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tv   SBA Inspector Gen. Testifies on Management and Performance Challenges  CSPAN  January 13, 2022 11:53pm-1:52am EST

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next a hearing on the challenges facing the small business administration in the coming year. the topics included a pandemic relief programs for small businesses and staffing and resource needs.
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we have an objection. arise to declare recess at any time. i would like to begin by noting. let me begin by saying the committee rules and practice will continue to apply during the proceedings. all members are reminded that they are expected to appear. house regulations require
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members [inaudible] so please keep your cameras on. if a member and counters technical issues that prevent them from being recognized for questioning the rules to the next available member of the same party and i will recognize that member at the next appropriate time slot and present in the committee room today. in accordance with the pending positions most recent guidance to all members and staff who attend this hearing in person will be required to wear masks in the hearing room and now i will move to my opening statement. first i would like to welcome the inspector general. thank you for being here today.
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your work has been indispensable. you should be proud of your efforts to the businesses. reporting on the management this year's report covers many long-standing issues and also it calls attention to the biggest challenge facing the agency. the pandemic relief program. 2020 the sba distributed nearly $1 trillion in economic relief. this figure surpasses the demand of money distributed and all other years of sba existence combined. this is an enormous achievement that helped keep millions of
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small businesses afloat during the pandemic. however, with any emergency effort of this magnitude, problems inevitably according to investigations the paycheck protection programs have been vulnerable to fraud. this can be traced back to the early days of the pandemic when problems were new, volume was high and they needed to get it out quickly was a priority. the report also notes that in 2020 the previous administration relaxed internal controls adding significant stress to the system and creating an environment ripe for fraud. the committee has worked diligently to conduct oversight and institute legislative fixes to address this problem.
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we've conducted hearings, letters, house briefings and past deals. and shorting money is going to small businesses that need it the most and not the bad actors. taking office in january the biden administration has demonstrated its commitment to ruling out fraud. the administrator inherited many recommendations from the oig. under her leadership, the sba has crossed out 75 recommendations this year alone. expecting to short off the fraud protections and critical programs that include implementing a review plan for loan forgiveness applications in the program and allowing the
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agency at any time in the process. the agency now also ensures that all borrowers are not on the treasury department [inaudible] list. these are just a few of the actions that help reduce fraud. so i look forward to continuing our work with the administration on this front. at the same time, the report covered other critical issues unrelated to pandemic relief. this includes challenges and small business, it security, access to capital and the disaster. addressing this will require sustained work on the bipartisan basis from the committee. i hope that today's hearing allows the us to take a close look at all of these issues and discuss bipartisan solutions to fix them. i would now like to yield to the
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ranking member for his opening statement. >> thank you madam chair and thank you for calling this hearing. welcome, inspector. always good to have you before r us to explain what's going on. before we begin i also want to thank the chair man for the changes in the order in which members. this is an important announcement i'm thankful for your action and i know members appreciated going back to regular orders and methods in the rules package. i would like to take this time to recognize and congratulate the committee's chief counsel on her upcoming retirement. a stall work for small businesses for years and has worked in public service for decades from her time with now senator portman to working at the white house and to her time, her services committee. the guidance and counsel for the past 31 years has always been welcomed by the several chair
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man and many committee members that she has served. thank you for the thoughtful insight, and analysis and especially those pertaining to regulations and its impact on small business. thank you very much. [applause] now as we start the second session of the 113th congress it is important that we begin with a discussion on oversight. roughly $1 trillion in assistance provided to the patient's smallest firms through the small business administration we must exercise the oversight responsibilities wisely and often. it just isn't dollars flowing to small businesses. there are new programs but also require our attention. that's why i'm thankful we have today's conversation with the inspector general. congress moved quickly to support the nation's economy with hundreds of millions of dollars in small businesses. some of the programs like the paycheck protection program which was by the private sector lenders focused heavily on the
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nation's workers. other programs that were administered directly through the sba moved slower and were overall less successful. fraud took place and taxpayer dollars continued to be wasted. ig reports approximately 4 billion in fraudulent activity in the paycheck protection program the economic injury disaster loan program is enmeshed in roughly $84 billion of potentially fraudulent activities. the only gatekeeper to the program and antitheft for businesses and individuals in the program is a major problem. differences on how the programs were run cannot be overstated and they should serve as case studies for future public policy debates on how they should run in its programs.
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asking them to expand or enhance the direct lending ability would be counter to the facts that we have on the ground. beyond the programs we know the sba struggled with identifying risks within their access to capital programs but we are seeing the contracting programs and updating and keeping peace pacewith the information technoy needs for years. the emergency period has compounded all these programs and challenges. i say when you put something under stress that's when you find out where the problems are and obviously with this covid situation and taking on a tremendously increased workload, we now know where a lot of problems are. more businesses know about the services and functions than ever therefore they must be ready to serve and assist small businesses all the while protecting taxpayer dollars and preserving the integrity of the existing programs. small business owners don't have time to waste they are facing significant price increases and having trouble finding workers.
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unfortunately it doesn't end there. they continue to work through planning and uncertainty in the vaccine mandate is ever present. now more than ever the programs cannot be duplicative, wasteful or counterproductive. i look forward to hearing more on where fraud stands today in the programs and update on all recommendations and what programs they will be examining next with such a significant amount of potential, clogging the process for small businesses i know the discussion will not end here. it will require an ongoing effort for years to come. with that i will look forward to working with you this year and to continuing to work with the inspector general and to that end i want to give you this letter that is a list and we can give that to your staff. a list of some of the witnesses and topics that i think would be impactful and helpful to us in the legislative and oversight work and with that i will yield
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back and look forward to working with you in the coming year. the gentle man yields back and with that i will now introduce the distinguished witness the auditable inspector general of the sba. sworn in as the inspector general in may 2018 and has been an effective leader in his role and to the committee. nearly 30 years of experience in the ig community rooting out fraud, waste and abuse. welcome. you are recognized for five minutes. >> thank you and good morning. distinguished members of the committee thank you as always for inviting me to speak with you today and for your support of my office. it was my hope that my next appearance before the committee would occur with the pandemic in our rearview mirror.
