizations Prepare for 

Potential Large-Scale 

Disasters 

 15GAO, Catastrophic Disasters: Enhanced Leadership, Capabilities, and Accountability 

Controls Will Improve the Effectiveness of Nation’s Preparedness, Response, and

Recovery System, GAO-06-618 (Washington, D.C.: Sept. 6, 2006); GAO, Hurricane Katrina:

GAO’s Preliminary Observations Regarding Preparedness, Response and Recovery, 

GAO-06-442T (Washington, D.C.: Mar. 8, 2006). 

16GAO-06-618. 

17The National Finance Center, based in New Orleans, designs, develops and operates

financial, administrative and management information systems and services, which 

includes integrated payroll/personnel systems for the Department of Agriculture, and other 

government customers. 

18GAO, Hurricane Katrina: Better Plans and Exercises Needed to Guide the Military’s

Response to Catastrophic Natural Disasters, GAO-06-643 (Washington, D.C.: May 15, 

2006); GAO, Hurricanes Katrina and Rita: Unprecedented Challenges Exposed the 

Individuals and Households Programs to Fraud and Abuse; Actions Needed to Reduce

Such Problems in Future, GAO-06-1013 (Washington, D.C: Sept. 27, 2006); GAO, Disaster 

Management: Improving the Nation’s Response to Catastrophic Disasters,

GAO/RCED-93-186 (Washington, D.C.: July 1993). 

19GAO-06-860. 

Page 12 GAO-07-114 SBA Disaster Preparedness
catastrophe risk model results.20 For example, SBA did not take part in the 

Hurricane Pam disaster simulation, which FEMA organized in 2004 to help 

prepare for a hurricane striking New Orleans.21 In an earlier report, we 

found that a lack of advance planning at all levels of government hindered 

response and recovery efforts to Hurricane Andrew, which struck South 

Florida in 1992.22

In addition to findings from our previous studies, other studies have 

concluded that a lack of contingency planning can affect an organization’s 

ability to carry out its mission and meet program goals at the time of a 

major disaster, and that there is no substitute for thorough preparation.23

Thus, these reports, such as Department of Homeland Security studies, 

congressional and White House reports, as well as private studies all 

 20Hurricane Pam was a simulated exercise that FEMA conducted in conjunction with the 

National Weather Service and various federal, state, and local organizations in June 2004. 

The simulation demonstrated the impact of a hurricane that would force the evacuation of

more than 1 million residents in the New Orleans area, and the destruction of 500,000-

600,000 buildings. See www.globalsecurity.org/security/ops/hurricane-pam.htm for 

additional details. In contrast, the Northridge earthquake damaged or destroyed about

60,000 buildings, according to a study by a structural engineering firm. In 2004, a risk 

modeling firm—Equecat—publicly estimated that a recurrence of the 1935 Labor Day 

hurricane that struck the New York region would result in insured losses alone of $60 

billion or more. In 2002, we estimated that the insured losses associated with the 

Northridge earthquake would be about $12.5 billion with total estimated losses of $30 

billion. See GAO, Catastrophe Insurance Risks: The Role of Risk-Linked Securities and

Factors Affecting Their Use, GAO-02-941 (Washington, D.C.: Sept. 24, 2002). 

21However, previous studies indicate that FEMA did not adequately leverage the Hurricane 

Pam simulation. For example, according to a 2006 report by the Department of Homeland

Security’s Office of Inspector General, FEMA did not execute catastrophic planning based 

on the Hurricane Pam simulation results. In the report, FEMA officials cited the lack of 

funding as the reason for not following through on the lessons from the exercise. (A 

Performance Review of FEMA’s Disaster Management Activities in Response to 

Hurricane Katrina, OIG-06-32, March 2006.) Also, a 2006 Senate report concluded that 

many of the lessons from Hurricane Pam were either ignored or inadequately applied.

(Hurricane Katrina: A Nation Still Unprepared, Report of the Committee on Homeland 

Security and Governmental Affairs, U.S. Senate (Washington, D.C.: May 2006). 

22GAO/RCED-93-186. 

23The White House: The Federal Response to Hurricane Katrina—Lessons Learned

(February 2006); Department of Homeland Security: The National Response Plan

(December 2004 and updated May 2006); Department of Homeland Security: Office of 

Inspector General, A Performance Review of FEMA’s Disaster Management Activities in

Response to Hurricane Katrina, OIG-06-32, March 2006; Association of Contingency 

Planners (ACP)–Hurricane Katrina Observations–Lessons Learned (Jan. 31, 2006); 

Hurricane Katrina–A Nation Still Unprepared–United States Senate: Washington, D.C.

(May 2006). 

Page 13 GAO-07-114 SBA Disaster Preparedness
identified the necessity for conducting rigorous planning. For example, a 

study by the Association of Contingency Planners (ACP) emphasized the 

need for organizations to formally train their staff in disaster planning and 

engage in thorough disaster simulations, particularly worst case scenarios, 

to help ensure adequate preparation. In addition, the Department of 

Homeland Security Inspector General reported, in March 2006, that FEMA

lacked final plans that specifically addressed the types of challenges the 

agency could be expected to face in catastrophic circumstances. The 

Inspector General recommended that FEMA develop a comprehensive 

plan to aid in responding to potential disasters. 

Disaster experts we interviewed agreed that sound planning can help 

organizations—such as federal agencies—prepare for potential disasters. 

The experts said that the failure to have an established plan can negatively

affect an agency’s response and recovery efforts. Additionally, the experts 

said that the failure to establish a plan requires agencies to relearn 

experiences from one disaster to the next, thereby further slowing agency

recovery efforts. One expert stated that, to provide for an effective agency

response to a disaster, a comprehensive plan should address, to a certain

extent, components of command, operations, logistics, finance, and 

administrative needs. For example, the expert said that the logistical 

component should entail a detailed staffing plan to help ensure an 

organization’s ability to fulfill its mission at the time of a major 

catastrophe. The individual noted that most organizations, including 

federal agencies, did not have staffing plans in place at the time of the Gulf

Coast hurricanes. However, the experts cautioned that an agency’s 

disaster contingency plan must be a flexible blueprint that can respond to 

changing circumstances and disaster scenarios. In estimating the potential

consequences of varying disaster scenarios, another expert advised that 

organizations could benefit from the further use catastrophe models, given 

that such technology has been available for about 20 years. 

