Unfiltered view of government. Crated by americas Cable Television company as a Public Service and brought to today by your television provider. Next, a hearing on preventing fraud and abuse in the Paycheck Protection Program. The Inspector General of the Small Business administration along with a representative of Government Accountability office testified. This is one hour, 20 minutes. I thank everybody for joining us today, both virtually and in the hearing room and id also like to thank the witnesses for their participation in this important and timely oversight hearing. Before we begin i would like to take this opportunity to note some important requirements and let me begin by saying that standing house and Committee Rules at practice will continue to apply during high proceedings and all members are reminded that they are expected to adhere to the standing rules and putting decorum. During the covered time designated by the speaker of the committee will operate in accordance with House Resolution 965 and the subsequent guidance from the rules committee in a matter that respects the rights of all members to participate. House regulations require members to be visible through a video connection throughout the proceeding so please keep your cameras on. Also remember to remain muted until you are recognized to minimize background noise. If you must participate in another proceeding please exit this one later. In the event a member can counter technical issues that prevent them from being recognized for their questioning i will move to the next available number of the same party and i will recognized that number at the appropriate time provided they returned to the proceedings. For those is a great present will also be following the health and safety guidelines issued by the attending physician and this includes social distancing and especially the use of masks. I urge members and staff to wear masks at all times while in the hearing room and i thank you in effect for your commitment to a safe environment for all here today. The covid19 pandemic has fundamentally altered the way Small Businesses operate. Mandatory closures to protect the Public Health has significantly affected their bottom lines and this ability. To help Small Businesses whether the Pandemic Congress has had past packages. On march 6 the Coronavirus Preparedness for supplemental appropriations act became law and authorized Disaster Assistance to use available funds to issue Economic Injury disaster loans or idle to Small Businesses affected by the pandemic. On march 27 the cares act was brought into law and greeted the Paycheck Protection Program or ppp and the Economic Disaster loan emergency advance. They acted quickly to lament these critical Economic Relief programs in order to deliver emergency funding to Small Business owners to keep them afloat. The past six months more than fivepoint to Million People he loans in a proximally 3. 5 idle applications have been approved and that is an incredible amount of federal assistance to americas Small Businesses and i commend creating the infrastructure to set up these programs so quickly. Spa was fast to undertake an arm is a challenging tasks to implement in these programs in just a few days. This committee recognizes that [inaudible] but the congress and the mega people must have confidence the administration is taking seriously their responsibilities to mitigate fraud and ensure that this assistance is available to all eligible Small Businesses. Today i hope to learn more from the fda Inspector General and the Government Accountability office about your findings and discuss ways to improve the delivery of sba service to Small Business. On july 20 the sba office of Inspector General released a report detailing perpetual incidences of fraud in the idle program. Initial investigations found tens of millions of dollars in duplicate loans at serious concerns about respective fraud, including instances of accounts established or stolen the identities and attempted award transfers to foreign accounts and deposit into things that have no evidence of business activity. Without swift action from sba the fraudulent activities will only become more of a threat as Congress Debates legislation to allocate more Emergency Assistance during the pandemic as it stretches on. I understand sba responded to this report by stating they have internal controls in place to address these types of fraud but yet recent reporting from the project on government oversight tasks to doubt on how effective these internal controls are. The pogo report says that antifraud policies were not fully implemented during idle processing and software was not uptodate and that sba was struggling in mid august to handle fraudulent applications and as a chairwoman of the investigations oversight and regulation subcommittee im concerned with these reports and hope we can have a constructive discussion to address these findings today. In addition, to the igs report the gao released a report on august 31 that ends september 21 detailing concerns that sba oversight of the ppp and their ability to collect and interpret applicant data and the september report outlines extremely concerning gaps in the availability of democratic information and serious data reliability issues. The report details potential fraud that the fda refers to both the ig and the department of justice and more than 40 fraud related cases are currently under investigation. Additionally, the report finds sba his spine to adequately prepare borrowers and lenders for the ppp forgiveness