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however the pandemic has been lasting with ever changing challenges. sba has played a pivotal and unprecedented role in stabilizing the economy. the men and women who've been on the front lines and directly met the needs of millions, they sacrificed their time and work long hours to implement these programs on an unprecedented scale. not only do we thank them for their hard work but there are countless whistleblowers who come forward to shine the light of transparency on matters that they believed were a concern to stewarding the taxpayer dollars. we thank them not only for their hard work but for their courage and that their sense of duty to the nation. the men and women in my office have been working diligently to provide oversight investigative responses and never lost sight of the small business owners and their employees with financial hardship but in many cases personal loss as a result of the pandemic. we are aware nothing short of
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the public's trust has taken the effort in the oversight efforts. we've already issued 18 reports with dozens of recommendations for corrective action. our investigative work today has resulted in 366 indictments, 294 arrests and 142 connections related to idle or ppe. from the oversight of the pandemic response efforts in fiscal year 2021 alone was $4.2 billion with congress investing just 50 million in supplemental funds in the oversight effort and the work has just begun. a significant portion of the supplemental funding will be exhausted by the end of fiscal year 2024. which will coincide with hundreds of billions of dollars in idle loans for payment. we anticipate this would be the key moment for realizing the scope of the fraud in the program which already is
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expensive. we believe the annual resource levels will need to be recognized to provide the necessary oversight of challenges in the years beyond the pandemic response notwithstanding the challenge they sought opportunities to more effectively and efficiently carry out the mission to provide oversight in real time producing reports in under two months and in doing so the community took note to develop a toolkit to all across government. the result of the innovation is that we proudly have the stakeholders and the public currently and fully informed of the sba response efforts. i'm also happy to report that they've taken significant strides in leveraging the data analytics to oversee these loan portfolios. moving from the posture to leveraging artificial intelligence and machine learning to get in front of the fraud and expand the reach of the oversight.
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in the dealing through the pandemic i've never had a reason to doubt the commitment to providing assistance to the nation's small businesses. in terms of characterization of the response to the findings related to the pandemic response it is my perspective that there were missed opportunities to recalibrate the total controls and implement the corrective action in a timely manner of the pandemic responses. this has changed significantly as we work more closely to implement the proper controls from the onset of new program start ups. we are committed to providing an objective oversight of the program and operations and in doing so continue to shine the light on the transparency and work diligently to keep everyone informed. thank you for the opportunity to speak with you today. i'm happy to answer any questions that you may have. >> thank you.
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this administration is implementing the recommendation. is this administration cooperating with of the audits and investigations if i could say unequivocally the leadership currently has taken recommendations quite quickly to resolve them. the briefing to the committee you indicated the
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recommendations how many remain? >> at this time i believe that number could be 20. i could get back to you on the exact number. half of the number that remains open hasn't quite come through yet. the date for another set of them passed just december 301st and we may have the information but we are not reconciling that information yet to give an update as to which one can be close. >> at the beginning of the pandemic leading to fraud control the current administration put guardrails back in place to prevent further fraud and abuse.
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under the previous administration. to answer the question directly, we are in the process of reviewing as a matter of fact, two reports should be addressing the questions more directly what is done differently in terms of this leadership team was in upfront focus that included what was best to be put in place prior to setting anything else up.
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>> how does this create the program to provide the capital to small businesses suffering economic injuries to the pandemic? in creating this program to acknowledge the private sector would struggle to deliver relief to small dollar borrowers quickly. given the emphasis on the delivery of funds and the approach. to totally completely different animals it's a difficult based on the evidence that we have to
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make a comparison end of the any of work definitely says the programs have had issues in terms of a fraud environment but so have the programs as well we have our own issues with them to make up a comparison because of so many different aspects that have to be considered we are focused primarily based on fraud risk even the stark differences and goals in the two programs. >> i believe they have to be considered if you are going to do a comparison and from an inspector general perspective
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the environment that would tell the tale. >> now i recognize the ranking member for five minutes. >> by discussing some of the numbers it looks like there's approximately $80 billion of fraudulent activity out of the 4.6 billion within the ppp. the programs have different mechanics as you've just described but i think contrary to the points of the chairman, there are some similarities and direct lending programs but they
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were done in a different fashion from the standpoint that they had the private sector and some folks and i think the difference correct me if i'm wrong but this is my question it would appear to me the regulations process controls or is not followed by the sba folks when it comes to the idle program and some of the other programs they implement versus the banks and credit unions with the laws in place that minimize you look at 4.6 million in ppe that's roughly 5%. would you agree with that?
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>> i would agree that it's a dealing with of the lenders it meant they had more of a relationship and they were able to let us know from the onset where the issues were to pull back a whole lot of the money. that was the reason we ended up with what we had. >> so it begs the question how did it get put back up. >> the guard rail was taken off.
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>> i'm going to follow up with regards to the ppe i looked at this discussion before and we found that a lot of the fraud in the program they didn't have the know your customer law in place and didn't really take the precautions to make sure the installers were going to a real person and this was a duplicate of action on the part of the borrower so you were telling me in earlier conversations he had reports that it was kind of the problem. have you seen it continue to be the situation do you see something different now or where are we at with this? >> where we were seeing the most fraud was a great percentage of those that had to deal with.
