Title: SBA Disaster Loans--Limiting Duplication of Assistance Description: After a natural disaster, the Small Business Administration helps homeowners and businesses recover by providing loans. While this funding is important, it is not unlimited. And in some cases, survivors may have received duplicate benefits. How is SBA working to prevent this duplication? We find out more from GAO's Courtney LaFountain. Related work: GAO-25-107608, Disaster Loan Program: Enhanced Procedures and Data Needed to Address Duplication of Benefits Released: May 2025 [ START ] [ Courtney LaFountain: ] Managing duplication of benefits is all about being a good steward of the taxpayer dollars. {Music} [ Holly Hobbs: ] Hi and welcome to GAO's Watchdog Report, your source for fact-based, nonpartisan news and information from the U.S. Government Accountability Office. I'm your host, Holly Hobbs. When you think of disaster recovery from events like hurricanes, wildfires and flooding, you might not immediately think of the Small Business Administration. But SBA plays an important role, through loans, in helping homeowners and businesses rebuild after disaster strikes. While this funding is important, it is not unlimited, and in some cases survivors may have received duplicate benefits. Today, we'll learn more about this issue from GAO's Courtney LaFountain. Thanks for joining us. [ Courtney LaFountain: ] Thanks for having me. [ Holly Hobbs: ] Courtney, maybe we can start with, what does it mean when we say a disaster loan benefit has been duplicated? What does that mean? [ Courtney LaFountain: ] So, after a disaster, disaster survivors can get assistance from multiple sources. There's voluntary organizations. There's federal agencies. There's private insurance. There's lots of places they can get help. A duplication of benefits occurs when someone is getting assistance from more than one source for the same purpose, and the amount they're getting is more than they need to cover the cost of addressing that damage. So let me give you an example. Think about a homeowner whose roof has been damaged by a tornado or a hurricane, and it's going to cost them $10,000 to repair the damage. They could file a claim with their insurance company, and they could also apply for an SBA disaster loan. And say they do both of those things. And they get $7,000 from their insurance and $7,000 from SBA. So, they've got $14,000 to repair the roof, but they only needed $10,000. So, this is a duplication issue because they've got more money than they need to cover the cost of the damage. [ Holly Hobbs: ] How does this happen? [ Courtney LaFountain: ] There's a few ingredients that can cause a disaster survivor to end up with duplicative benefits. One is uncertainty. So, after a disaster event, there's multiple sources of assistance, but someone might be uncertain about how much they're going to get from any one source. And there could also be uncertainty about how much it's going to cost to, you know, cover the cost of damages. A related factor is urgency. People want to get the recovery process started as quickly as possible. They want to get their money. They want to start repairing property. Sources of assistance want to give them that money as quickly as possible. People don't necessarily want to wait until they know exactly the full extent of the damage and exactly how much it's going to cost, because that could take too long. And then a third factor is complexity. So, right, getting assistance is a process. You might have to file an insurance claim. You might have to make a loan application, file for a grant. There's some processes to navigate that people might not be super familiar with. And they're doing it for like multiple sources. And so just the nuts and bolts of actually receiving assistance could be complex. [ Holly Hobbs: ] So it's not necessarily intentional or on purpose? [ Courtney LaFountain: ] So basically there's just a lot of moving parts. And there could be a situation where someone is purposefully applying for more assistance than they're eligible for. But there's also factors that can create a situation where someone ends up with more assistance than they need, but not on purpose. [ Holly Hobbs: ] Do we know how often this happens? [ Courtney LaFountain: ] So, we worked with SBA. And we looked at loans where SBA had started disbursing funds to the borrower sometime between June 2020 and December 2023. And there's about 90,000 loans that fit that description. And what SBA found is that they had flagged about 2,000 of those loans for duplication issues. That's about 2% of, a little more than 2% of the loans we looked at. So, one caution I'll give you there is that--we don't know if that's typical for loans that SBA started disbursing at other times. And we don't know if it's typical for disaster assistance in general. So that rate could be bigger or smaller in different circumstances. [ Holly Hobbs: ] So disaster strikes, and things are moving quickly, and someone receives a duplicate loan or duplicate benefit--what happens then? [ Courtney LaFountain: ] When SBA identifies that someone has received duplicative benefits, they notify the borrower and provide them some options for correcting the issue. So here it helps to know that SBA disperses its disaster loans in stages. So you don't get, you know, typically don't get all the money all at once. So, if they've already given out the full amount of the loan, then they might need the borrower to pay some of that money