SBA Did Not Engage in 

Comprehensive Disaster 

Planning Prior to Gulf 

Coast Hurricanes 

As was the case with SBA’s limited planning efforts for the implementation 

of DCMS, the agency also did not engage in comprehensive disaster 

planning for other logistical areas prior to the Gulf Coast hurricanes. For 

example, SBA had not completed a formal, centralized staffing plan to help

manage the surge in disaster loan applications that could be anticipated 

under various disaster scenarios. SBA headquarters officials said that they 

had not developed agency wide disaster planning guidance due to their 

view that field office staff were in a better position to plan their response 

in the event of a crisis. That is, the SBA headquarters staff said that agency 

field office staff had a vast level of knowledge and experience that allowed 

Page 14 GAO-07-114 SBA Disaster Preparedness
them to establish plans for a range of potential disaster scenarios and that, 

given the uncertainty of disaster scenarios, centralized advance planning 

would likely yield limited benefits. SBA management said they considered

this decentralized approach as appropriate and viewed headquarters’ role 

as being more of a resource that the field offices could rely on for policy 

and high-level strategic guidance. However, at the time of the Gulf Coast 

hurricanes, SBA field offices had not completed written plans to guide 

their efforts in the event of a disaster. One field office official said, while 

SBA headquarters encouraged field offices to establish written disaster 

plans, field offices were not required to do so. While SBA had not engaged 

in comprehensive contingency planning, the agency had projected various 

logistical requirements during a disaster largely based on the expertise of 

its staff and experiences in responding to previous disasters (none of 

which reached the magnitude of destruction of the Gulf Coast hurricanes, 

as discussed earlier). SBA officials said that they did not use other 

information—such as the results of disaster simulations or catastrophe 

models—in developing their logistical projections. 

SBA Faced Logistical 

Challenges during its 

Initial Response to Gulf 

Coast Hurricanes 

We recognize that even if SBA had engaged in comprehensive planning

prior to the Gulf Coast hurricanes, it likely would have encountered 

logistical challenges (staffing, space acquisition, and technological 

support) in providing timely disaster assistance due to the volume of loan 

applications, including erroneous applications.24 However, information 

obtained during the course of our review indicates that SBA’s limited 

disaster planning process, including the lack of a written plan for staffing 

requirements associated with surges in loan applications under varying

disaster scenarios, further impeded the efficiency of the agency’s 

response. For example, officials at SBA’s Ft. Worth disaster loan 

processing center said that they developed staffing requirements as 

 24According to SBA officials, the large volume of applications that SBA distributed and

received resulted in part from a large number of referrals FEMA made to SBA’s Disaster 

Loan Program without first applying SBA’s income thresholds. This was done for disaster 

victims who registered for disaster assistance via FEMA’s Internet site and did not report

any income. SBA’s Inspector General indicated that this resulted in the following: (1) 

increased costs incurred by SBA in mailing loan applications to disaster victims that 

normally would not be referred to SBA’s Disaster Loan Program; (2) delayed response

times for those applicants who did qualify for SBA’s Disaster Loan Program; (3) lower SBA

disaster loan approval rates; and (4) increased transaction flow through DCMS, which was

near maximum capacity. For more information, see GAO-06-860 and SBA Office of 

Inspector General, “Disaster Application Referrals with $0 Income from FEMA Online 

Registration Have Increased Cost and the Demand for SBA Resources,” Advisory 

Memorandum 06-12 (Feb. 17, 2006). 

Page 15 GAO-07-114 SBA Disaster Preparedness
Hurricane Katrina struck the Gulf Coast and in its immediate aftermath. 

The officials said they initially estimated that the hurricane would require 

enough staff to process 150,000 to 200,000 loan applications, but they 

doubled the staffing estimate after the levees in New Orleans failed, based 

on reports from the media, FEMA, and SBA loss verification teams.25

During the immediate aftermath of Hurricane Katrina, SBA had to move 

urgently to hire more than 2,000 staff by January 2006 at the Ft. Worth 

center, which previously had a permanent and temporary staff of about 

325 on board including 40 supervisors (see fig. 2).

26 SBA officials said that 

most of the individuals hired to work in the Ft. Worth center were 

temporary employees who received notice of the job opportunities 

through SBA advertisements in newspapers and other media outlets.27

Additionally, the SBA officials said that ensuring the appropriate training 

and supervision in hiring such a large number of inexperienced staff 

proved challenging. 

 25SBA staff responsible for loss verification conduct on-site damage inspections for 

physical disaster loan applications to estimate the cost of restoring damaged property to

predisaster condition. 

26Many of the temporary staff at the Ft. Worth center prior to Hurricane Katrina had been 

hired to process disaster loan applications associated with four hurricanes that made

landfall in Florida in 2004.

27SBA also transferred several staff members who work in other Office of Disaster 

Assistance locations to Ft. Worth, and the agency recalled some staff that had been laid off 

under the workforce transformation initiative. 

Page 16 GAO-07-114 SBA Disaster Preparedness
Figure 2: SBA Ft. Worth Loan Processing Staffing Levels 

Hurricane

Katrina

Approximate staff levels

2005 2006

PreKatrina Sept.

325

2,500 2,500

Jan. Sept. Nov.

2,700

Peak

staffing

level

Sources: GAO, based on information provided by SBA. The figure represents approximate SBA staffing levels at particular points

in time rather than hiring data by month.

Moreover, in preparing for potential disasters, SBA did not take practical 

steps to help ensure the availability of additional trained and experienced 

staff as described below: 

• SBA did not have a system for “cross-training” its staff so that individuals 

not normally associated with disaster assistance could help out in the case 

of an emergency. With such cross-training, SBA could have potentially 

quickly leveraged the expertise of loan officers who are normally involved 

in the agency’s other small business lending programs to help process 

disaster loan applications. We note that, subsequent to Hurricane Katrina’s 

landfall, SBA’s former Administrator directed some of the agency’s district 

offices to request that staff not normally involved in disaster assistance 

volunteer to process disaster loans. However, SBA officials at one district 

office we visited said that staff who volunteered to processes disaster 

loans lacked access to the agency’s loan processing system—DCMS—and, 

consequently, this presented further challenges in their ability to process 

disaster loan applications in a timely manner. For example, without access 

to DCMS, the district staff needed to take additional time to contact SBA’s 

Ft. Worth disaster loan processing center to verify data and other 

information contained in disaster applications. Moreover, the Ft. Worth 

staff, as mentioned in our previous report, had to engage in a laborintensive process of shipping files to the district office and manually 

inputting information into DCMS because the district office staff lacked 

access to the system. 