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not saying that if the proper controlled environment is in place that would be the case but that is what the evidence demonstrated. i know the chairman asked a number of times about the recommendations that you are making and it seems that they are making some progress which is great. i know the last time we talked there was some concern and at thesba administration would put that in place but the staff wouldn't execute on those recommendations. have you seen that in prove, is it still going on, what are you seeing? >> these things normally take
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time to happen in earnest. if not every person conducting a review what is currently in place we are finding in some instances it happens and others it doesn't and we fly into that in just about every program and adhering to the recommendations and now we have other people that aren't. they have to shape up or ship out. >> time has expired, but i will let you answer the question.
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>> in terms of what people need to do further team i don't believe that we now have someone that is willfully doing a poor job i wouldn't want to categorize it in that way and we have worked coming out on that very shortly. >> we have a problem. >> time has expired and now we recognize the gentle lady from illinois. >> thank you madam chair and ranking member this is a great discussion today. thank you for executing this daunting task it doesn't fall short on us that this is a
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complicated action that involves actions that took place two or three years ago so this forensic task force has been helpful but realizing that it's tough so i want to make one comment and clarify something because i want to clarify with you you were investigating potential fraud and they are relative to potential fraud not proven fraud. >> in terms of the investigations that are two different things, clearly in terms of the audit findings those were potential. we have not reviewed on the entire package yet to determine what is the actual fraud. we do know anecdotally it's very likely fraud because the cases and criminal convictions speak directly to the patterns that we document has potential fraud.
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>> thank you for clarifying. tell me a little bit about this. i've done this in business before so i like the product model. can you share more about what is in that kit? >> it's a way for you to identify and focus on a single question or to notify management and leadership with serious crucial problems that they need to take action on immediately. so in the case of idle for example, once we start to see the trend as we got to the table with the leadership team. while the team was working together told of them listened, would you need to put a stop to this right now we need a system of control that can identify these duplicate ip addresses and
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it's like three or four it needs to be addressed right now and we tried to get that. the information in the media and the public sees the entire thing they can respond to within 30 to 60 days. >> that sounds like it's working in real time which is what we want. we don't want to lose more time. one is data integrity. on the visit i guess it was probably in the first quarter, it was clear there was data integrity issues. can you share with of the committee what has been done the last three quarters to address the data integrity issue? >> what we found working with initially of course the things that came in completely broke the system so since that time they were a third party contractor that has done a great job in terms of cleaning up the data and as you know monthly
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they put out these things. there is one i'm trying to remember that has to do with congressional data that we are looking at right now so we are in the process of determining just how clean it is. >> and i will look forward to that report. finally, which of all of the loan programs did you find the least potential fraud and why do you think that it did the best? >> the least potential fraud of course was found in the paycheck protection program and i believe one of the reasons was because they knew their customers so they were able to ask the right questions off of that and put a stop to it prior.
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we got it within the first week or so like 5,000 contacts with banks. we knew there was a problem and they had it been a great partner in terms of having the funds returned. >> thank you for that and your work on this and i will say again thank you for going back to two or three years prior to this absolving some of the issues that arose at that time. appreciate your work. >> the gentle ladies time is expired and now we recognized the ranking member of the committee. >> thank you madam chairwoman and the ranking member and listening to this already how the committee and agency is so political and the small business owner is getting squeezed. this again will have to change.
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your report on almost every one of the programs but we talked about there's been nearly 80 million in fraudulent activity that leads to questioning the ability to carry out or set up new programs in the future they are unable to properly account for taxpayer dollars in the mainstream businesses needed most and they demonstrated their inability to discharge emergency lending at every single term yet my democratic colleagues want to expand the lending authority and kind of reward bad behavior even when the private sector has proven willing and able better suited to take on these efforts. the private sector always does it better. why should we expand direct lending authority to the sba with evidence that you talked about today has proven that they were unsuccessful and improperly executing the release program. >> thank you very much for that
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question. the question as to why should you do that is a program question that the ig is prohibited by law from responding to. i could tell you what our body of work talks about in terms of an internal control structure and the proper internal control structure regardless of which way this congress or the administration determines from a policy perspective is what is most critical in my eyes. >> during the pandemic various federal agencies were tasked at getting money to the american people asbestos possible. it seemed to be one of the worst of distributing the saving loans for the last two years. the venues operated grant program was from the act took
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over six months from being signed into law before a single dollar was dispersed. other entertainment venues across the country struggled to stay in business where they selected the administrator that hasn't been held to these catastrophic failures and people lost jobs. futures were torn apart so based on the fundamentally unprepared to perform their duties are indicative of the challenges over the basic incompetence and lack of leadership because of these embarrassing rollouts of the events and life-changing events for small business owners. >> that's a pretty simple question. >> again i go back simply to the work that we've done. we put out on the control environment and tracking performance results in that
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program. in terms of the framework that we ask them to put in place, the performance goals we know they put those items in place relative to the rollout of what happened and who is to blame and everything for the delay, we haven't looked into that. we have another report on svo g that should be out shortly. >> you could not get anybody
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so meanwhile members of this committee such as myself were stonewalled and did not receiving answers until october when our concerns were really present. as members of this committee we are charged and that we find a lack of communication troubling. do you have any information of the lack of communication with borrowers or lenders of this community? we are customers and you have to take care of your customers will your office commit to looking into the efficiency and effectiveness of the communication with stakeholders? >> definitely anything that is a concern taken seriously by my office and if there is a request you would like to put forward we can. >> i just did.
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>> the gentleman's time has expired we recognize the gentle lady from california for five minutes. >> i'm so glad to hear your office will continue to audit the ppp program. as you know in order to qualify for total loan forgiveness the employers have to extend 60 percent of ppp proceeds on payroll i heard from labor unions with hospitality who made very concerning allegations of several major hotels in the area including marriott members experienced widespread layoffs at the start of the pandemic they get the employer still receive millions of ppp loans and applied for forgiveness.
