Small Business Administration: Additional Steps Needed to Enhance
Agency Preparedness for Future Disasters (14-FEB-07, GAO-07-114).
                                                                 
The Small Business Administration (SBA) is the federal		 
government's primary provider of disaster loans to businesses,	 
homeowners, and renters. In a previous report (GAO- 06-860), GAO 
found that SBA's limited information systems planning contributed
to delays in processing disaster loans for the victims of the	 
2005 Gulf Coast Hurricanes (Katrina, Rita, and Wilma). To provide
further insight into how SBA's disaster preparedness could be	 
enhanced, this second report, initiated under the Comptroller	 
General's authority, assesses other logistical issues (e.g.,	 
staffing and space acquisition) that may have affected the	 
efficiency of the agency's response to the hurricanes.		 
Specifically, this report (1) assesses SBA's logistical planning 
efforts prior to the Gulf Coast hurricanes and current planning  
efforts and (2) discusses SBA's outreach services to hurricane	 
victims. GAO reviewed disaster planning reports, interviewed SBA 
officials, and visited the Gulf Coast region.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-114 					        
    ACCNO:   A65925						        
  TITLE:     Small Business Administration: Additional Steps Needed to
Enhance Agency Preparedness for Future Disasters		 
     DATE:   02/14/2007 
  SUBJECT:   Disaster planning					 
	     Disaster recovery					 
	     Disaster relief aid				 
	     Emergency preparedness				 
	     Human capital management				 
	     Hurricane Katrina					 
	     Hurricanes 					 
	     Lending institutions				 
	     Loans						 
	     Program evaluation 				 
	     Small business assistance				 
	     Strategic planning 				 

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GAO-07-114

   

     * [1]Results in Brief
     * [2]Background
     * [3]SBA's Limited Planning Likely Contributed to Initial Delays

          * [4]Various Sources Cite Planning as a Critical Element in Helpi
          * [5]SBA Did Not Engage in Comprehensive Disaster Planning Prior
          * [6]SBA Faced Logistical Challenges during its Initial Response
          * [7]SBA Has Initiated Measures to Better Prepare for Potential D

     * [8]SBA Utilized a Variety of Outreach Approaches during the Gul

          * [9]SBA's Outreach to Gulf Coast Hurricane Victims May Have Been
          * [10]SBA Has Initiated an Internal Review of Outreach Provided to

     * [11]Conclusions
     * [12]Recommendations for Executive Action
     * [13]Agency Comments and Our Evaluation
     * [14]GAO Contact
     * [15]Staff Acknowledgments
     * [16]GAO's Mission
     * [17]Obtaining Copies of GAO Reports and Testimony

          * [18]Order by Mail or Phone

     * [19]To Report Fraud, Waste, and Abuse in Federal Programs
     * [20]Congressional Relations
     * [21]Public Affairs

Report to Congressional Addressees

United States Government Accountability Office

GAO

February 2007

SMALL BUSINESS ADMINISTRATION

Additional Steps Needed to Enhance Agency Preparedness for Future
Disasters

GAO-07-114

Contents

Letter 1

Results in Brief 3
Background 7
SBA's Limited Planning Likely Contributed to Initial Delays in Processing
Gulf Coast Hurricane Disaster Loan Applications, and Announced Disaster
Planning Improvements Also Have Potential Limitations 11
SBA Utilized a Variety of Outreach Approaches during the Gulf Coast
Hurricanes, but Several Factors May Have Limited Their Effectiveness 25
Conclusions 29
Recommendations for Executive Action 30
Agency Comments and Our Evaluation 30
Appendix I: Objectives, Scope, and Methodology 34
Appendix II: Comments from the Small Business Administration 37
Appendix III: GAO Contact and Staff Acknowledgments 41

Figures

Figure 1: SBA's Realigned Disaster Loan Operation as of June 1, 2006 10
Figure 2: SBA Ft. Worth Loan Processing Staffing Levels 17
Figure 3: Example of an SBA Print Ad for Hurricane Katrina Victims 27

Abbreviations

ACP Association of Contingency Planners
AIR Applied Insurance Research
DCMS Disaster Credit Management System
DHS Department of Homeland Security
FEMA Federal Emergency Management Agency
GSA General Services Administration
IHP Individuals and Households Program
SBA Small Business Administration
USGS U.S. Geological Survey

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separately.

United States Government Accountability Office

Washington, DC 20548

February 14, 2007 

Congressional Addressees 

While the Small Business Administration (SBA) is generally known for the
financial support it provides to small businesses, the agency also plays a
critical if less publicized role in assisting the victims of natural and
other disasters. Specifically, SBA provides financial assistance through
its Disaster Loan Program to help homeowners, renters, and businesses of
all sizes recover from disasters such as earthquakes, hurricanes, and
terrorist attacks. In 2005 and 2006, SBA faced unprecedented demand for
its disaster loan assistance services in the wake of Hurricanes Katrina
(which made landfall in late August 2005), Rita, and Wilma, which battered
the U.S. Gulf Coast region. The Gulf Coast hurricanes caused more than $80
billion in estimated insured and uninsured property damages and over 1,400
deaths.^1 Nine months following Hurricane Katrina, SBA had approved more
than 148,700 disaster assistance loans totaling $9.7 billion to
individuals and businesses that suffered losses from the Gulf Coast
hurricanes. However, Congress and press reports expressed concerns that
SBA's response to the hurricanes was slow, leaving many disaster victims
without the timely assistance that they needed. In fact, as we previously
reported, as of late May 2006, SBA took, on average, about 74 days to
process disaster loan applications as compared with the agency's goal of
processing all disaster loan applications within 21 days.^212While the
Small Business Administration (SBA) is generally known for the financial
support it provides to small businesses, the agency also plays a critical
if less publicized role in assisting the victims of natural and other
disasters. Specifically, SBA provides financial assistance through its
Disaster Loan Program to help homeowners, renters, and businesses of all
sizes recover from disasters such as earthquakes, hurricanes, and
terrorist attacks. In 2005 and 2006, SBA faced unprecedented demand for
its disaster loan assistance services in the wake of Hurricanes Katrina
(which made landfall in late August 2005), Rita, and Wilma, which battered
the U.S. Gulf Coast region. The Gulf Coast hurricanes caused more than $80
billion in estimated insured and uninsured property damages and over 1,400
deaths. Nine months following Hurricane Katrina, SBA had approved more
than 148,700 disaster assistance loans totaling $9.7 billion to
individuals and businesses that suffered losses from the Gulf Coast
hurricanes. However, Congress and press reports expressed concerns that
SBA's response to the hurricanes was slow, leaving many disaster victims
without the timely assistance that they needed. In fact, as we previously
reported, as of late May 2006, SBA took, on average, about 74 days to
process disaster loan applications as compared with the agency's goal of
processing all disaster loan applications within 21 days.

In July 2006, we reported, that while the unprecedented volume of disaster
loan applications contributed substantially to the challenges that the
agency faced in providing disaster relief on a timely basis, limited
information technology planning also played a significant role.^3 In
particular, we concluded that SBA had not fully planned for the
implementation of its new disaster loan processing system--the Disaster
Credit Management System (DCMS), which the agency implemented in January
2005. For example, SBA planning was limited for the maximum In July 2006,
we reported, that while the unprecedented volume of disaster loan
applications contributed substantially to the challenges that the agency
faced in providing disaster relief on a timely basis, limited information
technology planning also played a significant role.^34 In particular, we
concluded that SBA had not fully planned for the implementation of its new
disaster loan processing system--the Disaster Credit Management System
(DCMS), which the agency implemented in January 2005. For example, SBA
planning was limited for the maximum number of staff that would need to
concurrently use DCMS during a disaster situation. In planning for the
maximum user capacity of DCMS, we found that SBA relied on data on the
volume of disaster loan applications it had received from victims of the
most severe disaster in the agency's experience--the Northridge,
California, earthquake of 1994--and other agency historical data. If SBA
had considered information available from disaster simulations and risk
modeling firms (particularly potentially more severe disaster scenarios
than the Northridge earthquake), we concluded that the agency may have
acquired additional capacity for DMCS that would have allowed it to
process Gulf Coast hurricane-related applications on a timelier basis. We
recommended, among other things, that SBA reassess DCMS's maximum user
capacity based on lessons learned from the Gulf Coast hurricanes and
information from catastrophe risk modeling firms, among other sources.
Although SBA took issue with some of our analysis that supported this
recommendation, the agency generally agreed to implement it.

^1In this report, we refer to Katrina, Rita, and Wilma collectively as the
Gulf Coast hurricanes.

^2See GAO, Small Business Administration: Actions Needed to Provide More
Timely Disaster Assistance, [22]GAO-06-860 (Washington, D.C.: July 28,
2006).

^3 [23]GAO-06-860 .

We have prepared this second report under the Comptroller General's
authority to conduct evaluations on his own initiative as part of a
continuing effort to assist Congress in reviewing how SBA's preparedness
for future disasters can be enhanced. This report generally focuses on
SBA's disaster planning and preparations prior to the Gulf Coast
hurricanes for logistical areas other than DCMS, such as hiring of
additional staff necessary to process applications in large disaster
situations, space acquisition, obtaining telecommunication and other
necessary technologies, and efforts to inform disaster victims of the
agency's relevant loan programs. Specifically, our objectives were to (1)
assess SBA's logistical planning efforts prior to the Gulf Coast
hurricanes and current disaster planning efforts and (2) discuss outreach
efforts that SBA provided to Gulf Coast hurricane victims.

^4Federal agencies and other organizations have developed assessments of
the potential destructive consequences of varying disaster scenarios,
which are intended to help federal, state, and local agencies enhance
their disaster planning. Moreover, many insurance companies and state
entities that provide catastrophe insurance coverage currently use
computer programs offered by several modeling firms to estimate the
financial consequences of various natural catastrophe scenarios. As
described in this report, estimates from disaster simulations and
catastrophe models completed prior to August 2005, when Hurricane Katrina
made landfall, indicated that there were potentially more destructive
disaster scenarios than SBA had contemplated through its disaster planning
process.