Page 17 GAO-07-114 SBA Disaster Preparedness
• SBA did not maintain the status of a reserve group of potential voluntary 

employees with expertise in the agency’s disaster assistance programs. 

According to an SBA official, in approximately 2001, the agency had in 

place a disaster reserve corps of about 600 individuals, who had a 

background in areas such as finance, accounting, property inspections, 

and customer service who could be asked to volunteer as temporary 

employees in the event of a crisis. SBA officials said that the agency’s 

disaster reserve corps includes retirees and students who must be willing 

to locate within 48 hours of notification that their services are required to 

assist in an emergency. As discussed in our 2003 report, SBA officials 

believed that the disaster reserve corps facilitated the agency’s capacity to

process the surge in disaster loan applications associated with the 

September 11, 2001, terrorist attacks.28 However, SBA officials said that 

the agency did not subsequently maintain the status of the disaster reserve 

corps afterwards, and after the terrorist attacks, it largely dissolved. While

an official said that SBA was in the process of rebuilding the corps when 

Hurricane Katrina struck, a senior agency official said the corps had fewer 

than 100 individuals at that time. 

Moreover, SBA did not have adequate plans in place to help ensure that it 

had adequate office space to house its expanded workforce—particularly 

in the Ft. Worth and Buffalo offices—or telecommunications support in 

Buffalo. While SBA partnered with GSA on an ad hoc basis to address its 

logistical challenges after Hurricane Katrina made landfall, in some cases, 

the agency was fortunate to quickly obtain the needed capacity. The 

following provides specific information regarding SBA’s Ft. Worth and 

Buffalo offices at the time of and after the Gulf Coast hurricanes: 

• At the Ft. Worth office, SBA did not initially have adequate space to 

accommodate the more than 2,000 employees that were hired to process 

disaster loans or an established plan to acquire such space (e.g., the Ft. 

Worth center could only accommodate 500 out of the 2,700 staff that were

ultimately employed, by September 2006, to process Gulf Coast hurricanerelated disaster loan applications). In September 2005, SBA worked with 

GSA on an ad hoc basis in an effort to locate additional space for the 

newly hired staff and was able to identify available offices near its existing 

facility. However, SBA officials said that the newly acquired space was not 

configured to serve as a disaster loan processing center, so the agency had 

 28GAO, Small Business Administration: Response to September 11 Victims and

Performance Measures for Disaster Lending, GAO-03-385 (Washington, D.C.: Jan. 29,

2003). 

Page 18 GAO-07-114 SBA Disaster Preparedness
to upgrade the space to accommodate its needs. Even so, we note that 

SBA still lacked sufficient capacity in Ft. Worth to process the growing 

backlog of disaster loan applications. To address this challenge, SBA was 

also able to reestablish the loan processing function at its Sacramento 

office, which had previously been discontinued as a result of its workforce 

transformation initiative. The Sacramento office space was available 

shortly after Hurricane Katrina struck because the lease had not yet 

expired. SBA established a workforce of approximately 250 individuals at 

the Sacramento office, and the office played a significant role in reducing 

the backlog of Gulf Coast hurricane disaster loan applications.29 In June 

2006, SBA also leased a 60,000 square foot facility in Ft. Worth, which, 

upon acquisition, was configured to meet the agency’s needs to house the 

staff that are processing disaster loans associated with the Gulf Coast 

hurricanes, according to officials. 

• SBA’s Buffalo office did not initially have sufficient space to serve as a 

customer call center in a catastrophic disaster situation. In June 2005, SBA 

closed a loan processing facility in Niagara Falls, New York, and opened a 

facility in Buffalo, with the intention of it becoming the agency’s customer 

service center (i.e., call center) at a later date. While SBA provided us with 

planning documents that recognized that the Buffalo office lacked 

sufficient space in order to expand during an emergency, the agency did 

not develop a contingency plan to guide its efforts in identifying suitable 

space to accommodate an expanded workforce if a major disaster 

occurred. As was the case in Ft. Worth, SBA collaborated with GSA on an

ad hoc basis after Hurricane Katrina and was able to locate nearby 

available space in a federal office building.30

• Further, SBA faced challenges due to limited support for the 

telecommunications system at its disaster loan customer service call 

center in Buffalo. According to SBA field managers, while the customer 

service call center’s telephone system processed calls as required, vendor 

service and support for the system were inadequate. An SBA official said 

that there was only one vendor in the Buffalo region that services the type

 29In our July 2006 report (GAO-06-860), we reported that, according to SBA, 8 months after 

Hurricane Katrina, the Sacramento satellite office had processed about 95,500 home and 

4,800 business applications through DCMS for the Gulf Coast hurricane victims. SBA also 

used the Sacramento satellite office to process about 10,700 home loan applications for 

smaller disaster declarations. 

30According to an SBA official, the agency had to seek space outside of the existing call 

center building because leasing additional space within the facility was considered cost 

prohibitive. 

Page 19 GAO-07-114 SBA Disaster Preparedness
of phone system that the agency uses. The SBA official said that limited 

support and maintenance for the agency’s phone system impacted the 

agency’s ability to be able to efficiently respond to inquiries from disaster 

loan applicants. Further, an SBA official said that the phone system was 

not designed to interface with other key agency systems, which also 

affected the center’s operations. For example, due to limitations in the 

phone system’s design, SBA customer service managers were forced to 

manually track and tally critical information necessary to effectively

manage the center, such as the number of inbound/outbound calls 

received in a given time period. According to an SBA field official, this 

information is necessary in order for the office’s workforce manager to 

accurately forecast staffing needs, but tracking this data manually is time 

consuming and inefficient. SBA officials said that they have initiated a 

review of the Buffalo phone system and are considering options to 

upgrade it. 

