Small Business Administration: Additional Steps Should Be Taken to Address Reforms to the Disaster Loan Program and Improve the Application Process for Future Disasters
Published: 2009-07-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: After the Small Business Administration (SBA) was widely criticized for its performance following the 2005 Gulf Coast hurricanes, the agency took steps to reform the Disaster Loan Program and Congress enacted the Small Business Disaster Response and Loan Improvements Act of 2008 (Act). GAO was asked to determine (1) the extent to which SBA addressed the Act's requirements, and (2) how SBA's response to major disasters in 2008 aligned with key components of its June 2007 Disaster Recovery Plan (DRP). GAO reviewed the Act, as well as SBA information on requirements addressed and steps taken, including the DRP, various reports to Congress, and policy memoranda. GAO also conducted site visits to areas affected by major 2008 disasters, reviewed SBA's customer satisfaction survey, and obtained the opinions of relevant stakeholders.
section_title: What GAO Found
paragraphs: As of June 2009, SBA met 13 of 26 requirements of the Act, partially addressed 8, and did not take action on 5 which are not applicable at this time. SBA officials told GAO the agency has not yet completely addressed some provisions that require new regulations because to do so, the agency must make extensive changes to current programs or implement new programs. For two requirements that will involve private lenders, SBA plans to implement pilots before finalizing regulations. SBA has not yet addressed the Act's requirements for region-specific marketing and outreach and ensured that Disaster Loan Program information is readily available to regional entities, such as Small Business Development Centers (SBDC). By doing so, SBA could leverage the efforts and capacity of local resources and emergency management groups, and ensure that it and they will be better prepared for future disasters. Also, as of June 2009, SBA had not met deadlines to issue an annual report to Congress or an updated DRP. Failure to do so can lead to a lack of transparency on the agency's progress in reforming the program and limit its ability to adequately prepare for and respond to disasters. Furthermore, SBA did not have an implementation plan for addressing the remaining requirements. SBA's initial response after the 2008 Midwest floods and Hurricane Ike aligned with certain components of its initial DRP, such as using technology and outreach efforts to ensure timely assistance. The individuals GAO interviewed and results from SBA's 2008 Disaster Loan Program Customer Satisfaction Survey provided some positive feedback about SBA's performance following recent disasters. However, interviewees and survey results indicated areas for improvement; in particular, both indicated that application paperwork was burdensome and that the application process needed improvement. SBA officials told GAO that they have been taking steps to improve the application process, but did not provide documentation of such efforts. As a result, it did not appear to have any formal process for identifying problems in the application process and making needed improvements.

section_title: Letter
paragraphs: While the Small Business Administration (SBA) is known primarily for its  financial support of small businesses, the agency also plays a critical role  in assisting the victims of natural and other declared disasters. Since the  agency’s inception in 1953, SBA has approved more than $46 billion in  disaster loans for homeowners, businesses, and nonprofit organizations.  SBA provides financial assistance through its Disaster Loan Program to  help homeowners, renters, businesses of all sizes, and nonprofits recover  from disasters such as earthquakes, hurricanes, and terrorist attacks. After  the 2005 Gulf Coast hurricanes (Katrina, Rita, and Wilma), SBA faced an  unprecedented demand for disaster loans, while also being confronted  with a significant backlog of applications; therefore, hundreds of  thousands of loans were not disbursed in a timely way. Many criticized  SBA for what was perceived to be a slow and confusing response to the  disasters. As a result, Congress and SBA agreed that the program needed  significant improvements. Since then, SBA has taken several steps to  reform its Disaster Loan Program, which include developing a Disaster  Recovery Plan (DRP), creating an online loan application, and increasing  the capacity of its Disaster Credit Management System (DCMS). In June  2008, Congress enacted the Small Business Disaster Response and Loan  Improvements Act to expand steps taken by SBA and require new  measures to ensure that SBA is prepared for future catastrophic disasters.
In response to your request, this report examines reforms made to SBA’s  Disaster Loan Program and the impact those reforms had following recent  disasters. Specifically, this report discusses (1) the extent to which SBA  addressed the requirements of the Small Business Disaster Response and  Loan Improvements Act of 2008 (Act), and (2) how SBA’s response,  following the major disasters of 2008, aligned with key components of its  June 2007 DRP.
To determine the extent to which SBA addressed the requirements of the  Act, we identified and analyzed the requirements and related statutory  deadlines; obtained information about SBA’s completed, current, and  planned reform efforts; reviewed documents and progress reports to  determine if requirements had been addressed and deadlines were met;  interviewed officials and obtained information on what, if any, challenges  exist that may affect SBA’s ability to implement certain requirements; and  interviewed officials to obtain information about next steps and resources  that the agency identified as needed to address any remaining  requirements. To assess how SBA’s response following the major disasters  of 2008 aligned with key components of its DRP, we conducted site visits  in Iowa and Texas, and obtained information on how SBA’s performance  in the aftermath of the 2008 Midwest floods and Hurricane Ike was viewed.  We interviewed SBA and Small Business Development Center (SBDC)  officials, state and local officials, and representatives of local Chambers of  Commerce, economic development organizations, and affected small  business owners about what worked well and suggested improvements to  SBA’s disaster loan processes. We also reviewed results from a survey of  SBA loan applicants on their satisfaction with SBA’s Disaster Loan  Program in 2008. Finally, we compared data for the 2008 disasters with  agency performance goals. Appendix I contains a detailed description of  our scope and methodology.
We conducted this performance audit from October 2008 through July  2009, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: SBA’s Disaster Loan Program, which has been a part of the agency since  its inception in 1953, is the primary federal program for funding long-term  recovery assistance. SBA’s Office of Disaster Assistance (ODA) responds  to disasters and administers the program––which provides affordable,  timely and accessible financial assistance following a disaster to  homeowners, renters, businesses of all sizes, and nonprofit organizations.  SBA does not provide disaster grants; rather, this financial assistance  generally is available in the form of direct, low-interest loans and is the  only SBA program not limited to small businesses.
subsections: section_title: Overview of Disaster Loans and Application and Disbursement Process
paragraphs: A Presidential disaster declaration puts into motion long-term federal  recovery programs, such as the Disaster Loan Program, but SBA is not a  “first responder” after a disaster. Rather, local government emergency  services assume the role of first responders, with help from state and  volunteer agencies. For catastrophic disasters, and if a governor requests  it, federal resources can be mobilized through the U.S. Department of  Homeland Security’s Federal Emergency Management Agency (FEMA) for  search and rescue, electrical power, food, water, shelter, and other basic  human needs. SBA typically responds to a disaster within 3 days by  sending ODA field staff to the affected area to begin providing public  information about SBA’s services.
