A complete substitute amendment. V2 significantly alters the accountability mechanisms for SBA disaster loans by removing explicit limitations on loan forgiveness and prohibitions on cost-increasing rules, while also softening mandatory loan limits during low funding periods to discretionary authority. It introduces new GAO reporting requirements on loan account data and a sunset clause for the low-funding provisions, fundamentally restructuring the bill's approach to SBA oversight.
DLARA
- Sponsor
- Sen. Budd, Ted [R-NC]
- Committees
- Small Business and Entrepreneurship Committee (primary)
- Last action
- Mar 4, 2025
Bottom line
This bill tightens oversight and imposes new constraints on the SBA's disaster loan program, particularly concerning funding management and reporting, with a sunset clause on some key provisions.
What it actually does
The bill, titled the "Disaster Loan Accountability and Reform Act," aims to enhance transparency and accountability in the Small Business Administration's (SBA) disaster loan program. It mandates more detailed monthly reports from the SBA on loan funding and expenditures, requires specific budget requests comparing current needs to 10-year averages for disaster and COVID-EIDL loans, and introduces new limitations on loan obligations when funding levels are low. Additionally, it commissions several Government Accountability Office (GAO) and SBA Inspector General (IG) reports to review past funding shortfalls and assess the impact of recent rule changes to the disaster loan program.
Proponents argue
Supporters argue the bill is crucial for preventing future funding shortfalls in the SBA's disaster loan program, ensuring taxpayer money is managed responsibly, and increasing transparency. They contend that recent funding issues highlight a need for stricter reporting and budgetary discipline, especially regarding the long-term costs of these programs. The bill's provisions for GAO and IG reviews will provide critical insights into past failures and help implement corrective actions, ultimately strengthening the program's integrity.
Opponents contend
Critics might argue that while accountability is important, the new limitations on obligating funds when balances are low could hinder the SBA's ability to respond swiftly and effectively to future disasters, potentially delaying aid to small businesses and homeowners in critical need. They might also contend that the increased reporting requirements could impose an undue administrative burden on the SBA, diverting resources from direct disaster assistance and potentially slowing down recovery efforts.
The bill is relatively concise and its provisions are clearly laid out, making it accessible for an informed reader to understand its implications within a reasonable timeframe.
Section 4, amending 15 U.S.C. 636k(a)
Enhanced Monthly Reporting on Disaster Loan Funding
This provision requires the SBA Administrator to submit more detailed monthly reports to Congress regarding the disaster loan program. It removes the previous limitation that these reports only apply during a major disaster, making them continuous. It also mandates reporting on when funding will reach 10% of the most recent appropriation and when it will be depleted, along with summaries of changes to estimates or assumptions. A new penalty is added: if the Administrator fails to submit a report on time, no funds may be obligated for their official travel until the report is submitted.
Supporters argue
Supporters argue this provision is essential for improving transparency and accountability in the SBA's disaster loan program. They believe more frequent and detailed reporting will allow Congress to better monitor funding levels, anticipate shortfalls, and ensure efficient use of taxpayer dollars, preventing situations like past unexpected funding crises.
Critics contend
Critics might argue that the increased reporting burden could strain SBA resources, potentially diverting staff and funds from direct disaster response and loan processing. They might also contend that the travel prohibition for the Administrator is an overly harsh and potentially counterproductive penalty, especially during active disaster responses.
Tradeoffs
The tension lies between the desire for increased oversight and the potential for administrative burden on an agency that needs flexibility to respond to unpredictable disasters.
Section 5, amending 31 U.S.C. 1105(a)
Detailed Budget Justification for Disaster and COVID-EIDL Loans
This section requires the President's annual budget request to include separate statements for the cost of SBA disaster loans and COVID-EIDL loans. For each, it must show the requested appropriation, the 10-year average cost, and an explanation for any difference. The same detailed reporting is required for the administrative costs associated with both types of loans, providing a comprehensive financial overview.
Section 6, amending 15 U.S.C. 636(b)
Funding Shortfall Limitations and Sunset
This section introduces new requirements when the unobligated balance for direct disaster loans falls below 10% of the 10-year average annual cost. The SBA Administrator must notify Congress within 24 hours. During this low-funding period, the Administrator may limit new loan obligations to the amount for which collateral is required. This authority applies to all direct loans and requires disbursement of remaining amounts within 14 days once additional funds are appropriated. This provision has a sunset clause, expiring 4 years after enactment.
Section 9
SBA Inspector General Review of Disaster Loan Funding Shortfall
This section requires the SBA Inspector General (IG) to conduct a review within 180 days of the circumstances surrounding a specific funding shortfall in the disaster loan program, as described in letters from President Biden and the SBA Administrator in October 2024. The review must identify any missed reporting requirements, reasons for diverted expenditures, accuracy of projections, internal controls, impact of SBA reorganizations, and actions to improve information accuracy, prevent future shortfalls, and enhance reporting.
The new requirements and limitations on disaster loans when funding is low (established in Section 6(a)) will automatically cease to be effective four years after the date of enactment of this Act.
Section 6(b)
Why it matters:This is standard legislative practice for pilot programs or provisions intended for evaluation before permanent adoption, allowing Congress to assess effectiveness and unintended consequences.
Case for: Proponents would argue that the sunset allows Congress to evaluate the effectiveness and unintended consequences of the new limitations before making them permanent, providing flexibility to adjust policy based on real-world experience.
Case against: Critics might argue that if the limitations are truly necessary for fiscal accountability, a temporary measure might not provide sufficient long-term stability or address systemic issues effectively.
Estimated impact: Ensures the significant operational changes to disaster loan funding are temporary, requiring future legislative action for continuation.