process. Demonstrating the seriousness of this problem last week sba announced they had received 96000 forgiveness applications representing less than 2 of the loans disbursed but they still have not processed a single one. Perhaps most troubling to me are reports that gao has had difficulty even completing their audit objective of sba has not been forthcoming with documentation and access to data. I would like to learn more about where sba stands and implementing internal fraud controls where the deficiencies lie in what the subcommittee can do to support sba in their efforts to prevent fraud in ppp. Again, i want to thank the witnesses for participating both virtually and in person and i now yield to the Ranking Member mr. Spinal or his Opening Statement. Thank you madam chairwoman and thank you chair for holding todays timely hearing to combat the economic and back of the coronavirus pandemic and this committee has worked to create an optimized Economic Relief programs administered by the sba. The bipartisan cooperation and interagency negotiations we graded the Paycheck Protection Program or ppp and we revitalize the preexisting loan program, the idl. I like to take a moment to thank everyone for the work both programs have been a lifeline for our nations Small Businesses. As of august 8, 2020 the date to the program reached the authors deadlines the fca has approved over fivepoint to million loans totaling more than 525 billion dollars. Average loan size was around 100,000 and there were nearly 5500 participating lenders. Small businesses received nearly 432 thousand ppp loans for more than 32 billion and in my district 10254 businesses have received 304 milliondollar loans in ppp. These loans have help Small Business owners keep the lights on and keep their employees on the payroll. I talked to many Small Business owner since the launch of the ppp and like tom powell, owner of boulder athletic wear and florida a manufactured womans athletic wear in my district. The loan was absolutely essential and crucial for mr. Powells business because it provided the critical capital necessary to retain his employees through the retail closures. In addition to creating the new ppp program the cares act and its subsequent legislation expanded the preexisting idle program administered by the Disaster Loan Program and as of september 13, 2020 the sba has proved 3. 5 million idle loans proportionally 190 billion of an average loan size of 53000. The idle advanced grant which is not required by the two be payback provided 6 million Small Businesses with 20 billion in grants. Small businesses had proximally four to 50000 idle loans approved for nearly 20 billion. With only the basic Statistics Congress cannot fully measure the impact of these programs that is for sure. We need to ensure the loans go to the intended businesses and that the loan proceeds were used properly. Fortunately, we have fantastic allies in the sba office of Inspector General and Government Accountability office. Today each office has said the representative and we are grateful for that to her present their initial or to present, i should say, initial reviews of ppp and idl. We look forward to working together to make sure the taxpayer dollars are spent appropriately introduce wastes, fraud and abuse in these critical sba relief programs. With that, madam chair, i yield back. Thank you. The gentleman yields back. If other subcommittees members have an Opening Statement we would ask that they be submitted for the record. I would like to just take a moment to explain how this hearing will proceed. Each witness will have five minutes to testify in each member will have five minutes for questions. Please ensure your microphone is on when you begin speaking that you return to mute when finished. I would now like to introduce our witnesses. Our first witness is the honorable Hannibal Mike ware, Inspector General of the fda. Mr. Ware was sworn in as the Inspector General in may 2018 and has been an effective leader in his role and an asset to this committee. He is 28 years of experience in the ig community rooting out fraud, waste and abuse and federal programs. He is received numerous awards throughout his career and putting several awards from the council of the inspectors general on integrity and efficiency and recognition for its in the vacant portfolio of oversight work. Welcome. Thank you. Our second witness is mr. Williams scheer, director of Financial Markets and Community Investment team and Government Accountability office. He leads gao work and Economic DevelopmentSmall Business and sbas covid19 response programs. Mr. Scheer joined gao more than 20 years ago and has a match masters degree in Public Policy and phd in economic from the university of chicago. He also served as an adjunct faculty member and the graduate program in the university of pennsylvania. Welcome, mr. Scheer. I would like to begin today hearing by recognizing mr. Ware for five minutes. Chairwoman, Ranking Members and members of the subcommittee thank you for inviting me to sit with you today and for your continued support of my office. Believe me when i say that. The men and women of the office of Inspector General have been working diligently to provide oversight of sba Pandemic Response and i am always proud to her present them publicly and to speak to you about our work. I come before you today in the wake of a historic crisis posed by the covid19 pandemic and ensuing unprecedented goals for the fda to mitigate the economic crisis. Fda is managing over 1 trillion in Lending Authority through ppp and