Once a disaster is declared, SBA, by law, is authorized to make two types  of disaster loans: (1) physical disaster loans, and (2) economic injury  disaster loans. Physical disaster loans are for the permanent rebuilding  and replacement of uninsured or underinsured disaster-damaged property.
That is, SBA provides loans to cover repair costs that FEMA or other  insurance has not already fully compensated or covered. The loans are  intended for repair or replacement of the disaster victim’s damaged  property to its pre-disaster condition. Interest rates are periodically  adjusted and SBA calculates rates after each disaster. By law, the interest  rates depend on whether each applicant has credit available elsewhere. If  SBA determines the applicant is unable to borrow from non-government  sources or does not have sufficient funds, then the applicant is considered  to not have credit available elsewhere. SBA offers two levels of interest  rates, a low rate for applicants who have no credit available elsewhere and  a higher rate for applicants with credit available elsewhere. Economic  injury disaster loans provide small businesses, including agricultural  cooperatives and private nonprofit organizations, with necessary working  capital until normal operations can resume after a disaster. Loan funds are  intended to cover operating expenses small businesses could have paid  had the disaster not occurred. The interest rates on an economic injury  disaster loan cannot exceed 4 percent (see table 1).
Immediately following a disaster, SBA public information officers are  responsible for providing information and outreach to victims about SBA’s  Disaster Loan Program and SBA customer service representatives are  available to help home and business owners complete loan applications.  However, certain restrictions and guidelines apply to SBA’s Disaster Loan  Program. For example, individuals must first register with FEMA and  obtain a registration number before SBA can issue an application. SBA has  separate applications for home and business loans and offers these  applications in both paper and electronic form. Furthermore, SBA only  will make a disaster loan if there is reasonable expectation that the loan  can be repaid—loan applicants must have a credit history acceptable to  SBA and demonstrate their ability to repay all outstanding loans. They  must also apply within certain time frames. Typically, loan applications for  physical disaster loans must be received by SBA within 60 days from the  date of the disaster declaration, while applications for economic injury  disaster loans must be received within 9 months. In addition, SBA  generally requires collateral for all loans greater than $14,000, recently  increased from $10,000 pursuant to section 12065 of the Act.
Once SBA receives a completed loan application, staff in its Loan  Processing and Disbursement Center review eligibility, check credit, and  calculate repayment ability. Applicants declined at this stage always  receive notification in writing from SBA. The letter provides reasons for  the declination and advises the applicant of its reconsideration rights.  Applications that are not declined are assigned to an SBA loss verifier,  who is responsible for contacting each applicant to make an appointment  to verify the physical losses and estimate a dollar value for damaged real  estate and personal property. Next, staff underwrite the application and  review in greater depth the applicant’s credit history, repayment ability,  and eligibility. Unless the application is withdrawn, SBA processes each  loan application to an approved or declined status.
SBA notifies approved applicants and makes arrangements to execute the  loan closing. Before SBA can make any disbursements, the borrower must  execute loan closing documents and return them to SBA within 60 days.  Upon receipt of the closing documents, SBA issues the first disbursement  of the unsecured portion of the loan––up to $14,000 for physical disaster  loans. After SBA has verified that lien requirements on collateral property  have been met, it can disburse the additional secured portion of the  physical disaster loan based on need or construction progress. Because no  physical repairs are associated with economic injury disaster loans, SBA  generally makes full disbursement for these loans once collateral and  insurance requirements are met. SBA monitors all disbursements to ensure  that loan funds are used in accordance with the loan authorization and  agreement.
ODA and the newly created Executive Office of Disaster Strategic  Planning and Operations (EODSPO), both headquartered in Washington,  D.C., are responsible for responding to disasters, coordinating with other  disaster recovery entities, and administering the agency’s Disaster Loan  Program. ODA has four field offices, which are the Customer Service  Center located in Buffalo, New York; two disaster Field Operations  Centers located in Atlanta, Georgia and Sacramento, California; and a  centralized Loan Processing and Disbursement Center located in Fort  Worth, Texas. ODA also has a Personnel and Administrative Services  Center and a DCMS Operations Center in Herndon, Virginia.  Organizationally the associate administrator of ODA reports directly to the  EODSPO chief; and the EODSPO chief reports to the SBA Administrator.  In addition, ODA can utilize SBA district offices, SBDCs, and SCORE  (formerly called Service Corps of Retired Executives) for local marketing  and outreach efforts.
section_title: Disaster Planning and SBA’s DRP
paragraphs: Among the lessons learned from the 2005 Gulf Coast hurricanes was the  need for a more organized, formal, and pre-planned approach for  providing SBA services in response to a disaster. Members of Congress  found that it was necessary for SBA to develop and implement a written,  comprehensive disaster plan. Congress acted to signify the importance of  an agency-wide plan that provided guidance and procedures governing  preparations for, and response to, declarations of disasters of various  dimensions, including catastrophic disasters, by including several related  requirements in the Act. Thus, one section of the Act requires that SBA  develop, implement, or maintain a comprehensive written disaster  response plan and update the plan annually and following any major  disaster when SBA declares eligibility for additional disaster assistance.  Our prior work also revealed the need for SBA to conduct comprehensive  disaster planning. For example, as we stated in our February 2007 report,  SBA did not engage in or complete comprehensive disaster plans before  the Gulf Coast hurricanes, and this limited logistical disaster planning  likely contributed to the initial challenges the agency faced in responding.  We recommended that SBA develop time frames for completing key  elements of a disaster management plan and a long-term strategy for  acquiring office space, and assess whether the use of disaster simulations  or catastrophe models would enhance the disaster planning process. In  August 2008, SBA provided information to us on how the agency had  implemented our recommendation to use disaster simulations to enhance  its disaster planning. Other GAO reports, reports by other investigative  agencies, and disaster management experts long have stated that  comprehensive planning can help organizations prepare for potential  disasters and mitigate their effects.
