SBA and CDBG-DR Duplication of Benefits in the Administration of Disaster Assistance: Background, Policy Issues, and Options for Congress

Summary

Numerous nonprofit, private, and governmental organizations provide a wide range of assistance after a disaster strikes. Section 312 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (P.L. 93-288) requires federal agencies providing disaster assistance to ensure that individuals and businesses do not receive disaster assistance for losses for which they have already been compensated. Duplication of benefits occurs when compensation from multiple sources exceeds the need for a particular recovery purpose. Recipients are liable to the United States when the assistance duplicates benefits provided for the same purpose.

The combination of any type of disaster assistance can cause duplication. This report focuses on duplication of benefits between the Community Development Block Grant Disaster Recovery (CDBG-DR) grant program and the Small Business Administration (SBA) Disaster Loan Program. Key areas of congressional concern over the past decade with respect to the two programs include:

despite quality checks and audits, agencies continue to provide duplicative disaster assistance to individuals and businesses;

duplication assessment and collection process costs often exceed the money recouped;

the execution of the required delivery sequence can be complex and confusing because a multitude of assistance sources can be difficult to coordinate and monitor;

the execution can also be complex and confusing because CDBG-DR is not listed in the Federal Emergency Management Agency’s regulatory sequence procedures;

benefits stem from multiple authorities subject to different interpretations;

federal guidelines regarding the process that states may follow in an effort to minimize potential duplication of benefits in the awarding of CDBG-DR are advisory and are not mandated requirements. To some this gives states too much flexibility to determine who is eligible for CDBG-DR;

disaster victims are sometimes unaware that they received an improper payment and, in some cases, receive collection notices well after they had spent the money on recovery needs.

Equity concerns also stem from the duplication of benefits. These include:

that CDBG-DR is not provided for all disasters. Consequently, some major disasters may benefit from CDBG-DR while others may not—even if they have similar losses;

in most cases, SBA disaster loans can be provided more quickly than financial assistance from a CDBG-DR grant. As a consequence, it is possible for some homeowners to receive an SBA disaster loan and later be deemed ineligible when applying for financial assistance from a CDBG-DR grant due to duplication of benefits requirements. To some, it may appear that homeowners who took initiative to repair and rebuild were unfairly penalized.

This report provides a brief description of the SBA Disaster Loan Program and CDBG-DR. It lists relevant authorities, and highlights policy considerations. The report also explores a number of policy options Congress might consider when addressing duplication of benefits issues related to SBA disaster loans and CDBG-DR. These policy options include

requiring FEMA to clarify the regulatory delivery sequence to help eliminate potential confusion;

prohibiting SBA disaster loan recipients from receiving CDBG-DR assistance or developing other policy options so that CDBG-DR assistance is awarded uniformly;

establishing CDBG-DR assistance as a permanent disaster assistance program;

replacing suggested guidelines for the disbursal of CDBG-DR with requirements;

investigating the use of a centralized database to identify duplication of benefits more effectively.

This report will be updated as events warrant.