the idle program. The speed on lowered guardrails relative to eligibility diversification controls surrounding the ppp and the idle lending authorities brought with it substantially increased list and as indicated in my written statement we sought to form the efforts through paper reports offering Lessons Learned and known risk to implement ppp and idle based on prior oversight of the recovery act and other disasters. At the same time we focused on preventing and deterring fraud by raising public awareness. At the outset we initiated several reviews and during the course of the reviews we had alarming findings causing us to issue a flash report on ppp and management alerts on idol idle in july. As oversight work carries on it solidified our pulmonary results and identified additional findings. On september 14 we provided leadership to draft reports and one containing our findings relating to the implementation of ppp and fdas initial Disaster Assistance to covid19. Our review standards require that we consider sba official comments and anticipate in midoctober following the 30 day review and comment. By the leaders. As such, my comments today regarding those findings must be considered preliminary so we can account for the official comments and nonetheless our findings are significant and speak to the need for strengthening internal control in combating potential fraud in the programs and our report speak to significant potential fraud in ppp and its been marked as potential only because weve not reviewed each loan associated with the area of finding. However, the amount of dollars we cite at the potential fraud are not based on projections but rather based on buckets of loans meeting criteria for internal control environment and in many instances we have active criminal investigations of fraud to substantiate the concern. Our office has received tens of thousands of complaints on our hotline, hundreds of investigations involving complaints have been initiated by my office and on ongoing with more results being reported daily by the department of justice which is been a tremendous partner. Among these the compliments was the first in charge of those fraudulent which was announced on may 5. [inaudible] the pot announced september 10. I want to assure the lending partner and the nation Small Business owners that if they followed the guidelines and act in good faith we are not focused on your actions. The findings we report do not diminish that the women and men and their limited partners or combos. At one point in the crisis it was reported that sba reported as 14 years worth of lending in just 14 days. However, or oversight were confirmed sba did not have sufficient controls to address risks and provide assurance that ppp loans and idle grants and loans will only be received by eligible [inaudible] we continue our efforts to keep this congress fully informed of our findings and we are not alone in this effort. Programs of this magnitude require a whole of government response. As a statutory member of the council of Inspector General on integrity and efficiencies Pandemic ResponseAbility Committee i am working with mayan specter general colleagues to leverage the collective power of Oversight Efforts to increase transparency of sba pandemic and rest assured, the men and women in my office understand the nothing short of the Publics Trust is at stake as well as the vitality of the nations economy. Thank you for the opportunity to speak to you today and i am happy to answer any questions you may have. Thank you. Mr. Scheer you are now recognized for five minutes. Thank you. I am pleased to be here this morning to discuss our work on sba Paycheck Protection Program in Economic Disaster loan program. Through these programs sbas guaranteed or made more than her team. 5 billion loans and grants providing 729 billion to help Small Businesses adversely affect covid19. In april 2020 sba moved quickly to implement ppp and given the immediate need for these funds sba worked to streamline the program so that lenders could begin distributing bonds as soon as possible. For example, they were permitted to rely on borrowers [inaudible] and use of loan proceeds. As a result there was significant that some fraudulent or inflated applications were approved. In our june report we recommended and sba developed an opponent plans to identify and respond to risk in ppp to ensure Program Integrity or achieve Program Effectiveness and address potential fraud. According to federal control standards and fraud risk framework executive Branch Agencies are responsible for managing risk and implement new practices or mitigating those risks. When fraud risk can be identified and mitigated fraud will be more likely to occur. In june 2020 we reported that reliance on applicants Self Certifications can leave a program vulnerable to expectation for those who work to circumvent eligibility or pursue criminal activity. Since may 2020 the department of justice has publicly announced charges of more than 50 fraud associate with ppp funds. In april 2020 sba announced it was more than 29 to confirm eligibility and officials subsequently stated that they would review you selected loans of less than 2 million to determine, for example, whether the borrower was entitled to loan forgiveness. However, they did not provide details on what would conduct either of these reviews and as of september 2020 they were working with the varmint of the treasury and contractors to finalize the plans for the reviews because sba limited time to implement the fronts for loan approval and we