In the wake of the Gulf Coast hurricanes, SBA officials said that they  recognized the importance of disaster planning—to improve planning, they  created the agency’s first DRP and also conducted their first simulation.  In creating the DRP, SBA acknowledged the need for a systematic  approach to carry out the agency’s disaster assistance mission and ensure  coordination, awareness, and support throughout the agency. The plan,  which was issued on June 1, 2007, was designed to provide procedures to  better handle future disasters of all sizes. Its major components–– infrastructure, human capital, information technology, and  communications and outreach––are designed to help ensure that  necessary resources are available, (including reserve corps, staff trained in  disaster loan processing, office space, and information technology) and  that SBA has established an enhanced approach for communicating with  the public and coordinating with other disaster assistance groups.
section_title: Small Business Disaster Response and Loan Improvements Act of 2008
paragraphs: The Act comprises 26 provisions with substantive requirements for SBA;  some with specific deadlines and some needing appropriations, and  includes requirements that SBA must meet regarding disaster planning and  response, disaster lending, and reporting. For instance, the Act includes  provisions to improve SBA’s coordination with FEMA, require that the  agency conduct biennial disaster simulations, create a comprehensive  disaster response plan, and improve communication with the public when  disaster assistance is made available. It includes requirements to improve  ODA’s infrastructure, appoint an official to oversee the disaster planning  and responsibilities of the agency, and establish reporting requirements  for various reports to Congress. The Act also includes provisions to create  new SBA disaster loan programs, such as the Immediate Disaster  Assistance Program that would provide small dollar loans immediately  following a disaster and the Expedited Disaster Assistance Loan Program  that would provide expedited disaster assistance to businesses.
The Act contains 9 provisions that establish deadlines for specific SBA  actions that range from 30 days to 1 year after the Act’s enactment (see  table 2). For example, the Act requires SBA to conduct a study of whether  the standard operating procedures (SOP) for loans offered are consistent  with the regulations for administering the Disaster Loan Program and  report to Congress on the study findings within 180 days after the Act’s  enactment. Additionally, the Act establishes multiple reporting  requirements for SBA. One example of these reporting requirements is that  SBA must submit an annual report to Congress on disaster assistance  within 45 days after the end of each fiscal year. This annual report must  include a report on the comprehensive disaster response plan, among  other things.
section_title: SBA Fully Addressed Half of the Act’s Provisions, but Has Not Yet Established Milestones for Implementation of Remaining Requirements
paragraphs: SBA has fully addressed requirements for 13 of 26 provisions of the Act,  partially addressed 8, and took no action on 5 that are not applicable at  this time. In addition, 9 of the 26 provisions are subject to deadlines and  the agency has had limited success in meeting them. SBA officials told us  the agency did not fully address requirements for some provisions because  the agency has to make extensive changes to current programs or create  new programs in order to comply with the Act’s requirements. SBA  officials also told us that the agency needed time to pilot new programs,  such as private disaster assistance programs, before making final  decisions about implementation. Also, SBA has not issued its first annual  report to Congress on disaster assistance, due November 2008, issued an  annually updated DRP since its initial June 2007 plan, or addressed how it  would market its Disaster Loan Program in different areas of the country  and adapt likely scenarios for certain regions prone to disasters.  Furthermore, the agency did not provide milestone dates for completing  implementation of these requirements and, as a result, Congress does not  have reliable information on the extent to which SBA has addressed the  requirements and made improvements to its program.
subsections: section_title: SBA Has Addressed Half of the Act’s Provisions and Five Other Provisions Do Not Require Any Actions at This Time
paragraphs: SBA has fully addressed 13 of the 26 provisions of the Act, partially  addressed 8, and took no action on 5 that are not applicable at this time.  For the 13 provisions SBA addressed, the agency’s actions included  making improvements to the agency’s disaster loan planning and response;  augmenting infrastructure, information technology, and staff; and  improving disaster lending by increasing access to funds for loan  applicants. For example, to improve the agency’s disaster loan planning  and response, the agency conducted a study on the consistency between  the Disaster Loan Program’s SOPs and regulations and reported its  findings to Congress. SBA has also taken steps to improve its  infrastructure, information technology, and staff by putting in place a  secondary facility in Sacramento, California to process loans during times  when the main facility in Fort Worth, Texas is unavailable and by making  improvements to DCMS to track and follow up with applicants.
Additionally, according to SBA officials, the agency increased DCMS’  capacity from 2,000 to more than 12,000 concurrent users and expanded  their disaster reserve staff from about 300 to more than 2,000 individuals.  Furthermore, the agency increased access to funds by making nonprofits  eligible for economic injury disaster loans, increasing loan amounts from  $10,000 to $14,000 without requiring collateral, and changing the  appropriate maximum disaster loan amount from $1.5 to $2 million. See  table 3 for other requirements of the Act that SBA has addressed.
Based on discussions with SBA officials and our review, 4 of the 26  provisions require no action by SBA at this time due to their discretionary  nature. More specifically, 1 provision provides SBA the discretion to offer  persons receiving disaster loans an option to defer repayment on their  loans and another provision provides SBA discretionary authority to  refinance Gulf Coast disaster loans. Two additional provisions only can be  triggered if the Administrator determines a disaster is a catastrophic event  and authorizes additional assistance. The statute states that the  determination is only to be made for the most extraordinary and  devastating events. Accordingly, SBA officials told us that the agency  needs to take no action unless a disaster is declared a catastrophic event  and the Administrator authorizes additional funding. Agency officials told  us SBA is able to carry out the requirements of these two sections and  stated that after the September 11, 2001, terrorist attacks in New York, the  agency carried out one of the requirements by issuing regulations and  permitting loans to small businesses located outside of the disaster area.
Additionally, we found that at least 1 provision––the Small Business  Bonding Threshold––requires no action at this time because it would  require the agency to obtain additional appropriations. For example, the  provision states that the SBA Administrator may carry out the  requirements of the section only with amounts appropriated in advance  specifically to carry out the requirements. Accordingly, SBA would need to  have an appropriation for implementation of that provision. However, the  American Recovery and Reinvestment Act of 2009 (ARRA) generally  increased the maximum contract amount for SBA bond guarantee to $5  million until September 2010.  According to SBA’s Office of General  Counsel, under ARRA, small business contracts up to $5 million are  eligible for an SBA bond guarantee up to September 30, 2010.
section_title: SBA Has Taken Steps to Partially Address the Remaining Requirements, but the Agency Has Not Demonstrated How It Will Address the Requirements for Region-Specific Marketing and Outreach
paragraphs: SBA partially addressed 8 provisions of the Act by taking some actions to  implement the requirements. For example, 1 provision requires SBA to  update the comprehensive DRP annually; while the agency originally  issued a plan in June 2007 and agency officials have participated in  leadership seminars to discuss revisions to the plan, SBA has failed to  comply with the Act and issue an updated plan, as required by section  12075. Moreover, the existing plan does not include information on, nor is  there separate information addressing, as the Act requires in section  12063, regional marketing information. Additionally, at least 4 provisions  require SBA to either create new or make changes to existing programs.  Three of these 4 provisions require SBA to issue regulations within 1 year  of the Act’s enactment, but the agency only has established regulations in  draft form and has not issued any final regulations. For the 8 partially  addressed provisions, our analysis was based on actions described by SBA  officials (see table 4).