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it's not clear how they would have met those requirements after laying off all of their workers so they have complaints to oig but they have not been contacted yet. can you talk about responding to complaints regarding ppp forgiveness and tens of thousands of complaints coming in will your office need assistance to investigate these claims in a timely manner? also in the hospitality business the allegations are made of larger employers of those worth millions of dollars. so are you planning to establish a dollar threshold over which recipients receive more quick. >> thank you. let me start that you are
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correct there are tens of thousands. >> we tried everything up front including we assigning staff and help from ten different ig offices. so now we have moved to a more data driven model. but my office developed a system where we could categorize and do some triage to get these things out to the field. and to get a public award for innovation and we're still working on it. as a matter of fact, it's my hope if i am in front of you in 30 days i would tell you
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there is no backlog everything has been addressed. so the issue is we have investigated staff at 180 and my investigators carrying a huge workload across the entire law enforcement landscape. the process of getting back to someone the people that you spoke about. but we don't provide case updates. so that's the process. >> i also asked about thresholds and how you are
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insuring. >> as you are aware all that criminal investigation with the department of justice. and then to the thresholds for our community. the focus right now and that might pop off. monthly providing an update with the convictions may be a small dollar amount and others with large dollar amounts. those would spill into what we're looking at with natural outpourings of that. >> your time has expired. we recognize the ranking member.
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>> and just as an oversight hearing with united states treasury the department of ppp as you well know secretary yellen has been requested long required to appear before this committee and twice on an annual basis but has yet to appear. do you have conversations with secretary yellen and informed her that she is ignoring our requests to appear before this committee and answer the important oversight questions? >> no i don't. my oversight is within the sba.
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and every other week. >> ppp falls within your wheelhouse as well. as far as insight and answers would be helpful as well as this committee. so with the loan program perhaps appropriately named unfortunately. the thing is was $80 billion in front over $260 billion of loans that is an outrageous figures here as well as taxpayers. ppp as you offered. that was far more successful $900 billion of loans with four.6 billion of potential
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fraud. a far better ratio for legitimate loans. and with the private sector. and even to expand the sole lending vehicles by members or colleagues on this committee or even your office that something you expand lending vehicles solely through the sba resources as opposed on advocating for such vehicles to be expanded to the partnership of the community bank such as the ppp loan was handled? which would you prefer? >> in my role and i rely
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solely on the work by my office to inform this congress and the people who set up policies and those who set up programs on what you have before you. there are a lot of moving parts to make a determination into that. >> you are in charge. we need your input what is most effectively carried out by the sba. please keep that in mind. let me just ask you that as well. but are you comfortable at this point with the loans being made as brought up with additional safeguards in place
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so that far does not continue? >> and with the onset and then initially it was dependent on sub certification. and then the type of data they are processing from the irs directed much of it. and we are in the process to make a determination with that landscape change and to the
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american taxpayer. >> i yield back. >> thank you madame chair. in the past you quoted many nations critical so how has the sba in dealing with them with the workforce challenges and please share with the committee the progress that has been made in this area. >> thank you for that question. i think i have to get back to you on that because i don't think i have the current work that informs that but i do know my people ask questions
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like this regularly. i know i have seen from the chief human officer here that they have put together plans to address that. we have not reviewed those plans as of yet. >> and then contracting with the government and in recent years to be successful. and 22 percent of all contracts how is that process proceeding? determing me on —- determining the percentages quick. >> exactly.
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and then to go back-and-forth with how they calculate those percentages. including how they run the numbers. one change that they had been transparent and coming up with that percentage. >> remember they are responsible for ensuring all government agencies are calculating the same way to make the percentage but the improvement is we know how they do it. >> thank you madame chair. you are recognized. >> you are recognized for five
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minutes. >> thank you madame chair. thank you so much for making yourself available on such an important topic and for you and your staff that you have been doing. spend spending some in-depth time and you have several challenges for the sba economic relief program to significant fraud risk and then in accurate procurement data and eligibility concerns through contracting programs undermine the reliability and sba never on —- has significant challenges and security controls. challenge number four sba risk management and oversight practices need improvements to ensure that challenge number five that management of
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business development program needs improvement and challenge number six identification of proper payments with the sba loan programs remain a challenge number seven with the disaster resistance a program must have competing priorities to have prompt assistance and prevent fraud and challenge number eight it needs robust grant management oversight. these challenges are significant for anyone in the institution let alone the sba. doesn't have the necessary infrastructure and wherewithal and then the direct business lending? >> our goal.
