Report 8-11 – Withdrawal of Disaster Loan Applications to Individuals and Businesses Impacted by the Gulf Coast Hurricanes

This report summarizes the results of our audit of disaster loan applications to victims of the Gulf Coast Hurricanes that were withdrawn by the Small Business Administration (SBA) during calendar year 2006. We initiated the audit in response to complaints by two former SBA employees that the Agency unnecessarily withdrew loan applications to meet production standards. Our audit objectives were to determine (1) whether SBA inappropriately withdrew loan applications prior to loan approval, and (2) the impact that withdrawals has on the applicants.

We focused our analysis on 9,348 of the 30,325 withdrawn loan applications that were identified as missing documents needed for processing, and statistically sampled 96 for review. We analyzed data entries in SBA’s Disaster Credit Management System (DCMS) associated with the 96 loan applications, and interviewed loan officers at SBA’s Processing and Disbursement Center (PDC) in Fort Worth, Texas to determine the reasons why loan applications were withdrawn and whether proper procedures were followed. To determine how the withdrawals impacted loan applicants, we were able to reach and interviewed 34 of the 96 applicants. We conducted the audit from August to September 2007 in accordance with Government Auditing Standards prescribed by the Comptroller General of the United States.