believe the planning and oversight by as ba is crucial in moving forward and we continue to be concerned about the potential for fraud in ppp and continued to conduct work on the program, including on internal controls and fraud Risk Management. Sbas efforts to expedite processing of Economic Disaster loan such as the reliance on Self Certification may have contributed to increased fraud risk in that program as well. In july 2020 as mike where just stated the office of Inspector General indicated widespread potential fraud including thousands of fraud complaints and deficiencies of the internal controls with the department of justice in conjunction with enteral agencies have also taken actions to address potential fraud. We continue to be concerned about the potential for fraud in the idle program and are currently conducting work on the program, including internal controls and fraud Risk Management. However, we are experienced data and information requested including access to idle data and continue to take actions to obtain records to move forward with our work. Chairwoman chu, Ranking Member stanhope and members of this committee this concludes my statement i would be pleased to respond to any questions you may have. Thank you, mr. Scheer bird we will begin the questioning and i will begin by recognizing myself for five minutes. Frankly, i am shocked by these findings. Our two main loan programs are idle and ppp and in both programs you have said that there are not the internal controls in existence to prevent fraud. I have many questions. First i would like to start with my where are Inspector General and just to summarize you said that there were there was fraud and also that there was a lack of internal controls so that where number one, there were 250 million worth of loans in the idle program that were given, despite the fact that they were clearly ineligible and that is no business was eligible if they created their business after january 1 of this year. And yet, loans forgiven in the amount of 250,000,002 grants for these particular businesses in the second problem, the duplicate loans, i mean there was no controls and as a result duplicate loans in the amount of 45. 6 million were approved and then third is the shocking social media fraud schemes in which they use social media to recruit applicants and then split the money with the ringleaders and, in fact, there was advertising of their ability to secure money for clients to start businesses and then the sharing of this money. Im astounded that these terrible acts took place when legitimate deserving businesses could have used that help. Again, in your report you stated that despite the internal controls the sba climbed was in place fraud and the potential for fraud still exist in the economic injuries of the idle program. Can you identify the weak points in sbas internal control and how can sba improve these existing controls in the time ahead . [inaudible]. They have to balance and balance balance is the key word there, the actual need while balancing against the controlled environment. In this instance the effort [inaudible] [inaudible] they lowered the guardrails for the idle program by removing controls and we have found through a fact tens of thousands on own Data Analytics that those actions increased fraud, risk significantly. Again, they have that balance to deal with but the balance, one part of the balancing act cannot be sacrificed for the other and the type of things we were finding in terms of controls are of course the part where one but the contrast of the day. With built in controls but these things the loan applications came in huge batches so that the process [inaudible] there were other controls that were not in place such as what happens after the contrast said this is a legitimate [inaudible] but they allowed on the back and the applicant to change the bank account before the money was dispersed and there was no control in place to at least double check or make sure those are eligible recipient. The agency in these meetings especially on idle they have taken a lot of action already and before the alert went out we have been meeting with them because we thought it was critical that the new information and they take action immediately so they shored up the control where we re fire that verified the bank, and if they didnt find the loan application only minor issues then they would come to sba in much smaller batches and they now have [inaudible] they found the logic issue with the system of control they said they had a place where wasnt identifying all the duplicate information and now they have addressed that issue and now the big thing they put in place is that they have began automatically declining loan applications where the system identifies online activity. For example, [inaudible] email addresses and phone numbers and somebody elses name. Mi. Ke. W a. Re and for example. That was along with the regular mike ware so if they force legitimate applicants into the reconsideration process to allow for support and documentation before the applicant gets a loan approval and so yeah, they have pivoted pretty quickly on implements and i dont know if time is up or not but fraud says they were do what they say theyre going to do. We have to continue to meet with the agency when we find new schemes so they can pay it quickly to mitigate the risks and to shore up their controls. I think they been pretty responsive to that. Thank you for that thorough answer and now we have a Ranking Member from florida. Thank you, madam chair. The care zack set up in an