In the wake of the Gulf Coast hurricanes, SBA officials said that they 

recognized the importance of further enhancing their disaster planning 

and have developed a master plan and initiated measures based on 

“lessons learned” from the experience. In particular, SBA convened a 

Disaster Oversight Council composed of senior agency leadership, to 

better leverage the resources of the agency as a whole, and incorporate 

new ideas and best practices into the agency’s preparedness capability. In

September 2006, SBA also appointed a single individual to coordinate the 

agency’s disaster preparedness planning and coordination efforts. Further, 

SBA officials said that the agency is taking steps to address limitations that 

existed in its disaster planning prior to the Gulf Coast hurricanes and 

weaknesses in disbursing approved disaster loan applications as follows: 

SBA Has Initiated 

Measures to Better 

Prepare for Potential 

Disasters but Has Not 

Established Time Frames 

for Plan Completion or 

Leveraged Available 

Disaster Planning 

Resources 

• Developing enhanced disaster forecasting and response capabilities.

SBA officials said that the agency is developing automated models to 

better estimate loan application volumes when disasters strike. The 

officials said that these models are based on data from the agency’s 

experiences in responding to previous disasters, including the Gulf Coast 

hurricanes. The officials said that the models allow the agency, for 

example, to estimate the number of loan applications that can be expected

under varying disaster scenarios. Officials said that the models’ estimates 

can be refined, after disasters occur, based on information provided by

FEMA and SBA loss verification teams. SBA officials also said that they 

are developing the capacity to better estimate resource requirements—-

such as staffing requirements—-to better respond to potential disaster 

scenarios. Additionally, SBA stated that DMCS has been tested and 

verified to support a minimum of 8,000 concurrent users (the agency 

Page 20 GAO-07-114 SBA Disaster Preparedness
maintained a workforce of about 4,300 at its peak in January 2006 to 

respond to the Gulf Coast hurricanes). SBA stated that it continues to 

explore the best means of upgrading DCMS’ capacity. 

• Ensuring additional trained and experienced staff in the event of a 

disaster. SBA officials said that the agency is developing a plan to crosstrain staff agencywide to provide disaster loan assistance. They also said 

SBA is planning to develop partnerships with private sector lenders who 

could assist SBA with loan processing and loan closing activities in the 

event of a major disaster. Additionally, SBA officials said that the agency 

has reestablished a disaster reserve corps of about 750 individuals, the 

majority of whom have been trained in the agency’s policies and systems. 

An SBA official added that the agency plans to ensure that corps members 

will be able to quickly obtain government identification and credit cards to 

help ensure their immediate availability in the event of a disaster. 

However, SBA officials said that maintaining the status of the corps may 

prove challenging over the longer term if their services are not required for

long periods. The officials said it can be difficult to ensure the training of 

potential volunteers or their continued availability. 

• Acquiring office space to provide additional capacity. SBA officials said 

that the agency has acquired additional facilities to house its disaster 

assistance staff. As described previously, for example, SBA officials said 

that, in June 2006, they leased a third facility in Ft. Worth with 60,000 

square feet of space that has been configured to serve as a disaster loan 

processing center (this facility has a 2-year lease). However, SBA officials 

said that there are trade-offs associated with maintaining such space over

the longer term. A senior SBA official also said that, if the space is 

ultimately no longer required to process Gulf Coast hurricane-related loan

applications, SBA would be required to incur lease costs at a time when 

funding for federal agency operations is limited. 

• Revising the existing approach to processing disaster loan applications 

to help ensure expedited fund disbursements. According to senior SBA 

officials, in July 2006, they reviewed the agency’s approach to disbursing 

approved Gulf Coast hurricane disaster loan applications and found that 

inefficiencies in the process were contributing to substantial disbursement 

delays.31 Senior SBA officials said that the previous loan disbursement 

approach was an “assembly-line” type process wherein loan applications 

 31The officials said that as of July 2006, approximately 93,000 loans had only been partially 

disbursed. The officials also said that many of the loans had not been totally disbursed due

to loan modifications (e.g., borrowers sought changes in the loans’ terms and conditions). 

Page 21 GAO-07-114 SBA Disaster Preparedness
moved from one stage to another (e.g., from loss verification to the legal 

department) and that mistakes or delays in any one stage could result in 

significant disbursement backlogs. Further, SBA officials said that the 

previous approach lacked accountability and made it difficult for 

applicants to find the status of their application or to obtain consistent 

information from the agency. Subsequently, SBA officials said that they 

have instituted a “case-manager” model in which each loan application is 

assigned to a case manager to ensure accountability, and the loan review 

units use in a team-oriented approach. According to SBA officials, the 

revised approach reduced the backlog of disbursed loans associated with

the Gulf Coast hurricanes from about 93,000 in August 2006 to 

approximately 35,000 in November 2006.32 SBA officials also said that the

revised approach should allow the agency to more efficiently disburse 

approved disaster loans in a future catastrophe.

While SBA’s announced changes address key limitations in its disaster 

planning process and preparedness efforts prior to the Gulf Coast 

hurricanes, agency officials have not established a time line for completing 

key elements of the disaster management plan. SBA officials explained

that the planning process is ongoing and that they intend to review and 

implement a variety of changes in the agency’s Office of Disaster 

Assistance in coming years. However, we note that several elements of 

SBA’s planning and preparedness process are discrete tasks that lend 

themselves to the establishment of a time line for completion. These 

elements include cross-training agency staff to provide backup support for 

disaster assistance services and reaching agreements with private sector 

lenders to process a surge in loan applications associated with disasters. 

Without the establishment of reasonable time frames for completing such 

planning and preparedness elements, it is difficult for SBA management, 

Congress, the public, and others to assess the progress of the agency’s 

efforts to better prepare for future disasters. 

Moreover, until recently, SBA had not taken steps to assess whether it 

could leverage outside resources to enhance its disaster planning and 

preparation efforts. SBA officials said that they had contacted other 

organizations, including FEMA, the National Weather Service, and the U.S. 

Geological Survey, in developing the agency’s enhanced model for 

 32In August 2006, SBA initiated the “90/45” initiative to reduce the backlog of loan 

disbursements associated with the Gulf Coast hurricanes. That is, SBA planned to finalize 

about 93,000 loan files, which were partially disbursed or pending modification, over a 45-

day period. 

