WASHINGTON — Steven Preston, administrator of the Small Business Administration, sought to reassure employees after a second article in recent weeks from the New York Times criticizing the agency's disaster loan assistance program.
This time, the publication mentioned a supposed probe from federal investigators into accusations that in speeding up its work, SBA made thousands of loans "without following its own rules to avoid fraud." According to the Feb. 27 article, current and former employees of the agency told investigators that agency workers failed to secure proper proof that borrowers owned the houses they were supposed to rebuild or had the required insurance.
SBA Administrator Steven Preston told the publication that "We never pushed for disbursement to be made without the proper documentation" and "Of course we want to get the disbursements out faster but it's very dangerous to assume that this would lead to fraud and losses to the taxpayer."
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In a Feb. 27 memo to SBA employees, Preston said he takes "seriously any criticism from inside or outside the agency, as it is an important way to identify shortfalls and learn how best to serve disaster survivors."
Preston also told employees that when he joined the agency in July 2006, there was a backlog of more than 120,000 approved loans for disaster victims. Today, 22,000 borrowers remain in the process, and most of them have received a portion of their funds.
According to the article, Caroline Pankove, who worked as a lawyer for the disaster loan program at the agency from June through December of last year, complained to the agency's managers and its inspector general that employees were improperly pressured to approve loans quickly. The publication said it also obtained e-mail messages that promised cash bonuses and overtime to the most productive workers.
The New York Times reported that a spokesman for SBA's inspector general confirmed that his office was looking into the accusations, but said he could not comment on a continuing investigation. Agency officials said that they were taking the complaints seriously, but that the problems described by Pankove and others "were isolated, not systemic," the publication reported.
In the memo to SBA staff, Preston said he expected criticisms would come on how the agency is trying to reduce the backlog referencing his State of the Agency speech in February: "[W]e know we will continue to see evaluations of the agency published that are critical and raise issues we need to address…[M]any criticisms will continue to be valid, and an important part of informing the change process is looking criticism in the face and learning from it."
Preston said it is important to quickly "address misunderstandings and inconsistent practices as broken processes are fixed and new procedures introduced. The reforms [Office of Disaster Assistance] is implementing are no exception, just as future agency reforms will be no exception." Preston told employees "the 'federal investigators' the Times says are looking into SBA's processes are from our own Inspector General, reviewing the operation at my request."
This is the second time in recent weeks that the New York Times has published an article on the SBA's disaster loan assistance program. A Jan. 18 article that reported the agency's disaster relief loan program was on the verge of running out of money and could shut down if Congress did not intervene to cover the administrative costs to keep it operating. In a Jan. 19 letter to the publication, Preston wrote, "The funding issue in question has nothing to do with 'budgeting problems' at the SBA. To report otherwise shows a fundamental misunderstanding of the matter."
President Bush has since proposed $329 million in carryover funds for disaster loans, and more than $1 billion in loans in for the revamped disaster assistance program. More than 98% of the 160,000 approved disaster loan recipients have received all or some of their loans, or chosen not to borrow, according to the agency. –[email protected]
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