Report 8-07 – Review of the Adequacy of Supporting Documentation for Disbursements

This report is the final in a series resulting from our review of the Small Business Administration's (SBA's) efforts to expedite loan disbursements during its 90-in-45 Campaign. The campaign was initiated in the fall of 2006 to disburse funds on approximately 90.000 loans approved for Hurricanes Katrina, Rita, and Wilma within 45 days. We initiated the audit in response to an employee complaint that loans processed during the campaign were disbursed without receiving the required supporting documentation.

We previously reported(1) that SBA had disbursed loans without obtaining all of the documents required to protect its interest in collateral on secured loans. The purpose of this audit was to determine whether SBA secured other documents prior to disbursing loan proceeds. To address the audit objectives, we reviewed general information about 40 of 1,154 statistically sampled loans disbursed by the 10 case managers within the Fort Worth Processing and Disbursement Center (PDC) who made the highest average daily disbursements during the 90-in-45 Campaign. This information included the borrower's name. loan number. and amount of the disbursement. We also examined loan documentation in SBA·s Disaster Credit Management System (DCMS) and the chronology log maintained by the PDC to determine the required documents applicable to each loan. These included hazard insurance, flood insurance. insurance injections, building permits, builder·s risk insurance, worker·s compensation, duplication of benefits declarations. and real estate injection documents pertaining to each of the 40 loans in DCMS. Finally, we interviewed attorneys at the PDC.

We conducted the audit from April through November 2007 in accordance with Government Auditing Standards as prescribed by the Comptroller General of the United States.