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72–209 2011

DISASTER ASSISTANCE: IS SBA MEETING THE 

RECOVERY NEEDS OF DISASTER VICTIMS? 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

HEARING HELD 

NOVEMBER 30, 2011 

Small Business Committee Document Number 112-046 

Available via the GPO Website: www.fdsys.gov 


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(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

ROSCOE BARTLETT, Maryland 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

JEFF LANDRY, Louisiana 

JAIME HERRERA BEUTLER, Washington 

ALLEN WEST, Florida 

RENEE ELLMERS, North Carolina 

JOE WALSH, Illinois 

LOU BARLETTA, Pennsylvania 

RICHARD HANNA, New York 

ROBERT SCHILLING, Illinois 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

MARK CRITZ, Pennsylvania 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

JUDY CHU, California 

DAVID CICILLINE, Rhode Island 

CEDRIC RICHMOND, Louisiana 

JANICE HAHN, California 

GARY PETERS, Michigan 

BILL OWENS, New York 

BILL KEATING, Massachusetts 

LORI SALLEY, Staff Director 

PAUL SASS, Deputy Staff Director 

BARRY PINELES, Chief Counsel 

MICHAEL DAY, Minority Staff Director 


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C O N T E N T S 

OPENING STATEMENTS 

Page 

Bartlett, Hon. Roscoe G ........................................................................................... 1 

Vela ́zquez, Nydia ..................................................................................................... 2 

WITNESSES 

Mr. James Rivera, Associate Administrator, Office of Disaster Assistance, 

United States Small Business Administration, Washington, DC .................... 3 

Mr. William Shear, Director, Financial Markets and Community Investment, 

United States Government Accountability Office, Washington, DC ................ 5 

APPENDIX 

Prepared Statements: 

Mr. James Rivera, Associate Administrator, Office of Disaster Assistance, 

United States Small Business Administration, Washington, DC ............. 26 

Mr. William Shear, Director, Financial Markets and Community Investment, United States Government Accountability Office, Washington, 

DC .................................................................................................................. 29 

Questions for the Record: 

None 

Answers for the Record: 

None 

Additional Materials for the Record: 

Agility Recovery Statement for the Record .................................................... 41 


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DISASTER ASSISTANCE: IS SBA MEETING THE 

RECOVERY NEEDS OF DISASTER VICTIMS? 

WEDNESDAY, NOVEMBER 30, 2011 

HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, DC. 

The Committee met, pursuant to call, at 1 p.m., in room 2360, 

Rayburn House Office Building, Hon. Roscoe G. Bartlett (Member 

of the Committee) presiding. 

Present: Representatives Bartlett, Mulvaney, Tipton, West, 

Barletta, Schilling, Vela ́zquez, Chu, Cicilline, Richmond, and 

Owens. 

Mr. BARTLETT. Good afternoon. In the absence of the chairman, 

it is my privilege to call this meeting to order. 

After disaster strikes, victims want to know that they will have 

the financial resources to recover. Immediate disaster assistance is 

led by State governments, along with assistance from the Federal 

Emergency Management Agency, or FEMA. However, long-term recovery is the responsibility of the Small Business Administration. 

Disaster assistance offered by the SBA helps homeowners, renters, 

businesses, and nonprofit organizations by offering long-term recovery loans. 

When working properly, SBA programs help people rebuild their 

homes and businesses after they have been destroyed. SBA loans 

also help businesses that suffer economic losses resulting from a 

community struggling to get back on its feet. 

What victims do not need is endless paperwork, misinformation, 

and delays. It is essential that SBA maintain the capacity to get 

money quickly into the hands of people who need the funds to rebuild. By properly planning and continually reassessing how it offers assistance, SBA can be better prepared to respond in times of 

emergency. Our role is to oversee SBA’s implementation of statutory changes to the disaster loan program and to ensure that it is 

meeting the needs of disaster victims. 

I find it troubling that in 2009, almost 4 years after Hurricane 

Katrina, GAO reported that they were not comfortable that SBA 

could meet the challenges of another disaster on the scale of 

Katrina. Today GAO continues to report that laws passed in 2008 

are not fully implemented. While I appreciate the progress that has 

been made, SBA needs to make disaster recovery a higher priority. 

There are too many people relying on SBA for assistance to rebuild 

their homes and their businesses for us not to get this right. 

With that, I look forward to receiving an update on SBA’s implementation of statutory changes and how those changes have helped 


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SBA respond to recent disasters. I am also interested in hearing 

what else can be done to make sure SBA is prepared to respond 

to any disaster we might face in the future. 

I would now like to yield to my good friend and ranking member, 

Ms. Vela ́zquez, for her opening remarks. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman, thank you for yielding. With so much of the national attention focused today on the 

holiday season, it is easy for Americans to lose sight of the risks 

posed by Mother Nature, but the reality is that natural disasters 

can occur in times and places where they are least expected. From 

fires in Texas to an earthquake in Virginia and a hurricane in the 

Northeast, the events of the past summer have shown the need for 

disaster readiness in every part of the country. 

Today we will examine whether the SBA’s disaster assistance 

program is prepared to meet this challenge and whether reforms 

enacted in the 110th Congress have been fully implemented by the 

agency. 

Since the agency’s creation in 1953, the SBA has performed its 

disaster assistance mission. Today the SBA’s disaster loans are the 

primary form of Federal assistance for the repair and rebuilding of 

private sector losses and are not limited to small businesses. SBA 

loans help homeowners rebuild their homes and can help every disaster victim replace damaged personal possessions. SBA loans can 

even help businesses cover the economic losses they experience as 

a result of a disaster. 

For those of us who have been on the committee for some time 

know that SBA also has a history of struggles with its disaster assistance programs. Nowhere was this more apparent than under 

the disaster loan program which faced significant challenges following Hurricane Katrina. At the time we asked GAO to take a 

look at the program and evaluate the agency’s response to the hurricane. The resulting reports led to the passage of the Disaster Response and Loan Improvements Act. That law laid the foundation 

for important reforms to the disaster assistance program. It fixed 

the shortcomings uncovered by Katrina and gave the agency new 

tools to better leverage its resources and coordinate with the private sector. 

In 2009, a full year after the passage of the Disaster Response 

and Loan Improvements Act, the committee held hearings to evaluate the agency’s progress in making reforms. At that time the SBA 

had yet to fully implement 13 out of 26 provisions contained in the 

act. In the 2 years since then, some progress has been made toward 

full compliance with the law, but as we will hear today, a great 

deal of work remains to be done. 

In addition to obstacles in effective disaster planning, SBA has 

struggled to meet deadlines on critical reports. Additionally, the 

agency has chosen to implement new bridge loan initiatives on a 

trial basis, even pilot programs that were not called for, and perhaps most notably, the agency has made very little progress in implementing its private disaster assistance program. It is important 

that these issues be resolved. Should another major disaster strike, 

it will be critical that the agency have a framework in place to deliver bridge assistance and private loans to victims. 


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In examining the current state of the disaster assistance program, it is clear that there is still significant work to be done. And 

the stakes could not be higher. It is estimated that between 40 and 

60 percent of businesses fail to recover from a natural disaster. 

This is why it is so important that the agency get it right. Our 

economy is counting on small firms to drive growth and create jobs. 

We simply cannot afford to lose these engines of growth. In making 

sure they are able to do that, we need an SBA that can step up 

to the plate and meet its mission to deliver disaster assistance 

where it is needed most. 

I would like to thank both Mr. Rivera and Mr. Shear for being 

here for this discussion, and I know we all look forward to hearing 

what they have to say. Thank you, Mr. Chairman. 

Mr. BARTLETT. Thank you very much. Our first witness is James 

Rivera, Associate Administrator of the Office of Disaster Assistance 

at the Small Business Administration. In this role Mr. Rivera is responsible for all aspects of the SBA disaster loan-making programs. 

During this time Mr. Rivera has worked at modernizing the disaster relief applications process, including the implementation of 

the electronic loan application. Mr. Rivera, welcome to our committee, and we look forward to your testimony. 

STATEMENTS OF JAMES RIVERA, ASSOCIATE ADMINISTRATOR, OFFICE OF DISASTER ASSISTANCE, UNITED 

STATES SMALL BUSINESS ADMINISTRATION; AND WILLIAM 

B. SHEAR, DIRECTOR, FINANCIAL MARKETS AND COMMUNITY INVESTMENT, UNITED STATES GOVERNMENT ACCOUNTABILITY OFFICE 

STATEMENT OF JAMES RIVERA 

Mr. RIVERA. Good afternoon, Congressman Bartlett, Ranking 

Member Vela ́zquez, and Chairman Graves, and the distinguished 

members of the committee. Thank you for inviting me to discuss 

SBA’s disaster assistance programs. 

