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Small Business Administration: Agency Has Controls to Comply with Paperwork Reduction Act but Could Improve Accessibility and Consistency of Disaster Loan Information

GAO-17-67 Published: Nov 21, 2016. Publicly Released: Nov 21, 2016.
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Highlights

What GAO Found

The Small Business Administration (SBA) process for complying with the Paperwork Reduction Act (PRA) includes a number of controls to help disaster business loan forms comply with the act and Office of Management and Budget (OMB) requirements (see figure). For example, SBA has a standard operating procedure that documents its clearance process; a requirement to solicit public comments; and a requirement that offices of Disaster Assistance, General Counsel, and Inspector General review submission packages for PRA clearance. SBA surveys business loan applicants to solicit suggestions for improving the loan process. The disaster business loan forms also include a valid OMB control number, as required by PRA.

Small Business Administration's Paperwork Reduction Act Clearance Process

Small Business Administration's Paperwork Reduction Act Clearance Process

SBA has implemented and planned actions to streamline the disaster business loan process, but the agency has not made loan-related information and requirements easily accessible or consistent, or defined key terms, contributing to applicants' burden. SBA's 2015 Performance Report set out the agency's recent and planned actions, including streamlining the loan process and enhancing online loan application capabilities. SBA has published written and electronic materials about the disaster loan process, but applicants cannot easily access these materials from SBA's dedicated disaster loan web portal, contrary to federal guidelines for improving digital services. Also, SBA's materials provide inconsistent information on the process, required documents, and estimated processing time frames. Business loan applicants reported that they found the documentation requirements confusing and the application time frames unclear. PRA and an OMB directive on open government generally state that agencies should explain the collection and use of information and promote transparency by providing the public with information about government activities. Similarly, some Small Business Development Centers told GAO that loan applicants have expressed confusion over undefined financial terminology in SBA's loan application, particularly terminology in the required personal financial statement. Federal law requires agencies' forms be written using plain language that is appropriate for the intended audience. Improved integration of electronic resources and consistency of information in SBA's materials would help business disaster victims better access resources and understand the disaster loan process and expected time frames. Further, providing definitions of loan terminology can help reduce victims' confusion.

Why GAO Did This Study

According to SBA, the agency received more than 40,000 disaster business loan applications from fiscal years 2010 through 2014, and estimates that applicants spent on average a total of more than 25,000 hours per year filling out disaster loan application forms. PRA requires agencies to minimize paperwork burden on individuals and small businesses. The Recovery Improvements for Small Entities After Disaster Act of 2015 includes a provision for GAO to evaluate SBA's compliance with PRA. This report examines (1) controls in SBA's process for complying with PRA form renewal requirements in administering its disaster business loans, and (2) SBA's recent and planned actions to reduce burden for business loan applicants.

GAO analyzed applicable laws and guidance, including PRA and OMB and SBA guidance and policies, relevant reports, and loan applicants' responses to SBA and other surveys. GAO also interviewed SBA officials and a nongeneralizable sample of eight SBA resource partners (Small Business Development Centers) that provided disaster-related assistance to businesses, based on county-level loan approvals for 2012 through April 1, 2016.

Recommendations

SBA should (1) better integrate disaster-loan-related information on its web portal; (2) improve consistency of information, including the loan process, required documents, and estimated time frames, in paper and electronic resources; and (3) define financial terminology on disaster business loan application forms. SBA agreed with GAO's recommendations.

Recommendations for Executive Action

Agency Affected Recommendation Status
Small Business Administration To help business disaster victims and resource partners better access information about the disaster loan process, the Administrator of the Small Business Administration should integrate information resources such as the fact sheet, reference guide, and three-step process flier into its disaster loan assistance web portal and Partner Training Portal in a way that is more accessible to users.
Closed – Implemented
SBA has integrated information resources, including the fact sheet, reference guide, and the three-step loan process into its disaster loan assistance web portal. Since our report, SBA also has discontinued using its Partner Training Portal. For resource partners, SBA has been directing them to access loan-related informational materials on SBA's web portal, where they can download and distribute resource materials to disaster victims. The integration of loan-related resources and materials in SBA's website should help business disaster victims and resource partners better access information about the disaster loan process.
Small Business Administration To help reduce confusion about the disaster loan process and the time frames applicants may experience, the Administrator of the Small Business Administration should ensure the consistency of content across its disaster loan process resources by including in these written and online resources, as appropriate, the following: (1) the three-step process; (2) the types of documentation SBA may request and the general reasons why such information may be requested; and (3) estimates of loan processing time frames applicants might experience and external factors, such as the severity of a disaster, that may affect these time frames using, for example, estimates from its forecasting and related planning tools.
Closed – Implemented
SBA has provided a consistent messaging about the timeframe for making approval decisions on disaster loan applications, including information on its three-step loan process, the types of documentation SBA may request from loan applicants and how the requested information may be used, and customized estimates of the loan processing timeframes--ranging from 2-3 weeks to 4-plus weeks, depending on the expected volume of loan applications and estimated demands of SBA resources. The consistency of SBA's messaging should help reduce confusion among loan applicants about the disaster loan process and time frames.
Small Business Administration To further assist disaster business loan applicants, the Administrator of the Small Business Administration should define technical terminology related to financial statements and other finance terminology on the disaster business loan application forms, in both electronic and paper format. For example, in the online application portal, SBA could incorporate a glossary in the "help" feature. Additionally, SBA could include a glossary in the paper application, so that business applicants who apply by mail can access the definitions as well as the general reasons why such information may be requested.
Closed – Implemented
SBA has developed a glossary of business financial terms that define terminology used in SBA's home and business disaster loan applications and required supporting financial documents. On June 21, 2018, SBA placed a link to access the glossary in its Disaster Loan Assistance website and the Resources webpage of its Office of Disaster Assistance website. Additionally, SBA provided screenshots of its online disaster loan application portal showing that SBA has incorporated a link to access the glossary in the Loan Information section of the online application portal. The development and inclusion of the glossary of business financial terms should assist disaster loan applicants in better understanding the types of information and supporting documentation required of loan applicants.

Full Report

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Topics

AccessibilityBank loansDisaster recoveryDocumentationFormsInformation accessInternal controlsLoan interest ratesLoansPaperwork reductionRequirements definitionSurveysTerminologyCustomer satisfactionInformation resources