To address the first objective, we reviewed our previous reports and
reports from other organizations that have investigated the federal
response to the Gulf Coast hurricanes, including the Association of
Contingency Planners and the Office of Inspector General of the Department
of Homeland Security.^5 We also interviewed disaster management experts,
SBA officials in headquarters and agency field offices, and state
officials in Mississippi and Louisiana. Further, we reviewed SBA documents
that pertain to the agency's disaster planning process. For the second
objective, we reviewed SBA documentation that describes the agency's
outreach efforts during the Gulf Coast hurricanes and discussed these
outreach efforts with SBA officials. Further, we discussed SBA's current
plans to evaluate its disaster outreach program with agency officials.
Appendix I explains our objectives, scope and methodology in greater
detail.

We conducted our work in Washington, D.C., at SBA's headquarters and at
agency field offices that played a role in the agency's response to the
Gulf Coast hurricanes, including the disaster loan processing center in
Ft. Worth, Texas, the satellite loan processing facility in Sacramento,
California, the disaster loan customer service call center in Buffalo,
N.Y., and the Atlanta field office, which along with the Sacramento
office, is responsible for disaster services outreach, among other duties.
Additionally, we visited the DCMS operations center in Virginia, and SBA's
Georgia District Office. We also visited state and local disaster response
offices in Louisiana and Mississippi. Our work was conducted from November
2005 to January 2007 in accordance with generally accepted government
auditing standards.

Results in Brief

SBA engaged in limited logistical disaster planning prior to the Gulf
Coast hurricanes, which, in retrospect, likely contributed to the initial
challenges that the agency faced in processing the related surge in
disaster loan applications on a timely basis. Our reports, including the
report on SBA's limited planning for the implementation of DCMS, other
investigative reports, and disaster management experts have stated that
comprehensive planning, to include detailed staffing plans, and the
supplementary use of sophisticated techniques as appropriate (e.g., using
the results of disaster simulations and catastrophe models), can help
organizations better prepare for potential disasters and thereby mitigate
their effects. However, SBA did not engage in or complete comprehensive
disaster plans prior to the Gulf Coast hurricanes, in part due to the view
by headquarters officials that such centralized planning yielded limited
benefits and that local agency officials were in the best position to
estimate logistical requirements. While SBA had developed some estimates
of staffing and other logistical requirements, it largely relied on the
expertise of agency staff and previous disaster experiences (none of which
reached the magnitude of the Gulf Coast hurricanes) in doing so and had
not leveraged other resources, including the results of disaster
simulations or catastrophe models. As a result, available evidence
suggests that SBA could have been better positioned to provide initial
disaster assistance to Gulf Coast hurricane victims in an organized and
efficient manner as described below:

^5The Association of Contingency Planners is a nonprofit trade
organization that is dedicated to fostering continued professional growth
and development in effective business continuity and continuity of
operations planning.

           o SBA faced challenges in establishing a workforce to process the
           surge in disaster loan applications, which could potentially have
           been mitigated through better planning. For example, during the
           immediate aftermath of Hurricane Katrina, SBA had to move urgently
           to hire more than 2,000 temporary staff, largely through newspaper
           and other advertisements, at its Ft. Worth disaster loan
           processing center, which previously had a permanent and temporary
           staff of about 325 on board including 40 supervisors. SBA
           officials said that ensuring the training and supervision of this
           large influx of temporary staff proved very difficult. Prior to
           the Gulf Coast hurricanes, SBA had not taken steps to help ensure
           the availability of additional trained and experienced staff such
           as (1) cross-training agency staff not normally involved in
           disaster assistance to provide backup support or (2) maintaining
           the status of a reserve of potential temporary employees trained
           in the agency's disaster policies and systems (SBA officials said
           that the disaster reserve corps had shrunk from about 600
           individuals in 2001 to less than 100 in August 2005).^6 
           o SBA had not thoroughly planned for the office space requirements
           that would be necessary in a disaster the size of the Gulf Coast
           hurricanes. For example, SBA only had the capacity to house about
           500 employees at its facility in Ft. Worth, so it had to identify
           another facility in the city after Hurricane Katrina made landfall
           (which had not been configured with technology to meet the
           agency's needs) with the assistance of the General Services
           Administration (GSA) to house the remaining approximately 2,000
           employees.^7 Fortunately, SBA was also able to quickly reestablish
           its satellite loan processing facility in Sacramento, which was in
           the process of being closed under an agency reorganization
           initiative, to help to reduce the application backlog.^8

           In the wake of the Gulf Coast hurricanes, SBA officials said that
           they recognized the importance of enhanced disaster planning and
           have planned or implemented several measures to better prepare for
           and respond to potential disasters. For example, SBA officials
           said the agency is developing enhanced systems, largely based on
           previous agency experiences including the Gulf Coast hurricanes,
           to estimate staffing and other logistical requirements when
           particular disasters occur. SBA is also developing procedures to
           help ensure additional experienced and trained staff are available
           to respond to a disaster, which include cross-training other
           agency staff, reestablishing the disaster reserve corps, and
           reaching agreements with private lenders to provide disaster loan
           processing capacity. Additionally, SBA has significantly revised
           its approach for disbursing approved disaster loans, which agency
           officials said substantially reduced the disbursement backlog
           associated with Gulf Coast hurricane-related applications and
           should be similarly effective in future catastrophes.^9 However,
           we have also identified several apparent limitations in SBA'
           disaster planning process, including that the agency has not: (1)
           established a time frame for implementing key elements of its
           disaster management plan such as cross-training other SBA staff to
           provide backup support, (2) assessed whether the agency's disaster
           planning process could benefit from the supplemental use of
           available resources--such as the results of disaster simulations
           or catastrophe models--to help develop estimates of its logistical
           requirements under varying disaster scenarios (particularly worse
           case scenarios), and (3) developed a long-term strategy to help
           ensure its capacity to obtain suitable office space in a disaster
           situation.^10

           SBA took a variety of steps under trying conditions to inform
           victims of the Gulf Coast hurricanes of the agency's assistance
           programs, but several factors may have limited their
           effectiveness. SBA staff members reached out to disaster victims
           (many of whom had relocated to other parts of the country) by
           speaking at about 600 organized events, advertising through the
           media, staffing disaster recovery centers, and making follow-up
           phone calls. However, SBA officials said that informing and
           educating the public about the agency's disaster services can be
           challenging because (1) it is not normally associated with
           providing such services and (2) the federal government's disaster
           relief programs are complex (e.g., both SBA and the Federal
           Emergency Management Agency [FEMA] provide financial assistance to
           disaster victims). Further, due to the extent of the disasters,
           SBA lacked the resources necessary to comply with an informal
           agency policy of conducting follow-up phone calls with all
           disaster victims to whom they mailed loan applications and,
           therefore, could not reach approximately 800,000 individuals.^11
           According to SBA officials, the agency has initiated an internal
           review of the outreach that it provided to victims of the Gulf
           Coast hurricanes and is developing a plan to better provide such
           outreach in future disasters.

           To help ensure that SBA is better prepared to provide critical
           assistance to victims of future disasters, this report recommends,
           among other steps, that the agency (1) establish a time frame for
           completing key elements of its disaster management plan and a
           long-term strategy to help ensure its capacity to obtain suitable
           office space and (2) assess whether available resources--such as
           the results of disaster simulations or catastrophe models--could
           enhance its disaster planning efforts.

           We provided a draft of this report to SBA for its review and
           comment. In its written responses, SBA described a number of
           measures that the agency has initiated to better respond to a
           future disaster. SBA also agreed to implement the recommendations
           in the report, including (1) establishing time frames for
           completing key disaster planning initiatives and (2) assessing
           whether available disaster simulations and external catastrophe
           models could enhance the agency's disaster planning process.
           Additionally, SBA officials said the agency has taken steps to
           help ensure the availability of additional office space configured
           to meet its requirements in a future disaster.
			  
			  Background

           The Gulf Coast hurricanes formed a catastrophe that was one of the
           most devastating natural disasters in U.S. history. In August
           2005, Hurricane Katrina struck first on the East Coast of Florida
           before hitting the northern Gulf Coast region, including Louisiana
           and Texas, resulting in a substantial loss of life and widespread
           devastation. The storm also caused substantial damage in the
           Florida panhandle, Georgia, and Alabama. In September 2005,
           Hurricane Rita caused substantial devastation and deaths near the
           Texas and Louisiana border. In October 2005, Hurricane Wilma made
           landfall in Florida, and also caused fatalities and created a
           significant amount of damage and destruction there.

           The federal government provides funding and assistance to
           individuals and businesses after disasters, primarily through FEMA
           and SBA. FEMA is responsible for coordinating response and
           recovery efforts under presidential disaster declarations. FEMA
           works with other federal, state, and local agencies to assist
           victims after major disasters, and volunteer organizations such as
           the American Red Cross also participate in these efforts.
           Following a presidential disaster declaration, FEMA will open
           Disaster Recovery Centers where disaster victims can meet with
           representatives, obtain information about the recovery process,
           and register for federal disaster assistance. Victims may also
           register with FEMA by telephone or via FEMA's Internet site. FEMA
           provides housing assistance to disaster victims through the
           Individuals and Households Program (IHP).^12 Under the IHP, FEMA
           can make grants available to repair or replace housing damaged in
           a disaster that is not covered by insurance. However, the IHP is a
           minimal repair program that is designed to make the victim's home
           habitable and functional, not to restore the home to its
           predisaster condition. When disaster victims register for FEMA
           assistance, they are asked to provide their approximate household
           income. If the applicant's income exceeds certain thresholds, FEMA
           automatically refers them to SBA's Disaster Loan Program.^13

           SBA's Disaster Loan Program is the primary federal program for
           funding long-range recovery for private sector, nonfarm disaster
           victims and the only form of SBA assistance not limited to small
           businesses. The Small Business Act authorizes SBA to make
           available the following two types of disaster loans:

           o Physical disaster loans--These loans are for permanent
           rebuilding and replacement of uninsured or underinsured
           disaster-damaged property. They are available to homeowners,
           renters, businesses of all sizes, and nonprofit organizations.
           These loans are intended to repair or replace the disaster
           victims' damaged property to its predisaster condition.
           o Economic injury disaster loans--These loans provide small
           businesses with necessary working capital until normal operations
           resume after a disaster declaration. They cover operating expenses
           the business could have paid had the disaster not occurred. The
           act restricts economic injury disaster loans to small businesses
           only.