intricate way of oversight mechanisms utilizing preexisting offices and creating new ones like the Pandemic Response accountAbility Committee and office of the special Inspector General recovery. My question is how does your offices contribute to the larger pandemic oversight system and if you could answer that, first. We have a major responsibility in the cares act and it was actually articulated to each of the affected agencies as far as our role in overseeing care zach programs broadly and the need for us to report on a generally a bimonthly basis to the congress and wide variety of issues. So, in contrast i just say that we focused on the issues just as my colleague mike ware it does dealing fraud risk and things of that nature but we deal with broader issues having to do with the integrity of the programs so we do look at responsiveness and we have issued reports in june, august and september to deal with the wide range of care zach programs. And addressing them in a broadway and doing detailed auto work. Mr. Where would you like to sure, yeah, i will. Business is actually one of the questions i was hoping that i would get mainly because of the prominent role on today and i am the Audit Committee chair and we meet regularly like every single work in the statutory member of that committee so in our meetings we were constantly to determine how we can help the community and how we can move the whole of government approach forward. If youve noticed its concerning our investigative work and it is, we always join and we have been working with fdi, fdic, Federal Reserve board, hhs and this has been an all hands on deck approach because no single one of our offices that handled this alone did this with the magnitude of issues that was our finding. Regarding [inaudible] him and i have had several oneonone meetings particularly on certain things to my office that he is not able to do at this time but we are all inc. Mitigation and all working in a collaborative manner to shore up the proper level of oversight. [crowd boos] do you feel like you need any Additional Guidance or clarity in terms of the roles that you were playing respectively . I do not and i believe that that the act that stood up that we refer to it as was pretty clear. I do believe that in some means we discussed access to data and but im pretty sure that is something that the executive director [audio difficulties] mr. Scheer would you like to respond to that . I think that the cares act beyond just relying on our access in our role generally has congress that there was very clear that we had very expansive authority we had very expansive responsibilities and we had our comptroller had come on in that direction and we generally have had very good cooperation with the agencies that are included. Its an expansive role and at very clearly states what our role is and what our authorities are in terms of access to information. Thank you, madam chair i yield the remainder of my time. Thank you, the gentlemans time has expired and the gentleman yields back. Now the gentle lady from new york our chairwoman is recognized for five minutes. Thank you, chairwoman chu. This is a very important oversight responsibility that we have in this Committee Regarding the cares act. Mr. Scheer, we understand that you had issues and problems accessing idle data from sba. Why do you think that happened . We and i always tried to avoid trying to say what is going through peoples mind but what we can observe is the situation that is not a cooperative one which we have experienced a more cooperative environment with sba dealing with other matters but not when it comes to cares act. As you know that with ppp data. Excuse me, would you characterize your actions as destructive . There was obstruction when we were trying to obtain loan level ppp data that went on for weeks. Getting access to people to talk about how they were implementing ppp that went on for weeks. We still arent getting a lot of cooperation from sba and yet they accuse us of not giving them credit for what oversight they have in place when they provide very low information and dont respond to what we are asking. With idle it is more extreme. We have asked a very long time ago for application of vital data. Sir, let me ask you, it is clear that you have expand authority and the controller general has expanded authority to demand and to have the access to the information and to have access to the data and so i myself have to call the administrator to ask and expedite or to allow for the comptroller general to have the information that he was requesting. He personally called me and i believe that he even called the Ranking Member. Can you imagine it is our responsibility to protect taxpayers money and to make sure that the program is implemented and what we have seen is not only a case of fraud and abuse committed in the idle and both the ppp the mismanagement probably, the obstruction coming out of the sba is because they knew they didnt take or implement the kind of control to prevent fraud and abuse. So, what can we do and what can congress do to help you do your job Going Forward . Do you think that, for example, withholding Agency Funding that will be an option . It is like it could be an option but i hope it would not come down to that. If you go back to the issues that we had we just did not get loan level ppp data im sure you and other members of congress were surprised when the comptroller general was making personal calls to you, seeking your support and we appreciate it greatly. It is unfortunate it was necessary with