Page 22 GAO-07-114 SBA Disaster Preparedness
forecasting loan application volumes when disasters strike. However, as 

discussed previously, SBA officials said that they were largely relying on 

the agency’s previous disaster experiences in enhancing their forecasting 

capacity, which is similar to the agency’s disaster planning approach prior 

to the Gulf Coast hurricanes. SBA officials said that they had not used 

other outside resources, such as the results of disaster simulations or 

catastrophe models, in the disaster planning process. A senior SBA official

said that the agency has not determined how catastrophe models could be

incorporated into its planning process, given the differences that exist 

between the insurance sector and SBA’s Disaster Loan Program. For 

example, the official noted that insurers use the models to limit their 

financial losses, due to hurricanes or earthquakes of varying severity, in

specific areas where they insure properties, whereas SBA covers 

uninsured homes and businesses on a nationwide basis. While we 

recognize these differences, as discussed in our report on SBA’s 

implementation of DCMS, the results of disaster simulations or 

catastrophe models could provide SBA with additional insight into 

potential disaster loan application volumes, and related agency logistical 

resource requirements, for particularly severe events that potentially rival

or surpass the scope of disasters that the agency has previously 

encountered, including the Gulf Coast hurricanes.33

In December 2006, SBA took initial steps to assess whether an available 

catastrophe model could help enhance its disaster planning efforts. SBA 

contacted FEMA regarding a catastrophe model that the agency has 

developed, referred to as HAZUS, that is designed to help estimate the 

damages associated with potential hurricanes, earthquakes, and floods, as 

well as the potential financial losses associated with varying disaster 

 33In April 2006, USGS, Stanford University, Lawrence Livermore National Laboratory, URS 

Corp., and the University of California, Berkeley, released the results of a disaster 

simulation involving a repeat of the 1906 San Francisco earthquake in the San Francisco 

Bay Area. The simulation involved the use of computer models developed by USGS to

predict the consequences of an earthquake striking the Bay Area with a magnitude of 7.9 on 

the Richter scale. This simulated exercise estimated that the consequences of such an 

earthquake on the Bay Area today would damage or destroy 90,000 buildings with an 

estimated repair and replacement cost of $90 billion. Additionally, the simulation estimated 

that up to 250,000 households would be displaced from damaged residences. See 

http://quake.usgs.gov for additional details. Moreover, in 2006, a risk modeling firm,

Applied Insurance Research (AIR), estimated the insured losses that would occur if past 

disasters were to recur today. For example, AIR estimated that a repeat of the 1906 

earthquake would result in insured losses of about $108 billion, whereas a repeat of

Hurricane Katrina would result in insured losses of about $41 billion. See http://www.airworldwide.com/_public/html/air_currentsitem.asp?ID=1031. 

Page 23 GAO-07-114 SBA Disaster Preparedness
scenarios.34 SBA informed FEMA that the agency was interested in 

exploring the use of HAZUS as part of its disaster planning program. SBA 

requested that FEMA brief the agency’s senior managers on HAZUS, as 

well as the types of training on the system that is available. It remains to 

be seen the extent to which SBA will decide to incorporate the HAZUS 

system into its disaster planning efforts. 

Finally, while we acknowledge that SBA would incur lease and other costs 

associated with maintaining facilities in anticipation of disasters, 

developing pragmatic strategies to help ensure the timely acquisition of 

suitable space over the long-term should be a key component of the 

agency’s disaster contingency planning. Currently, SBA has a substantial 

amount of office space leased in Ft. Worth, for example, to complete the 

processing of Gulf Coast hurricane-related disaster applications, and 

which agency officials said could be used if another disaster occurs in the 

near term. However, if no such disaster occurs, and SBA reduces its office

space inventory in Ft. Worth over the next several years to save costs, and 

the agency closes its Sacramento satellite loan processing facility in fiscal

year 2007 as planned, the agency would lack adequate loan processing 

space to respond to a future disaster the size of the Gulf Coast hurricanes 

or larger. Under such a scenario, a repeat of the steps SBA took during the 

Gulf Coast hurricanes (i.e., contacting GSA after Hurricane Katrina made 

landfall) could similarly compromise the agency’s capacity to provide 

efficient and timely disaster services. Analyzing the cost-effectiveness of 

obtaining and retaining certain office facilities over the long-term could 

improve SBA’s preparedness for future disasters. 

 34We have not reviewed HAZUS or its use in previous disasters.

Page 24 GAO-07-114 SBA Disaster Preparedness
SBA took a number of steps, under trying conditions, to reach out to Gulf 

Coast hurricane victims to provide information and assistance regarding 

disaster recovery loan assistance services. For example, the agency

mobilized its staff members to reach out to victims by speaking at 

organized events and by advertising in a variety of media including the 

Internet. However, various factors (including the fact that many people do

not equate SBA with disaster assistance) may have limited the

effectiveness of the agency’s efforts. For example, due to the number and 

dislocation of the hurricane victims, the catastrophic damage caused by

the storms, and limited agency resources, SBA was not able to comply 

with an informal policy of conducting follow-up calls with all individuals 

who were mailed disaster assistance loan applications. According to SBA 

officials, the agency has initiated a review of its outreach to Gulf Coast 

hurricane victims and is developing a plan to better provide such outreach 

in future disasters. 

SBA officials told us that they took a variety of steps to explain the 

agency’s disaster assistance programs to the victims of the Gulf Coast 

hurricanes. After Hurricane Katrina made landfall, officials from SBA’s 

field operations centers said they acted quickly to mobilize their staff and 

sent them to the Gulf Coast region to begin assisting the victims by 

providing information about their Disaster Loan Program. These officials 

told us that staff members shared information about SBA’s Disaster Loan 

Program at meetings with various groups including congressional offices,

chambers of commerce, community-based organizations, and local 

businesses. According to an SBA official, staff members from one field 

operations center attended more than 600 of these meetings between 

October 1, 2005, and May 15, 2006. This official said that the number of 

meetings they participated in was more than were typically held, due to 

the increased needs of the hurricane victims. SBA also provided 

information about its Disaster Loan Program to Small Business 

Development Centers, as well as state and local disaster management 

agencies.35 Further, SBA staff members provided outreach at FEMAestablished Disaster Recovery Centers where they conducted initial 

interviews with disaster victims to determine whether the victim and the

SBA Utilized a Variety 

of Outreach 

Approaches during 

the Gulf Coast 

Hurricanes, but 

Several Factors May 

Have Limited Their 

Effectiveness 

SBA’s Outreach to Gulf 

Coast Hurricane Victims 

May Have Been Reduced 

by the Complexity of 

Federal Disaster 

Assistance Programs and 

the Damage Associated 

with the Hurricanes 

 35The SBA administers the Small Business Development Center Program to provide 

management assistance to current and prospective small business owners. The centers 

offer one-stop assistance to small businesses by providing a wide variety of information 

and guidance in branch locations. The program is a cooperative effort of the private sector, 

the educational community, and federal, state, and local governments. 