           A key element of SBA's loan program is that the disaster victim
           must have repayment ability before a loan can be approved. If SBA
           determines that a victim cannot afford a loan, SBA will
           automatically refer the individual back to FEMA where they may be
           eligible for other grant assistance. FEMA may be able to provide
           funds for "other than housing" needs, however, this additional
           help is not available to businesses.^14 FEMA's additional help is
           intended to meet necessary expenses and serious needs not met by
           any other form of help, including insurance and SBA disaster
           loans.

           In 2004, SBA began a process to realign its Office of Disaster
           Assistance's organizational structure (referred to as "workforce
           transformation") that was designed to allow the agency to better
           provide disaster assistance, leverage technology such as DCMS, and
           reduce operating costs. Previously, SBA maintained four area
           offices nationwide that generally operated independently of one
           another. For example, each area office had its own customer
           service duties and loan processing functions, and provided
           administrative support within a geographic area. As a result of
           its transformation effort, SBA centralized its Disaster Loan
           Program's customer service function in its Buffalo office and its
           loan processing function in its Ft. Worth office. Additionally,
           SBA established two field operations centers in both Sacramento
           and Atlanta that are responsible for all disaster field
           operations, public information, and congressional relations
           functions. The centers also provide space for SBA's Field
           Inspection Team, which conducts property inspections in order to
           verify loan applicants' losses. SBA collocated its administrative
           and personnel support center in Herndon, Va., with the DCMS
           operations center. Figure 1 shows SBA's revised structure as of
           June 2006.

^6SBA's disaster reserve corps consists of volunteers, including retirees
and students, who have backgrounds in the agency's disaster programs
(e.g., loan officers and customer support) and who are willing to work on
a temporary basis for the agency in an emergency situation. Such
individuals must agree to relocate within 48 hours of notification of a
disaster situation where their services are required by SBA.

^7GSA, among other responsibilities, provides office space and other
logistical support services to federal agencies.

^8As described in this report, SBA's Office of Disaster Assistance
initiated a consolidation initiative (referred to as "workforce
transformation") in 2004 to better structure its operations. SBA's
Sacramento field office disaster loan processing center had been slated
for closure in October 2005, but the facility was still available at the
time Hurricane Katrina made landfall because its lease had not yet
expired.

^9According to SBA, as of August 2006, the agency had approved
approximately 93,000 loans in which funds had not been disbursed to loan
applicants. SBA officials said that figure had been reduced to about
35,000 as of November 2006 as a result of changes made to the loan review
process.

^10As described in this report, in December 2006, SBA contacted FEMA
regarding a model that agency has developed to estimate the financial and
other consequences of earthquakes, floods, and hurricanes. SBA officials
contacted FEMA to help determine whether the model would enhance SBA's
disaster planning process.

^11SBA's field management officials told us they had established an
informal policy of contacting disaster victims to whom the agency had sent
loan applications, but had not returned completed applications within a
specified time frame. This practice was established and implemented before
the occurrence of the Gulf Coast hurricanes.

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

^13SBA provides the income thresholds to FEMA, which vary based on the
applicant's household size and are adjusted annually for inflation. For
example, SBA's minimum income threshold for fiscal year 2005 was $13,965
for a household size of one; the threshold increased to $14,355 for fiscal
year 2006. If the applicant's household income falls below the income
thresholds, FEMA will automatically refer them to its Other Needs
Assistance Program. This program provides financial assistance to
individuals and households who have other disaster-related necessary
expenses or serious needs, such as medical expenses.

^14Funds are available for necessary expenses and serious needs caused by
the disaster. This includes medical, dental, funeral, personal property,
transportation, moving and storage, and other expenses that are authorized
by law.

Figure 1: SBA's Realigned Disaster Loan Operation as of June 1, 2006

Prior to Hurricane Katrina, SBA's Office of Disaster Assistance had a
staff of approximately 800 individuals, including about 350 to 400
permanent staff and about 400 temporary staff (who had generally been
hired to process disaster loan applications associated with the four
hurricanes that struck Florida in 2004). However, due to the volume of
disaster loan applications associated with the Gulf Coast hurricanes, SBA
had increased the size of its disaster loan staff to more than 4,300
employees by January 2006, primarily through hiring temporary employees.
SBA largely hired these temporary employees through advertisements in
newspapers and on local radio stations.

SBA's Limited Planning Likely Contributed to Initial Delays in Processing Gulf
Coast Hurricane Disaster Loan Applications, and Announced Disaster Planning
Improvements Also Have Potential Limitations

Our previous reports and reports of others as well as disaster experts
have stated that advance contingency planning is a crucial element in
helping organizations function and respond to large-scale disasters.
However, we found that prior to the Gulf Coast hurricanes, SBA had
generally not engaged in such comprehensive planning efforts in either
headquarters or in field offices. SBA had not (1) taken practical steps to
help ensure that there would be additional trained and experienced staff
available to process applications, (2) established plans to secure
additional office space configured to meet the needs of the agency, and
(3) established adequate telecommunications support for the customer call
center in Buffalo. While SBA partnered with GSA on an ad hoc basis to help
address these challenges, in some cases it was fortunate to obtain the
necessary logistical capacity. In the wake of the Gulf Coast hurricanes,
SBA officials said that they had initiated steps to better plan and
prepare for potential disasters, including developing more advanced
disaster forecasting techniques and establishing measures to help ensure
the availability of additional trained and experienced staff. SBA has also
taken steps to expedite the process for disbursing approved disaster
loans. However, SBA's planning approach appears to be limited in that the
agency has not established a time frame for completing key aspects of its
comprehensive disaster management plan, such as cross-training other
agency staff to provide backup support in a disaster and has not assessed
whether it could leverage outside resources--such as the results of
disaster simulations or catastrophe models--to enhance its disaster
planning processes. Further, SBA has not developed a strategy to help
strengthen its long-term ability to obtain suitable office space in the
event of a major disaster.

Various Sources Cite Planning as a Critical Element in Helping Organizations
Prepare for Potential Large-Scale Disasters

As we have stated in a previous report and in testimony, the ability of
the United States to prepare for, respond to, and recover from
catastrophic disasters can be enhanced through strong advance contingency
planning, both within and among organizations responsible for responding
to such disasters.^15 Our work has also identified instances where advance
planning allowed federal agencies to respond effectively to the Gulf Coast
hurricanes.^16 For example, we found that the Coast Guard, Social Security
Administration, and the National Finance Center were able to continue
their services to Gulf Coast disaster victims with minimal interruptions
because of their disaster planning initiatives.^17 In contrast, our work
identified other federal agencies, which did not engage in comprehensive
planning prior to the Gulf Coast hurricanes, and thereby faced significant
challenges in fulfilling their disaster response and recovery
obligations.^18 For example, as discussed previously, our July 2006 report
found that SBA's limited information technology planning prior to the Gulf
Coast hurricanes negatively affected the agency's capacity to process
disaster loan applications.^19 SBA based its information technology
processing requirements primarily on the Northridge earthquake experience
of 1994, which was the largest disaster that the agency had previously
experienced, and did not evaluate the consequences of other potentially
more severe disaster scenarios that were available from existing disaster
simulations or catastrophe risk model results.^20 For example, SBA did not
take part in the Hurricane Pam disaster simulation, which FEMA organized
in 2004 to help prepare for a hurricane striking New Orleans.^21 In an
earlier report, we found that a lack of advance planning at all levels of
government hindered response and recovery efforts to Hurricane Andrew,
which struck South Florida in 1992.^22

15GAO, Catastrophic Disasters: Enhanced Leadership, Capabilities, and
Accountability Controls Will Improve the Effectiveness of Nation's
Preparedness, Response, and Recovery System, [24]GAO-06-618 (Washington,
D.C.: Sept. 6, 2006); GAO, Hurricane Katrina: GAO's Preliminary
Observations Regarding Preparedness, Response and Recovery,
[25]GAO-06-442T (Washington, D.C.: Mar. 8, 2006).

^16 [26]GAO-06-618 .

^17The National Finance Center, based in New Orleans, designs, develops
and operates financial, administrative and management information systems
and services, which includes integrated payroll/personnel systems for the
Department of Agriculture, and other government customers.

^18GAO, Hurricane Katrina: Better Plans and Exercises Needed to Guide the
Military's Response to Catastrophic Natural Disasters, [27]GAO-06-643
(Washington, D.C.: May 15, 2006); GAO, Hurricanes Katrina and Rita:
Unprecedented Challenges Exposed the Individuals and Households Programs
to Fraud and Abuse; Actions Needed to Reduce Such Problems in Future,
[28]GAO-06-1013 (Washington, D.C: Sept. 27, 2006); GAO, Disaster
Management: Improving the Nation's Response to Catastrophic Disasters,
[29]GAO/RCED-93-186 (Washington, D.C.: July 1993).

^19 [30]GAO-06-860 .

