Katrina-Hit Businesses Slow to Get Aid
Friday, July 28, 2006; 5:57 PM
WASHINGTON -- Shortsighted planning and faulty computer equipment led to long delays by the Small Business Administration in approving loans to companies that were slammed by Gulf Coast hurricanes last year, congressional investigators say.
Four months after Hurricane Katrina hit the region last Aug. 29, an estimated 204,000 loan applications were still waiting to be approved, according to a Governmental Accountability Office report on Friday.
After developing a new system in January 2005 to approve disaster loans, the SBA "focused only on its historical experience and did not consider the possibility of a single or series of disasters of the magnitude of the Gulf Coast hurricanes when planning," the report said.
As a result, "SBA experienced significant backlogs and delays in processing applications," it concluded. GAO is the investigative arm of Congress.
SBA spokesman Mike Stamler said the agency does not agree with all of the findings but that the report "contains a number of solid recommendations for improving the system we use to respond to disasters."
Additionally, in a written response included in the report, the SBA said investigators seem "to place an unreasonable and unwarranted emphasis on some key points," without recognizing improvements the agency has made.
Friday's report marked the latest in a series of concerns raised by Congress over SBA's sluggish response to helping small companies devastated by Katrina.
The agency did not send its first check for Katrina's victims until more than a month after the storm, although SBA eventually was able to boast that it approved more than $10 billion in disaster relief loans. Lawmakers on Capitol Hill were angered by delays and glitches shortly after the hurricane, and SBA head Hector Barreto resigned under criticism in April.
Investigators found that the SBA's new loan processing system was largely designed to match the agency's response to the 1994 Northridge earthquake in California. But that planning underestimated the volume of incoming applications from larger catastrophes such as Katrina, the report found. The agency said it received 420,000 applications from 2005 hurricane victims, compared with 250,000 following the Northridge quake.
Moreover, the report said, SBA failed to stress-test the new system before it was put into action. The agency was also given incorrect computer hardware and ineffective technical support from contractors _ resulting in "system instability, outages and slow response times," the report said.
In a July 17 response, SBA Associate Administrator Herbert L. Mitchell said the agency had upgraded its loan processing system since Katrina to handle four times the number of applications as before and had more than quadrupled its staff.
The SBA also said it had improved communications and partnered with private companies to speed aid to victims.