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the agency and the department we are responsible for. i believe that men and women of the sba up to task. and that type of system that changes to detail in the document put in place. and then to have the assurance there is more integrity and these programs. is probably better i stop there but i do believe the sba has the capacity to run the programs they are charged with. >> and to spend many years as a loan underwriter and then
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with taxpayers money. and frankly for the american people overall is if the sba has a track record who will carry the losses when the sba gets it wrong because there so many challenges in the infrastructure? here and issue bears the real burden from sba if they don't have a second writing capacity outlined in your report? >> who with it? >> who bears the responsibility for dollars lost? >> . >> and the direct lending
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program. and the agency pays the guarantee. >> and frankly we both knew but it is important for all members of the committee number on —- the matter what side you are on that even though there are some good intentions to see the sba engage in for the various of businesses in our country that the sba is nowhere near capable from the capacity standpoint to address those needs especially with the ppp program and the existing loans there is a lot of work to be done they are nowhere close and in my view to radically change the mandate into direct
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lending to cause significant problems and to exacerbate the problems it will not fix them but to be right back here. i yield back thank you so much. >> now we recognize the gentle lady from pennsylvania for five minutes. >> thank you madame chair and for your diligent work to oversee the unprecedented response to the covid 18 pandemic and went to take my upper time and how we can apply lessons we have learned from the pandemic to future disaster relief programs. many small businesses in my community have been seriously impacted by the damage recently caused by hurricane ida and my community is under a federal state of emergency. some have found quickly others are less fortunate and those
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faced with damages to equipment on top of economic pressures from the pandemic the veteran owned small business opted to close doors for good that they simply do not have the capital to apply for the sba loan or the capacity to take on another bill to pay without the possibility of forgiveness. unfortunately the situation is common between 40 and 60 percent of small businesses never reopen their doors like hurricane ida. following the hurricane was where is ppp for natural disaster? i agree. why don't we have loan forgiveness like enter ppp for small business impacted by natural disasters that are increasingly more common? and with those positive aspects to make improvements where necessary and ensure
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small businesses have the support they need to recover from all disasters whether related to public health or climate change with this context in mind i'm interested in learning more from you how we can appropriately balance the need to get into the hands quickly while understanding certainly the prevention can require a deliberative review. has the sba and your organization examines the tipping point getting businesses in a timely manner while rooting out cases of fraud and abuse? are you not just looking at cases and addressing if they are fraud or not that trying to catalog and so that we can take the good of the ppp program and apply it to other uses? >> thank you for your question. please know that that is a
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major focus of my office to put out 18 different reports on the pandemic program. found the for the very first loan issued so what needs to be done? how you need to communicate to folks to know they are doing? this is a major part of what we are looking at and i have sought to do this across government in my role. we are going to work on a document that tells an entire disaster and that the lesson that we learned this time around are there forever so we don't make the same type of mistakes again. so yes that is a huge focus and has been from the beginning.
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>> are there any aspects of the responsibility to be helpful to modify a ppp to end up with a disaster program quick. >> as a matter of fact we worked closely with the reports where legislation is put in place for our findings. and this has been on top from making immediate changes. >> i only have 40 seconds i would rather not ask my second question i don't believe we have time for an answer but with my limited time come i am an entrepreneur of a midsize business and the most remarkable things ever happen
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is when a company is under duress. we experienced extreme duress due to covid and the innovations that have resulted is like that ppe ostp program that definitely have seen some abuse but we need to make sure we are taking advantage of the innovation figuring out how to take advantage of the neural pathways and their banking institutions and to make sure we can use those innovations for the stressors of natural disasters as well. >> thank you very much madame chair. and then to ask and answer
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important question. so what number of recommendations do you make to the biden administration have yet to be closed out? >> so that exact number of the recommendations i could get back to you really quickly. >> has the agency explained why? >> it's important for me to know this. but then to close out the majority of the recommendations. there are not that many outstanding having to do with those recommendations were. it's like 110 recommendations 60 or 70 had to do with the financial statement audit and
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so to move ppp and the program that we issued we close those out. there's only a few remaining. most of them the date has not, when they are to be closed. >> my time is limited. you mentioned the sba have partially or totally disagreed with some of your recommendations. what procedure is in place that occurs if they do not support your recommendation? do they remain open? >> no. both the agencies to get these closed out. we have a process in place to make a final determination. if the final determination is that we flat-out don't agree with you then i raise that
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with this committee as an item to determine whether or not you feel. >> think some of those suggestions will be coming back to this committee i am quite sure. and this is that he does not advocate in one way or the other. we need you to advocate one way or another. looking at four.$6 billion of fraud and $84 billion you see deficiencies the sba needs some changing so we need you to advocate for those changes. 84billion and as you look into this further you will see more fried. and my colleague asks who pays for this? the american taxpayer. i understand in this town
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millions and billions he eventually and is thrown around like it is nothing $84 billion that is exactly what we need you to find and hold these people accountable. we need your advocacy that is the preorder on —- priority your mission statement sense as inspector general. and lastly because my time is limited, i just want to say in closing i want to express my deep concern of the fraud at the sba it should be troubling to everyone here is families are struggling with inflation and higher energy bills the hard earned tax dollars are not being stripped away to criminals for fried. i am completely want you to understand i respect on —- respect the work you are doing
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for these taxpayer dollars that my colleagues on the other side ours still trying to ram through to increase the fund at the sba they know they are not efficient right now so the safeguards you recommended are not even put in place. so we need your advocacy in this and step up and help this. the committee has full oversight. we cannot allow career bureaucrats. because once we have done that, because $84 billion of taxpayer money. i cannot explain it to my constituents in northern minnesota. but we will find that money and prosecute. >> time has expired.
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>> the gentle lady from georgia is recognized for five minutes. >> thank you chairwoman for holding today's hearing and thank you inspector general for joining us today and your important work. since taking office i've been working to ensure they have access to receive loan forgiveness under the ppp program. can you give us an update on the oig work for the loan forgiveness activity and how involved it is in the process and of particular interest to me that early on we noticed there was disparity in my district in who was receiving the loan forgiveness and who was not? i ask you talk about that particular issue as well.
