Facing a congressional inquiry, the Small Business Administration said Tuesday it believes it followed the law during its nearly $5 billion lending effort to help small companies recover from the Sept. 11, 2001, attacks.
To make its case, the agency distributed one audit that praised some of its work while omitting a second report by the same congressional auditing agency that criticized the SBA’s post-Sept. 11 relief work.
The SBA was responding to an Associated Press story last week that found numerous loans went to small businesses that neither knew they were getting — nor wanted — loans designed for economic victims of the terrorist attacks.
AP reported companies hundreds of miles from the devastation of ground zero — from a Utah motorcycle dealer to an Ohio Subway sandwich shop — had received SBA-backed loans without being aware they had been drawn from the Sept. 11 relief programs.
“After 9/11, the SBA was doing all it could to help small businesses, not only in the areas directly affected by the terrorist attacks, but across the country as well,” SBA chief Hector Barreto said. “We are confident the SBA implemented the program in the way Congress intended and did so in an open and above-board manner.”
Barreto described the AP report as “sensational and distorted,” without citing any specifics.
Sen. Olympia Snowe, R-Maine, chairwoman of the Senate Small Business and Entrepreneurship Committee, said the apparent abuse of the program was “nothing short of an outrage.” Sens. John Kerry, D-Mass., and Hillary Rodham Clinton, D-N.Y., also called for investigations.
The SBA circulated an August 2004 report by the Government Accountability Office, Congress’ auditing arm, that concluded the SBA had followed its rules in one of the lending programs.
“No qualified loan applicants for SBA disaster relief after the 9/11 terrorist attacks were denied loans,” the SBA said.
But the audit it cited was undertaken in response to complaints that more should have been done for affected businesses. The report also only looked at lending procedures under SBA’s Economic Injury Disaster Loan (EIDL) program, which accounted for slightly more than $1.1 billion in direct government loans.
Many of the loans cited in the AP story came from the SBA’s Supplementary Terrorism Activity Relief (STAR) program, which accounted for roughly $3.7 billion in guaranteed loans that were distributed by banks.
The SBA’s press release also omitted a second GAO report, from January 2003, that rapped the agency for using “inconsistent and subjective measures” to gauge the success of its disaster-relief efforts.
“The inadequacies of SBA’s measures are especially evident when considered in light of the agency’s performance in responding to the Sept. 11 terrorist attacks,” the second report concluded.
That report also noted that “business owners testified that SBA’s existing disaster program did not have the ability to provide adequate loans to small businesses within the disaster areas.”