According to agency officials, SBA did not fully address requirements for  some provisions because the agency has to make extensive changes to  current programs or create new programs to comply with the Act’s  requirements, and it takes time to implement these types of changes. More  specifically, according to agency officials, SBA has not completely  addressed some provisions because:    Sections 12062, 12083, 12084, 12085: These 4 provisions require SBA  to issue regulations or make amendments to its SOPs that either establish  new disaster programs or make changes to an existing program, but the  agency said it takes time to develop and issue regulations and, in some  cases, it is developing pilot programs before making decisions about  regulations. SBA officials told us they have requested funding to carry out  requirements for two of these––the Immediate and Expedited Disaster  Assistance Programs––in the fiscal year 2010 President’s Budget.
According to SBA, the funds will be used to implement pilot programs  with private commercial lenders. SBA officials told us that such a pilot  would be necessary to see how private lenders would administer the  programs.
Section 12066: Requires coordination between SBA and IRS to ensure  tax records are shared quickly, and the two agencies intend to meet on an  ongoing basis and update processes, as necessary.
Section 12075: Requires the agency to issue an updated comprehensive  DRP, and while the agency has drafted its updated plan, the draft may  undergo additional changes after the agency holds it next Senior  Leadership Seminar in which it will conduct disaster simulation exercises– –scheduled for June 29-30, 2009––and then agency officials must submit  the updated plan to the new Administrator for review and approval.
Section 12091: Establishes a new reporting requirement that SBA submit  an annual report to Congress on disaster assistance each fiscal year, but  SBA has not issued an annual report because the agency is awaiting input  from the new Administrator. Furthermore, EODSPO staff are responsible  for developing and submitting the annual report to Congress, but SBA  officials told us the office was not fully staffed in November 2008 when the  first annual report on disaster assistance was due to Congress.  Specifically, the Act requires that SBA report annually on the total number  of SBA disaster staff, major changes to the Disaster Loan Program (such  as changes to technology or staff responsibilities), a description of the  number and dollar amount of disaster loans made during the year, and  SBA’s plans for preparing and responding to possible future disasters.
Additionally, we believe that SBA has partially addressed the provision in  section 12063 mandating region-specific marketing and outreach.  However, agency officials told us that their comprehensive DRP and  Leadership Guide for Managing a Response to a Disaster include  marketing and outreach components and satisfy the Act’s requirement,  and therefore, they do not believe a separate plan is necessary. While SBA  believes that this requirement has been met, the DRP and Leadership  Guide do not provide region-specific marketing information or have steps  in place to ensure that the information is available to SBDCs––as required  by the Act. Specifically, the Act states the marketing and outreach plan  must (1) encourage a proactive approach to disaster relief efforts; (2)  make clear the services provided by SBA; (3) describe SBA’s different  disaster loan programs, how they are made available, and the eligibility  requirements for each; (4) provide regional marketing information,  focusing on disasters occurring in each region, and likely scenarios for  disasters occurring in each region; and (5) ensure the marketing and  outreach plan is available at SBDCs and on SBA’s Web site. For example,  lessons learned from the 2005 Gulf Coast hurricanes can provide a basis  for developing marketing information for regions that may be prone to  large scale disasters affecting large geographic areas. Based on our review,  the DRP and Leadership Guide do not include regional marketing  information, such as lessons learned from prior disasters, and it is unclear  how SBA ensures availability of the information to SBDCs and the public  through the agency’s Web site. Also, as we will describe later, officials  with whom we spoke during our site visits to Iowa and Texas noted the  importance of regional marketing and outreach information and suggested  this type of information would be helpful prior to a disaster. By not  developing region-specific information in its updated plan and clear  mechanisms to share the information with SBDCs, SBA is not in  compliance with requirements of the Act, and has not fully leveraged the  efforts of regional entities, such as SBDCs and emergency management  groups, to ensure that it and they will be better prepared for future  disasters.
section_title: SBA Has Had Limited Success in Meeting Deadlines of the Act, Including Issuing An Annual Report and Updating the DRP
paragraphs: SBA has had limited success in meeting the deadlines in 9 provisions of  the Act. The agency met some deadlines for 4 provisions, missed one  deadline by 27 days, and missed deadlines for the 4 remaining provisions– –in some cases, by many months. The statutory deadlines range from 30  days to 1 year after the Act’s enactment. Table 5 shows the status of SBA’s  efforts to meet the deadlines, as of June 2009.
As we discussed earlier, the Act requires that SBA address region-specific  marketing and outreach requirements, but we believe that its current DRP  and Leadership Guide for Managing a Response to a Disaster do not  address all the requirements in the Act and, therefore, SBA missed this  deadline. Additionally, the Act requires SBA to issue final regulations for  two new programs––the Private and Expedited Disaster Assistance  Programs––and regulations for SBA’s coordination of disaster assistance  programs with FEMA. SBA officials told us the agency has developed draft  regulations for these requirements, but missed the statutory deadlines to  publish final regulations. According to SBA officials, they missed the  deadlines because they needed time to issue new regulations, as well as  create and pilot new disaster programs, and conduct an interagency  review with FEMA before making final decisions about implementation.
The Act also establishes multiple reporting requirements, and while SBA  has met some deadlines, others were missed. For example, SBA  successfully submitted monthly accounting, staffing, and activity reports  to Congress, starting in December 2008. However, the agency missed  deadlines for submitting its first annual report on disaster assistance, due  November 2008, as noted earlier, and contracting and loan approval rate  reports. According to officials, SBA is waiting for input from the newly  confirmed Administrator––who also must review and approve the reports  prior to their issuance.
In addition, because SBA has not published an update to the DRP since the  plan’s issuance in June 2007, we found that it contained obsolete  information in some areas, and did not include information on many of the  changes resulting from the Act or the agency’s own disaster reform efforts  since 2007, such as the establishment of EODSPO and appointment of a  chief as director of all disaster planning responsibilities, update to DCMS  to track and follow up with applicants, the increase in the system’s  capacity from 2,000 to more than 12,000 concurrent users, and  incorporation of disaster simulations to enhance its disaster planning. As  we noted earlier, agency officials may revise the plan following its  leadership seminar in June 2009. Agency officials said the updated plan  will likely be issued in August or September 2009 and will incorporate  changes to the Disaster Loan Program resulting from the Act.