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>> we have to ongoing reviews right now. what i do know as of this month, or one week ago the loans that have been fully or partially forgiven, those ppp loans n-95 percent of the amount of the loan value of 2020 ppp has been forgiven all or in part. i do know that. that is what i have so far. the work is in progress. >> okay. thank you. that should cover everybody pretty much. so moving on with this, the other half is to make sure we are protecting fraud in the loan forgiveness piece what
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work are you doing to prevent ppp forgiveness fraud for business owners? >> great. what i do know last year by the middle of last year is when sba changed the way for the loan review process for forgiveness status. so they decided they would prioritize more manual review based on fraud risk based on the status of forgiveness to go to a machine learning type of environment where they can learn risk but that does not mean we cannot review the loan afterward or come after so we are still in the fight for that. >> okay. thank you. >> you will be evaluating for
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the risk program. >> and then lastly i know your office is working on investing fried of different programs can you provide some insight if the agency is further along those fried issues. >> where are they further along? >> covid liars realigned in turn only under the definition of sba that deals with ppp. so it is more of a familiarity for the banks and lending institutions standpoint in terms of the systems they have in place to catch fried that
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allow it to be better suited with this attack of fraudsters. the lowering of guardrails to focus specifically on speed at the time. >> i yield back. >> i now recognize the gentle he from the subcommittee from workforce development for five minutes. >> thank you for holding this very important hearing. and thank you for taking time to testify and to help shed light on the waste fraud and
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abuse taking place at the sba we all recognize it is indispensable to safeguard dollars to push the federal government to work more efficiently for small businesses. a lot has been discussed then the loans provided and to have many of the same concerns raised by my colleagues to the select loan program. and i have to say i am very troubled we are considering extending and then just before we do anything. since the beginning of the pandemic, the sba disaster
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loan program we know this in heaven talking about this those topping $70 million this calls into question the efficiency of the sba so has the leadership done with the direct lending program over the past year? >> i would say, yes. they have done a great deal. there is so much that pops into my head. remember that is only been out the management alert and with what type of fried you are dealing with and sba did not move leadership as quickly as we would have liked it. but since that time they have
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implemented quite a bit of the recommendations son even in real-time and then one that comes to mind to stop people from changing the bank account information after the verification has been conducted and is one way we stopped it immediately with that level of fraud and with those duplicate ip addresses a lot of controls and then put in place. >> hearing that it has a checkered past when call into question if it has the capacity and then to open the doors for more fraud? >> i would say the work that i provided with the onset is a
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completely different controlled environment and that i don't advocate but any type of advocacy that comes from the inspector general is evidence from what i put before you showing what is going on in the program. >> and one of the failures it says sba is expected with the project scope by the end of 2021. can you provide us an update if it was successful in concluding the emotionality by the end of 2021? >> that information currently
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the system is basically where it is but we are looking into it at the end of 2022. we are looking at it and that delivers the woman owned small business capability and then the application so they hope to make that decision in the next two months. >> thank you for your response. my time is up. i yield back. >> now we recognize the gentleman the chairman of committee oversight. >> thank you madame chair. moments ago one of my colleagues insinuated
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democrats not to seem not to care about fraud but i want to remind everybody that i think we all agree we are here to provide oversight and ensure as much as we can come every dollar lost to fraud is a dollar denied for the businesses we are here to serve and understandable discussed by me and every taxpayer. there's a lot of work to be done but i applaud the dedication to provide oversight for the diligence implemented number of ig recommendations in recent months. as chair of the small business community of investigation let me assure you we are both committed to ensure oig has the necessary resources for proper oversight.
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period. just $15 million in support of congress four.2 million dollars that is an extraordinary return on investment. what marking congress do to support oig? >> thank you. thank you to this committee from the work you have done to make sure we get you what you need. but do we have enough resources to provide for the pandemic loans? so as we demonstrated that's not a good argument. but the current level of oversight includes just over 180 positions.
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the problem is a non- supplemental budget authority only provides for 125 and at the supplemental funds by fiscal year 2024 that can be a key moment but i believe that annual resource level i worked with omb and they worked with me and to please support to match the landscape. and then for that deep consideration when the request is made ppp was designed to expeditiously find with the fraud and eligibility controls
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and rather during the loan forgiveness period. i know oig has identified 70000 loans four.$6 billion a potentially fraudulent ppp loans and this might be the tip of the iceberg. a large majority of the ppp loans partially or fully forgiveness does oig have a better sense of total fraud? i don't remember if you gave a specific sense and if not you have a more distinct picture? the work on loan forgiveness those that are ongoing currently with some indication of what we are looking at we will see where the rubber meets the road because the numbers are large so those
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that have an early default high risk lending review program. >> we know there are non-bank lenders is oig working specifically to identify those lending institutions are the non-bank lenders quick. >> we have not focused on any the number we are dealing with we have enough from the entire landscape. our agents have caseloads. >> my first question is what resources do you need i'm sure you have the resources to provide the oversight so thank
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you for your service and with that i yield back. >> and now we recognize the gentleman from wisconsin. >> thank you madame chair and thank you for being here. you can hear the level of frustration in the members voices as they continue to ask questions and it is difficult in a five-minute exchange to get down to the nitty-gritty. but in the fall of 2021 the semiannual report to congress, you mentioned the oig was working diligently with federal state law enforcement partners over the past year to bring more than 300 ppp fraudsters to justice. the result has been reiterated
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$460 million in assets recovered not including the three.1 billion the oig helped recover. what is the measuring stick you are using at this point to gauge what you would consider success? the way the math shakes out it is just a 3 percent recovery but i am wondering is what is the goal that you have internally right now and i would love to hear updates on a regular basis so we know where we are at and what is going on. >> regarding the update there is a update document that comes out on a monthly basis
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that goes to this committee. and with the semiannual report covers six months. so in terms of success that is the whole of government approach from the onset we work with the department of justice and across the country and working with fbi and the secret service our successes all success it is with the american taxpayer how many fraudulent actors i don't have the number for x amount of people but what i do know is we are diligently working to bring fraudulent asked to justice.