SBA’s Office of Disaster Assistance provides financial assistance 

in the form of low-interest loans. Earlier last week SBA reached a 

milestone in providing more than $50 billion in disaster loans. We 

are proud to help homeowners and businesses get back on their 

feet after a disaster. 

Although SBA is not a first responder agency, we are on the 

ground immediately following a disaster. SBA’s primary focus is 

providing low-interest, long-term loans as part of the recovery efforts in coordination with other government partners at the Federal, State, and local levels. Additionally, SBA offers economic injury disaster loans to small businesses, small agricultural cooperatives, and most private nonprofit organizations who have suffered 

economic injury caused by a disaster. These loans provide working 

capital to a business or organization until normal operations can 

resume following a disaster. 

Since the 2005 Gulf Coast hurricanes, SBA has made dramatic 

improvements in our operation, and we see a great deal of success 

because of that. SBA is now better prepared to process loans faster, 

provide a better quality of service, and be more helpful to disaster 

survivors. To ensure overall preparedness, the disaster program 


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has increased the number of work stations from 366 to 1,750 in our 

Fort Worth, Texas, operation, and we have added a surge center 

in Sacramento, California, with 350 additional work stations, our 

core staff of 850 regardless of activity, and we have a pool of over 

2,000 disaster reservists who we can draw from. 

During Hurricane Irene and Tropical Storm Lee we peaked at 

1,750 staff. On top of this, we have increased the disaster credit 

management systems capacity from 800 to 10,000 concurrent users. 

Throughout the year we have invested in staff to increase their 

skills, streamlined the loan process, improved technology, reduced 

contracting costs, and implemented a new staffing strategy for 

ODA. 

Under the newly implemented staffing strategy we were able to 

increase staff, train and deploy an additional 900 employees within 

3 weeks in many of your congressional districts during the response to Hurricane Irene and Tropical Storm Lee. From a loan 

processing perspective, we are currently exceeding our processing 

goals by approving or declining loan application requests within 8 

days for homeowners and 10 days for business owners during fiscal 

year 2011. Our goal is 14 days for homeowners and 18 days for 

businesses. In response to Irene and Lee, SBA is processing loan 

applications in less than 10 days on average. 

To put this in perspective, the average processing time during 

the Gulf Coast hurricanes was 74 days for disaster home loans and 

66 days for disaster business loans. Additionally, in August of 

2008, SBA introduced an electronic loan application which allows 

disaster survivors to apply for assistance online. 

SBA has also revamped the post-approval process and improved 

processes and tools for loan closing and funding disbursements. To 

ensure coordination and collaboration across the board, SBA also 

works closely with our sister agencies. For instance, SBA and 

FEMA have consistently worked together in order to effectively 

provide assistance to disaster survivors, including implementing internal agency agreements for continual electronic data exchange. 

Since the beginning of Hurricane Irene and Tropical Storm Lee, 

SBA has approved more than $355 million in disaster loans to help 

more than 9,200 homeowners, renters, businesses and nonprofit organizations recover and rebuild from the devastation caused by 

Irene and Lee. 

Additionally, SBA has responded to the needs of residences and 

business owners by deploying 600 SBA disaster staff workers and 

field inspectors to staff 163 disaster recovery centers located 

throughout the East Coast to assess damage to homes and businesses in 12 States and Puerto Rico. At these centers SBA representatives are providing one-on-one service to disaster survivors 

and have personally met with more than 16,000 disaster survivors 

to answer questions, explain SBA’s disaster program, help complete 

loan applications, and close disaster loans. In addition, homeowners and businesses can call our disaster call center in Buffalo, 

New York, which has handled over 61,000 calls relating to Hurricane Irene and Tropical Storm Lee. 

In closing, we appreciate the opportunity to share with the committee the role SBA plays in the small business disaster recovery 

efforts, and we believe that the reforms we have instituted and the 


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new tools Congress has provided to us will allow us to effectively 

and efficiently respond to the needs of our Nation’s citizens. I look 

forward to further describing these efforts and answering your 

questions. Thank you. 

[The statement of Mr. Rivera follows on page 26.] 

Mr. BARTLETT. Thank you very much. Our second witness is Bill 

Shear, who is Director of the Financial Markets and Community 

Investment team at the U.S. Government Accountability Office. 

Mr. Shear is a frequent guest before this committee, providing 

testimony on a broad range of SBA oversight issues. Mr. Shear, 

welcome back to the committee, and we look forward to your 

testimony. 

STATEMENT OF WILLIAM B. SHEAR 

Mr. SHEAR. Mr. Chairman, Ranking Member Vela ́zquez, and 

members of the committee, it is really a pleasure to be here today 

to discuss our work on reforms made to the Small Business Administration’s disaster loan program. After the 2005 Gulf Coast hurricanes, many deficiencies were exposed in the program and demonstrated the need for reform. Since then SBA has taken several 

steps to reform its program, which includes creating an online loan 

application and increasing the capacity of its disaster credit management system. 

In June 2008, Congress enacted the Small Business Disaster Response and Loan Improvement Act, which places new requirements 

on SBA to ensure that it is prepared for future catastrophic disasters. We first reported to this committee in July 2009 on SBA’s actions to address the act’s requirements, and in our report we made 

five recommendations to SBA to facilitate progress in meeting and 

complying with these requirements and improve the disaster loan 

program. My statement today provides updated information on 

SBA’s actions. 

SBA has continued to make progress in addressing provisions of 

the act, although continued attention to certain provisions will be 

important for sustained progress. SBA has met requirements for 16 

of 26 provisions of the act and partially addressed six. Four provisions do not require any action at this time. 

For example, in terms of progress made, SBA updated its disaster recovery plan annually, most recently in June 2011. SBA also 

has taken steps to address the act’s requirements for region-specific 

marketing and outreach. The agency has begun a dialogue with the 

State directors of small business development centers in the Gulf 

Coast about disseminating disaster planning information in the 

five most hurricane-prone States before the hurricane season. 

Additionally, SBA officials told us that the agency has issued 

some public service announcements in disaster-prone areas. SBA 

has issued annual reports to Congress on disaster assistance in 

2009, 2010, and 2011, as required by the act. 

As we have reported in the past, the biggest challenges SBA appears to have experienced in its attempt to fully address the act’s 

requirements involve making extensive changes to current programs or implementing new programs. In particular, SBA still 

plans to implement pilots before finalizing regulations for two proVerDate Mar 15 2010 21:26 Jan 17, 2012 Jkt 072209 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 E:\HR\OC\A209.XXX A209

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grams that would involve private lenders making short-term loans 

to applicants awaiting assistance. 

With respect to recommendations we made in our 2009 report, 

SBA has taken steps to implement three of the five recommendations. These three recommendations address fulfilling the act’s region-specific marketing and outreach requirements; completing its 

annual report to Congress; and issuing an updated disaster recovery plan. Beginning 12 days ago, on November 18th, SBA has been 

providing us information responsive to these recommendations, and 

we have continued to receive information since my written statement was completed and provided for this hearing. 

Our final two recommendations were for the agency to, first, develop an implementation plan and report to Congress on its 

progress in addressing all of the act’s requirements; and, second, to 

develop and implement a formal process to identify problems in the 

disaster loan application process and make improvements for future applicants. Here SBA officials and we have agreed to continue 

a dialogue on actions that could lead to improvements in the disaster loan program. 

Mr. Chairman, Ranking Member Vela ́zquez, and members of the 

committee, it is really a pleasure to be here, and I look forward to 

your questions. 

[The statement of Mr. Shear follows on page 29.] 

Mr. BARTLETT. Thank you very much, both of you, for your testimony. As is usually my practice when I chair a committee, I reserve my questions until the end, hoping that they will have been 

asked by my colleagues, so I yield now to our ranking member, Ms. 

Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you. Mr. Shear, given everything that 

you have reviewed in your past reports, are you today, are you 

comfortable that the SBA is prepared for another disaster on the 

scale of Hurricane Katrina or a major earthquake on the West 

Coast? 

Mr. SHEAR. Two years ago when I was here before this committee, you asked that question, and my answer at that time, I 

think, was more negative than the answer you will hear from me 

today, but let me divide it into three pieces. 

First, I say it is relative. I think SBA is better prepared than it 

has ever been to deal with any disaster, including one of the scale 

of Katrina. I think they have made improvements in their program. 

The second part of this is that when we looked at the 2008 

floods, again at your request for this committee, even though those 

were on a much smaller scale, we did see that the responsiveness 

of the agency to those disasters was much greater than we had 

seen in the past, so, again, it is consistent with improvements in 

the program. 

