When disasters such as floods, tornadoes, or earthquakes strike, federal, state, and local government agencies coordinate to provide assistance to disaster victims. SBA, through its Disaster Loan Program, is part of this effort. SBA provides loans to households and businesses without credit available elsewhere at a maximum rate of 4 percent and up to a 30-year term. For households or businesses with credit available elsewhere, SBA provides loans at a maximum rate of 8 percent and, for businesses, up to a 3-year term. Business loans are available up to $1.5 million, loans for physical damage to homes are available up to $200,000, and loans for the repair or replacement of personal property are available up to $40,000. Like other federal programs, SBA’s Disaster Loan Program follows performance measurement guidelines under the Government Performance and Results Act (GPRA) of 1993. GPRA requires agencies to set multiyear strategic goals in their strategic plans and corresponding annual goals in their performance plans, measure performance toward the achievement of those goals, and report on their progress in their annual performance reports. Annual performance plans are sent to Congress soon after the transmittal of the President’s budget and provide a direct linkage between an agency’s long-term goals and mission and day-to-day activities. Related annual performance reports describe the degree to which performance goals have been met. Guidance from the Office of Management and Budget (OMB) indicates that performance plans should include measures of outcomes—intended results—when the outcomes can be achieved during the fiscal year covered by the plan. Otherwise, the guidance recognizes that the performance plans will predominantly include measures of outputs (program activities) rather than outcomes. In 1999, SBA began a loan asset sales program, at the direction of OMB, to reduce the amount of debt the agency owned and serviced. OMB is interested in increasing loan asset sales in order to improve the management of loan assets and to transfer loan servicing responsibilities to the private sector. Our review focused on SBA’s first five loan sales through January 2002 in which 110,000 loans with an outstanding balance of $4.4 billion were sold. Approximately 85 percent of the dollar volume of loans SBA sold were disaster assistance loans made directly by SBA, most of which have below-market borrower interest rates. The remaining 15 percent were mostly defaulted 7(a) loans, made by SBA’s lending partners (primarily banks). In the weeks and months following the terrorist attacks, SBA and Congress faced the challenge of responding to the lingering effects of the attacks and subsequent federal actions on small businesses throughout the country. SBA responded first in Lower Manhattan, then expanded its response as additional parts of the New York City and Pentagon areas were designated disaster areas. Ultimately, SBA helped small businesses around the country with disaster lending. In response to the concerns expressed by small businesses, SBA and Congress modified the program, expanding eligibility for economic injury loans to small businesses around the country, providing translators for applicants, modifying the size standards for small businesses, expediting the loan approval and disbursement processes, and providing larger loans. SBA’s response to the terrorist attacks began on September 11, when SBA officials arrived in Lower Manhattan to begin coordinating the agency’s efforts. The initial disaster area in New York City and New Jersey eventually expanded to include additional counties in Connecticut, Massachusetts, New Jersey, New York, and Pennsylvania. Maryland, Virginia, and parts of the District of Columbia were also declared disaster areas for SBA purposes. As the United States began to deploy military personnel in response to the terrorist attacks, small businesses nationwide affected by the loss of employees called up as military reservists were eligible to apply for a disaster loan under the Military Reservist Economic Injury Disaster Loan (EIDL) program. Small businesses across the nation that were adversely affected by the lingering effects of the attacks and subsequent government action, such as airport closings and the precipitous drop in tourism, were also eligible to receive disaster loans under SBA’s Expanded EIDL program. In essence, the entire country was deemed a disaster area. More than half the loans went to small businesses outside the area of the attack sites in New York City and at the Pentagon, with businesses in Florida and California receiving the second and third largest share of loans (see fig. 1). Loans ranged from $300 to $1.5 million, with $50,000 as the most frequently disbursed amount (11 percent of all loans). Businesses outside the immediate sites of the attacks generally received slightly more than those close by, in part because they did not have access to the resources available in New York City. The loans were spread among industries, with no single type of business accounting for most of the funds (see fig. 2). The manufacturing sector received the most funds, followed by professional, scientific, and technical services; transportation