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>> my concern is as we go to this process now, ppp, even though they have been great successes, they are tarnished now by the high fraudulent number. if there is some way for us moving forward to say this is where you might shatter a program you might make a determination it is no longer serving its purpose because of the high fraudulent number. i don't think that's out of the round and it seems to be what is in the past related to other sba programs. for my perspective is something we should be aware of and watching and one year from now let's i get back together to see exactly where we are at because that might mean the end of some programs if it isn't characterized this
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way without specific hard deadlines i think it is in the best interest of the sba your office has the reins and you can make that happen. i am hoping with these monthly updates i will pay more attention to that. i hope the communication is free throwing between the committee and your office. >> one of the things i forgot to mention it's important for everyone to understand that white collar crime normally takes years to manifest and to
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really come forward. what we have done is expedited this in a way that has not happened in the past. we are still only at the beginning the loans have not even come up for repayment yet. that's where the real rubber meets the road in terms of friday cases and everything else we are still at the onset of oversight. >> your time has expired. the gentle lady is recognized for five minutes. >> thank you chair woman and inspector general for enjoy on —- joining us today for reporting on the problematic challenges. as you mentioned in your testimony the paycheck
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protection program and the covid idol program are susceptible to forms of fraud and abuse in these have been vulnerable because of the broad scope and the rapid instrumentation during the very beginning of the pandemic. i am particularly concerned about the fraud of the covid idol program with identity theft and not only harms taxpayers but also individuals who are not at all connected in that way. so the oig reports released in may you examine the handling of identity theft and raise concerns of the oig lack of administrative seizure authority i.e. and curious of that has impacted the case with what you are seeing now
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for what your office is able to pursue quick. >> we work very closely with the secret service and have a great relationship with them on our behalf with the seizure authority. in this instance we can move a little faster. >> i appreciate that and that something that stuck out to me. i want to switch over to ongoing liability with those initial vulnerabilities that have been fixed and i and curious if you can speak to the ongoing liabilities and
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what further steps the sba or the committee need to take as we go forward? >> what do you mean specifically for ongoing liability quick. >> there was some guidance that occurred earlier on and i am curious whether or not if there is ongoing liability but what i'm thinking is the potential for additional fraud that when the rubber meets the road that has not come up yet so can you talk to us for what
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is going on with the steps we need to be taking quick. >> the landscape is different so the money at this point is already out we are dealing at looking from a loan forgiveness perspective it will inform us greatly on that continued risk from the standpoint the same will happen when they come up for repayment so in terms of informing that but it is two different things with you know what i mean in terms of money going out the door, it is out the door already. >> i appreciate the work you
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are doing over there and i look forward if there are any further issues we are seeing we will keep the line of communication open with your office. i yield back. >> we recognize the gentle lady from texas for the community oversight investigation. >> thank you very much chairwoman for holding this hearing today and thank you for being here with your continued oversight work what your office does last few years it's made clear by the four.2 billion from the oversight and the pandemic response efforts last year as we are all aware those cpi numbers just came out today and they are worse than expected once again gasoline
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is the band use car and truck syrup 37.3 percent rental cars and trucks up 36 percent propane and kerosene and firewood are up on the backs of working americans and small business employers many deserving applicants are being pushed out and beat out by fragile and applicants. if this is between 80 and $100 billion of fraudulent and improper payments given out by the sba then theoretically if sba were to return not fraudulent money today then provide that to other more deserving applicants? >> i need to get back to you on that.
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that's a complicated question quite frankly and i do believe it has to go through treasury. there are some rules that need to be followed and an office that easy but i need to clarify that i don't want to give the wrong answered on the record. >> $100 million is appropriated to be given out in this find of 100 billions was fraudulently given out it seems to me you can take that money and help those people who needed them most that was the purpose of the appropriation's of you could get back to my office i would appreciate it. >> the only issue is that we don't have our hands on that money spent that was part of my question if you were to obtain those funds it is clear the amount of fraud is incredibly large and the
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national recovery was quoted as saying he has never seen something at this scale. so considering those issues what would you recommend that this committee reach out to to expedite getting the funds back to prevent further fraud from occurring? those that have been recovered. >> not yet recovered how do we get them back and quickly or expedite the recovery? to do you recommend this committee work with quick. >> i believe that is the department of justice but they are working hand-in-hand with enforcement community federal state and local in that regard. >> that financial institutions
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involved in have been able to help return funds would it be beneficial to work collaboratively with these financial institutions by holding hearings or other means? >> remember you are talking about two different programs one is a direct lending another done by banks and so many have pointed out what we found went that pride was in another program. >> if it would be better to identify how we could better the program for the future. >> perhaps. >> and then you looked at the department analysis totaling
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over three.$1,000,000,000.550 million to be dispersed to and eligible recipients has this been resolved? >> yes. they immediately instituted the do not paycheck that is automatic in the process. >> i appreciate your hard work is given us a lot to think about a hope the chairman of the subcommittee agrees we should be holding a hearing on the rampant fraud we have heard. >> your time has expired you
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are recognized for five minutes. >> thank you madame chair for your service. the staffing major disasters continue to be a performance challenge for sba it's even more evident with the current pandemic and for me louisiana as well as the natural disaster that we suffered with hurricane ida. when the agency was forced to hire more permanent and temporary staff and process millions of covid and to develop that action plan to assess how the staff performed during the pandemic so they can do better with the next disaster. to your knowledge as the
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agency committed to conducting the's assessments? >> they have to we have not yet seen it. >> when do you anticipate doing it and what effort do you have to make sure this gets done quick. >> i do anticipate that there was a big associated deadline when they were supposed to do it. it has not come up yet. they certainly can get that to you but the only way that recommendation will be resolved if it's with the document. >> will you provide any guidance on the best way to conduct this assessment pretty plan to play any role quick. >> as part of the inspector general i cannot build it for the and then review it by law so it's evidence up to that