In addition to findings from our previous studies, other studies have
concluded that a lack of contingency planning can affect an organization's
ability to carry out its mission and meet program goals at the time of a
major disaster, and that there is no substitute for thorough
preparation.^23 Thus, these reports, such as Department of Homeland
Security studies, congressional and White House reports, as well as
private studies all identified the necessity for conducting rigorous
planning. For example, a study by the Association of Contingency Planners
(ACP) emphasized the need for organizations to formally train their staff
in disaster planning and engage in thorough disaster simulations,
particularly worst case scenarios, to help ensure adequate preparation. In
addition, the Department of Homeland Security Inspector General reported,
in March 2006, that FEMA lacked final plans that specifically addressed
the types of challenges the agency could be expected to face in
catastrophic circumstances. The Inspector General recommended that FEMA
develop a comprehensive plan to aid in responding to potential disasters.

^20Hurricane Pam was a simulated exercise that FEMA conducted in
conjunction with the National Weather Service and various federal, state,
and local organizations in June 2004. The simulation demonstrated the
impact of a hurricane that would force the evacuation of more than 1
million residents in the New Orleans area, and the destruction of
500,000-600,000 buildings. See
www.globalsecurity.org/security/ops/hurricane-pam.htm for additional
details. In contrast, the Northridge earthquake damaged or destroyed about
60,000 buildings, according to a study by a structural engineering firm.
In 2004, a risk modeling firm--Equecat--publicly estimated that a
recurrence of the 1935 Labor Day hurricane that struck the New York region
would result in insured losses alone of $60 billion or more. In 2002, we
estimated that the insured losses associated with the Northridge
earthquake would be about $12.5 billion with total estimated losses of $30
billion. See GAO, Catastrophe Insurance Risks: The Role of Risk-Linked
Securities and Factors Affecting Their Use, [31]GAO-02-941 (Washington,
D.C.: Sept. 24, 2002).

^21However, previous studies indicate that FEMA did not adequately
leverage the Hurricane Pam simulation. For example, according to a 2006
report by the Department of Homeland Security's Office of Inspector
General, FEMA did not execute catastrophic planning based on the Hurricane
Pam simulation results. In the report, FEMA officials cited the lack of
funding as the reason for not following through on the lessons from the
exercise. (A Performance Review of FEMA's Disaster Management Activities
in Response to Hurricane Katrina, OIG-06-32, March 2006.) Also, a 2006
Senate report concluded that many of the lessons from Hurricane Pam were
either ignored or inadequately applied. (Hurricane Katrina: A Nation Still
Unprepared, Report of the Committee on Homeland Security and Governmental
Affairs, U.S. Senate (Washington, D.C.: May 2006).

^22 [32]GAO/RCED-93-186 .

^23The White House: The Federal Response to Hurricane Katrina--Lessons
Learned (February 2006); Department of Homeland Security: The National
Response Plan (December 2004 and updated May 2006); Department of Homeland
Security: Office of Inspector General, A Performance Review of FEMA's
Disaster Management Activities in Response to Hurricane Katrina,
OIG-06-32, March 2006; Association of Contingency Planners (ACP)-Hurricane
Katrina Observations-Lessons Learned (Jan. 31, 2006); Hurricane Katrina-A
Nation Still Unprepared-United States Senate: Washington, D.C. (May 2006).

Disaster experts we interviewed agreed that sound planning can help
organizations--such as federal agencies--prepare for potential disasters.
The experts said that the failure to have an established plan can
negatively affect an agency's response and recovery efforts. Additionally,
the experts said that the failure to establish a plan requires agencies to
relearn experiences from one disaster to the next, thereby further slowing
agency recovery efforts. One expert stated that, to provide for an
effective agency response to a disaster, a comprehensive plan should
address, to a certain extent, components of command, operations,
logistics, finance, and administrative needs. For example, the expert said
that the logistical component should entail a detailed staffing plan to
help ensure an organization's ability to fulfill its mission at the time
of a major catastrophe. The individual noted that most organizations,
including federal agencies, did not have staffing plans in place at the
time of the Gulf Coast hurricanes. However, the experts cautioned that an
agency's disaster contingency plan must be a flexible blueprint that can
respond to changing circumstances and disaster scenarios. In estimating
the potential consequences of varying disaster scenarios, another expert
advised that organizations could benefit from the further use catastrophe
models, given that such technology has been available for about 20 years.

SBA Did Not Engage in Comprehensive Disaster Planning Prior to Gulf Coast
Hurricanes

As was the case with SBA's limited planning efforts for the implementation
of DCMS, the agency also did not engage in comprehensive disaster planning
for other logistical areas prior to the Gulf Coast hurricanes. For
example, SBA had not completed a formal, centralized staffing plan to help
manage the surge in disaster loan applications that could be anticipated
under various disaster scenarios. SBA headquarters officials said that
they had not developed agency wide disaster planning guidance due to their
view that field office staff were in a better position to plan their
response in the event of a crisis. That is, the SBA headquarters staff
said that agency field office staff had a vast level of knowledge and
experience that allowed them to establish plans for a range of potential
disaster scenarios and that, given the uncertainty of disaster scenarios,
centralized advance planning would likely yield limited benefits. SBA
management said they considered this decentralized approach as appropriate
and viewed headquarters' role as being more of a resource that the field
offices could rely on for policy and high-level strategic guidance.
However, at the time of the Gulf Coast hurricanes, SBA field offices had
not completed written plans to guide their efforts in the event of a
disaster. One field office official said, while SBA headquarters
encouraged field offices to establish written disaster plans, field
offices were not required to do so. While SBA had not engaged in
comprehensive contingency planning, the agency had projected various
logistical requirements during a disaster largely based on the expertise
of its staff and experiences in responding to previous disasters (none of
which reached the magnitude of destruction of the Gulf Coast hurricanes,
as discussed earlier). SBA officials said that they did not use other
information--such as the results of disaster simulations or catastrophe
models--in developing their logistical projections.

SBA Faced Logistical Challenges during its Initial Response to Gulf Coast
Hurricanes

We recognize that even if SBA had engaged in comprehensive planning prior
to the Gulf Coast hurricanes, it likely would have encountered logistical
challenges (staffing, space acquisition, and technological support) in
providing timely disaster assistance due to the volume of loan
applications, including erroneous applications.^24 However, information
obtained during the course of our review indicates that SBA's limited
disaster planning process, including the lack of a written plan for
staffing requirements associated with surges in loan applications under
varying disaster scenarios, further impeded the efficiency of the agency's
response. For example, officials at SBA's Ft. Worth disaster loan
processing center said that they developed staffing requirements as
Hurricane Katrina struck the Gulf Coast and in its immediate aftermath.
The officials said they initially estimated that the hurricane would
require enough staff to process 150,000 to 200,000 loan applications, but
they doubled the staffing estimate after the levees in New Orleans failed,
based on reports from the media, FEMA, and SBA loss verification teams.^25
During the immediate aftermath of Hurricane Katrina, SBA had to move
urgently to hire more than 2,000 staff by January 2006 at the Ft. Worth
center, which previously had a permanent and temporary staff of about 325
on board including 40 supervisors (see fig. 2).^26 SBA officials said that
most of the individuals hired to work in the Ft. Worth center were
temporary employees who received notice of the job opportunities through
SBA advertisements in newspapers and other media outlets.^27 Additionally,
the SBA officials said that ensuring the appropriate training and
supervision in hiring such a large number of inexperienced staff proved
challenging.

^24According to SBA officials, the large volume of applications that SBA
distributed and received resulted in part from a large number of referrals
FEMA made to SBA's Disaster Loan Program without first applying SBA's
income thresholds. This was done for disaster victims who registered for
disaster assistance via FEMA's Internet site and did not report any
income. SBA's Inspector General indicated that this resulted in the
following: (1) increased costs incurred by SBA in mailing loan
applications to disaster victims that normally would not be referred to
SBA's Disaster Loan Program; (2) delayed response times for those
applicants who did qualify for SBA's Disaster Loan Program; (3) lower SBA
disaster loan approval rates; and (4) increased transaction flow through
DCMS, which was near maximum capacity. For more information, see
[33]GAO-06-860 and SBA Office of Inspector General, "Disaster Application
Referrals with $0 Income from FEMA Online Registration Have Increased Cost
and the Demand for SBA Resources," Advisory Memorandum 06-12 (Feb. 17,
2006).

^25SBA staff responsible for loss verification conduct on-site damage
inspections for physical disaster loan applications to estimate the cost
of restoring damaged property to predisaster condition.

^26Many of the temporary staff at the Ft. Worth center prior to Hurricane
Katrina had been hired to process disaster loan applications associated
with four hurricanes that made landfall in Florida in 2004.

^27SBA also transferred several staff members who work in other Office of
Disaster Assistance locations to Ft. Worth, and the agency recalled some
staff that had been laid off under the workforce transformation
initiative.

Figure 2: SBA Ft. Worth Loan Processing Staffing Levels

Moreover, in preparing for potential disasters, SBA did not take practical
steps to help ensure the availability of additional trained and
experienced staff as described below:

           o SBA did not have a system for "cross-training" its staff so that
           individuals not normally associated with disaster assistance could
           help out in the case of an emergency. With such cross-training,
           SBA could have potentially quickly leveraged the expertise of loan
           officers who are normally involved in the agency's other small
           business lending programs to help process disaster loan
           applications. We note that, subsequent to Hurricane Katrina's
           landfall, SBA's former Administrator directed some of the agency's
           district offices to request that staff not normally involved in
           disaster assistance volunteer to process disaster loans. However,
           SBA officials at one district office we visited said that staff
           who volunteered to processes disaster loans lacked access to the
           agency's loan processing system--DCMS--and, consequently, this
           presented further challenges in their ability to process disaster
           loan applications in a timely manner. For example, without access
           to DCMS, the district staff needed to take additional time to
           contact SBA's Ft. Worth disaster loan processing center to verify
           data and other information contained in disaster applications.
           Moreover, the Ft. Worth staff, as mentioned in our previous
           report, had to engage in a labor-intensive process of shipping
           files to the district office and manually inputting information
           into DCMS because the district office staff lacked access to the
           system.
           o SBA did not maintain the status of a reserve group of potential
           voluntary employees with expertise in the agency's disaster
           assistance programs. According to an SBA official, in
           approximately 2001, the agency had in place a disaster reserve
           corps of about 600 individuals, who had a background in areas such
           as finance, accounting, property inspections, and customer service
           who could be asked to volunteer as temporary employees in the
           event of a crisis. SBA officials said that the agency's disaster
           reserve corps includes retirees and students who must be willing
           to locate within 48 hours of notification that their services are
           required to assist in an emergency. As discussed in our 2003
           report, SBA officials believed that the disaster reserve corps
           facilitated the agency's capacity to process the surge in disaster
           loan applications associated with the September 11, 2001,
           terrorist attacks.^28 However, SBA officials said that the agency
           did not subsequently maintain the status of the disaster reserve
           corps afterwards, and after the terrorist attacks, it largely
           dissolved. While an official said that SBA was in the process of
           rebuilding the corps when Hurricane Katrina struck, a senior
           agency official said the corps had fewer than 100 individuals at
           that time.