Page 25 GAO-07-114 SBA Disaster Preparedness
damaged property were generally eligible for the loan program and to 

explain the application forms and process. SBA also established Business 

Recovery Centers to provide business owners with information on how 

disaster loans could help them in financing recovery from the hurricanes. 

In addition, SBA advertised through various forms of media such as the 

SBA Internet site, radio, television, and newspapers. Figure 3 shows an 

example of a newspaper advertisement SBA placed following Hurricane 

Katrina. SBA advertisements about its Disaster Loan Program are intended 

to inform potential loan applicants where to obtain loan applications and 

otherwise to assist victims in applying for disaster loans. Following the 

Gulf Coast hurricanes, field operations center staff members also posted 

informational flyers throughout the declared disaster areas, according to 

SBA officials. An SBA official also told us that many of these outreach 

activities were not just localized to the declared disaster areas, but staff 

members also conducted these activities in the cities where victims had 

relocated. 

Page 26 GAO-07-114 SBA Disaster Preparedness
Figure 3: Example of an SBA Print Ad for Hurricane Katrina Victims 

However, SBA officials said that the agency’s outreach efforts face 

challenges even under normal (nondisaster) circumstances, which can 

limit their effectiveness. For example, agency officials said that most 

people tend to equate SBA with small business lending activities rather 

than its disaster assistance programs. In a limited survey of 62 Gulf Coast 

hurricane victims who filed SBA disaster loan applications, we found that 

more than half reported not being aware of the agency’s disaster 

Source: SBA.

Page 27 GAO-07-114 SBA Disaster Preparedness
assistance program prior to August 2005.

36 Additionally, an SBA official 

said that the public tends to confuse SBA’s disaster assistance programs 

with those of FEMA. As noted previously, this potential for confusion was 

heightened when, in the wake of the Gulf Coast hurricanes, FEMA referred 

many disaster loan applications to SBA even though such applications did 

not meet SBA’s creditworthiness standards. Furthermore, SBA’s outreach 

efforts may face substantial challenges when disasters of the magnitude of

the Gulf Coast hurricanes or greater strike. In such cases, millions of 

people may be relocated throughout the United States, and widespread 

telephone and electrical service disruptions may take place. 

To illustrate the potential impact that a large-scale disaster can have on

SBA’s outreach efforts, we note that the agency was not able to comply 

with an informal policy requiring follow-up phone calls to all individuals 

who did return disaster assistance loan applications after the Gulf Coast 

hurricanes. While such phone calls are not mandatory, SBA officials said

that in previous disasters they had attempted to contact 100 percent of all 

individuals who did not return applications that had been mailed to them. 

The officials said that such follow-up phone calls provided the agency with

another opportunity to explain the Disaster Assistance Loan Program and 

potentially assist victims. While SBA mailed about 2 million disaster loan 

applications to victims of the Gulf Coast hurricanes, it only received about 

400,000 completed applications in return. 37 SBA officials said that the 

agency made follow up phone calls to 800,000 individuals who did not 

return the applications but was unable to contact the remaining 800,000.38 

Although SBA officials said the agency makes it a practice to make such 

follow up phone calls, it lacked the necessary staff resources to do so and 

that contacting people who may be relocated in such circumstances is 

highly challenging. 

 36We provide more details on our survey in appendix I.

37Statistics are compiled for the Gulf Coast hurricanes and are as of May 1, 2006. 

38SBA provided the data regarding these figures, based on their estimates. However, the

agency does not have a formal procedure for verifying the number of follow-up calls the

staff made. 

Page 28 GAO-07-114 SBA Disaster Preparedness
According to SBA officials, the agency has initiated a follow-up internal 

review of its outreach to victims of the Gulf Coast hurricanes. An SBA 

official said that the agency is developing a plan to strengthen its outreach 

communication and coordination and that this plan will be submitted to 

the SBA Administrator in early 2007. According to this official, SBA has 

consulted internal outreach staff as well as federal disaster relief agencies, 

including FEMA, and local agencies to conduct the evaluation of its 

outreach efforts. Additionally, the SBA official said that the agency has 

created a revised brochure to explain its disaster outreach services to the

public and that the SBA Administrator has held forums with the public in

the Gulf Coast region to explain the agency’s assistance services. 

While the unprecedented volume of disaster loan applications clearly 

affected SBA’s capability to provide timely assistance to Gulf Coast 

hurricane victims, the absence of a comprehensive and sophisticated 

planning process beforehand also likely limited the efficiency of the 

agency’s initial response. SBA officials said that they recognize the 

importance of better disaster planning and are in the process of 

developing a disaster plan that is designed to addresses key limitations in 

the agency’s previous planning approach (e.g, strengthening loan surge 

capacity through potential agreements with private sector lenders and 

reestablishing the disaster reserve corps). Additionally, according to SBA 

officials, the agency has significantly revised its loan processing approach

to reduce the backlog of approved, but not disbursed, disaster loan 

applications associated with the Gulf Coast hurricanes. SBA officials said

that the revised approach should allow the agency to more efficiently 

disburse approved disaster loans in a future catastrophe. However, SBA 

has not established a time frame for competing key elements of the 

disaster management plan such as cross-training other agency staff to 

provide backup support, and has not assessed whether the plan would 

benefit from the supplemental use of available resources, such as the 

results of disaster simulations or catastrophe models (although SBA did 

recently contact FEMA about using its catastrophe model). Further, while 

we recognize that maintaining unused office space would not be costeffective, SBA has not developed a long-term strategy to help ensure that it

could acquire necessary and suitable office space in an emergency. 