The third part of this is what causes me to say we are still uncertain, so I will say I hope SBA is prepared for another Katrina. But 

the third part of this, which is part of what was passed in the act, 

which is to perform simulation exercises, and the simulation exercises and the after-action reports were not completed at the time 

we reported to you 2 years ago. We have had interactions with SBA 

since then, but we still have not seen the results of those simulation exercises, and given that you haven’t had another Katrina 


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since then, the results of those exercises, at least in principle, 

should allow SBA to address your question and to really give a 

good answer because that is the part of the evidence that is missing for us. 

Ms. VELA ́ ZQUEZ. So what are the reasons given to you since you 

finalized your report for not doing the exercise of the simulation? 

Mr. SHEAR. I think the agency has done simulation exercises. We 

have never actually explicitly asked for the results of them because 

we haven’t had ongoing audits of those programs. We are certainly—we would be glad to look at them either at the initiative 

of SBA or this committee, we would be glad to look at them and 

to have discussions about what is ready for public consumption and 

things of that nature, but we haven’t explicitly asked for them because we haven’t had an ongoing audit where the results were necessary for us to complete our work. 

Ms. VELA ́ ZQUEZ. Okay. SBA, Mr. Shear, failed to make use of its 

authority to defer or refinance loans for businesses affected by Hurricane Katrina, Rita, or Wilma. My question to you is, if they had, 

do you believe that the Gulf Coast region would have recovered 

more quickly? 

Mr. SHEAR. I can’t answer the question explicitly and directly, 

but these are the things I would point to. SBA disaster loans have 

certain requirements, certain underwriting requirements, collateral 

requirements, and one of our experiences from our work we have 

done in the Gulf Coast over the years is that there was felt a need 

such as in Louisiana to have State-run programs. So I would say 

that to fill part of the void there were State loan programs and 

grant programs that were run to try to address the needs that SBA 

could not address, and then there were community development 

block grant funds provided by HUD that were used to support 

some of that State activity. 

So it is clear that the SBA disaster loans did not fulfill what was 

considered necessary for the recovery of the Gulf Coast, but given 

that those State programs are there, I don’t know how much extra 

would have resulted from an additional Federal program. So, 

again, something more than SBA disaster loans seem to be needed, 

but to some degree it was addressed by the State-run programs. 

Ms. VELA ́ ZQUEZ. In your testimony you noted difficulties that the 

SBA has had in making its annual report to Congress in a timely 

fashion as is required by the statute. What is causing the agency 

to repeatedly miss these deadlines? Is it a lack of staff or a failure 

to prioritize? 

Mr. SHEAR. I want to put that in relation to our experience with 

open recommendations. We are not quite sure whether it is due to 

communication problems within the agency in terms of the liaison 

function, the congressional relations function or more substantively 

with the program functions. So those are things that, based on personal experience, I can point to, but it does seem like there is a 

lack of prioritization in terms of saying what is necessary and what 

is required and make sure that we are—that the agency is meeting 

those requirements. 

Ms. VELA ́ ZQUEZ. Okay, thank you. Mr. Rivera, with the economic 

recovery still at an early stage, the effects of a natural disaster can 

be especially challenging. Section 12068 of the Disaster Response 


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and Loan Improvements Act gave victims of the most severe disaster the option of longer payment deferrals. With many people 

still struggling, will your agency make use of this authority? 

Mr. RIVERA. Congresswoman Vela ́zquez, we currently have the 

authority to grant deferments, and we do on a case-by-case basis. 

Ms. VELA ́ ZQUEZ. So you have done it? 

Mr. RIVERA. Yes, ma’am. A good example is the BP oil spill. We 

provided many deferments to existing SBA homeowners and businesses in the impacted area. 

Ms. VELA ́ ZQUEZ. Okay. I have more questions, so in the second 

round I will be making those questions. Thank you. 

Mr. BARTLETT. Thank you. Mr. Schilling. 

Mr. SCHILLING. Thank you, Chairman. Welcome, fellows. I guess 

I will start out with Mr. Rivera. The SBA covers losses not covered 

by insurance, and how closely does the SBA work with insurance 

companies to make sure the costs are allocated properly? 

Mr. RIVERA. Congressman Schilling, what we actually do is we 

send out a field inspector, and the field inspector goes to the property and they come up with an estimate of what it is going to cost 

to repair or replace the damaged property. We encourage disaster 

survivors to go ahead and apply first and not wait for an insurance 

recovery. That way we can go ahead and get the funds and the rebuilding process through quicker, and then we can work with the 

insurance companies once the settlement is made. The difference 

between when we do an inspection and when an insurance company does an inspection is we do it based on fair market value, 

where most insurance companies will take a depreciated value approach, so there is a gap, and usually that is what our loan entails. 

Mr. SCHILLING. Oh, very good. And then also disaster victims 

still report that there are numerous paperwork burdens between, 

related to the IRS paperwork. How closely do you guys work to improve that gap? 

Mr. RIVERA. Yes, sir, that is something that we also hear. We 

have worked closely with the Internal Revenue Service. We actually have a one-page form, not to get technical here, but it is called 

an IRS Form 8821. What it does is once a disaster survivor signs 

that one-page form, it enables us to go directly to the Internal Revenue Service, and we get copies of their tax transcripts, certain 

items, so we have streamlined that process. Where in the old days 

we used to ask for, you know, 3 years of Federal tax returns, paper 

copies, bring that in, we currently have that as part of our streamlined process where they fill out that one page, they sign it, and 

we can provide that to the Internal Revenue Service, and they can 

provide us with copies of their tax transcripts. 

Mr. SCHILLING. Very good, that is streamlining. Awesome. 

Mr. RIVERA. Thank you. 

Mr. SCHILLING. Mr. Shear, just a couple questions. Has the SBA 

developed a system to make improvements based on customer services, you know, from surveys that you might be getting back? 

Mr. SHEAR. SBA has taken—they have some good tools, they 

have taken some actions in that there is an annual survey of customers where they receive information. Mr. Rivera and others state 

that when they are out in the field, they do listen to people. What 

we are looking for is more of a formal process. Whether it is the 


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resource partners like the small business development centers and 

others involved in the process, when we conduct our audit work, we 

hear of certain pain points. Some of them have to do with the topic 

you just brought up, having to do particularly with the business 

loans, but we think that it would be useful for the agency to have 

more of a formal process to try to deal with these pain points, 

whether it comes from the annual survey or whether it comes from 

other sources, and to have a formal process to act on it. 

Mr. SCHILLING. Very good. And then lastly, since most disaster 

victims first must apply for FEMA assistance, are the applications 

you feel falling through the cracks when being transferred between 

the two agencies or is that something we have got a pretty good 

grip on also? 

Mr. SHEAR. You are asking me? Okay. We saw that this process 

was very badly broken after Hurricane Katrina, and that was the 

one time we looked really in depth at that process, and part of the 

problem was when FEMA referred to SBA that SBA took so much 

time to reach a decision, and especially if it was a declined decision, it was hurting the recipient or the victim. It was harming 

them by not getting a rejection to be able to go back to FEMA. So 

that process was broken. We have not looked at that process since 

our work following Hurricane Katrina. 

Mr. SCHILLING. So would you say that since Katrina have we had 

any disasters that would really help us test the system out to see 

how tuned up it is? 

Mr. SHEAR. We have, and this, I will refer to my answer to Ranking Member Vela ́zquez that we have some windows, including the 

report we did for this committee when we looked at the 2008 disasters. It gives a window as far as how responsive is SBA, how are 

things working, coming up with certain recommendations having to 

do with loan application process and things of that nature. So we 

have a certain window, but we do not quite see the extent of a disaster anywhere of the magnitude of Katrina. But we have seen, for 

example, looking at the act that there have been certain regulations for working with FEMA, so we haven’t gone out and tested 

those regulations, but we do observe that there is regulations in 

place to address that problem. 

Mr. SCHILLING. Okay, very good. I yield back my time. Thank 

you. 

Mr. BARTLETT. Thank you. Mr. Owens. 

Mr. OWENS. Thank you, Mr. Chairman. I have a couple of questions on the interest rate calculation. You indicate in your testimony or maybe in the report that interest rates are determined 

based upon the availability of credit from other sources. Can you 

describe for me exactly how that formula works? Either one who 

would like to take a stab at it. 

Mr. RIVERA. Sure, I will take that one. The interest rate calculation, it is a credit elsewhere test is what we do. It is a very simplified test. Basically it looks at the available cash flow and the 

available assets of an individual or of a business, so in I would say 

90—85, 90 percent of the time the individuals get the lower rate. 

In the case of Hurricane Irene and Tropical Storm Lee, that is 

21⁄2 percent for homeowners and 4 percent for businesses, and the 


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credit elsewhere rate is 5 percent for homeowners and 6 percent for 

businesses. 