Finally, the agency did not provide milestone dates for completing  implementation of the requirements that have not been completely  addressed. Because these actions and reports have been delayed and SBA  did not have a plan detailing expected completion dates on the  requirements that still need to be addressed, Congress does not have  reliable information on the extent to which SBA is reforming its Disaster  Loan Program. Furthermore, failure to produce the annual report can lead  to a lack of transparency on the agency’s progress in reforming the  program, and the delay in updates to the DRP limits SBA’s ability to  adequately prepare for and respond to disasters.
section_title: SBA’s Response Following 2008 Disasters Aligned with Certain Components of its DRP, but SBA’s Response to Disaster Victims’ Feedback on the Application Process Could be Improved
paragraphs: SBA’s initial response after the 2008 Midwest floods and Hurricane Ike  aligned with certain components of its DRP, such as infrastructure, human  capital, information technology, and communications and outreach. For  example, many of the individuals we met in Iowa and Texas said that SBA  staff provided outreach and public information about its Disaster Loan  Program, distributed application information, assigned knowledgeable  customer service representatives to various DRCs and BRCs, and assisted  in the initial application process by answering questions, providing  guidance, and offering one-on-one help. Individuals we interviewed and  results from SBA’s 2008 Disaster Loan Program Customer Satisfaction  Survey provided some positive feedback about SBA’s performance  following recent disasters. However, interviewees and these same survey  results indicated areas for improvement; in particular, these sources both  indicated that the application paperwork was burdensome and that the  application process needed improvement. SBA officials told us that they  intend to improve the application process, but did not provide  documentation of such plans and did not appear to take advantage of  feedback from applicants, such as that received from the customer survey.
subsections: section_title: Major Disasters of 2008 Provided a Limited Test of SBA’s Ability to Plan for and Respond to Disasters in Accordance With Its DRP
paragraphs: Three major disasters struck our nation in 2008 that provided a limited test  of SBA’s ability to plan for and respond to major disasters and tested the  improvements stemming from recent disaster reform efforts––the Midwest  floods and Hurricanes Ike and Gustav. First, beginning in late May 2008,  tornadoes, severe storms, and flooding affected six Midwestern states  (Iowa, Illinois, Indiana, Missouri, Nebraska, and Wisconsin). Notices of  Presidential declarations of major disasters were issued in each state.  Flooding continued into July 2008 in some areas, with Cedar Rapids, Iowa,  being hardest hit, in terms of suffering the most physical damage and  business losses. The floods left 13 dead and damage region-wide was  estimated in the tens of billions of dollars. In addition to FEMA, state and  local emergency management agencies, the American Red Cross, and the  National Guard assisted the victims of flooding with disaster relief and  evacuation. Second, in early September 2008, a major disaster struck the  Gulf Coast states when Hurricane Ike made its way through Texas and  Louisiana. Hurricane Ike made landfall as a Category 2 hurricane near  Galveston, Texas, on September 7, 2008, and was declared a major disaster  by the President on September 13, 2008. Ike was the third most  destructive hurricane to make landfall in the United States and the third  major hurricane of the 2008 Atlantic hurricane season; it caused  widespread damage to some Gulf Coast areas already trying to recover  from Hurricane Gustav, which hit Louisiana on September 1, 2008.  Hurricane Ike was blamed for at least 100 deaths and damages are  estimated at approximately $24 billion.
Based on our review, SBA’s response following the 2008 Midwest floods  and Hurricane Ike aligned with certain components of its DRP, and the  agency’s efforts were in accordance with the plan. Though we noted  earlier that the 2007 plan has not been updated and, therefore, has some  obsolete information, for purposes of this study, we found that the plan  addresses the major components—including infrastructure, human  capital, information technology, and communications and outreach—and  puts into writing a disaster assistance framework and related processes  for how the agency plans to prepare for and respond to victims of  potential disasters, and subsequently, offer assistance through its Disaster  Loan Program. For example, according to SBA, following both disasters  the agency used its organizational infrastructure and key staff in each of  its core functions to provide disaster assistance. ODA also utilized  available operational and technological support, and communications and  outreach, to help ensure that the agency would be able to provide timely  financial assistance to the disaster victims. While the 2008 disasters were  not as severe as those in 2005, the agency’s performance in the aftermath  of the 2008 flooding dramatically improved over its performance in the  aftermath of the 2005 Gulf Coast hurricanes. Specifically, following the  2005 Gulf Coast hurricanes, processing times for a home loan reached a  maximum of about 90 days, but in 2008 the processing time was about 5  days. Similarly, SBA took 70 days to process a business loan in 2005, but in  2008 the average processing time was about 9 days. In addition, on June  24, 2008, SBA opened a BRC in Cedar Rapids, which was co-located with  FEMA’s DRC. The BRC enabled businesses owners and homeowners to  work directly with SBA staff to learn about available recovery resources  and programs, receive counseling, and receive face-to-face answers to  their questions. At the peak of its efforts, SBA reported having 194 staff  working from about 67 centers in Iowa to provide recovery assistance to  flood victims in more than 81 counties. As of June 2009, SBA had approved  more than $411 million in disaster assistance to individuals and business  owners whose homes or property were damaged by the Midwest floods.
In addition, in the aftermath of Hurricane Ike, SBA had about 116 disaster  staff in Texas and 200 in Louisiana. In Texas, particularly, SBA customer  service representatives provided assistance to Hurricane Ike victims  through 13 DRCs, two Disaster Loan Outreach Centers, and two BRCs. The  customer service representatives were available to meet individually with  disaster victims to issue loan applications, answer questions about SBA’s  disaster loan program, explain the application process, and help  individuals complete their applications. Additionally, as of June 2009, SBA  had approved approximately $677 million in SBA disaster loans to Texas  and Louisiana homeowners, renters, businesses, and nonprofits who  sustained damages from Hurricane Ike. Specifically, SBA provided about  $478 million in loans to more than 9,260 homeowners and renters, and  about $199 million in loans to nearly 1,640 businesses and nonprofit  organizations.