           Moreover, SBA did not have adequate plans in place to help ensure
           that it had adequate office space to house its expanded
           workforce--particularly in the Ft. Worth and Buffalo offices--or
           telecommunications support in Buffalo. While SBA partnered with
           GSA on an ad hoc basis to address its logistical challenges after
           Hurricane Katrina made landfall, in some cases, the agency was
           fortunate to quickly obtain the needed capacity. The following
           provides specific information regarding SBA's Ft. Worth and
           Buffalo offices at the time of and after the Gulf Coast
           hurricanes:

           o At the Ft. Worth office, SBA did not initially have adequate
           space to accommodate the more than 2,000 employees that were hired
           to process disaster loans or an established plan to acquire such
           space (e.g., the Ft. Worth center could only accommodate 500 out
           of the 2,700 staff that were ultimately employed, by September
           2006, to process Gulf Coast hurricane-related disaster loan
           applications). In September 2005, SBA worked with GSA on an ad hoc
           basis in an effort to locate additional space for the newly hired
           staff and was able to identify available offices near its existing
           facility. However, SBA officials said that the newly acquired
           space was not configured to serve as a disaster loan processing
           center, so the agency had to upgrade the space to accommodate its
           needs. Even so, we note that SBA still lacked sufficient capacity
           in Ft. Worth to process the growing backlog of disaster loan
           applications. To address this challenge, SBA was also able to
           reestablish the loan processing function at its Sacramento office,
           which had previously been discontinued as a result of its
           workforce transformation initiative. The Sacramento office space
           was available shortly after Hurricane Katrina struck because the
           lease had not yet expired. SBA established a workforce of
           approximately 250 individuals at the Sacramento office, and the
           office played a significant role in reducing the backlog of Gulf
           Coast hurricane disaster loan applications.^29 In June 2006, SBA
           also leased a 60,000 square foot facility in Ft. Worth, which,
           upon acquisition, was configured to meet the agency's needs to
           house the staff that are processing disaster loans associated with
           the Gulf Coast hurricanes, according to officials.
           o SBA's Buffalo office did not initially have sufficient space to
           serve as a customer call center in a catastrophic disaster
           situation. In June 2005, SBA closed a loan processing facility in
           Niagara Falls, New York, and opened a facility in Buffalo, with
           the intention of it becoming the agency's customer service center
           (i.e., call center) at a later date. While SBA provided us with
           planning documents that recognized that the Buffalo office lacked
           sufficient space in order to expand during an emergency, the
           agency did not develop a contingency plan to guide its efforts in
           identifying suitable space to accommodate an expanded workforce if
           a major disaster occurred. As was the case in Ft. Worth, SBA
           collaborated with GSA on an ad hoc basis after Hurricane Katrina
           and was able to locate nearby available space in a federal office
           building.^30 
           o Further, SBA faced challenges due to limited support for the
           telecommunications system at its disaster loan customer service
           call center in Buffalo. According to SBA field managers, while the
           customer service call center's telephone system processed calls as
           required, vendor service and support for the system were
           inadequate. An SBA official said that there was only one vendor in
           the Buffalo region that services the type of phone system that the
           agency uses. The SBA official said that limited support and
           maintenance for the agency's phone system impacted the agency's
           ability to be able to efficiently respond to inquiries from
           disaster loan applicants. Further, an SBA official said that the
           phone system was not designed to interface with other key agency
           systems, which also affected the center's operations. For example,
           due to limitations in the phone system's design, SBA customer
           service managers were forced to manually track and tally critical
           information necessary to effectively manage the center, such as
           the number of inbound/outbound calls received in a given time
           period. According to an SBA field official, this information is
           necessary in order for the office's workforce manager to
           accurately forecast staffing needs, but tracking this data
           manually is time consuming and inefficient. SBA officials said
           that they have initiated a review of the Buffalo phone system and
           are considering options to upgrade it.
			  
			  SBA Has Initiated Measures to Better Prepare for Potential
			  Disasters but Has Not Established Time Frames for Plan Completion
			  or Leveraged Available Disaster Planning Resources

           In the wake of the Gulf Coast hurricanes, SBA officials said that
           they recognized the importance of further enhancing their disaster
           planning and have developed a master plan and initiated measures
           based on "lessons learned" from the experience. In particular, SBA
           convened a Disaster Oversight Council composed of senior agency
           leadership, to better leverage the resources of the agency as a
           whole, and incorporate new ideas and best practices into the
           agency's preparedness capability. In September 2006, SBA also
           appointed a single individual to coordinate the agency's disaster
           preparedness planning and coordination efforts. Further, SBA
           officials said that the agency is taking steps to address
           limitations that existed in its disaster planning prior to the
           Gulf Coast hurricanes and weaknesses in disbursing approved
           disaster loan applications as follows:

           o Developing enhanced disaster forecasting and response
           capabilities. SBA officials said that the agency is developing
           automated models to better estimate loan application volumes when
           disasters strike. The officials said that these models are based
           on data from the agency's experiences in responding to previous
           disasters, including the Gulf Coast hurricanes. The officials said
           that the models allow the agency, for example, to estimate the
           number of loan applications that can be expected under varying
           disaster scenarios. Officials said that the models' estimates can
           be refined, after disasters occur, based on information provided
           by FEMA and SBA loss verification teams. SBA officials also said
           that they are developing the capacity to better estimate resource
           requirements---such as staffing requirements---to better respond
           to potential disaster scenarios. Additionally, SBA stated that
           DMCS has been tested and verified to support a minimum of 8,000
           concurrent users (the agency maintained a workforce of about 4,300
           at its peak in January 2006 to respond to the Gulf Coast
           hurricanes). SBA stated that it continues to explore the best
           means of upgrading DCMS' capacity.
           o Ensuring additional trained and experienced staff in the event
           of a disaster. SBA officials said that the agency is developing a
           plan to cross-train staff agencywide to provide disaster loan
           assistance. They also said SBA is planning to develop partnerships
           with private sector lenders who could assist SBA with loan
           processing and loan closing activities in the event of a major
           disaster. Additionally, SBA officials said that the agency has
           reestablished a disaster reserve corps of about 750 individuals,
           the majority of whom have been trained in the agency's policies
           and systems. An SBA official added that the agency plans to ensure
           that corps members will be able to quickly obtain government
           identification and credit cards to help ensure their immediate
           availability in the event of a disaster. However, SBA officials
           said that maintaining the status of the corps may prove
           challenging over the longer term if their services are not
           required for long periods. The officials said it can be difficult
           to ensure the training of potential volunteers or their continued
           availability.
           o Acquiring office space to provide additional capacity. SBA
           officials said that the agency has acquired additional facilities
           to house its disaster assistance staff. As described previously,
           for example, SBA officials said that, in June 2006, they leased a
           third facility in Ft. Worth with 60,000 square feet of space that
           has been configured to serve as a disaster loan processing center
           (this facility has a 2-year lease). However, SBA officials said
           that there are trade-offs associated with maintaining such space
           over the longer term. A senior SBA official also said that, if the
           space is ultimately no longer required to process Gulf Coast
           hurricane-related loan applications, SBA would be required to
           incur lease costs at a time when funding for federal agency
           operations is limited.
           o Revising the existing approach to processing disaster loan
           applications to help ensure expedited fund disbursements.
           According to senior SBA officials, in July 2006, they reviewed the
           agency's approach to disbursing approved Gulf Coast hurricane
           disaster loan applications and found that inefficiencies in the
           process were contributing to substantial disbursement delays.^31
           Senior SBA officials said that the previous loan disbursement
           approach was an "assembly-line" type process wherein loan
           applications moved from one stage to another (e.g., from loss
           verification to the legal department) and that mistakes or delays
           in any one stage could result in significant disbursement
           backlogs. Further, SBA officials said that the previous approach
           lacked accountability and made it difficult for applicants to find
           the status of their application or to obtain consistent
           information from the agency. Subsequently, SBA officials said that
           they have instituted a "case-manager" model in which each loan
           application is assigned to a case manager to ensure
           accountability, and the loan review units use in a team-oriented
           approach. According to SBA officials, the revised approach reduced
           the backlog of disbursed loans associated with the Gulf Coast
           hurricanes from about 93,000 in August 2006 to approximately
           35,000 in November 2006.^32 SBA officials also said that the
           revised approach should allow the agency to more efficiently
           disburse approved disaster loans in a future catastrophe.

           While SBA's announced changes address key limitations in its
           disaster planning process and preparedness efforts prior to the
           Gulf Coast hurricanes, agency officials have not established a
           time line for completing key elements of the disaster management
           plan. SBA officials explained that the planning process is ongoing
           and that they intend to review and implement a variety of changes
           in the agency's Office of Disaster Assistance in coming years.
           However, we note that several elements of SBA's planning and
           preparedness process are discrete tasks that lend themselves to
           the establishment of a time line for completion. These elements
           include cross-training agency staff to provide backup support for
           disaster assistance services and reaching agreements with private
           sector lenders to process a surge in loan applications associated
           with disasters. Without the establishment of reasonable time
           frames for completing such planning and preparedness elements, it
           is difficult for SBA management, Congress, the public, and others
           to assess the progress of the agency's efforts to better prepare
           for future disasters.