Mr. OWENS. Is that in any way tied to, if you will, the cost of 

funds to the government for these loans? 

Mr. RIVERA. The substantive calculation does have a connection 

with the, you know, the credit elsewhere determination or actually 

the number of loans that are made. 

Mr. OWENS. Really what I am asking is the—currently borrowing 

rates for the government are 1 percent or less in general, and I am 

asking whether or not the interest rate calculation is based upon 

the cost of funds to the government. 

Mr. RIVERA. Right. The interest rate calculation is statutorily, I 

mean it is a formula that we follow, and it is basically, the home 

rate is based on treasuries, and the business rate is based basically 

like the 7(a) loan, it is based on prime plus the spread that we get 

on a 7(a) loan. 

Mr. OWENS. All right, thanks. The other issue that the testimony 

and report raised was the issue of collateralization of these loans. 

How do you make that determination if someone’s home has essentially been destroyed or their business has been destroyed? What 

is the collateral that they can offer or is that collateralization determined based upon the anticipated rebuild? 

Mr. RIVERA. In collateral, it is a real simple calculation, I mean, 

it is a real simple approach. Basically what we do is we take the 

best available collateral. So if you have a home that has been damaged, and let’s say you had, and it is worth $100,000 and we 

make—you know, you have a $50,000 mortgage and we make 

$100,000 worth of repairs, we will take a second lien position. The 

homeowner will be upside down, but that is why we enable, you 

know, the loan to be for 30 years, but we don’t have to be in a first 

lien position, we don’t have any loan-to-value collateral, I mean 

loan-to-value ratios. We take whatever is best available from the 

applicant. 

Mr. OWENS. So, in effect, you could have a piece of property that 

currently has a fair market value of $25,000 had a cost of $100,000, 

and you would give a loan based upon the cost? 

Mr. RIVERA. We would give a loan based on what it costs to repair or replace the damage, and then we would attach a lien on the 

amount of that loan, whether it is $50,000 or $200,000. 

Mr. OWENS. Okay. Good. Thank you. I yield back. 

Mr. RIVERA. Thank you. 

Mr. BARTLETT. Thank you. Mr. Tipton. 

Mr. TIPTON. Thank you, Mr. Chairman and Ranking Member. 

Mr. Shear, Mr. Rivera, thanks for being here. Mr. Shear, could you 

maybe give me a little more background. I apologize if I missed it. 

The GAO report came out with 26 items that they had listed. You 

were alluding to five that you had been working on, but I believe 

there were another six provisions that they had suggested, and one 

of immediate interest to me right now is establishing immediate 

disaster assistance program for getting dollars back to small businesses. Can you tell me how that is progressing? 

Mr. SHEAR. Our understanding on that program was when we 

were before this committee in the past that SBA wanted to pilot 

that program, and we are very sympathetic with pilots when you 


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don’t quite understand how a program is going to work and what 

the risks are of a particular program. As of the information we 

have just gotten for this hearing, the regulations are in place, but 

the pilot hasn’t occurred yet, and I think that is related to its operation by the Office of Capital Access at SBA, and they have been 

quite busy, our understanding is, with the Recovery Act provisions. 

So that pilot has not occurred as of yet, and it seems these other 

private loan programs are to some degree—those not being implemented are to some degree related to the pilot on the immediate 

disaster assistance loans not being used yet. That is our understanding of it. 

Mr. TIPTON. It is a work in progress. Mr. Rivera, disaster loans 

are made directly to, by the SBA, not through the network of lending partners, and I would just like to get your thoughts. Do you 

think that is a good idea, bad idea? 

Mr. RIVERA. Well, we have been doing it this way since 1953, and 

we feel we have the capacity and the ability to provide this service 

to the disaster victims. We cut out having to go through, you know, 

a guaranteed loan, for example, like on the 7(a) side, so we deal 

directly with the disaster victims because it is a unique situation. 

It is not a working capital loan, it is not an expansion loan, it is 

usually debt on top of debt, and so we have established this relationship, and we feel like we are prepared, and we feel like we can 

do it comfortably. 

Mr. TIPTON. Okay. You know where you get a little bit of crossover, I would like to just maybe have your thoughts on it between 

SBA loans, some of the private loans particularly, and disaster relief. Dodd-Frank has obviously helped free some of the credit markets that are out there. Are you seeing some real impacts when we 

are talking about seeing recovery and response after a disaster? 

Mr. RIVERA. We have seen a weakness in the economy in 2008 

and 2009, no doubt about that. But we continue to, you know, provide assistance to the individuals based on, you know, their available cash flow from that perspective and inadequate credit. We are 

the most aggressive lender in town, we will make the loans that 

the lenders won’t make. From the perspective of a lender providing 

the service, if there is a lender out there that is providing bridge 

loans, we will definitely look at taking out that bridge loan. So I 

mean, we work with some lenders across the country that have 

that bandwidth. 

Mr. TIPTON. Is it your thought, since you first have to apply to 

FEMA and then ultimately to the SBA, is there a way to be able 

to bridge that or is that creating more problems? 

Mr. RIVERA. Well, it is actually a seamless process. The reason 

we want disaster survivors to apply first with FEMA is that we 

want them to be available for all types of resources that are available on behalf of the Federal Government. There is crisis counseling, there is medical, dental, funeral, there is all kinds of available immediate assistance that is available to help them with minimal repairs to their home, you know, from that perspective. So 

once they go through that, there is a minimum income test, and if 

they are below that threshold, the individual disaster survivor, 

they stay with FEMA and they move over to the grant program. 


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Mr. TIPTON. Where you say that is seamless, I guess what I am 

curious about is just some of the time frame. 

Mr. RIVERA. So somebody will register with FEMA today, you 

will call the 1–800 FEMA phone number, and you will register 

today with FEMA, they will take some preliminary information, 

and then they will turn around and they will send us the referral 

that same day. Our computers are linked up. That is something 

that we have done since KRW. We have a computer matching 

agreement where we get several dumps throughout the day, if I 

can use a computer term, where they actually provide us this information. 

Once we get this information, we mail out an application, and we 

are looking at ways of being a little bit more proactive. For example, we can call them, you know, these are some of the process improvements we are currently looking at, as far as like maybe giving 

them a call and saying, you know, you just registered with FEMA, 

we are with SBA and we provide the loan program, and you need 

to provide an application with us, and then we go through that 

process. Once we actually get the application back, we are processing in 10 days. Unfortunately, you know, Katrina wasn’t our 

best day from a disaster perspective. We were doing, you know, 60 

to 70 days just to decline or approve a loan. What we have done 

is we have reengineered that process where we don’t take an applicant through the entire process. We can tell pretty much upfront 

who is an obvious decline, and we go and refer those individuals 

back to FEMA. 

Mr. TIPTON. Thank you, sir. 

Mr. RIVERA. Thank you. 

Mr. TIPTON. Yield back, Mr. Chairman. 

Mr. BARTLETT. Thank you. Ms. Chu. 

Ms. CHU. Thank you. Mr. Rivera, I was in New Orleans at the 

beginning of November at a hearing pertaining to the BP oil spill. 

There were many Asian-American, particularly Vietnamese fisherman there, and they shared many of their stories about the aftermath. Of course, they have had a hard time getting back on their 

feet, and they did not seem to know much about SBA disaster 

loans and were unclear about whether or not they could still apply 

for it. 

As you may know, the literacy rate in the community is very low, 

as well as their understanding of English for many of the fishermen. How do you ensure that small businesses like this are aware 

of your loan program and that they can actually understand the 

language on it as well? 

Mr. RIVERA. Thank you, Congresswoman Chu. We actually work 

closely with FEMA on presidential declarations. I know the BP oil 

spill, from an administration’s perspective, we did an SBA declaration based on the Governor’s certification that there were five businesses which sustained substantial economic injury, but in the case 

of the BP oil spill, we actually went into communities, and if we 

found a pocket, for example, if there was a Vietnamese language 

or whatever the language was, we often have the skill set within 

our existing staff, and if we don’t, we will pick up an interpreter 

there locally that can help us communicate. We have—usually an 

interview takes anywhere from 5 to 10 minutes, explaining the proVerDate Mar 15 2010 21:26 Jan 17, 2012 Jkt 072209 PO 00000 Frm 00016 Fmt 6633 Sfmt 6602 E:\HR\OC\A209.XXX A209

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gram with the disaster victim or face to face, but if it takes us an 

hour, if it takes us longer than that, we have the time and we 

spend the time to get that application back with the information 

that we need and to communicate that. We also do town hall meetings, and we will also meet with the local small business development centers, the resource partners on the ground, who in the BP 

oil spill were very instrumental in helping us with businesses that 

may not have had the financial aptitude to be able to provide us 

with the information, so we had an SBDC partner right next to us, 

and they were able to help us with, okay, this is what we mean 

when we want a financial statement, this is what we need from a 

balance sheet, this is what we need from an income statement, and 

they were able to really help us provide that, bridge the communication gap from that perspective. 

