News From the
Committee on Small Business
Nydia M. Velázquez, Chairwoman

For Immediate Release                   CONTACT:  Alex Haurek; Duncan Neasham
July 29, 2009                                                      202-226-3636

GAO: Despite Progress Made, Problems Remain With SBA Disaster Preparedness

WASHINGTON, D.C. — A new Government Accountability Office (GAO) report finds that despite progress made in improving the Small Business Administration’s (SBA) preparedness for future large-scale disasters, questions continue to linger. Just a month before the fourth anniversary of Hurricane Katrina, federal investigators have found that future recovery efforts could be undermined by the SBA’s failure to fully implement requirements Congress imposed to update the agency’s disaster preparation. The GAO’s findings were made in a report released today during a hearing of the House Small Business Committee.

“In previous hearings, the Committee found that, after a disaster, 40 to 60 percent of businesses fail to recover, often because they lack the financial resources to restart their operations,” said Rep. Nydia M. Velázquez (D-NY), the Chairwoman of the House Committee on Small Business. “When small businesses are unable to recover from catastrophes, the local economy suffers and the pace of recovery in the entire community is slowed down, which is why the SBA’s disaster programs are a critical piece of our nation’s overall disaster response.”

Following Hurricane Katrina and the 2005 Gulf Coast hurricane, the SBA was widely criticized for its response. To improve the agency’s capacity to respond to future catastrophes Congress passed the Small Business Disaster Response and Loan Improvements Act. Among other measures, the Act was meant to ensure the agency better coordinates with local agencies and federal agencies such as FEMA, improves planning and enhances SBA’s preparation for disasters and ensures the agency is more responsive to the needs of small business borrowers.

“After Katrina, Congress recognized that SBA’s disaster response ability was inadequate,” Velázquez said. “The law we passed was meant to bolster SBA’s response to disasters, but also streamline SBA services so that when small businesses close their doors after disasters, they don’t close them forever.”

The latest review by GAO looked at 26 requirements in the law, finding SBA had only met half of them. Among the most serious shortcomings, investigators faulted the SBA for not leveraging regional and local emergency management groups and resources, limiting effective disaster response. According to GAO, the agency also failed to develop and maintain a comprehensive disaster plan, leaving the agency unprepared. GAO also noted that SBA has failed to implement a required program that would speed loans to small businesses and facilitate private small businesses lending after disasters strike. Although the report found significant shortcomings in the SBA’s implantation of the disaster law, it did find that the agency has made some important progress. For instance, the SBA has set up a secondary facility in Sacramento, California to process loans when the main facility in Fort Worth, Texas is unavailable. The agency has also expanded its disaster reserve staff from about 300 to more than 2,000 individuals.

“While the agency is better equipped to respond to catastrophes than it was before Katrina, it has not taken all the steps required by the law,” Velázquez said. “These problems need to be swiftly rectified so that, when future disasters happen, SBA is ready to help small businesses get back on their feet.”

Since 1953, the SBA disaster loan program has provided more than $46 billion in low-interest loans as the primary form of federal assistance for long-term repair and rebuilding for homeowners, businesses, and nonprofits devastated by disasters.

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Click here for the GAO report.

Click here for video from today’s hearing.