Similar to its response following the Midwest floods, SBA took less time to  process disaster loan applications during its post-Hurricane Ike response  because of upgrades made to DCMS, an expanded disaster response  workforce, and an online electronic loan application––eliminating the  need to mail an application or visit a center. As a result, the time needed to  process a home loan following Hurricane Ike averaged about 5 days and a  business loan averaged about 12 days.
section_title: SBA’s Response to Recent Major Disasters Considered Satisfactory, but Both Our Interviewees and SBA’s Survey Results Identified Areas for Improvement
paragraphs: Individuals affected by both disasters told us they considered the agency’s  overall performance satisfactory in responding to the disasters. However,  the individuals believed some improvements could be made to SBA’s  disaster loan application process. Similarly, our review of SBA’s 2008  Disaster Loan Program Customer Satisfaction Survey also showed that  respondents provided some positive feedback about SBA’s performance,  but they too believed that improvements were needed. During our site  visits to areas in Iowa and Texas, we obtained insights on the devastation  caused by the Midwest floods and Hurricane Ike from various state and  local government officials and small business owners, as well as their  perceptions of SBA’s initial efforts. SBA District Office officials and  SBDCs affected by the disasters, as well as representatives of  nongovernmental organizations also gave their views on the disaster  recovery efforts. According to SBA and SBDC officials, state and local  government officials, nongovernmental representatives, and business  owners we interviewed in Iowa and Texas, in the days immediately  following the disasters, ODA staff reported to the affected areas,  established several BRCs, assigned knowledgeable customer service  representatives, and began providing the needed disaster assistance. The  individuals said that SBA representatives distributed loan applications and  assisted in the initial application process by answering questions,  providing guidance about the Disaster Loan Program, its eligibility rules  and requirements, offering one-on-one assistance with filling out the  disaster loan application, and accepting completed applications.
Additionally, interviewees said SBA staff provided outreach and public  information to affected individuals and businesses about the Disaster Loan  Program. For example, to ensure that individuals and businesses knew  about available assistance, SBA staff worked with the local media in  providing television, radio and newspaper interviews, communicating  information about loan availability, and disseminating information through  various community briefings and town hall meetings. The interviewees  said SBA staff also made several visits to state and local groups, such as  the Chamber of Commerce to tell them about SBA’s Disaster Loan  Program. Many of the people we interviewed said that while most  applicants used the paper application, the electronic loan application–– introduced in August 2008 just prior to Hurricane Ike––worked well and  they were not aware of any DCMS problems. Furthermore, many of them  were satisfied overall with SBA’s initial disaster assistance efforts, and the  feedback we received on SBA’s response to the disasters indicated to us  that the agency’s assistance was consistent with the processes and  procedures outlined in the DRP.
As mentioned, respondents to SBA’s 2008 Disaster Assistance Program  Customer Satisfaction Survey also were somewhat satisfied with ODA’s  Disaster Loan Program. Specifically, our review of the 2008 survey  results showed that ODA’s aggregated customer satisfaction index score  was 55 on a scale of 100. Respondents, however, had mixed reaction program and the agency’s performance in key areas such as application  processing, SBA’s Customer Service Center and the disaster recovery  centers, inspection and decision processes, and loan closing. Specifically,  survey results showed applicants who were declined for an SBA disaster  loan had lower satisfaction ratings compared to applicants that were  approved for disaster loans. For example, the declined applicants’ overall  customer satisfaction index was 34 as compared to approved applicants’  customer satisfaction index, which ranged from 63 to 81, with  homeowners and renters generally more satisfied than business owners.  The survey results also showed that the inspection process and disaster   to the  recovery center areas were rated positively by all respondents. The  respondents noted that the DRCs were easy to locate, had convenient  hours of operation and accessible SBA staff; and rated SBA staff as being  professional, knowledgeable and helpful. Additionally, respondents rated  the SBA inspection process as an area where SBA staff excelled.
section_title: Interviewees and Survey Results Point to the Need for Improvements in the Application Process, but SBA Does Not Have A Clear Process with Which to Respond to Ongoing Concerns
paragraphs: While SBA’s response to the disasters was considered satisfactory overall,  both the individuals we interviewed and survey results point to areas for  improvement and suggested ways to increase satisfaction with SBA’s  disaster assistance process. For example, some business owner applicants  we interviewed expressed concern over collateral requirements and  interest rates. They also complained about disparity between verbal versus  final written loan terms and amounts, having multiple loan officers or case  managers, and SBA not using district and branch office staff for follow up  after centers were closed in their areas. Additionally, some business owner  applicants said that the disaster loan application was too complex or  lacked adequate instructions—a problem which interviewees believed  sometimes caused some applicants to withdraw their application or decide  not to apply for SBA disaster loans.
Both the interviewees and the survey results indicated the amount of  paperwork required for the application process was burdensome, and  interviewees also expressed concerns about the timeliness of loan  disbursements. Specifically, some interviewees said that improvements  were necessary to speed up loan disbursements because some business  owners had to wait as long as 7 months after submitting the disaster loan  application to receive an initial loan disbursement, by which time a small  business could be so economically weakened that its future operations  would be in question. In terms of the survey, business loan and economic  injury disaster loan recipients were dissatisfied particularly with the  timeliness of fund disbursals after loan approval, and rated the application  process for business loans as among the areas most needing improvement.  In addition, the application and decision process were consistently among  the lower-rated performing areas.
In addressing some of the areas in need of improvement, many business  owner applicants we interviewed suggested changes to SBA’s disaster loan  application process, such as providing partial disbursements earlier in the  process and using bridge loans to help ensure disaster victims receive  timely assistance. We also consistently heard from SBDCs and state and  local emergency management agencies, the need for joint pre-planning and  disaster preparedness efforts with SBA, and more up-front information  about SBA’s disaster response plan and their expected roles and  responsibilities as part of that response effort. In addition, during our  interviews, some business owner applicants complained that they had to  provide copies of 3 years of federal income tax returns, although they had  signed an IRS form 8821—Tax Information Authorization––which allows  SBA to get tax return information directly from IRS. Interviewees found  this process burdensome and somewhat inefficient and, as a result,  suggested that SBA change its application requirements to remove the  requirement that applicants must provide copies of tax returns. SBA  officials explained the current process for obtaining tax information from  IRS and stated that SBA does not require copies of tax returns from all  business applicants. Rather, they said that SBA requests copies on a case- by-case basis when it is unable to determine repayment ability based on  the tax transcript obtained by using IRS form 8821. However, our review  of SBA’s filing requirements for business loans showed that SBA’s written  procedures differed from those the officials explained. Specifically, SBA’s  written requirements for business loans state that while SBA requires  business applicants to sign form 8821, applicants also must submit copies  of their tax returns. In addition to the potential paperwork burden for  applicants, the conflicting written procedures and SBA’s current process  could cause confusion and inefficient processing during disaster  responses.
Similarly, one suggestion from the ACSI report of survey results was that  SBA improve or maintain its process in high-performing areas of the loan  application process and work to improve its performance in the low- performing areas to demonstrate commitment to further improving the  process for future disaster loan applicants. For instance, areas with the  lowest impact on an applicant’s overall satisfaction, such as the inspection  process and DRCs, were rated higher than other areas by all respondent  groups and those areas rated as having the highest impact on satisfaction  for most respondents—the application and decision areas—scored lowest  in satisfaction.