Ms. CHU. And if they were monolingual in another language or 

primarily spoke some other language, what happened there? 

Mr. RIVERA. We also have the ability, we have a service, a national call line service where when those individuals talk with our 

call agents up in Buffalo, New York, at the call center or at our 

processing center in Fort Worth where we have a call service where 

we can actually have an interpreter walk us through or explain, 

you know, interpreter—from disaster survivor to interpreter to us, 

and we are very sensitive to the language requirements in different 

parts of the country, but we go in, and from a FEMA perspective, 

they also assist us because they will go in with community relations group, and they will hit the different pockets, and they will 

go door to door, and we usually assist them there, too. 

Ms. CHU. Do you have translated documents? 

Mr. RIVERA. No, ma’am. What we do is our forms are currently 

in English and Spanish, but in the event that a local, you know, 

there is the Vietnamese community, they will also assist us in 

translating the documents for us, so we don’t have—because the 

dialects change. I mean, I am from Texas, I am a Mexican American, my Spanish is different than, you know, somebody from New 

York or the dialects are different from, you know, across the different parts of the country, so we rely on the local community to 

help us with the translation services, and they are usually pretty 

receptive to providing that help to us. 

Ms. CHU. Do you know how many fishermen applied for the economic injury disaster loans? 

Mr. RIVERA. I don’t have that information with me in my book 

here, but I will be glad to get that information back to you. 

Ms. CHU. Yeah, I would like to know what that is, and I would 

also like to know, many of the fishermen on the Gulf operate on 

a cash basis, and they lost documents during Hurricane Katrina, 

and some then lost whole livelihoods based on the oil spill, and 

they might not have the documentation required for typical loans. 

What kind of flexibility do you have there? 

Mr. RIVERA. And if I can go back, we approved about $41 million 

in bridge loans for the BP oil spill, and obviously, you know, the 

Gulf Coast claims facility was the facility that was in place to help 

BP, and I think they provided like $5 or $6 billion worth of service. 

But how do we deal with individuals? We deal with a lot of businesses, and we in the old days, we used to require individuals to 


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bring in copies of their tax returns, and as I mentioned earlier, 

what we do now is we actually have them sign an IRS Form 8821, 

and we can get copies of their tax transcripts. Being a Federal 

agency, we give them credit for whatever they report to the Federal 

Government, and then that kind of allays any issues as far as, you 

know, being a cash business or whatever type of business they are. 

Whatever they report to the Federal Government, to the IRS is 

what we give them credit for. 

Ms. CHU. And that would be adequate for the loan then? 

Mr. RIVERA. Yes, ma’am, that is what we use for repayment ability or for part of our repayment analysis. 

Ms. CHU. Thank you. I yield back. 

Mr. RIVERA. Thank you. 

Mr. BARTLETT. Thank you. Mr. Barletta. 

Mr. BARLETTA. Thank you, Mr. Chair. Mr. Shear, after the combination of Hurricane Irene and Tropical Storm Lee hit northeastern Pennsylvania, my district experienced the worst flooding in 

its history, and they are still dealing with it as we speak. I just 

came back with Chairman John Mica who came to see the damages, Speaker John Boehner was there as well, and many of the 

businesses in our area are making decisions of whether or not they 

even want to go back in business again. I traveled throughout the 

district and talked to many of the business owners, and I told them 

what the United States will do through the Small Business Administration is if you can get credit elsewhere, we will provide you with 

a 6 percent loan. I could tell you the reception was not very warm 

when I told them this is the help we have to offer, especially when 

a business is trying to decide whether or not they are even going 

to stay in business again. 

The United States gave Pakistan for flood disaster relief $215 

million in the last 2 years. The interest rate that we charged the 

flood disaster victims in Pakistan was 0, with no payback. Do you 

believe a 6 percent loan is meeting the needs of disaster victims 

here in the United States? 

Mr. SHEAR. I don’t have a basis to answer your question. I have 

to rule out not knowing what our assistance to Pakistan was. I will 

make the—— 

Mr. BARLETTA. Well, how about just the 6 percent loan? 

Mr. SHEAR. Just the 6 percent loan, I will make the observation 

that SBA is part of our recovery framework, so there are other Federal programs involved, as I alluded to in work in the Gulf Coast, 

so I can’t comment on it directly. I would say there it is a question 

for the Congress. At GAO, we don’t make value judgments when 

we evaluate programs as far as how much assistance should be 

provided and at what cost, so the question really is—— 

Mr. BARLETTA. How is the interest rate determined? 

Mr. SHEAR. The interest rate, and Mr. Rivera can speak to the 

interest rate much better than I can, the credit elsewhere requirement I think is intended to make it a lower cost program than it 

would be, and the 6 percent interest rate makes it a lower cost program than if a lower interest rate were offered. So it is—there are 

certainly trade-offs there, and but except for observing that, we 

don’t have audit work that would let me respond directly. 


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The one thing that I will say that does relate to our audit work 

is that, and it gets to these pain points that many times the victims of disasters feel is that SBA is saying apply to us and apply 

to us, and it is good that SBA is out there and reaching out in 

these disaster recovery centers and the like, but it is important to 

know what the pain points are and to make sure that SBA is being 

very transparent about what is being offered and not offered, so 

that gets to our audit work. 

Mr. BARLETTA. See I am very concerned, especially with unemployment over 9 percent, and we are trying to create jobs and keep 

jobs here in America, and when a disaster strikes, and I have said 

this here in this committee before, and I am going to say it again, 

when disaster strikes, America is the first country to come to the 

aid of other countries around the world, and I am very proud of 

that, I am very proud of that fact, but when you see disasters 

strike the people in your neighborhood and your friends and relatives and you know that we are sometimes doing more for people 

we don’t even know, sometimes countries that don’t even like us 

than we are for Americans, I just believe that we should take care 

of Americans first. 

I am hoping to change the way America deals with disasters. I 

am introducing a bill that would give a 1 percent loan for 30 years. 

It would cover the administrative costs, but let’s get Americans 

back up on their feet again, and hopefully they will stay in business and create those jobs that we are trying to do here every day. 

Mr. SHEAR. I think you raise a very good point, and I hope you 

just understand that we are a fact-based agency and we can only 

comment, I can only comment based on the facts from the audit 

which we have conducted. 

Mr. BARLETTA. I am not upset with you, Mr. Shear, I am just 

frustrated after spending so much time with these people and seeing how hard they have worked and knowing that we can do more 

for Americans, and I hope I will find many colleagues here that will 

agree with me. Thank you. 

Mr. SHEAR. Thank you. 

Mr. BARTLETT. Thank you. Mr. West. 

Mr. WEST. Thank you, Mr. Chairman, and our ranking member, 

and gentlemen, good to see you today. 

Mr. Shear, a question. I saw back in 2009 that GAO did a report, 

and they had some provisions that had to be worked out, I think 

it was about 14 of the 26. Have we gone back and recertified to 

make sure that those provisions, as far as this program, have been 

worked out and been rectified? 

Mr. SHEAR. Well, in the statement submitted for today, we have 

16 of the 26 provisions have been addressed by SBA. There are five 

provisions still left. I hope I am remembering the number right. It 

is, and partially addressed six of them. So there are still six provisions that have not been fully addressed. 

Mr. WEST. So is there a plan to make sure we can close that out? 

Because one of the things, we just come out of hurricane season 

down in our neck of the woods, and so I would want to hope that 

we can rectify these things before we go into the next hurricane 

season. 


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Mr. SHEAR. Just over the last couple of weeks we have had some 

interactions with Mr. Rivera and his team, and we think that SBA 

is getting close on some of the provisions, and the ones that seem 

to be, remain the biggest challenges have to do with loan programs 

involving private lenders. 

Mr. WEST. Okay. Mr. Rivera, Hurricane Wilma, pretty important 

to us down there, and that was the last major storm that we had 

in the southeast Florida area. Do you have any information that we 

could get later from you as far as what were the relief that you 

gave to small businesses as a result of Hurricane Wilma, and 

maybe we can go back and track and see how those businesses are 

doing today? 

Mr. RIVERA. Oh, absolutely, we can get you that information. 

Mr. WEST. Okay, I appreciate it. The other thing, you know, 

being from military, I saw that a major disaster response plan is 

to conduct a disaster simulation exercise at least once every 2 

years. Can you kind of give us an idea of what that simulation exercise is like, and have you kept on par doing it every 2 years, and 

what did you learn from it? 