back. If, they haven't fully disbursed the loan, then they might just not give more money to the borrower. And then a third option, of course is that a borrower has an option to demonstrate that their eligible losses are actually bigger than everyone originally thought, in which case they actually are entitled to that extra amount. So, those are sort of three of the options for correcting a duplication issue. [ Holly Hobbs: ] What is SBA doing to prevent this from happening? [ Courtney LaFountain: ] So SBA is taking multiple steps to prevent these duplication issues from happening in the first place. So first off, SBA has loss verifiers that help estimate how much it's going to cost to repair certain damages. And then when someone's applying for a loan, they're supposed to inform SBA of all the other sources of assistance they're getting, you know, from private insurance and FEMA and, wherever else. And SBA loan officers, check on that information. And then borrowers are also supposed to keep SBA up to date if there's any changes in assistance amounts from other sources. And then the last thing, SBA has data sharing agreements with other agencies, which might be providing disaster assistance. So, it can figure out directly from that provider how much someone is getting or if they're getting any assistance without actually having to go to the borrower. So, they have a data sharing agreement, say, with FEMA. So they can just contact FEMA directly and figure out who's getting FEMA assistance and how much they're getting. And so that's another way they can prevent duplicative benefits. [ Holly Hobbs: ] Well, I'm glad you brought up FEMA, because it raises this question--to duplicate a benefit, there has to be other benefits coming in and SBA isn't the only agency out there providing help. But we only looked at SBA. So, I guess I just want to know, is it only SBA's responsibility or are other agencies checking too? [ Courtney LaFountain: ] Great question. Short answer is yes. Multiple agencies are available to help people after a disaster. But that also means that multiple agencies all have to be responsible for managing duplicative benefits issues. So right after a disaster, the first the first sources of assistance are voluntary organizations and private insurance. And then FEMA assistance typically comes next. And then SBA loans. And then there's some additional federal agencies and other volunteer organizations that might have assistance available after SBA. And so you can just think of this line and everyone, all the agencies are responsible for making sure that their assistance doesn't to duplicate benefits from anyone who came before them. So, we just looked at SBA's part in this process. But it really is, a responsibility of all the agencies that are available to help people. {MUSIC} [ Holly Hobbs: ] So after disaster strikes, the Small Business Administration provides important resources to help people and businesses recover. But sometimes, this assistance is duplicated even when SBA is working to prevent that from happening. Courtney, what more do we think SBA should be doing about this issue? [ Courtney LaFountain: ] So there's a couple of things we think SBA could do. First of all, we think they could improve their written procedures for fully resolving duplication issues. So, we know that when SBA becomes aware of a duplication issue, it notifies a borrower and provides them some options, but it doesn't have any written guidance to help its loan officers take steps after that initial notification. So some written guidance could just help ensure that the loan officers are consistently and appropriately following up and making sure cases are fully resolved. The other thing we think SBA could do is improve its data tracking and reporting capabilities. This is going to get a little wonky. But bear with me. So SBA does keep track of kind of critical pieces of information associated with duplication issues. But it keeps them in narrative text fields. So, I'm talking about things like whether or not a borrower needs to repay money to SBA, how much it needs to repay, whether they've actually repaid the amount. Key pieces of information to make sure you're resolving the issue. It does keep this information. But it keeps it in a narrative text field. And so someone would have to like, manually read and review those text fields to sort of pluck out the information. And that means it's going to be hard for SBA to ever get a summary of what's going on for its portfolio of loans as a whole. So better procedures, better data. We think those two steps would help SBA better manage its duplication issues. [ Holly Hobbs: ] And last question what's the bottom line of this report? [ Courtney LaFountain: ] Managing duplication of benefits is all about being a good steward of the taxpayer dollars that federal agencies use to help people after a disaster, and just ensuring that they can help as many people as possible. [ Holly Hobbs: ] That was Courtney LaFountain talking about her new report on SBA disaster loans. Thanks for your time, Courtney. [ Courtney LaFountain: ] Thanks for having me. {Music} [ Holly Hobbs: ] And thank you for listening to the Watchdog Report. To hear more podcasts, subscribe to us on Apple Podcasts, Spotify, or wherever you listen. And make sure to leave a rating and review to let others know about the work we're doing. For more from the congressional watchdog, the U.S. Government Accountability Office, visit us at GAO.gov. [ END ]