Consequently, in reporting the results and suggestions for agency action,  SBA was encouraged to: (1) maintain its efforts in areas that were high  performing and had low impact on overall customer satisfaction, and (2)  increase its efforts to improve areas that were low performing and had a  higher impact on satisfaction.
During our review and analysis of the 2008 customer satisfaction survey,  we found that the survey’s results were not a formal part of the agency’s  process for reforming its disaster loan program, or its efforts to  continually improve the application process. SBA officials were unable to  cite specific actions taken to incorporate the survey’s results into efforts  to improve its disaster program, and it appears that its primary use for the  annual survey is linking it to the agency’s budget and performance  accountability reports to provide an outcome measure for the Disaster  Loan Program. Additionally, apart from SBA’s 2008 launch of its online  disaster loan application, we found that the agency’s other disaster reform  efforts, to date, have not focused on the complexity of the disaster loan  application (particularly for business applicants), the extensive amount of  paperwork and documents required, or the timeliness of disbursements.  While SBA officials said they continually look for ways to improve the  disaster loan application, the agency does not appear to have a formal  process for addressing problem areas within its program and making  needed improvements. Consequently, it may be missing opportunities to  demonstrate its commitment to further improve the application process  for future applicants.
Finally, some of the improvements suggested by the individuals we  interviewed are related to some requirements in the Act. For example, as  we noted earlier, the Act requires that SBA provide specific regional  marketing and outreach information and scenarios in its DRP, and include  SBDCs in preparing for future disasters. Additionally, the Act requires that  SBA coordinate with IRS, as necessary, in sharing tax records of disaster  loan applicants to ensure expedited processing of all disaster loans. As  mentioned earlier in this report, as of June, SBA has yet to address these  two requirements.
section_title: Conclusions
paragraphs: SBA’s response to the 2005 Gulf Coast hurricanes exposed many  deficiencies in the agency’s Disaster Loan Program and demonstrated the  need for reform. Since then, SBA has taken steps to improve its program.  For instance, SBA issued a DRP, adopted an electronic loan application,  upgraded the system capacity of its DCMS, improved employee training  and expanded its disaster reserve staff. With passage of the Act, Congress  also acted to transform and improve SBA’s Disaster Loan Program and  ensure the agency is better prepared to handle future large-scale disasters.  SBA adapted its initial DRP in June 2007, which laid out a framework and  processes the agency has in place that would enable it to respond  effectively to disasters, and the Act requires that SBA have such a plan and  regularly update it. However, SBA has not addressed specifically how it  would market its Disaster Loan Program in different areas of the country,  nor adapted likely scenarios for certain regions prone to disasters.  Although SBA believes that it has addressed the requirement for marketing  and outreach in its DRP, the 2007 plan does not provide any regional  perspective, nor has the agency updated this plan since 2007. We  consistently heard from regional entities, such as SBDCs and emergency  management groups, about the need for more upfront information on  SBA’s Disaster Loan Program and their expected roles and responsibilities  in disaster response efforts. By taking such actions, SBA could leverage  the efforts and capacity of SBDCs, as well as state and local emergency  management agencies, and ensure that it and they will be better prepared  for future events, especially in disaster-prone areas.
SBA has taken a number of steps to address the many requirements of the  Act; however, some provisions have presented challenges for SBA in  implementing specific requirements and meeting some associated  deadlines. For example, SBA has not completely met certain requirements  and the agency does not have an implementation plan in place to ensure  the remaining requirements are addressed. Some of the changes required  by the Act, especially those requiring SBA to create new programs, will  take time to implement. It will be important for the agency to do so in a  comprehensive manner; but because the implementation process already  is behind schedule, it also will be important for SBA to ensure it has a plan  for implementing the remaining requirements and report on its progress to  Congress. Failure to produce annual reports on schedule can lead to a lack  of transparency on the agency’s progress in reforming the program. Delays  in updates to the DRP also limit its ability to adequately prepare for and  respond to disasters. By continuing its efforts to address and implement all  requirements in the Act and expeditiously communicate its actions, SBA  could improve its operations for the 2009 hurricane season, build on the  lessons learned in the aftermath of the 2005 Gulf Coast hurricanes, and  further signal its commitment to its mission of providing affordable and  timely financial assistance to help businesses and homeowners recover  from disasters.
SBA’s initial response following the 2008 Midwest floods and Hurricane  Ike aligned with certain components of its DRP, and the affected  individuals we interviewed, as well as respondents to SBA’s 2008 Disaster  Loan Program Customer Satisfaction Survey were somewhat satisfied with  the agency’s performance after the major disasters of 2008. However, the  individuals we interviewed and survey results both indicated areas for  improvement with SBA’s disaster loan program. For instance, our  interviewees and the survey results indicated the amount of paperwork in  the application process was burdensome and cited the application  process, including tax information requirements, as an area for  improvement. As discussed in this report, while SBA has made progress,  the agency has missed opportunities to further improve its Disaster Loan  Program, and, in particular, improve the application process for future  applicants. For example, it was unclear to what extent it had a formal  process in place for addressing identified problem areas and making  needed improvements to its program. By establishing such a process to  address identified problem areas, SBA could better demonstrate its  commitment to improve the Disaster Loan Program.
section_title: Recommendations for Executive Action
paragraphs: To facilitate SBA’s progress in meeting and complying with requirements  of the Act and improve the Disaster Loan Program, we recommend that  the Administrator of SBA take the following five actions:    develop procedures for regional entities that would enable SBA to meet all  region-specific requirements of the Act. Specifically, building on the  lessons learned from previous disasters, SBA should include likely  scenarios for certain regions prone to disasters and regional marketing  information for SBDCs, other local resources, and local emergency  management groups. In addition, SBA should make this information and  other Disaster Loan Program information readily available to these  regional entities prior to the likely occurrence of a disaster;    complete the first annual report to Congress on disaster assistance, and  adhere to the required time frames for subsequent annual reports;    expeditiously issue an updated DRP that reflects recent changes resulting  from the Act’s requirements, as well as SBA’s own disaster reform efforts;    develop an implementation plan and report to Congress on the agency’s  progress in addressing all requirements within the Act––including creating  and implementing new programs, such as the Immediate and Expedited  Disaster Assistance Programs––and include milestone dates for  completing implementation and any major program, resource, or other  challenges the agency faces as its continues efforts to address  requirements and meet deadlines in the Act; and    develop and implement a process to address identified problems in the  disaster loan application process for future applicants.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided SBA a draft of this report for review and comment. In  comments provided to us in an email, SBA generally agreed with our  recommendations and stated the agency’s plan to incorporate them into its  ongoing efforts to implement the Act and improve the application process.  Specifically, SBA said that the agency has plans to expand its outreach  efforts to ensure the public in all regions of the country are more aware of  SBA disaster assistance programs before a disaster strikes. SBA is also  planning to submit both the required annual report, and the 2009 revision  to its DRP to Congress by November 15, 2009. Additionally, SBA officials  said the agency has plans to develop an implementation plan for  completion of the remaining provisions. Finally, in response to our  recommendation on the application process, the officials cited the  electronic loan application as an example of its efforts to improve the  application process and said the agency has plans to continue its  improvement efforts and make such improvements an ongoing priority.  The comments also referred to ongoing efforts since 2005 to improve  various processes, including 79 projects to improve the processing and  disbursement process, but did not specify how these efforts improved the  application process for disaster victims. In addition, SBA did not say how  it would implement a formal process to address identified problem areas  in the disaster loan application process.