idle and some of this is not just data that we know should be readily available and but there are saying things like contracts is a tremendous delegation of authority and the contractors where we are just asking for contracts with very straight forward information to provide and so we soon and we hope that it does not have to go up were close to being at the stage where he might be hearing from the comptroller general again in the administrative sba will be hearing from the comptroller general again in our general counsel will be reaching out to the general counsel at sba and it is an extreme situation. So, the agency is not collecting Demographic Data that we have requested and that was the intent of the senate will be passed the legislation. It is clearly stated and so how difficult does that make your job and our job in determining whether or not we are making sure that the loans are going to deserving businesses and particularly minorities and businesses in underserved communities. This is an issue we have dealt with with numerous programs, including now with the ppp as far as Demographic Data and sba takes a certain view towards its authority to collect data on race and ethnicity. We have been dealing with that so the work around think becomes for sba and for us is to code where we are not saying who are the borrowers and are they minority or Small Businesses but are they operating and then that becomes the best we can do with that situation. Chairwoman, with your indulgence i need to ask one more question and if you consider that necessary, please allot the same time to the minority. There are 4226 loans that went to businesses with over 500 employees. In your work have you been able to examine whether sba has confirmed these businesses employ the number of employees stated in their application . I am still at that stage weve been waiting for a meeting that is now scheduled for next week just dealing with what we consider extreme data reliability issues which affects our ability to do work that is associated with evaluating, Data Analytics. It is affecting our ability to, evaluate, who the programs are serving and we are trying to move forward on that but we arent at that stage yet. Part of that is the delays we get in dealing with sba. [crowd boos] thank you, i yield back. Thank you, the gentle ladies time has expired. The gentle lady yields back. Now, the gentleman from tennessee is recognized for five minutes. Thank you, chair lady. I appreciate the panel. I guess my first question was would be what is the Economic Impact of this and i will open that up to anybody who would care to answer that . Positive or negative . Overall. [audio difficulties] youre talking about Economic Impact . Both sides of it and i would like to hear both sides of it. There is absolutely no doubt that this program in both programs that we tell the people who are in need and we know that for certain. We also know for certain that there is no assurance that all that money went to the Small Businesses it was intended to go to. This is a fact. I do believe there is a balance that could be struck in order to mitigate much of the risk fraud and to shore up vulnerabilities the both of us have identified for sba but on the one side i am telling you that sbas employees have worked long and hard to get this money into the hands of people who needed it. Fraudsters do what fraudsters do it weve identified many of the schemes and we worked with the agency to mitigate much of that risk so i know there is a large part and there is no doubt that there is a large part that have gone to ineligible and fraudulent recipients. Since we have identified those do you think it is in place, sorry to interrupt you, i like what you said about fraudsters will fraud. I think thats pretty accurate and every time you do something some new plan work some horrible tragedy occurs in our country and these dirtbags get out and take advantage of the situation but is something in place to go after these people and to feel like we will go after them . Or will be just say let it go . No, the government of justi justice, what is it called, the press comes we had a few weeks ago we had it to signify the arrest made of the fraudsters and there are hundreds of investigations already in the process and the fbi offered the conference and stated they had over 500 investigations involved and if you just know how fraud works and Fraud Investigation works that normally doesnt take place until 12, 18 months after the results have gone out. The fact we moved so very quickly to catch peoples been pretty remarkable and has to do with the department of justice with us and to keep but we are on this and we will keep going. Road. I appreciate that. I am afraid that we move on to the next calamity in our country and we forget about the working folks who did not get the money that shouldve and thats my favorite term, these dirtbags got the money and they should not have. Weve got hardworking business folks, especially smaller businesses and rural and innercity areas will not receive that funding. Thank you for your answer. I know you are wanting to Say Something to as well. Please. I wont pull this from the fraud issue but just saying who are the intended beneficiaries of this program and how is it serving the Small Businesses in the communities they operate in kind of like overtime and it was clear that ppp is trying to both keep businesses in business and to allow businesses to keep payroll. Idol is a little bit more of the focus on keeping businesses sustainable so there is slightly different approaches