Administered by SBA’s Office of Disaster Assistance (ODA), the Disaster Loan Program is the primary federal program for funding long-range recovery for nonfarm businesses that are victims of disasters and is the only form of SBA assistance not limited to small businesses. SBA can make available several types of disaster loans, including two types of direct loans: physical disaster loans and economic injury disaster loans. Physical disaster loans are for permanent rebuilding and replacement of uninsured or underinsured disaster-damaged property. They are available to homeowners, renters, businesses of all sizes, and nonprofit organizations. These loans are intended to repair or replace the disaster victims’ damaged property to its predisaster condition up to a certain capped amount. Economic injury disaster loans provide small businesses that are not able to obtain credit elsewhere with necessary working capital until normal operations resume after a disaster declaration. The loans cover operating expenses the business could have paid had the disaster not occurred. Not all businesses are eligible for both types of loans. Businesses of all sizes may apply for physical disaster loans, but only small businesses are eligible for economic injury loans. Congress enacted the Small Business Disaster Response and Loan Improvements Act of 2008 to expand steps taken by SBA after Hurricane Katrina and require new measures to help ensure that SBA would be prepared for future disasters. The act includes three provisions requiring SBA to issue regulations to establish new guaranteed disaster programs using private-sector lenders: Expedited Disaster Assistance Loan Program (EDALP) would provide small businesses with expedited access to short-term guaranteed loans of up to $150,000. Immediate Disaster Assistance Program (IDAP) would provide small businesses with guaranteed bridge loans of up to $25,000 from private-sector lenders, with an SBA decision within 36 hours of a lender’s application on behalf of a borrower. Private Disaster Assistance Program (PDAP) would make guaranteed loans available to homeowners and small businesses in an amount up to $2 million. The following section discusses the extent to which SBA met goals for timely processing of business loan applications and factors affecting timeliness; changes SBA made to address processing issues; and challenges that business organizations identified to timely receipt of assistance. Following Hurricane Sandy, SBA did not meet its goal to process business loan applications within 21 days from receipt to loan decision. SBA took an average of 45 days for physical disaster loan applications and 38 days for economic injury applications. The average processing time for business loans peaked in March 2013 (5 months after the storm); business loans for which SBA reached a decision in March 2013 had spent nearly 60 days being processed, on average. One year after the storm, processing times for business loan applications still exceeded 21 days. A backlog of applications that were “in processing” (meaning SBA had not yet made a loan decision) grew rapidly over the course of SBA’s response to the disaster (see fig. 1). SBA said that in the aftermath of Hurricane Sandy, it was challenged by a high volume of loan applications submitted at a faster rate than it had experienced in previous disasters. SBA’s initial estimates of when it would receive applications differed from when it actually received them. To prepare for a disaster, SBA uses assumptions about the volume and timing of the applications it expects to receive based on historical data— known as the “application intake curve.” These assumptions serve as inputs to forecasting models that predict the staff levels necessary to meet processing needs. According to the application intake curve for Hurricane Sandy, SBA estimated that application submission would peak about 7–9 weeks after Sandy. However, as shown in figure 2, SBA began receiving business applications earlier. According to SBA, the early spike in applications occurred because a majority of applications were submitted electronically rather than on paper, which resulted in a large volume of applications within a few days of the disaster. SBA stated that the earlier receipt of electronic submissions was caused by the convenience and speed of the Internet-based application as well as the elimination of postal handling time. While SBA created web-based loan applications to simplify and expedite the application process and encouraged electronic submissions, SBA noted that it did not anticipate receiving such a large volume of electronic loan applications early in its response to Hurricane Sandy. Based on its experience in fiscal year 2012, SBA initially estimated that it would receive between 11,000 and 21,600 business disaster loan applications after Sandy and 36 percent of all applications would be submitted electronically. Following Sandy, SBA received 15,745 business disaster loan applications, and 55 percent of all applications were submitted electronically. At the time of our report, SBA had not updated its key disaster planning documents—the Disaster Preparedness and Recovery Plan and the Disaster Playbook—to adjust for the effects that a Sandy-like surge in early applications could have on staffing, resources, and forecasting models for future disasters. Federal internal control standards state that management should identify risk (with methods that can include forecasting and strategic planning) and then analyze the risks for their possible effect. According to SBA’s Preparedness and Recovery Plan, the primary goals of forecasting and modeling are to predict as accurately as possible the application volume that will result from a disaster and the timing of application receipt. Without taking its experience with early application submissions after Hurricane Sandy into account, SBA risked being unprepared for such a situation in future disaster responses, potentially resulting in delays in disbursing loan funds to disaster victims. We therefore recommended that SBA revise its disaster planning documents to anticipate the potential impact of early application submissions on staffing and resources for future disasters, as well as the risk this impact might pose for timely disaster response. In response to our recommendation, SBA has updated its Disaster Playbook. The changes SBA made include explicit recognition of the effects that high volumes of loan applications early in the response period could have on staffing and loan processing. Our review to determine if these changes addressed our recommendation remains ongoing. Another factor that affected the timeliness of disaster assistance was inaccurate expectations for application processing rates, which caused SBA to delay its decision to increase staff levels. ODA officials said the agency’s processing and disbursement center communicated inaccurate production estimates to ODA headquarters, which led to delays in increasing staff levels to respond to the early influx of applications. ODA officials said that the center’s management projected a loan officer could process an average of 3 home loan applications and 1.5 business loan applications per day, for a combined average of 2.25 disaster loan applications. However, this expectation was not met over the course of the response. Because the estimates were based on production benchmarks established after Hurricane Katrina, ODA officials noted that they relied on the estimates and delayed their decision to increase staff. ODA officials said they later recognized the past rate was not an appropriate indicator of production for Sandy due to factors including differences in the types of businesses affected and the larger number of approved applications. As shown in figure 3, ODA ultimately added loan officers to two agency locations (Buffalo and Sacramento) after the peak months of receipts. We reported in September 2014 that ODA told us it subsequently made several changes regarding communication with the processing and disbursement center and staffing increases. The center was required to produce a new series of daily reports for ODA headquarters to improve communication during future disasters. Specifically, these reports include more detailed information on production rates, number of applications submitted, and size of the application backlog. ODA also created a standard template for requesting and justifying additional staff that included information such as current and expected performance. At the time of our report, SBA also was determining whether it needed to add permanent loan processing staff to offices other than the processing and disbursement center to respond to disasters. To address challenges with providing timely assistance following Hurricane Sandy, SBA made various changes to its loan processing approach, DCMS, and loan officer training. However, as we stated in 2014, because SBA has not received a large volume of applications since Hurricane Sandy, it is too early to determine whether these changes will improve the timeliness of SBA’s response for future disasters similar in magnitude to Sandy. Loan processing approach: SBA used to process loans in the order in which they were received, regardless of whether the applicant was a business or homeowner. After Sandy, SBA received more than four times as many home loan applications as business applications, and these home loan applications were received earlier. As a result, business owners faced delays due to the large number of home loan applications submitted ahead of them. In October 2013, SBA put in place two separate application tracks for home and business loans. DCMS challenges: Over the course of its response, SBA encountered various challenges with DCMS, including server hardware crashes and periods of system latency (slowness and freezing), which added to some delays faced by business owners in receiving disaster assistance. In 2014, we reported that according to SBA, the agency was taking steps to improve DCMS for future disasters. For example, SBA planned to institute a process for updating system equipment (including conducting a baseline inventory and implementing a plan to replace outdated hardware). SBA officials said the inventory had been validated and the plan completed. In addition, SBA officials said the agency made improvements to its DCMS Help Desk, which responds to loan officers who experience system issues. Loan officer training: Most of the additional processing staff, particularly in Sacramento, were new hires, but SBA found that the new officers were not effectively trained to quickly respond to the backlog of business applications. In 2014, we reported that SBA revised its loan officer training for future disasters. For instance, all loan officers had to complete a revised training course for processing business loans.