Preparing for Catastrophe: Management Review of the Small Business Administration Disaster Assistance Program

June 2007 - The Small Business Association’s Office of Disaster Assistance (ODA) is the agency element that responds to disasters and administers the Disaster Assistance Program by providing low interest loans and working capital to homeowners, renters, businesses and nonprofit organizations that have been devastated by disaster. Based on concerns with SBA’s response in wake of the 2005 Gulf Coast storms, Congress asked the Academy to conduct a management review of SBA’s Disaster Assistance Program that focused on the Program’s experiences over the last decade and on the agency’s efforts and actions following the 2005 Gulf Coast hurricanes.

Key Findings and Recommendations

The Panel found that the Disaster Assistance Program has shown that it can provide loans to affected homeowners and businesses on a timely and effective basis in ‘normal’ disasters.

The recommendations outlined in this report apply to two broad aspects of the Disaster Assistance Program:

(1) Improving current business processes

  • Include district, regional and branch offices and Small Business Development Centers in SBA’s disaster planning and in regional coordination with constituents
  • Translate disaster loan fact sheets/applications into multiple languages and disseminate as needed to disaster areas
  • Prepare a one-page explanation of the disaster loan process
  • Secure funding/statutory changes to preserve the disaster Reserve Corps
  • Revise and automate the “credit elsewhere test” and incorporate the test into the loan processing system
  • SBA should begin the process of developing an automated underwriting system for disaster home loan applications and collect loan-level data
  • Improve loan servicing and monitor risk by revising underwriting standards and servicing actions in response to observed trends

(2) Changing the fundamental structure of the type of loans offered

  • SBA should pilot a disaster assistance program on a regional basis utilizing banks and other financial institutions to process, close and disburse direct loans.