and warehousing; wholesale trade; and accommodation and food services. In the months after the terrorist attacks, small business owners affected by the terrorist attacks presented a number of concerns to Congress about SBA’s Disaster Loan Program. SBA officials regarded these comments as valuable feedback and worked with Congress to make several modifications to the program for September 11 victims: First, in October 2001, SBA issued regulations to make economic injury disaster loans available to small businesses nationwide, an unprecedented change to the Disaster Loan Program, according to SBA officials. SBA’s Expanded EIDL program enabled businesses outside the declared disaster areas to apply for loans to cover “ordinary and necessary” operating expenses that could not be met because of the attacks or related actions of the federal government between September 11 and October 22, 2001. Second, SBA printed informational packets in languages such as Spanish and Chinese; provided multilingual staff at its offices who could speak Mandarin Chinese, Croatian, Arabic, and Spanish; and was prepared to send employees with additional language capabilities to New York City. Third, in February 2002, SBA modified the size standards for all September 11 loan applicants, allowing borrowers to take advantage of recent inflation-based adjustments. In addition, in March 2002, SBA increased the size threshold for travel agencies adversely affected by the attacks from $1 million in annual revenues to $3 million. Fourth, to expedite loan processing, loan officers streamlined their needs analysis, calculating economic injury loans using the applicant’s annual sales and gross margin. By the end of fiscal year 2002, SBA was processing September 11 business loans, on average, in 13 days compared with 16 days for disaster assistance business loans processed in fiscal year 2001. To further expedite disbursement to those in the World Trade Center and Pentagon disaster areas, SBA decreased the amount of documentation needed to disburse up to $50,000. Fifth, in January 2002, Congress approved supplemental appropriations for SBA of $150 million, raised the maximum loan amount from $1.5 million to $10 million, and deferred payments and interest for 2 years. Congress also created the Supplemental Terrorist Activity Relief (STAR) program to provide assistance to small businesses affected by the terrorist attacks through SBA’s 7(a) loan guaranty program, which is not part of the Disaster Loan Program. Under the STAR program, SBA reduced the fee charged to lenders on new 7(a) loans from 0.50 percent of the outstanding balance of the guaranteed portion of the loan to 0.25 percent. As of the end of fiscal year 2002, SBA had guaranteed about 4,700 STAR loans for $1.8 billion. Some small businesses affected by the terrorist attacks maintained that SBA’s underwriting criteria—for example, collateral requirements—were too restrictive. They testified that SBA had withdrawn their applications because they would not use their homes as collateral. They argued that it was too risky to use their homes as collateral, especially since the survival of their businesses was uncertain. SBA, however, did not change its underwriting criteria for September 11 victims. SBA officials said that the agency makes every effort to approve each application by applying more lenient credit standards than private lenders. However, the officials said that they adhered to their credit standards to minimize losses and program costs. SBA data indicate that the 52 percent rate for withdrawing and declining September 11-related loan applications was not out of line when compared with other disasters or with private lenders. The primary reasons SBA identified for withdrawing September 11 loan applications was a lack of Internal Revenue Service (IRS) records to corroborate applicants’ income, and applicants’ failure to provide additional information SBA had requested. SBA officials said that the most common reasons for declining September 11 loan applications were inability to repay the loan and unsatisfactory credit. According to SBA, these were also the primary reasons for withdrawing or declining nearly two-thirds of all SBA disaster loan applications in fiscal year 2001. SBA officials believed that many of the complaints about the disaster program resulted from the mismatch between victims’ expectations of SBA’s disaster program and the nature of the program. SBA officials told us that they tried to minimize public confusion about the nature of the assistance available from SBA by working closely with the media and public officials to provide accurate information about the Disaster Loan Program. The six performance indicators SBA currently uses to measure the Disaster Loan Program are field presence within 3 days of a declaration, loans processed within 21 days, homes restored to predisaster condition, businesses restored to predisaster condition, and initial loan disbursement within 5 days of receiving closing documents. We identified several problems with these measures. For example, several are output measures that did not reflect the actual progress being made. Some are proxies that did not accurately represent what was being measured.