           Moreover, until recently, SBA had not taken steps to assess
           whether it could leverage outside resources to enhance its
           disaster planning and preparation efforts. SBA officials said that
           they had contacted other organizations, including FEMA, the
           National Weather Service, and the U.S. Geological Survey, in
           developing the agency's enhanced model for forecasting loan
           application volumes when disasters strike. However, as discussed
           previously, SBA officials said that they were largely relying on
           the agency's previous disaster experiences in enhancing their
           forecasting capacity, which is similar to the agency's disaster
           planning approach prior to the Gulf Coast hurricanes. SBA
           officials said that they had not used other outside resources,
           such as the results of disaster simulations or catastrophe models,
           in the disaster planning process. A senior SBA official said that
           the agency has not determined how catastrophe models could be
           incorporated into its planning process, given the differences that
           exist between the insurance sector and SBA's Disaster Loan
           Program. For example, the official noted that insurers use the
           models to limit their financial losses, due to hurricanes or
           earthquakes of varying severity, in specific areas where they
           insure properties, whereas SBA covers uninsured homes and
           businesses on a nationwide basis. While we recognize these
           differences, as discussed in our report on SBA's implementation of
           DCMS, the results of disaster simulations or catastrophe models
           could provide SBA with additional insight into potential disaster
           loan application volumes, and related agency logistical resource
           requirements, for particularly severe events that potentially
           rival or surpass the scope of disasters that the agency has
           previously encountered, including the Gulf Coast hurricanes.^33

           In December 2006, SBA took initial steps to assess whether an
           available catastrophe model could help enhance its disaster
           planning efforts. SBA contacted FEMA regarding a catastrophe model
           that the agency has developed, referred to as HAZUS, that is
           designed to help estimate the damages associated with potential
           hurricanes, earthquakes, and floods, as well as the potential
           financial losses associated with varying disaster scenarios.^34
           SBA informed FEMA that the agency was interested in exploring the
           use of HAZUS as part of its disaster planning program. SBA
           requested that FEMA brief the agency's senior managers on HAZUS,
           as well as the types of training on the system that is available.
           It remains to be seen the extent to which SBA will decide to
           incorporate the HAZUS system into its disaster planning efforts.

           Finally, while we acknowledge that SBA would incur lease and other
           costs associated with maintaining facilities in anticipation of
           disasters, developing pragmatic strategies to help ensure the
           timely acquisition of suitable space over the long-term should be
           a key component of the agency's disaster contingency planning.
           Currently, SBA has a substantial amount of office space leased in
           Ft. Worth, for example, to complete the processing of Gulf Coast
           hurricane-related disaster applications, and which agency
           officials said could be used if another disaster occurs in the
           near term. However, if no such disaster occurs, and SBA reduces
           its office space inventory in Ft. Worth over the next several
           years to save costs, and the agency closes its Sacramento
           satellite loan processing facility in fiscal year 2007 as planned,
           the agency would lack adequate loan processing space to respond to
           a future disaster the size of the Gulf Coast hurricanes or larger.
           Under such a scenario, a repeat of the steps SBA took during the
           Gulf Coast hurricanes (i.e., contacting GSA after Hurricane
           Katrina made landfall) could similarly compromise the agency's
           capacity to provide efficient and timely disaster services.
           Analyzing the cost-effectiveness of obtaining and retaining
           certain office facilities over the long-term could improve SBA's
           preparedness for future disasters.
			  
			  SBA Utilized a Variety of Outreach Approaches during the Gulf
			  Coast Hurricanes, but Several Factors May Have Limited Their
			  Effectiveness

           SBA took a number of steps, under trying conditions, to reach out
           to Gulf Coast hurricane victims to provide information and
           assistance regarding disaster recovery loan assistance services.
           For example, the agency mobilized its staff members to reach out
           to victims by speaking at organized events and by advertising in a
           variety of media including the Internet. However, various factors
           (including the fact that many people do not equate SBA with
           disaster assistance) may have limited the effectiveness of the
           agency's efforts. For example, due to the number and dislocation
           of the hurricane victims, the catastrophic damage caused by the
           storms, and limited agency resources, SBA was not able to comply
           with an informal policy of conducting follow-up calls with all
           individuals who were mailed disaster assistance loan applications.
           According to SBA officials, the agency has initiated a review of
           its outreach to Gulf Coast hurricane victims and is developing a
           plan to better provide such outreach in future disasters.
			  
			  SBAï¿½s Outreach to Gulf Coast Hurricane Victims May Have Been
			  Reduced by the Complexity of Federal Disaster Assistance Programs
			  and the Damage Associated with the Hurricanes

           SBA officials told us that they took a variety of steps to explain
           the agency's disaster assistance programs to the victims of the
           Gulf Coast hurricanes. After Hurricane Katrina made landfall,
           officials from SBA's field operations centers said they acted
           quickly to mobilize their staff and sent them to the Gulf Coast
           region to begin assisting the victims by providing information
           about their Disaster Loan Program. These officials told us that
           staff members shared information about SBA's Disaster Loan Program
           at meetings with various groups including congressional offices,
           chambers of commerce, community-based organizations, and local
           businesses. According to an SBA official, staff members from one
           field operations center attended more than 600 of these meetings
           between October 1, 2005, and May 15, 2006. This official said that
           the number of meetings they participated in was more than were
           typically held, due to the increased needs of the hurricane
           victims. SBA also provided information about its Disaster Loan
           Program to Small Business Development Centers, as well as state
           and local disaster management agencies.^35 Further, SBA staff
           members provided outreach at FEMA-established Disaster Recovery
           Centers where they conducted initial interviews with disaster
           victims to determine whether the victim and the damaged property
           were generally eligible for the loan program and to explain the
           application forms and process. SBA also established Business
           Recovery Centers to provide business owners with information on
           how disaster loans could help them in financing recovery from the
           hurricanes.

           In addition, SBA advertised through various forms of media such as
           the SBA Internet site, radio, television, and newspapers. Figure 3
           shows an example of a newspaper advertisement SBA placed following
           Hurricane Katrina. SBA advertisements about its Disaster Loan
           Program are intended to inform potential loan applicants where to
           obtain loan applications and otherwise to assist victims in
           applying for disaster loans. Following the Gulf Coast hurricanes,
           field operations center staff members also posted informational
           flyers throughout the declared disaster areas, according to SBA
           officials. An SBA official also told us that many of these
           outreach activities were not just localized to the declared
           disaster areas, but staff members also conducted these activities
           in the cities where victims had relocated.

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

           However, SBA officials said that the agency's outreach efforts
           face challenges even under normal (nondisaster) circumstances,
           which can limit their effectiveness. For example, agency officials
           said that most people tend to equate SBA with small business
           lending activities rather than its disaster assistance programs.
           In a limited survey of 62 Gulf Coast hurricane victims who filed
           SBA disaster loan applications, we found that more than half
           reported not being aware of the agency's disaster assistance
           program prior to August 2005.^36 Additionally, an SBA official
           said that the public tends to confuse SBA's disaster assistance
           programs with those of FEMA. As noted previously, this potential
           for confusion was heightened when, in the wake of the Gulf Coast
           hurricanes, FEMA referred many disaster loan applications to SBA
           even though such applications did not meet SBA's creditworthiness
           standards. Furthermore, SBA's outreach efforts may face
           substantial challenges when disasters of the magnitude of the Gulf
           Coast hurricanes or greater strike. In such cases, millions of
           people may be relocated throughout the United States, and
           widespread telephone and electrical service disruptions may take
           place.

           To illustrate the potential impact that a large-scale disaster can
           have on SBA's outreach efforts, we note that the agency was not
           able to comply with an informal policy requiring follow-up phone
           calls to all individuals who did return disaster assistance loan
           applications after the Gulf Coast hurricanes. While such phone
           calls are not mandatory, SBA officials said that in previous
           disasters they had attempted to contact 100 percent of all
           individuals who did not return applications that had been mailed
           to them. The officials said that such follow-up phone calls
           provided the agency with another opportunity to explain the
           Disaster Assistance Loan Program and potentially assist victims.
           While SBA mailed about 2 million disaster loan applications to
           victims of the Gulf Coast hurricanes, it only received about
           400,000 completed applications in return. ^37 SBA officials said
           that the agency made follow up phone calls to 800,000 individuals
           who did not return the applications but was unable to contact the
           remaining 800,000.^38 Although SBA officials said the agency makes
           it a practice to make such follow up phone calls, it lacked the
           necessary staff resources to do so and that contacting people who
           may be relocated in such circumstances is highly challenging.
			  
			  SBA Has Initiated an Internal Review of Outreach Provided to 
			  Victims of the Gulf Coast Hurricanes

           According to SBA officials, the agency has initiated a follow-up
           internal review of its outreach to victims of the Gulf Coast
           hurricanes. An SBA official said that the agency is developing a
           plan to strengthen its outreach communication and coordination and
           that this plan will be submitted to the SBA Administrator in early
           2007. According to this official, SBA has consulted internal
           outreach staff as well as federal disaster relief agencies,
           including FEMA, and local agencies to conduct the evaluation of
           its outreach efforts. Additionally, the SBA official said that the
           agency has created a revised brochure to explain its disaster
           outreach services to the public and that the SBA Administrator has
           held forums with the public in the Gulf Coast region to explain
           the agency's assistance services.
			  