Mr. RIVERA. Yes, Congressman. We actually do more than one 

every 2 years. We partner with FEMA, and they have a national 

level exercise every year. But, for example, as a requirement of the 

farm bill we do a biennial exercise. There is a peer of mine, his 

name is Steve Smith, he is with the Office of Disaster Planning. 

He actually creates the simulations. So if we go back to 2008, at 

the time FEMA had done the Chesapeake Bay hurricane, it was a 

mock hurricane that came through the National Capital Area here. 

We simulated the exact same type of disaster. So the test goes like 

this, you know, it is a 1-day exercise, but in the morning what we 

will do is we will look at the track of the hurricane, the impact, 

and we have, for example, we have models, FEMA has these models that tell us the number of businesses, the number of units, 

structures impacted in the path of disaster. Then we go through a 

scalability model internally where we know pretty precisely how 

many field inspectors we need, how many customer service reps we 

need on the ground, how many loan officers we need, how many 

case managers we need, so we go through that whole process. We 

bring in all my staff, my senior management staff from all my centers, and then the office of field operations brings in the district directors and regional administrators from the impacted area, and 

then we have the administrator, the deputy administrator, and the 

senior team that is there who has dealt with this. 

For example, for Hurricane Irene and Tropical Storm Lee, we 

were watching both of these storms, and actually we had Tropical 

Storm Marie that also hit Puerto Rico. We are actually watching 

these storms days before they come out. That is one nice thing 

about a hurricane, it gives you plenty of warning time. So we were 

positioning, prepositioning, calling up reservists, and we were going 

through that whole process. So the simulation is a kind of a scope 

from that perspective. So what happens after this is that there is, 

they call it a hot wash. I am not sure why they use that term. 

Mr. WEST. Yes, I know what a hot wash is. 

Mr. RIVERA. So we had a hot wash, and they actually explained 

you could do this better, you could do that better. We have actually 


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had several of these simulations. I am not sure why. I was a little 

bit surprised that a lot of these requirements have not been closed 

out because we thought we had closed out all but three, but we are 

committed to work with GAO and Mr. Shear on getting these finally resolved because in our mind we have really actually gone 

through the process, but the simulation, it is a good exercise. It 

tests us, and there is independence between the Office of Disaster 

Planning and the Office of Disaster Assistance. 

Mr. WEST. Last question. Did you find out, you know, when I 

talk about my colleague Congressman Barletta, did things work 

smoothly in rectifying a lot of the situations that he had in his 

area? 

Mr. RIVERA. Well, we actually had an early-on conversation with 

Congressman Barletta. He was gracious enough to let us know 

where the pockets of businesses that we could possibly set up a 

business recovery center, so we were early into the conversation 

with him, and we set up a couple of business recovery centers in 

the disaster impacted area, you know, and FEMA helps us with 

disaster, the Governor’s office in the States help us with disaster 

recovery centers between the State, FEMA, and SBA, but we also, 

when we have situations like we had in Congressman Barletta’s 

backyard, where there is businesses, there is a pocket of businesses 

that we can help, so we set up a couple of business recovery centers 

to try to see what we could do from that perspective. 

Mr. WEST. Thank you very much. I yield back, Mr. Chairman. 

Mr. BARTLETT. Thank you. Mr. Richmond. 

Mr. RICHMOND. Thank you, Mr. Chairman; thank you, Ranking 

Member. 

Mr. Rivera, I am a member from, born and raised and live in 

New Orleans, and I don’t have to tell you about the Katrina experience, but I say that to say that I have seen the agency probably 

at its worst, and I see it now at a different place, and I would just 

urge you to be as candid and honest with us as possible to tell us 

what you need to get up to full compliance with where you need 

to be with our 2008 act, but we need to make sure that we have 

a functioning SBA after tragedies, and to that extent I can follow 

up on Mr. West’s question about your reserves. Do you think you 

have an adequate workforce, and I won’t use Katrina because that 

may be a little overwhelming, but let’s use Rita or Gustav or Ike. 

Do you think you have an adequate workforce if those were to happen next hurricane season, that you could ramp up and be there? 

Mr. RIVERA. Congressman, we are prepared. There is no doubt 

about it in my mind. When you look back at Katrina and you look 

at today, there is several key differences that we have. One is I 

mentioned the infrastructure. You know, we only had 366 seats for 

individuals to process loans. Now we have 2,100. We only had, we 

could only get people on our staff on our computer only 800 at a 

time. Now we can get 10,000 people on the system at a time, and 

we didn’t have a reserve force. We had 866 employees when 

Katrina hit, so we had to go out and we had to hire all of this, 

these employees, local hires, schedule As. It was a very ad hoc approach. Now we have an ODA staffing strategy that actually has 

850 core employees, and we have 2,000 reservists that we have 


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that we can call on, and they are ready, they are readily available 

within 24, 48 hours. 

The Hurricanes Gustav and Ike, we processed about 100,000 applications, a little bit short of 100,000 applications, and we approved about a billion dollars worth of loan activity. I need to go 

back and double check, but my recollection from 2008 is we had 

about 2,500 employees. We weren’t as efficient back then as we are 

today with all the process improvements, so we feel that we have 

a very comfortable bandwidth from 0 to 3,000 employees; as we go 

in to surge and surge-plus week, we have the capability of pulling 

in contracts, talking to private lenders, and working through that 

process. So we feel that, as Mr. Shear said earlier, we are as prepared as we have ever been, from an agency perspective. 

Mr. RICHMOND. The other question, in looking at going all the 

way back really to Andrew and when Katrina first happened they 

said it would be a 10-year recovery period, which I truly now know 

that it is a true 10-year recovery period, but for those small business programs that have time periods in which people or businesses can participate in them, do you think it would be wise to 

give the administration discretion that when we have a federally 

declared disaster that that time period is tolled or frozen? 

For example, let’s consider the 8(a) program where in Louisiana 

those businesses were shut down for 2 years. They lose those 2 

years in the 8(a) program, and they still graduate out on schedule. 

Do you think it would be wise to give the Administrator the ability 

in any federally declared disaster where recovery is over a certain 

number of years to extend a person’s length of participation in the 

program? 

Mr. RIVERA. In reference to the 8(a) program, Congressman? 

Mr. RICHMOND. Yes, or any other program that there is a specific 

time period. 

Mr. RIVERA. I would have to go back and have a discussion with 

the associate administrators over those different divisions. I mean, 

as you know, I have been with the disaster program for 22 years, 

so I wouldn’t feel comfortable making a statement on behalf of, you 

know, of the 8(a) program as far as the certification process. 

Mr. RICHMOND. Okay. Let’s shift to BP, the Deep Water Horizon 

oil spill. How are things going with the loan process for the fishermen and the oystermen down there as they still wait on the claims 

center to process claims, which is slow if not, just not moving at 

all? 

Mr. RIVERA. The BP oil spill we provided, I recall, about $40, $41 

million in disaster assistance. It was bridge loans for economic injury disaster loans. So the application period is a little bit longer. 

We were actually on the ground helping disaster, businesses actually fill out BP or Gulf Coast claims facility applications. Our declaration period for applying for assistance is closed, but we still get 

reports from BP, and I will be glad to, you know, put you in touch 

with somebody with the Gulf Coast claims facility. 

Mr. RICHMOND. Well, I am in touch with them all the time, and 

in closing, Mr. Chairman, I would just advocate that the claims 

center is not working as it is designed, and that facility and that 

process is really on BP because it is a private actor, and they are 

doing it, but I think we have a role as government to make sure 


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that we are still there with the process for people to borrow money 

from the SBA, waiting for those BP claims because here is what 

is happening in reality: The interim payments are so slow that 

they don’t get them at all, and then BP comes or the claims center 

comes, and they offer them little or nothing for a final claim, but 

they will offer the final claim without offering any interim, so people are so desperate right now that they are taking really pennies 

on the dollar in terms of their final claim, and I just think that if 

they had the ability to rely on an SBA to back them up in the 

meantime while they are waiting on it, then they wouldn’t be at 

such an unfair playing field to take those claims. I mean, we had 

a field hearing down there, and people who were owed $150- and 

$200,000 were settling for $5,000 simply because they had bills 

they had to pay right then and there. 

So if we could look at opening that up and creating some program that would offer them the ability to stay on their feet awaiting the Gulf claims center and the BP process, that would be very, 

very helpful, and I think it would change the lives of a lot of the 

fishermen in that entire Gulf Coast area. 

Thank you, Mr. Chairman, and I will yield back. 

Mr. BARTLETT. Thank you. Mr. Mulvaney. 