We are sending copies of this report to interested Members of Congress  and the Administrator of the Small Business Administration. In addition,  this report will be available at no charge on the GAO Web site at  http://www.gao.gov.
Please contact me at (202) 512-8678 or shearw@gao.gov if you or your staff  have any questions about this report. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this report. Key contributors to this report are listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our objectives were to review (1) the extent to which the Small Business  Administration (SBA) addressed the requirements of the Small Business  Disaster Response and Loan Improvements Act of 2008 (Act), and (2) how  SBA’s response, following the major disasters of 2008, aligned with key  components of its June 2007 Disaster Recovery Plan (DRP).
To respond to these objectives overall, we reviewed agency documents  related to SBA’s implementation of the Act’s requirements, identified key  components of the DRP, interviewed key officials at SBA headquarters  about their roles and responsibilities in implementing the Act and SBA’s  response to major disasters in 2008, and identified the requirements  specified in the Act––including any statutory deadlines for implementing  specific provisions of the Act. SBA officials we met with included senior  officials representing the Executive Office of Disaster Strategic Planning  and Operations (EODSPO) and the Office of Disaster Assistance (ODA).  We also met with officials from SBA’s Office of the Inspector General to  discuss planned audits and oversight activities related to SBA’s Disaster  Loan Program and the agency’s implementation of the Act.
To determine the extent to which SBA addressed the requirements and  deadlines of the Act, we  reviewed the Act and identified 26 provisions with substantive statutory  requirements and 9 provisions with related deadlines;  reviewed the Act to determine which provisions require general or explicit  appropriations;    obtained, reviewed and analyzed documentation, such as policy  memorandums, reports issued to Congress, or progress reports to  determine if requirements had been addressed and deadlines had been  met;  interviewed agency officials to obtain information on what, if any,  challenges exist that may affect SBA’s ability to address certain  requirements—including identifying reasons for any delays in meeting the  statutory deadlines; and    met with SBA to obtain information about the agency’s next steps and  resources the agency identified it needs to completely address the  remaining provisions. During these meetings, we requested expected time  frames for completion, milestone dates, resources needed, and reasons for  delay, if applicable, for the partially addressed provisions.
To assess whether SBA’s initial response following the 2008 disasters  aligned with key components of its 2007 DRP, we conducted site visits to  areas impacted by the 2008 Midwest floods (Iowa) and Hurricane Ike  (Texas). We reviewed SBA’s DRP and other plans issued by the agency  (i.e., SBA’s ODA Field Operations, Processing and Disbursement Center,  and Customer Service Center Disaster Response Plans) to identify some of  the key components of the plans such as determining the agency’s strategy  for establishing field operations, disseminating information, coordinating  with Small Business Development Centers (SBDC) and other regional  entities, and effectively processing applications, as well as the agency’s  DRP that discusses its approach for being prepared for and responding to  a disaster declaration, strategy for internal and external communication,  and a description of ODA’s responsibilities. In both Iowa and Texas, we  interviewed various stakeholders including SBA and SBDC officials, state  and local government officials, representatives of local Chambers of  Commerce and economic development organizations, and small business  owners to discuss what worked well, in terms of SBA carrying out key  components of their DRP, and what, if any, improvements were suggested  for SBA’s Disaster Loan Program and processes. While our limited number  of site visits was too small for generalizing the information obtained to  assess ODA’s overall ability to respond to any disaster, the observations  and perspectives expressed by the various stakeholders was sufficient to  suggest that SBA has begun institutionalizing key reforms in its disaster  program’s policy and practices. Furthermore, we obtained information  about loan applicants’ and recipients’ satisfaction with the agency’s  Disaster Loan Program and related services immediately following the  Midwest floods and Hurricane Ike.
We also reviewed the 2008 Disaster Assistance Program Customer  Satisfaction Survey that addressed five customer segments which measure  customer satisfaction with SBA’s Disaster Loan Program. It included four  types of loan recipients—homeowners, renters, and business owners who  received physical damage and economic injury disaster loans, as well as  declined applicants. The survey questionnaire, which was developed  through a collaborative effort between the Claes Fornell International  (CFI) Group and SBA, measured overall satisfaction with SBA’s program  in areas such as application processes, customer service center, recovery  center, and inspection processes. About 4,800 loan recipients and declined  applicants were included in the survey population resulting in about 570  completed responses used for analysis—a response rate of about 20  percent. Further, the number of completed interviews was based on a  quota for calling among the five customer segments, with weights applied  to responses for the number of completed surveys and the number of loan  recipients and declined applicants studied. Our overall data reliability  assessment of the Customer Satisfaction survey was generally based on  discussions with SBA officials and our knowledge of the Disaster Loan  Program, publicly available information on ACSI, and our prior reports  which included analyses of past years’ survey results. As a result, we  determined that survey data were sufficiently reliable for purposes of this  report.
We conducted this performance audit from October 2008 through July  2009, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Summary of the 2008 Small Business Disaster Response and Loan Improvements Act Requirements
paragraphs: Appendix II: Summar Busine Improvy of the 2008 Small  ss Disaster Response and Loan  ements Act Requirements  Addressed (initil or ongoing) or dedline met Prtilly ddressed or ome dedline met Not ddressed or missed dedline Not pplicable ecause no ction i needed to e tken SBA t thi time, de to proviions’ dicretionry nre.
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
paragraphs: William B. Shear, Director, (202) 512-8678, or shearw@gao.gov.
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Kay Kuhlman, Assistant  Director; Michelle Bowsky; William Chatlos; Beth Ann Faraguna;  Alexandra Martin-Arseneau; Marc Molino; Linda Rego; and Barbara  Roesmann made significant contributions to this report.