			  Conclusions

           While the unprecedented volume of disaster loan applications
           clearly affected SBA's capability to provide timely assistance to
           Gulf Coast hurricane victims, the absence of a comprehensive and
           sophisticated planning process beforehand also likely limited the
           efficiency of the agency's initial response. SBA officials said
           that they recognize the importance of better disaster planning and
           are in the process of developing a disaster plan that is designed
           to addresses key limitations in the agency's previous planning
           approach (e.g, strengthening loan surge capacity through potential
           agreements with private sector lenders and reestablishing the
           disaster reserve corps). Additionally, according to SBA officials,
           the agency has significantly revised its loan processing approach
           to reduce the backlog of approved, but not disbursed, disaster
           loan applications associated with the Gulf Coast hurricanes. SBA
           officials said that the revised approach should allow the agency
           to more efficiently disburse approved disaster loans in a future
           catastrophe. However, SBA has not established a time frame for
           competing key elements of the disaster management plan such as
           cross-training other agency staff to provide backup support, and
           has not assessed whether the plan would benefit from the
           supplemental use of available resources, such as the results of
           disaster simulations or catastrophe models (although SBA did
           recently contact FEMA about using its catastrophe model). Further,
           while we recognize that maintaining unused office space would not
           be cost-effective, SBA has not developed a long-term strategy to
           help ensure that it could acquire necessary and suitable office
           space in an emergency. Consequently, SBA should take additional
           steps to help ensure that it would be better prepared to provide
           timely and effective assistance to the victims of a future
           disaster.
			  
			  Recommendations for Executive Action

           To better position SBA to prepare for and respond to potential
           disasters, we recommend that the Administrator of SBA direct the
           Office of Disaster Assistance to take the following two actions:

           o develop time frames for completing key elements of the disaster
           management plan and a long-term strategy for acquiring adequate
           office space; and
           o direct staff involved in developing the disaster management plan
           to further assess whether the use of disaster simulations or
           catastrophe models would enhance the agency's disaster planning
           process.
			  
			  Agency Comments and Our Evaluation

           We provided SBA with a draft of this report for review and
           comment. The Associate Administrator for Disaster Assistance
           provided written comments that are presented in appendix II. The
           agency also provided technical comments, which we have
           incorporated as appropriate. In its comments, SBA stated that the
           agency is better prepared to respond to potential disasters as a
           result of the measures that have been initiated since the Gulf
           Coast hurricanes. Additionally, SBA stated that it agreed with the
           report's recommendations. Specifically, SBA stated that the agency
           will (1) establish clear time-lines for completing key disaster
           planning initiatives discussed in the report and (2) assess the
           more extensive use of disaster simulations and external
           catastrophe models to enhance its disaster planning process.

           SBA also said that it had taken steps to help strengthen its
           capacity to ensure the availability of adequate office space in
           the event of a future disaster. In particular, SBA stated that it
           will retain 100,000 square feet of additional office space that it
           obtained in Ft. Worth after Hurricane Katrina to process disaster
           loans. SBA said that the additional space should allow the agency
           to respond to the initial surge in loan applications of a future
           disaster while allowing time for it to work with GSA to obtain
           additional space as needed. We contacted SBA to obtain additional
           information about its space acquisition plans. SBA officials said
           that the agency will retain a 60,000 square foot facility in Ft.
           Worth that has been specifically configured to process disaster
           loans and plan to expand it by another 40,000 square feet.
           Further, the officials said that SBA will retain the facility for
           at least 5 years (the facility originally had a 2-year lease) and
           may retain it longer. We acknowledge that such an approach, if
           implemented, is a step that is consistent with the development of
           a comprehensive disaster management plan.
			  
^28GAO, Small Business Administration: Response to September 11 Victims
and Performance Measures for Disaster Lending, [40]GAO-03-385 (Washington,
D.C.: Jan. 29, 2003).

^29In our July 2006 report ( [41]GAO-06-860 ), we reported that, according
to SBA, 8 months after Hurricane Katrina, the Sacramento satellite office
had processed about 95,500 home and 4,800 business applications through
DCMS for the Gulf Coast hurricane victims. SBA also used the Sacramento
satellite office to process about 10,700 home loan applications for
smaller disaster declarations.

^30According to an SBA official, the agency had to seek space outside of
the existing call center building because leasing additional space within
the facility was considered cost prohibitive.

^31The officials said that as of July 2006, approximately 93,000 loans had
only been partially disbursed. The officials also said that many of the
loans had not been totally disbursed due to loan modifications (e.g.,
borrowers sought changes in the loans' terms and conditions).

^32In August 2006, SBA initiated the "90/45" initiative to reduce the
backlog of loan disbursements associated with the Gulf Coast hurricanes.
That is, SBA planned to finalize about 93,000 loan files, which were
partially disbursed or pending modification, over a 45-day period.

^33In April 2006, USGS, Stanford University, Lawrence Livermore National
Laboratory, URS Corp., and the University of California, Berkeley,
released the results of a disaster simulation involving a repeat of the
1906 San Francisco earthquake in the San Francisco Bay Area. The
simulation involved the use of computer models developed by USGS to
predict the consequences of an earthquake striking the Bay Area with a
magnitude of 7.9 on the Richter scale. This simulated exercise estimated
that the consequences of such an earthquake on the Bay Area today would
damage or destroy 90,000 buildings with an estimated repair and
replacement cost of $90 billion. Additionally, the simulation estimated
that up to 250,000 households would be displaced from damaged residences.
See http://quake.usgs.gov for additional details. Moreover, in 2006, a
risk modeling firm, Applied Insurance Research (AIR), estimated the
insured losses that would occur if past disasters were to recur today. For
example, AIR estimated that a repeat of the 1906 earthquake would result
in insured losses of about $108 billion, whereas a repeat of Hurricane
Katrina would result in insured losses of about $41 billion. See
http://www.air-worldwide.com/_public/html/air_currentsitem.asp?ID=1031.

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

^35The SBA administers the Small Business Development Center Program to
provide management assistance to current and prospective small business
owners. The centers offer one-stop assistance to small businesses by
providing a wide variety of information and guidance in branch locations.
The program is a cooperative effort of the private sector, the educational
community, and federal, state, and local governments.

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

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

^38SBA provided the data regarding these figures, based on their
estimates. However, the agency does not have a formal procedure for
verifying the number of follow-up calls the staff made.			  

           We are sending copies of this report to appropriate congressional
           committees, the Administrator of the SBA, and other interested
           parties, and we will also make copies available to others upon
           request. In addition, the report will be available at no charge on
           the GAO Web site at http://www.gao.gov.

           If you are your staff have questions regarding this report, please
           contact me at (202)512-8678 or [email protected]. Contact points for
           our Offices of Congressional Relations and Public Affairs may be
           found on the last page of this report. GAO staff who made major
           contributions to this report are listed in appendix III.

           William B. Shear
			  Director, Financial Markets and Community
           Investment

           List of Congressional Addressees

           The Honorable Joseph I. Lieberman
			  Chair
			  The Honorable Susan M. Collins
			  Ranking Member
			  Committee on Homeland Security and Governmental Affairs
			  United States Senate

           The Honorable John F. Kerry
			  Chair
			  The Honorable Olympia J. Snowe
           Ranking Member
			  Committee on Small Business and Entrepreneurship
           United States Senate

           The Honorable Richard J. Durbin
			  Chair
			  The Honorable Sam Brownback
           Ranking Minority Member
			  Subcommittee on Financial Services and General Government
			  Committee on Appropriations
			  United States Senate

           The Honorable Barbara A. Mikulski
			  Chair
			  The Honorable Richard C. Shelby
			  Ranking Member
			  Subcommittee on Commerce, Justice and Science
			  Committee on Appropriations
			  United States Senate

           The Honorable Henry A. Waxman
			  Chair
			  The Honorable Tom Davis
           Ranking Member
			  Committee on Oversight and Government Reform
			  House of Representatives

           The Honorable Nydia M. Velazquez
			  Chair
			  The Honorable Steven J. Chabot
			  Ranking Member
			  Committee on Small Business
			  House of Representatives

           The Honorable Jose E. Serrano
			  Chair
			  The Honorable Ralph Regula
           Ranking Minority Member
			  Subcommittee on Financial Services
           Committee on Appropriations
			  House of Representatives

           The Honorable Donald Manzullo
			  House of Representatives

           The Honorable Dianne Feinstein
			  United States Senate

           The Honorable Mary L. Landrieu
			  United States Senate
			  
			  Appendix I: Objectives, Scope, and Methodology

           The objectives of this report were to (1) assess the Small
           Business Aministration's (SBA) logistical planning efforts prior
           to the Gulf Coast hurricanes and current disaster planning efforts
           and (2) discuss SBA's outreach efforts to Gulf Coast hurricane
           victims.

           To address the first objective, we reviewed our previous studies
           related to disaster planning as well as similar studies by other
           organizations and available disaster simulation reports.^1 We also
           interviewed disaster experts to obtain their insight and views on
           appropriate planning efforts and the aspects that a comprehensive
           disaster plan should entail.^2 Further, we reviewed relevant SBA
           planning and other documentation including the agency's standard
           operating procedures, internal policy memos, and the Office of
           Disaster Assistance's 2003-2008 strategic plan. Moreover, we
           reviewed SBA documentation regarding the agency's workforce
           transformation initiative, which aided our assessment of the
           logistical challenges that SBA encountered in its response to the
           Gulf Coast hurricanes. These documents included an organizational
           impact study and a cost-benefit analysis. We also interviewed
           officials from SBA's Office of Disaster Assistance (ODA) in
           headquarters regarding the agency's disaster planning initiatives
           both before and after the Gulf Coast hurricanes. Additionally, we
           conducted site visits to each of SBA's four disaster loan field
           offices to discuss the agency's disaster planning initiatives.^3
           Finally, we visited the Gulf Coast region and met with federal,
           state and local officials, as well as disaster victims.

           To address the second objective, we reviewed SBA's various methods
           and techniques for informing and educating disaster victims about
           the disaster loan program. Further, we reviewed the section of
           SBA's 2003-2008 strategic plan that described the agency's goals
           and objectives for promoting public awareness, which includes
           outreach. We also interviewed officials in SBA's headquarters and
           the public information officers in the Atlanta and Sacramento
           field offices to discuss the agency's outreach efforts during the
           Gulf Coast hurricanes, as well as current plans to evaluate such
           outreach efforts.