Mr. MULVANEY. Thank you, Mr. Chairman. Mr. Rivera, I believe—down here, sir. I believe I may be unique on this committee, 

at least I hope that I am because it is not something I would wish 

on anybody, but I have actually participated in the disaster assistance relief program. I showed up at work about 6 months after I 

had started my own business one morning to find my office furniture floating in the front yard. We had been through a flood, and 

I was able to get a disaster relief loan from the SBA, and my experience was actually quite good. It was extraordinarily helpful. That 

was one of the reasons I was interested in participating in this 

committee when I got here was because it was a pretty good experience for me, but as I was going over preparing for this hearing, I 

tried to remember how I found out about the program, and it occurred to me that I found out through my insurance agent, and one 

of the things Ms. Chu and I in her district, on our subcommittee, 

one of the things we heard when we were out in California was the 

lack of information about SBA programs. Few people knew what 

the SBA had to offer. If it hadn’t been for that particularly astute 

insurance agent that I had, I probably never would have found out 

about the program. 

So tell me, sir, what it is that you all are doing generally, what 

are you doing specifically, how are you making information about 

disaster relief programs and assistance available to the public? 

Mr. RIVERA. Thank you, Congressman. We have taken a very aggressive marketing and outreach program. I mean, internally, you 

know, within the SBA, SBA has the opportunity, we have an online 

disaster tool kit for all the SBA employees, so when a disaster 

strikes, we make sure that all of our employees in the district offices, in the centers know what they need to do. We have also provided media training for all regional administrators, district directors, public information officers. Externally, though, what we have 

done is we have worked with the National League of Cities on 

emergency training, we actually partnered in 40-plus courses 


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across the country for a crisis leadership for local officials, and we 

have actually set up some really awesome partnerships. For example, we have agility recovery solutions, we have had 15 monthly 

webinars over the last 15 months, that provides an educational tool 

for small businesses, preparemybusiness.org is the web site. We 

have also partnered with the American Red Cross and started talking about their ready rating system to homeowners and to businesses, and we also partner with FEMA and provide the, you know, 

the information as far as what SBA does. 

Branding is a challenge. I mean, there is no doubt about it. 

When we get into a disaster area, we actually go and we meet with 

the State officials, the local officials, the congressional delegation, 

and we try to get as much information out as we possibly can. We 

do public service PSAs in all the disaster-impacted areas. So we 

continue to send public information officers into the different areas 

and try to get the word out as best we can. 

Mr. MULVANEY. Tell me about these partnerships because one of 

the things that one of the subcommittees of this committee deal 

with, the one that I chair, deals a lot with outsourcing versus insourcing, opportunities that the government has to outsource 

things. You mentioned the webinars, you mentioned the web site, 

my understanding that is a partnership with a private entity? 

Mr. RIVERA. Yes, Agility Recovery Solutions is a small business. 

Mr. MULVANEY. Tell me how that is working out, how you measure success. Do you consider it to be a success? What are the 

metrics? How many visits are you getting? Do you get the impression that it is actually having an impact? 

Mr. RIVERA. I really do think we are having a pretty significant 

impact. On the monthly webinars, I did one not too long ago, the 

title is a little bit interesting, my mom was really excited about it. 

It was about the Ten Commandments of disaster preparedness, I 

am not sure how we came up with the Ten Commandments, but 

anyway, we had about 800 people that actually got on the webinar 

and participated in the webinar, so it is 800 more businesses, I 

hope, that hear about SBA, and that is a big challenge that we 

have been discussing with GAO and Bill Shear over the years is 

how do we get, you know, how do we get as much information out 

as we possibly can. You know, I go to a lot of lending conferences, 

I go to a lot of, you know, different types of conferences. Most individuals really don’t want to hear about disaster until they have 

had one, and they really get it once they are in a disaster, what 

do I need to do now. And that is why the ready rating system and 

the Agility Recovery Solutions, those are just fabulous partners because they are talking about what you need to do to prepare. You 

may still have that disaster, but if you have the ability to be prepared, it makes that disaster process, you can go back to your muscle memory and figure out this is what I need to do instead of 

being in panic stage and not being able to help yourself through 

the disaster. 

Mr. MULVANEY. Well, I am going to commend your group, the administration, because we have actually done a good bit of work in 

South Carolina, the local office has reached out to me. We have 

toured my district to put on presentations on how to not only start 

your small business, but after you have started it, what you need 


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to do, and actually I have a list of things that you can do or you 

should do when things are pretty good because the time to prepare 

for a disaster obviously is not the day after that you experience 

one. 

So to the extent sometimes it is no fun to come down and testify 

before these committees, I want to thank you for what you folks 

are doing in this particular area, and with that I yield back. Thank 

you, Mr. Chairman. 

Mr. BARTLETT. Thank you very much. Before we go to our second 

round, let me make a little comment and ask a question. Mr. 

Barletta mentioned the funds that we vote to give to other countries or to send to other countries for flood relief; for instance, some 

disaster relief. Are those loans, do we expect to get that money 

back? 

Mr. RIVERA. Congressman, I am not familiar with this foreign 

loan program. I apologize. I mean, I can go get some due diligence 

done and provide information for the record, but I really have no 

knowledge of this foreign loan program. 

Mr. BARTLETT. I am not sure these are loans. I suspect that they 

are grants, that they are simply given to them, and I want to identify myself with Mr. Barletta’s observation that charity ought to 

begin at home. It frequently doesn’t, does it? 

Several years ago we had a major drought in the district I am 

honored to represent, it is a largely agricultural district, and there 

was a near total crop failure, and the Department of Agriculture 

came by and said, gee, we want to help, and so they had some low 

interest loans that they wanted to give to my farmers, and one of 

the farmers got up, he says, you know, I am now standing on my 

tiptoes in a sea of debt about 6 feet deep with my nose barely above 

water, and you want to add another 2 feet to that sea of debt, I 

am just going to drown. What he needed, of course, was not another loan, but he needed a grant, he needed some help to see him 

through this crisis. Do we have that kind of a program available 

to those for whom a low-interest loan just can’t make it? 

Mr. RIVERA. In reference to a disaster? 

Mr. BARTLETT. Yes, disaster relief. 

Mr. RIVERA. Well, in reference to farmers also? 

Mr. BARTLETT. No, with reference to anybody, any small business. Farmers are one type of small business, of course. 

Mr. RIVERA. You know, a loan isn’t always the right option for 

some individuals, some homeowners and some businesses. We are 

providing debt on top of debt in many cases, and, you know, we 

just don’t want to burden somebody if they can’t repay a loan. We 

just don’t—you know, if they don’t have reasonable repayment ability and adequate credit, we are just not going to go that extra step 

from that perspective because what it does is it just puts them closer to bankruptcy, and that is not our objective here. We are just 

trying to help businesses that can qualify for loans and try to make 

them recover from that perspective. 

In the case of businesses, we refer them to the resource partners, 

and a local SBDC may be able to work out and figure out if there 

is a way that you can assist this business, help them with their 

local lender, and maybe they can restructure their debt, and there 


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is a lot of non-disaster type situations that an SBDC and our resource partners can help these type of small businesses. 

Mr. BARTLETT. I am not a big government advocate, but at least 

to some extent with the taxes that we pay, small businesses, I 

think, have a right to see, to view some of those taxes as a kind 

of an insurance premium payment, and, you know what we do in 

insurance, of course, is to spread the risk, each person pays a little, 

not everybody will have a disaster, but those that do can then be 

recompensed for it. Don’t you think that our small businesses, at 

least to some extent, could use some of the taxes they pay as a kind 

of an insurance premium that when it is really tough and they are 

going under, if they don’t get some direct help, not just a low interest loan, if you are simply burying them deeper in a sea of debt, 

that is not going to be helpful, is it? 

Mr. RIVERA. Congressman, that is a great question. From the 

perspective of, you know, the disaster loan program, that is what 

I feel comfortable responding to—— 

Mr. BARTLETT. Because you are disaster loans, you are not in disaster grants, okay. But this is a legitimate question I think that 

we need to consider, and I am not an advocate of big government. 

Mr. Mulvaney indicated that he learned about your existence 

from his church I think he said. Do you partner with FEMA and 

other agencies so that when there is a disaster—you know, there 

are many small businesses out there that don’t even know that you 

exist because they have gone out on their own, they haven’t had 

a loan from Small Business and don’t even know you exist until 

they have a disaster, and do you show up with a desk along with 

desks of other representatives of the government to let them know 

that you are there? 

Mr. RIVERA. Well, we are collocated with FEMA at all of the joint 

information centers, the disaster recovery centers. So anywhere 

FEMA is at on the ground, we are actually at on the ground also. 

Like I mentioned earlier with Congressman Barletta, he identified 

some pockets of businesses, and we set up a business recovery center that was SBA-only, and it provided some resource partners like 

SBDCs and stuff. 

Mr. BARTLETT. So if I am a small business and I have a disaster 

and FEMA shows up, either to their right or their left I am going 

to see your desk so I know you are there? 

