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Disaster Loan Accountability and Limits

Full Title:
DLARA

Summary#

This bill, the Disaster Loan Accountability and Reform Act (DLARA), changes how the Small Business Administration (SBA) reports, budgets for, and limits its direct disaster loan program. Its main goal is to increase oversight and prevent the agency from running out of funds for disaster loans without warning Congress. The bill adds reporting rules, requires audits and studies by the Government Accountability Office (GAO) and the SBA Inspector General, and creates a temporary funding-limit rule that kicks in when unobligated loan funds fall very low.

Key changes:

  • More detailed and frequent reporting: SBA must provide stronger monthly reports on disaster loan funding, estimates, and any changes to assumptions. If a report is late, the SBA Administrator cannot use funds for official travel until it is filed.
  • Budget transparency: The President’s annual budget must separately show requested appropriations and 10-year averages for the cost and administrative costs of SBA disaster loans and COVID-era EIDL loans, with explanations for differences.
  • Automatic limits when funds are low: If the unobligated balance for disaster loan costs drops below 10% of the program’s 10-year average cost, SBA must notify Congress within 24 hours and may limit making loans to amounts that require collateral until Congress provides more funds. This limit expires after up to 4 years unless renewed.
  • Oversight studies: GAO must report on how fast loan funds are obligated and how loans are disbursed and the cost effects of two recent regulatory changes. The SBA Inspector General must review the causes of the 2024 funding shortfall and recommend fixes.
  • Forecasting fixes: SBA must report, within 30 days, on corrections it will make to forecasting and budgeting for disaster loans and then update Congress every 90 days until fixes are implemented.

What it means for you#

  • Disaster loan applicants (homeowners, businesses, small farms):

    • You may see more public information about how much money is available for SBA disaster loans.
    • If program funds run very low, the SBA could restrict loans to those for which collateral is required. This could make it harder for some borrowers without collateral to get loans during that shortfall period.
    • If Congress provides more funds, the SBA must obligate and disburse remaining amounts on a regular schedule and within 14 days after additional appropriations begin.

  • Small businesses and nonprofits:

    • The bill could change which loan types are prioritized when funding is low (collateralized loans may be favored).
    • The timing of disbursements and approval could change if the SBA enacts limits while awaiting new appropriations.

  • SBA employees and management:

    • Must provide more detailed monthly reports and budget corrections.
    • Face new oversight from GAO and the Inspector General, plus regular reporting obligations until forecasting fixes are made.

  • Congress and watchdogs:

    • Will receive faster notifications when disaster loan funds approach depletion and new GAO/IG reports to review causes and effects.
    • Will get more detailed budget numbers in the President’s budget for disaster loans and COVID-era EIDL loans.

  • Taxpayers:

    • The bill aims for greater transparency about the cost of disaster loans and why funding needs change. Any direct fiscal effect is not specified in the bill text.

Expenses#

No publicly available information about the bill’s estimated cost is included in the material provided.

Other expense points (inferred from the bill text):

  • The bill requires several reports and reviews by SBA, GAO, and the SBA Inspector General. This could increase administrative and oversight costs for those agencies.
  • The requirement to prepare and update forecasting corrections, and to provide frequent reporting, could add staff time and IT or data-quality work at SBA.
  • The bill does not include a clear estimate of savings or additional appropriations tied to its changes.

Proponents' View#

The bill appears intended to improve accountability and reduce the chance that SBA disaster loan funds will be unexpectedly exhausted. Possible arguments in favor:

  • It would give Congress faster notice (within 24 hours) when unobligated disaster loan funds fall below the set threshold.
  • Requiring separate budget lines and 10-year averages may make it easier to spot and explain unusual budget requests and variances.
  • GAO and Inspector General reviews could identify the causes of past shortfalls and recommend fixes to forecasting and management.
  • Limiting obligations to collateralized loans when funds are extremely low could preserve remaining funds for loans with lower credit risk.
  • Regular forecasting corrections and status updates aim to prevent future funding shortfalls.

Opponents' View#

The bill raises several possible concerns or trade-offs that follow from its text:

  • One concern is that limiting loans to amounts that require collateral when funds fall below the 10% threshold could leave many borrowers without access to unsecured disaster loans (for example, homeowners or very small businesses that lack collateral) right when they need help.
  • The 24-hour notification followed by an immediate limitation could create abrupt changes in loan availability and disrupt ongoing application processing.
  • It is unclear how the collateral-based limitation will operate in practice (for example, how to apply it across different loan types and applicants).
  • Frequent reporting and the required studies could increase administrative burden and costs for SBA, GAO, and the Inspector General without clear estimates of those costs or savings.
  • The bill relies on 10-year averages in budget comparisons. In years with unusually large disasters, averages may understate near-term needs and could lead to overly restrictive actions.
  • The bill does not include a fiscal estimate or specify who will pay the additional oversight and reporting costs.