           To obtain further insight into SBA's outreach efforts, we
           conducted a limited structured telephone survey of 62 Gulf Coast
           hurricane victims who had applied for an SBA disaster assistance
           loan. Using data from its Disaster Credit Management System
           (DCMS), SBA provided us with a list of the 414,289 loan
           applications, for either a home or business physical disaster
           loan, or an economic injury disaster loan in response to losses
           due to the Gulf Coast hurricanes. We selected a stratified random
           sample of 400 loan applications based on the type of
           loan--business and economic injury, home, and economic injury
           only--and loan decision--approved, withdrawn, declined, or
           pending--in order to get coverage across loan type and decision
           outcomes. We attempted to reach 168 loan applicants by phone and
           were able to contact and complete telephone interviews with a
           total of 62 applicants. Of the 62 respondents to our survey, 46
           were affected by Hurricane Katrina, 9 by Hurricane Wilma, and 7 by
           Hurricane Rita. Of those, 28 had applied for home loans, 22 had
           applied for economic injury and business loans, and 12 had applied
           for economic injury loans. At the time we surveyed the applicants,
           SBA had approved loans for 24 of the applicants, declined loans
           for 26 of the applicants, and had decisions pending for 6 of the
           applicants. The other 6 applicants had either withdrawn their
           applications or had their applications withdrawn by SBA.

           From the survey, among other things, we obtained the loan
           applicants' views on how and when they learned of the disaster
           loan program. In developing the survey questions, we relied on
           SBA's 2003-2008 strategic plan, strategic operation plans, SBA
           2003-2005 customer satisfaction surveys, and other information
           that SBA officials provided to us through interviews as it related
           to our request. We pretested our survey with five loan applicants
           who represented a mix of home, business, and economic injury
           loans, as well as decisions that were approved and withdrawn. We
           conducted analysis using the Statistical Analysis System (SAS)
           version 9 with appropriate checks for missing data and incorrect
           responses and deemed it to be sufficiently reliable for the
           purpose of this report. Because of the small sample size, the
           survey results are limited to those we spoke with but may also be
           considered as indicative of how Gulf Coast victims might have
           responded; however, results could not be projected to the entire
           population.

           We conducted our work in Washington, D.C.; Sacramento, Calif.;
           Atlanta, Ga.; Ft. Worth, Texas; Buffalo, N.Y.; and in state and
           local offices in Louisiana and Mississippi from November 2005 to
           January 2007, and in accordance with generally accepted government
           auditing standards.

^1 [42]GAO/RCED-93-186 ; The National Response Plan, December 2004 and
updated May 2006; Department of Homeland Security; The Robert T. Stafford
Disaster Relief and Emergency Assistance Act, 42 U.S.C. SS 5121-5206.

Department of Homeland Security: Office of Inspector General, A
Performance Review of FEMA's Disaster Management Activities in Response to
Hurricane Katrina, OIG-06-32, March 2006; The White House: The Federal
Response to Hurricane Katrina - Lessons Learned, February 2006; A Failure
of Initiative: Final Report of the Select Bipartisan Committee to
Investigate the Preparation for and Response to Hurricane Katrina, U.S.
House of Representatives, February 16, 2006; Hurricane Katrina: A Nation
Still Unprepared, Report of the Committee on Homeland Security and
Governmental Affairs, U.S. Senate, May 2006; Hurricane Pam Exercise (),
http://www.ohsep.louisiana.gov/newsrelated/hurripamends.htm Louisiana
Homeland Security & Emergency Preparedness, July 26, 2004; Managing Risk
in Earthquake County: Estimated Losses for a Repeat of the 1906 San
Francisco Earthquake and Earthquake Professional's Action Agenda for
Northern California, April 17, 2006.

^2We defined "expert" as someone having extensive knowledge in disaster
planning and management. The expert's knowledge was derived from his or
her formal education and experience. For example, some of the experts we
contacted have served in consulting roles for state and local agencies
with disaster planning responsibilities.

^3The field offices are the field operations centers East and West in
Atlanta, Ga., and Sacramento, Calif., respectively, the disaster loan
processing center in Ft. Worth Texas, and the disaster loan customer
service call center in Buffalo, N.Y. We also visited the Disaster Credit
Management System Operations Center in Virginia and SBA's Georgia district
office.
			  
			  Appendix II: Comments from the Small Business Administration
			  
			  Appendix III: GAO Contact and Staff Acknowledgments
			  
			  GAO Contact

           William B. Shear, (202) 512-8678, [email protected]
			  
			  Staff Acknowledgments

           In addition to the individual named above, Wesley Phillips,
           Assistant Director; Daniel Blair; Tania Calhoun; William Chatlos;
           Landis Lindsey; Marc Molino; David Pittman; Cheri Truett; and
           Michelle Zapata made key contributions to this report.
			  
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(250271)

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

To view the full product, including the scope
and methodology, click on the link above.

For more information, contact William B. Shear at (202) 512-8678 or
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Highlights of GAO-07-114, a report to congressional addressees

February 2007

SMALL BUSINESS ADMINISTRATION

Additional Steps Needed to Enhance Agency Preparedness for Future
Disasters

The Small Business Administration (SBA) is the federal government's
primary provider of disaster loans to businesses, homeowners, and renters.
In a previous report (GAO-06-860), GAO found that SBA's limited
information systems planning contributed to delays in processing disaster
loans for the victims of the 2005 Gulf Coast Hurricanes (Katrina, Rita,
and Wilma).  To provide further insight into how SBA's disaster
preparedness could be enhanced,  this second report, initiated under the
Comptroller General's authority, assesses other logistical issues (e.g.,
staffing and space acquisition) that may have affected the efficiency of
the agency's response to the hurricanes. Specifically, this report (1)
assesses SBA's logistical  planning efforts prior to the Gulf Coast
hurricanes and current planning efforts and (2) discusses SBA's outreach
services to hurricane victims.

GAO reviewed disaster planning reports, interviewed SBA officials, and
visited the Gulf Coast region.

[44]What GAO Recommends

To help ensure that SBA is better prepared to provide disaster assistance,
GAO recommends that the agency (1) establish time frames for completing
key elements of its disaster management plan and (2) assess whether use of
disaster simulations and models could enhance disaster planning efforts. 
SBA agreed with these recommendations.

SBA engaged in limited logistical disaster planning prior to the Gulf
Coast hurricanes, which, in retrospect, likely contributed to the initial
challenges that the agency faced in processing the related surge in
disaster loan applications on a timely basis. GAO reports, reports by
other investigative agencies, and disaster management experts have stated
that comprehensive planning and the supplementary use of sophisticated
techniques (e.g., simulations of varying disaster scenarios) can help
organizations prepare for potential disasters and mitigate their effects.
However, SBA did not engage in or complete comprehensive disaster plans
prior to the Gulf Coast hurricanes, in part, due to the view by
headquarters agency officials that such planning yielded limited benefits
and that local agency officials were in the best position to estimate
logistical requirements. With better planning, available evidence suggests
the agency could have been better positioned to provide initial  disaster
assistance to hurricane victims in an organized and efficient manner. In
particular, SBA faced challenges in training and supervising thousands of
temporary employees hired to process loan applications, had not taken
steps to help ensure additional trained staff would be available, and
encountered difficulties in obtaining suitable office space for the
expanded workforce.

In the wake of the Gulf Coast hurricanes, SBA officials said that they
recognized the importance of disaster planning and have initiated a
planning process designed to address key areas, which includes
cross-training other agency staff to provide disaster assistance and
recruiting and training a reserve of potential temporary employees. SBA
has also taken steps to expedite the process for disbursing approved
disaster loans. However, GAO continues to have concerns about several
limitations in SBA's current  planning process, including the lack of a
timetable for competing key elements of its disaster management plan and
the fact that the agency has not assessed whether its disaster plan would
benefit from the supplemental use of disaster simulations or catastrophe
models.

SBA took a variety of steps under trying conditions to inform victims of
the Gulf Coast hurricanes about its assistance programs, but several
factors may have limited the effectiveness of these outreach efforts. SBA
staff members reached out to disaster victims by speaking at about 600
organized events and advertising. However, the effectiveness of SBA's
outreach efforts may have been reduced by, among other things, both the
extensive damage and victim relocations associated with the hurricanes.
According to SBA officials, the agency has  initiated an internal review
of the outreach that it provided to victims of the Gulf Coast hurricanes
and is developing a plan to better provide such outreach in future
disasters.

References

Visible links
  22. http://www.gao.gov/cgi-bin/getrpt?GAO-06-860
  23. http://www.gao.gov/cgi-bin/getrpt?GAO-06-860
  24. http://www.gao.gov/cgi-bin/getrpt?GAO-06-618
  25. http://www.gao.gov/cgi-bin/getrpt?GAO-06-442T
  26. http://www.gao.gov/cgi-bin/getrpt?GAO-06-618
  27. http://www.gao.gov/cgi-bin/getrpt?GAO-06-643
  28. http://www.gao.gov/cgi-bin/getrpt?GAO-06-1013
  29. http://www.gao.gov/cgi-bin/getrpt?GAO/RCED-93-186
  30. http://www.gao.gov/cgi-bin/getrpt?GAO-06-860
  31. http://www.gao.gov/cgi-bin/getrpt?GAO-02-941
  32. http://www.gao.gov/cgi-bin/getrpt?GAO/RCED-93-186
  33. http://www.gao.gov/cgi-bin/getrpt?GAO-06-860
  40. http://www.gao.gov/cgi-bin/getrpt?GAO-03-385
  41. http://www.gao.gov/cgi-bin/getrpt?GAO-06-860
  42. http://www.gao.gov/cgi-bin/getrpt?GAO/RCED-93-186
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