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point that a good deal with the recommendations from there. >> so that doesn't put you in a potential conflict to provide some guidance on best practices how this could be done quick. >> and what we can offer up. >> and how that particular report different to me it is something definitely i can get back to you more definitively i don't want to speak above and have the auditors come after me. >> are there lessons you take from other agencies? >> i am certain that they could but this program is not new and has been around
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forever they consistently have the challenge. they know how to ramp up that are they properly trained or vetted and that we work with them to see that is done. >> do you look for and determines small and minority businesses and women on disadvantage women have an opportunity to be a part of the ramp up often times these agencies are big and then to be ready for these opportunities that because the small business administration we have an interest to make sure we are providing opportunities for truly small businesses to play a role any
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rules or guidance or thoughts as you go through your oversight to determine if we are reaching those small businesses to partake in the aftermath of the case of the pandemic. >> that's a good question i don't believe my office performed or conducted any work with your question but it's something we can look at i will talk to my team responsible for the disaster programs and get their thoughts on it. >> particularly in my jurisdiction the small businesses that are often times on the side watching larger firms that are in the jurisdiction the natural disaster is in the nest difficult we tried to build a small business space for it to
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create opportunities for small and emerging businesses anything you can give us in that area to provide guidance i appreciate it. i yield back. >> thank you chair and ranking member for having this hearing thank you for being here. my colleagues brought up before fiscal year 2022 and the first on the list was economic relief program you have seen the books and the workings of the sba and a couple people have asked already if you would advocate increasing the programs but is the sba prepared to start a
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new direction for increase what they are landing before the challenges addressed? and asking you if they should but are they prepared? >> i believe sba is more prepared now than they ever have been with that is currently in place from a risk perspective. i look at it from a risk perspective from the taxpayer-funded so the control environment is stronger now than it has ever been and certainly much stronger from the onset of the pandemic. >> see you are saying there is still risk of fried because the audience an investigation that is facing significant risk of fried because of the
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loan program size and scope so that currently exist but they are still facing significant risk of fraud but it is less and at the beginning when the program started? >> yes. let me clarify it's important to understand and to make sure that is mitigated. >> is it is mitigated now as it can be. >> there are those panels and recommendations as at less risk of fraud that was taken into account? >> the importance to understand that more than half have to do with the financial statement dealing with something quite different.
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>> i understand it is 60 or so. and those that could be addressed that would further address the risk of fraud so there are some that would reduce the risk of fraud. >> yes. >> where do you like to see those items addressed before any new programs start? i have advocated from the very beginning that certain controls need to be in place before any program is started i said that before ppp was rolled out we had a report out employing the agency to look at these before taking them
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off. >> i appreciate that and the work your office has been doing on these reports they are very thorough and i would love to see the sba address these but any risk bad guys will do bad things always find a way to do it we need to stay on top of them to make sure it is as diminished as possible. just based on what you said and your advocacy you put in front of us anyone take a position but so before the sba starts any program or increases the amount of money through the current programs they should listen to you and address those issues because any risk of fried is
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unacceptable. i appreciate the work you have been doing. thank you for your testimony and a hope the sba administrators listen to you thank you. i yield back. >> and i we recognize the gentle lady from new york. >> thank you ranking member for taking time to be here and we are grateful for your work and what you are doing and exposing the issues with the sba and how to improve it to make it more friendly to our business community we greatly appreciate that. and we know they have struggled and it's one of the reasons i partnered with senator lee for that transparency expenditures act.
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only through the fall audit can we ensure these mistakes are not meet again. we know sba has failed to respond to the's policies use set forth which are highlighting that we need to make sure we push them in the right direction but i want to specifically get back to an issue i had with the administrator bozeman in november and she said she was unaware that sba was illegal providing millions of dollars of loans to multiple planned parenthood affiliates and it's illegal for the federal funds to be used for abortion and all applicants and they must
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abide by the rules and since planned parenthood is 16000 employees nationwide they are ineligible have you provided information about the paycheck protection loan to planned parenthood to the administrator have you provided her with this information? >> i have not personally provided information on planned parenthood to the administrator. i hope the committee knows that we checked off a job looking at eligibility of nonprofits that deals with the affiliation standards and planned parenthood is a part of that we do have a lot of work that is going way —- on right now and with a small business committee. >> are you aware of loans made to planned parenthood?
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>> sim. >> do you know if those were made at the administrator was aware and if they were forgiven? >> i don't know of either of those. the work is ongoing. >> does the administrator have access whether the top line numbers as the rest of us would. >> do you recommend that sba change internal controls that violate the constitutional provision nor those of the ppp program that is something through your inspector general role that would be forthcoming
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at the conclusion of our review but that is ongoing. >> if it is ongoing are there any preliminary information given as she comes into testified next week she denied knowing any of these and as administrator find that startling since it is an ongoing production of information i myself don't know where we are on this assignment and i have anything to provide currently. >> nothing is uploaded in the public domain other than what we know because those have been given and received on the irs forms. >> it is fully vetted and completed.
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>> there has been nothing disclosed since november? >> no. i meet with her every other week. >> i want to reiterate that concerns my colleague had at the customer service issues still receiving information about loans that are handled in the efficient and continuous manner we hope you will continue to urge the administration to answer complaints faster and more efficiently as people are waiting a not have loans processed for one year but i appreciate your work to get the correct information to function better with a small business community struggling to the pandemic i yield back.
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>> thank you again for being here today your oversight is very important more now than ever and valuable lessons for the future. it is vital we address the systemic challenges and work together to ensure internal controls are in place. doing so we make the agency stronger and better able to handle these disasters in the future and to that end it's important to close out that outstanding recommendation and with those challenges all throughout the agency. if we have learned anything
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that we need to have a well-functioning and funded to address the day to day needs and to be ready for any catastrophe facing the nation i hope today's hearings motivate all of us to have a bipartisan solution and without objection members have five legislative days for the record if no further business to come before the committee we are adjourned. thank you
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