Report 9-06 – The Use of Proceeds from Gulf Coast Disaster Loans

This final report summarizes the results of our audit of the Use of Proceeds from Gulf Coast Hurricane Disaster Loans. As of November 2008, approximately $6.6 billion in loans had been disbursed to assist Gulf Coast disaster victims. The objectives of the audit were to determine whether the Office of Disaster Assistance (ODA) has adequate controls in place to reasonably ensure that the proper documents were secured from borrowers and adequately reviewed before making subsequent (1) loan disbursements to disaster victims.

To determine whether ODA had adequate controls to secure the proper documents before distributing additional loan proceeds, we reviewed Borrower’s Progress Certification forms and other supporting documents on 127 of 4,252 statistically sampled loans that were disbursed between October 2005 and October 2007. We compared these documents to requirements established in the Loan Authorization and Agreement for each loan, and Standard Operating Procedures (SOP) for the Program. To determine whether the Small

Business Administration (SBA) adequately reviewed the expenditure of prior proceeds, we reviewed Borrower’s Progress Certifications and entries in SBA’s Disaster Credit Management System (DCMS). We also interviewed ODA staff assigned to the Fort Worth Loan Processing and Distribution Center (PDC), including attorneys within the Accounts Department, to determine the process followed for subsequent disbursement reviews. Additionally, we reviewed policy revisions relating to the requirements for subsequent disbursements.

Finally, we contacted contractors associated with 31 loans to verify that they had completed work as claimed by borrowers, and visited selected borrowers’ homes to inspect progress made on repairs.

We conducted the audit from December 2007 to August 2008, in accordance with Government Auditing Standards as prescribed by the Comptroller General of the United States.