Mr. RIVERA. Yes, sir, we are always there with FEMA. 

Mr. BARTLETT. Thank you very much. Ms. Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. Mr. Rivera, can you 

tell the committee what will be the timetable for full implementation of all the 26 provisions contained in the act? 

Mr. RIVERA. Congresswoman Vela ́zquez, we feel that we have 

completed 23 of the 26, and we will continue to work towards working with Mr. Shear and GAO. The remaining three loan programs, 

the IDAP, the Immediate Disaster Assistance, the $25,000 loan 

program, the bridge loan program, we are working right now with 

the Office of Capital Access. We have promulgated regs, we have 

actual loan authority. 

Ms. VELA ́ ZQUEZ. When do you think you will be ready? 


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Mr. RIVERA. We will continue to work with the Office of Capital 

Access, and I know that that is one of their priorities as we move 

forward, so hopefully in the near future. 

Ms. VELA ́ ZQUEZ. So next year? We are not going to be conducting 

an oversight and you are not going to give me the same answer? 

Mr. RIVERA. If we have a hearing next year, hopefully we will 

have this program implemented. All we need to do is go out and 

do the pilot with the 7(a) lenders, and we are basically in place 

from that perspective, so we are pretty close. 

Ms. VELA ́ ZQUEZ. Two years ago, Mr. Rivera, Administrator Mills 

appeared before the committee and clearly stated her commitment 

to improve the agency’s disaster readiness, and I am concerned 

that for fiscal year, this fiscal year your agency has proposed cutting, reducing the personnel of the disaster loan program by 150 

full-time employees, and so my question to you is, this, based on 

the assessment that your agency had in the budget submission, 

says that we will reduce to 3 weeks the application, the processing 

of some of the applications. Study has shown that when a disaster 

strikes, if the small business do not get, doesn’t get help, assistance, disaster assistance within the 3, 4 weeks probably that business will close. So aren’t you concerned that this is going to impact 

the readiness of the program? 

Mr. RIVERA. Well, Congresswoman Vela ́zquez, the fiscal year 

2012 budget did go from as comparison to the fiscal year 2011 

budget, the fiscal year 2012 budget proposal does go from a thousand full time equivalents to 850, yes, ma’am. We feel that that is 

now our core, and we feel with the core and the surge and the 

staffing strategy we have in place, we feel comfortable that we can 

do this. We don’t keep staff if we don’t need them, so if we don’t 

have disaster activity, we go down to—— 

Ms. VELA ́ ZQUEZ. That is the problem. We don’t know when the 

next Katrina is going to strike. 

Mr. RIVERA. Yes, ma’am, you are absolutely correct, and what we 

have with the staffing strategy is we have the surge and surge-plus 

approach where we have these individuals that actually have 

signed up with us and are ready to show up in 24 to 48 hours, and 

these are the 2,000 employees that we have in the surge pool. 

Ms. VELA ́ ZQUEZ. Mr. Shear, in your prior reports on this program 

you have stressed that disaster preparation depends on the agency’s ability to identify and balance risks against available agency 

resources. So how do you balance this out in terms of the reduction 

of 150; will that compromise the agency’s ability to identify and 

balance risk? 

Mr. SHEAR. I can’t answer the question on the 150 exactly, but 

one of the things I have said to this committee before is that many 

times I am here before this committee and we are talking about 

programs other than disaster assistance, and we are saying, well, 

programs are fragmented, we are looking to get rid of redundancies 

or programs that don’t leverage each other effectively, but disaster 

assistance is a different business, so I will just repeat the points 

from before. You want some redundancy in the system, and the 

thing that if I were Mr. Rivera or this committee, or I will just say 

as a public citizen, that would cause me to lose sleep at night is 

that once, whether it is a 9/11 or Katrina, and that is way in the 


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past, do people forget so much that you don’t have the reserves in 

place, that they are available. So it is a huge problem, how do you 

balance those, because there is a cost of having reserves in place, 

but disaster recovery you have to have some concept of risk management. These simulation exercises are part of establishing that 

framework, and you have to be responsive to the risks that are out 

there, and we hope that that is occurring. 

Ms. VELA ́ ZQUEZ. Mr. Rivera, how should this committee and the 

American public judge your agency’s success in responding to a 

major disaster? Should we look at the percentage of loans disbursed, the number of dollars loaned, customer satisfaction surveys 

or something else? 

Mr. RIVERA. Congresswoman, I think you hit on all the factors 

that we look at. I mean, for example, the American—we do the 

independent survey with the American Customer Satisfaction 

Index. Out of a score of 100 we actually scored 80 percent. It is an 

independent survey, we have no control, we contract that survey 

out. We also believe that we are prepared. We believe we have a 

good workforce in place, they are well trained, we continue to work 

on process improvements, try to make ourselves as efficient as possible and continue to collaborate and work closely with FEMA and 

other Federal agencies, HUD, and just go, Internal Revenue Service, and just continue to try to be as proactive as we possibly can. 

Ms. VELA ́ ZQUEZ. Well, I am glad to hear that this committee got 

it right when we passed the legislation in 2008, but now we need 

full implementation of those provisions. Thank you, Mr. Chairman. 

Mr. BARTLETT. Thank you. Mr. Richmond. 

Mr. RICHMOND. Thank you, Mr. Chairman, again. A quick question. How much do you think it costs you all to service, let’s say, 

an SBA loan from Katrina-Rita in a percentage point? 

Mr. RIVERA. I would have to get back with you. I don’t know that exact dollar. I know that we spend on average about $160 to $200 

million a year for the disaster, loan making and disaster loan servicing perspective, but the actual cost, the unit cost I would have to 

get back with you for the record. 

Mr. RICHMOND. Because I guess I am interested in all of the 

loans that were done after Hurricane Rita and Katrina, and to that 

extent, Gustav and Ike also, that the interest rate with an SBA 

loan is above what it costs you to service that loan, and part of the 

question becomes what is the rationale for the difference, where 

does the money go, does it go in the future program, in future 

loans? But to the extent that it can help, it could help people in 

terms of reducing their interest payment, it would just serve wonders to people in those devastated areas if we could give them some 

relief on those interest rates above what it costs us to service them. 

We ought not make a profit, and we ought not let government grow 

on the backs of people who just went through a disaster. So I would 

be interested in what it is costing to service them, what is the average percentage rate, and what that means in the terms of real dollars. 

Mr. RIVERA. Yes, sir, we will get back with you for the record. 

Mr. RICHMOND. And, Mr. Chairman, that is it. I would like to 

thank Mr. Shear and Mr. Rivera for coming today and thank the 

SBA for what they do, and my district has been a constant beneVerDate Mar 15 2010 21:26 Jan 17, 2012 Jkt 072209 PO 00000 Frm 00028 Fmt 6633 Sfmt 6602 E:\HR\OC\A209.XXX A209

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ficiary of their work. We don’t want to be, but it just so happens 

that if it is not one thing it is another, and thank you for what you 

do. 

Mr. BARTLETT. Thank you very much. In its annual report on top 

management challenges, the SBA’s Inspector General report said 

improper payments in the disaster program were underestimated 

by close to $1.4 billion. How much of this was in your area and 

what is being done to address this problem? 

Mr. RIVERA. Congressman, the improper payments process that 

we had, the audit that we had with the Office of Inspector General, 

we took a very proactive approach and have reengineered how we 

do the process. Under the old process, the director in the Texas office had control of the improper payments and the calculation. Currently we have my director up in headquarters who is in charge of 

loan programs that actually goes through that process, so it is completely reengineered, and we continue to work on the improper payments and continue to reduce that percentage. 

Mr. BARTLETT. So after the next disaster, the Inspector General 

will not be able to make a report like this; is that correct? 

Mr. RIVERA. Well, that is always our goal. 

Mr. BARTLETT. Thank you. Okay, as I anticipated, my colleagues 

have done a good job of asking the questions. When we look at the 

record, we may decide that there are other questions that we need 

to ask one or both of you so that we have a complete record for the 

future, and we hope that you can respond for the record if we ask 

those questions. 

I would like to end by thanking both of our witnesses for appearing today. Providing assistance in the aftermath of a disaster is a 

fundamental mission and something that we have the responsibility to get right. While SBA has improved the process for many 

disaster victims, we need to make sure that these improvements 

continue and that we are prepared for any disaster that might 

come our way. This committee will continue to monitor SBA’s performance to make sure that we are helping our neighbors when 

they need it most. 

With that, I ask unanimous consent that members have 5 legislative days to submit statements and supporting materials for the 

record. Without objection, so ordered. The subcommittee now 

stands in adjournment. 

[Whereupon, the subcommittee was adjourned at 2:26 p.m.] 


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