Consequently, SBA should take additional steps to help ensure that it 

would be better prepared to provide timely and effective assistance to the 

victims of a future disaster. 

SBA Has Initiated an 

Internal Review of 

Outreach Provided to 

Victims of the Gulf Coast 

Hurricanes 

Conclusions 

Page 29 GAO-07-114 SBA Disaster Preparedness
To better position SBA to prepare for and respond to potential disasters, 

we recommend that the Administrator of SBA direct the Office of Disaster 

Assistance to take the following two actions: 

• develop time frames for completing key elements of the disaster 

management plan and a long-term strategy for acquiring adequate office

space; and 

• direct staff involved in developing the disaster management plan to further 

assess whether the use of disaster simulations or catastrophe models 

would enhance the agency’s disaster planning process. 

We provided SBA with a draft of this report for review and comment. The 

Associate Administrator for Disaster Assistance provided written 

comments that are presented in appendix II. The agency also provided 

technical comments, which we have incorporated as appropriate. In its 

comments, SBA stated that the agency is better prepared to respond to 

potential disasters as a result of the measures that have been initiated 

since the Gulf Coast hurricanes. Additionally, SBA stated that it agreed

with the report’s recommendations. Specifically, SBA stated that the 

agency will (1) establish clear time-lines for completing key disaster 

planning initiatives discussed in the report and (2) assess the more 

extensive use of disaster simulations and external catastrophe models to 

enhance its disaster planning process. 

SBA also said that it had taken steps to help strengthen its capacity to 

ensure the availability of adequate office space in the event of a future 

disaster. In particular, SBA stated that it will retain 100,000 square feet of

additional office space that it obtained in Ft. Worth after Hurricane 

Katrina to process disaster loans. SBA said that the additional space 

should allow the agency to respond to the initial surge in loan applications 

of a future disaster while allowing time for it to work with GSA to obtain 

additional space as needed. We contacted SBA to obtain additional 

information about its space acquisition plans. SBA officials said that the 

agency will retain a 60,000 square foot facility in Ft. Worth that has been 

specifically configured to process disaster loans and plan to expand it by

another 40,000 square feet. Further, the officials said that SBA will retain 

the facility for at least 5 years (the facility originally had a 2-year lease) 

and may retain it longer. We acknowledge that such an approach, if 

implemented, is a step that is consistent with the development of a 

comprehensive disaster management plan. 

Recommendations for 

Executive Action 

Agency Comments 

and Our Evaluation 

Page 30 GAO-07-114 SBA Disaster Preparedness
We are sending copies of this report to appropriate congressional 

committees, the Administrator of the SBA, and other interested parties, 

and we will also make copies available to others upon request. In addition, 

the report will be available at no charge on the GAO Web site at 

http://www.gao.gov. 

If you are your staff have questions regarding this report, please contact 

me 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 report. GAO staff who made major contributions to this report are 

listed in appendix III. 

William B. Shear 

Director, Financial Markets and 

 Community Investment 

Page 31 GAO-07-114 SBA Disaster Preparedness
List of Congressional Addressees 

The Honorable Joseph I. Lieberman 

Chair 

The Honorable Susan M. Collins 

Ranking Member 

Committee on Homeland Security 

 and Governmental Affairs 

United States Senate 

The Honorable John F. Kerry 

Chair 

The Honorable Olympia J. Snowe 

Ranking Member 

Committee on Small Business and Entrepreneurship 

United States Senate 

The Honorable Richard J. Durbin 

Chair 

The Honorable Sam Brownback 

Ranking Minority Member 

Subcommittee on Financial Services and General Government 

Committee on Appropriations 

United States Senate 

The Honorable Barbara A. Mikulski 

Chair 

The Honorable Richard C. Shelby 

Ranking Member 

Subcommittee on Commerce, Justice and Science 

Committee on Appropriations 

United States Senate 

The Honorable Henry A. Waxman 

Chair 

The Honorable Tom Davis 

Ranking Member 

Committee on Oversight and Government Reform 

House of Representatives 

Page 32 GAO-07-114 SBA Disaster Preparedness
The Honorable Nydia M. Velazquez 

Chair 

The Honorable Steven J. Chabot 

Ranking Member 

Committee on Small Business 

House of Representatives 

The Honorable Jose E. Serrano 

Chair 

The Honorable Ralph Regula 

Ranking Minority Member 

Subcommittee on Financial Services 

Committee on Appropriations 

House of Representatives 

The Honorable Donald Manzullo 

House of Representatives 

The Honorable Dianne Feinstein 

United States Senate 

The Honorable Mary L. Landrieu 

United States Senate 

Page 33 GAO-07-114 SBA Disaster Preparedness
Appendix I: Objectives, Scope, and Appendix I: Objectives, Scope, and Methodology 

Methodology 

The objectives of this report were to (1) assess the Small Business 

Aministration’s (SBA) logistical planning efforts prior to the Gulf Coast 

hurricanes and current disaster planning efforts and (2) discuss SBA’s 

outreach efforts to Gulf Coast hurricane victims. 

To address the first objective, we reviewed our previous studies related to

disaster planning as well as similar studies by other organizations and 

available disaster simulation reports.1

 We also interviewed disaster experts 

to obtain their insight and views on appropriate planning efforts and the 

aspects that a comprehensive disaster plan should entail.2

 Further, we 

reviewed relevant SBA planning and other documentation including the

agency’s standard operating procedures, internal policy memos, and the 

Office of Disaster Assistance’s 2003-2008 strategic plan. Moreover, we 

reviewed SBA documentation regarding the agency’s workforce 

transformation initiative, which aided our assessment of the logistical 

challenges that SBA encountered in its response to the Gulf Coast 

hurricanes. These documents included an organizational impact study and 

a cost-benefit analysis. We also interviewed officials from SBA’s Office of 

Disaster Assistance (ODA) in headquarters regarding the agency’s disaster

planning initiatives both before and after the Gulf Coast hurricanes. 

Additionally, we conducted site visits to each of SBA’s four disaster loan 

 1

GAO/RCED-93-186; The National Response Plan, December 2004 and updated May 2006; 

Department of Homeland Security; The Robert T. Stafford Disaster Relief and Emergency

Assistance Act, 42 U.S.C. §§ 5121-5206. 

Department of Homeland Security: Office of Inspector General, A Performance Review of

FEMA’s Disaster Management Activities in Response to Hurricane Katrina, OIG-06-32, 

March 2006; The White House: The Federal Response to Hurricane Katrina – Lessons 

Learned, February 2006; A Failure of Initiative: Final Report of the Select Bipartisan 

Committee to Investigate the Preparation for and Response to Hurricane Katrina, U.S. 

House of Representatives, February 16, 2006; Hurricane Katrina: A Nation Still 

Unprepared, Report of the Committee on Homeland Security and Governmental Affairs, 

U.S. Senate, May 2006; Hurricane Pam Exercise 

(http://www.ohsep.louisiana.gov/newsrelated/hurripamends.htm), Louisiana Homeland 

Security & Emergency Preparedness, July 26, 2004; Managing Risk in Earthquake County:

Estimated Losses for a Repeat of the 1906 San Francisco Earthquake and Earthquake 

Professional’s Action Agenda for Northern California, April 17, 2006. 

2

We defined “expert” as someone having extensive knowledge in disaster planning and

management. The expert’s knowledge was derived from his or her formal education and 

experience. For example, some of the experts we contacted have served in consulting roles 

for state and local agencies with disaster planning responsibilities. 

Page 34 GAO-07-114 SBA Disaster Preparedness
Appendix I: Objectives, Scope, and 

Methodology 

field offices to discuss the agency’s disaster planning initiatives.

3

 Finally, 

we visited the Gulf Coast region and met with federal, state and local 

officials, as well as disaster victims. 

To address the second objective, we reviewed SBA’s various methods and 

techniques for informing and educating disaster victims about the disaster 

loan program. Further, we reviewed the section of SBA’s 2003-2008 

strategic plan that described the agency’s goals and objectives for 

promoting public awareness, which includes outreach. We also 

interviewed officials in SBA’s headquarters and the public information 

officers in the Atlanta and Sacramento field offices to discuss the agency’s 

outreach efforts during the Gulf Coast hurricanes, as well as current plans 

to evaluate such outreach efforts. 

To obtain further insight into SBA’s outreach efforts, we conducted a 

limited structured telephone survey of 62 Gulf Coast hurricane victims 

who had applied for an SBA disaster assistance loan. Using data from its 

Disaster Credit Management System (DCMS), SBA provided us with a list 

of the 414,289 loan applications, for either a home or business physical 

disaster loan, or an economic injury disaster loan in response to losses due 

to the Gulf Coast hurricanes. We selected a stratified random sample of 

400 loan applications based on the type of loan—business and economic 

injury, home, and economic injury only—and loan decision—approved, 

withdrawn, declined, or pending—in order to get coverage across loan 

type and decision outcomes. We attempted to reach 168 loan applicants by

phone and were able to contact and complete telephone interviews with a 

total of 62 applicants. Of the 62 respondents to our survey, 46 were 

affected by Hurricane Katrina, 9 by Hurricane Wilma, and 7 by Hurricane 

Rita. Of those, 28 had applied for home loans, 22 had applied for economic 

injury and business loans, and 12 had applied for economic injury loans. At 

the time we surveyed the applicants, SBA had approved loans for 24 of the 

applicants, declined loans for 26 of the applicants, and had decisions 

pending for 6 of the applicants. The other 6 applicants had either 

withdrawn their applications or had their applications withdrawn by SBA. 

 3

The field offices are the field operations centers East and West in Atlanta, Ga., and 

Sacramento, Calif., respectively, the disaster loan processing center in Ft. Worth Texas, 

and the disaster loan customer service call center in Buffalo, N.Y. We also visited the 

Disaster Credit Management System Operations Center in Virginia and SBA’s Georgia 

district office. 

Page 35 GAO-07-114 SBA Disaster Preparedness
Appendix I: Objectives, Scope, and 

Methodology 

From the survey, among other things, we obtained the loan applicants’ 

views on how and when they learned of the disaster loan program. In 

developing the survey questions, we relied on SBA’s 2003-2008 strategic 

plan, strategic operation plans, SBA 2003-2005 customer satisfaction 

surveys, and other information that SBA officials provided to us through 

interviews as it related to our request. We pretested our survey with five 

loan applicants who represented a mix of home, business, and economic 

injury loans, as well as decisions that were approved and withdrawn. We 

conducted analysis using the Statistical Analysis System (SAS) version 9 

with appropriate checks for missing data and incorrect responses and 

deemed it to be sufficiently reliable for the purpose of this report. Because

of the small sample size, the survey results are limited to those we spoke 

with but may also be considered as indicative of how Gulf Coast victims 

might have responded; however, results could not be projected to the 

entire population. 

We conducted our work in Washington, D.C.; Sacramento, Calif.; Atlanta, 

Ga.; Ft. Worth, Texas; Buffalo, N.Y.; and in state and local offices in 

Louisiana and Mississippi from November 2005 to January 2007, and in 

accordance with generally accepted government auditing standards. 

Page 36 GAO-07-114 SBA Disaster Preparedness
Appendix II: Comments from the Small Appendix II: Comments from the Small Business Administration 

Business Administration 

Page 37 GAO-07-114 SBA Disaster Preparedness
Appendix II: Comments from the Small 

Business Administration 

Page 38 GAO-07-114 SBA Disaster Preparedness
Appendix II: Comments from the Small 

Business Administration 

Page 39 GAO-07-114 SBA Disaster Preparedness
Appendix II: Comments from the Small 

Business Administration 

Page 40 GAO-07-114 SBA Disaster Preparedness
Appendix III: 

A

GAO Contact and Staff 

cknowledgments 

Page 41 GAO-07-114

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact William B. Shear, (202) 512-8678, shearw@gao.gov 

In addition to the individual named above, Wesley Phillips, Assistant 

Director; Daniel Blair; Tania Calhoun; William Chatlos; Landis Lindsey; 

Marc Molino; David Pittman; Cheri Truett; and Michelle Zapata made key 

contributions to this report. 

SBA Disaster Preparedness

Staff 

Acknowledgments 

(250271) 
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