and they serve slightly different issues but let me take ppp. We have serious concerns about data reliability having to do with jobs reported. Nonetheless, it is clear ppp has spent a large amount of resources to support a large number of Small Businesses that employ a lot of people and so it has been a lifeline. We can observe that. And what became clear is that it was an eight week time before forgiveness that it was recognized that the pandemic would continue for longer time and made legislative changes to expand in that time and what we dont know yet in terms of Economic Impact is basically that to what degree it has helped various segments of the economy and its very difficult question to answer and it might not be possible until weve gone through much of, if not all of loan forgiveness but there is a lot of questions as far as over the long haul whether there are still uncertainties about what will happen with the pandemic and there is still a lot of questions about what the Economic Impact ultimately will be but it has certainly been a lifeline for, you know, a very large number of his businesses. Terry lady, ive gone over but if you could issue my distaste of the fact that this is such an important issue and we have so much and i have to go to another committee and we are marking up bills but if you could tell them to prioritize these things, both parties do it and they should be prioritized we should not be scheduled another meeting and we go our studio day with nothing going on, nothing, absolutely nothing and they stack these committees on top of each other and its a disservice to you as a cheerleader and disrespectful to you and disrespectful to the dad, taxpayers and i talked to my leadership and i would hope you would do the same because this is a very important issue and i apologize and i have to go to another committee and very passionate about this issue. Thank you maam and your courtesy to me and friendship. Thank you. Thank you. The gentlemans time has expired and the gentleman yields back. And now the gentleman from pennsylvania, mr. Evans, is recognized for five minutes. Thank you, madam chair. Fda has relied on heavy contract for idle applications. What information has sba presided to you about the contractual responsibility of contracting and why such important [inaudible] this is one of the areas we had a meeting with sba last wednesday so just eight days ago where there was at least a meeting to talk about what we were requesting from the agency so that was a step forward but there was no timeline on providing material and both of these programs but you ask with respect to idle there is heavy reliance on contractors so we just ask for the contracts themselves and that will lead to questions about what the contractors are doing but it will get us started in terms of information that should be readily available we still waiting for a response and as i said to chairwoman velasquez we are taking actions to push this forward just like we did with ppp and axis ii ppp data but we are still seeking information on the contracts and what the contractors are doing. Did you get any real sense of cooperation on that . No, the cooperation has been poor. I dont like stating this but we havent had good cooperation in conducting this work. There was some improvement when the agency then decided that they would provide us loan level ppp data but it is not usual cooperation that we have received from sba from them and other agencies. With respect to both of these programs. Mr. Ware, it is my understanding that sba did not put in eternal controls in place for ppp on the front end of loans because of the miscarriage act and [inaudible] if congress authorized additional in the chairwoman authorized additional funding, could you be specific, what would you recommend Congress Take to make sure at the beginning of the proposal process and the loans . Back to the question, recommend congress. [audio difficulties] if an application calls into the highrisk one of those fraud buckets it requires an automatic second look to verify. The lower end of the guard rails needs to, particularly on those that have fallen in high risk areas. Those that have multiple loans in the same type of code carry good worries from the same ip addresses of those that have random email generator accounts and those were the Bank Accounts are changed after the approval process is over. Those that are in the name of, for example, common politicians, prominent Business Leaders that we would all know their names and vote clearly ineligible and those captured ineligible entities that does not meet this this and is automatically [inaudible] those controls are necessary. Thank you, madam chair. I yield back. Thank you, the gentlemans time has expired for gentleman yields back. And now the gentle lady from minnesota is recognized for five minutes. Thank you so much, chairwoman chu. Good morning everyone. Chairwoman and Ranking Member im so grateful were having this hearing today. This issue is incredibly important to me, the issue of fraud and improper payments in government waste. Who still need that help. In improper payments are exactly why i introduced the payment integrity information act which im proud President Trump signed into law earlier this year. It strengthens protections against improper payments and in federal programs. So, currently there are a number of resources and tools out there in the market to detect exactly the kind of fraudulent activity that seems to have gotten through. In fact, located right in my Congressional District it has that kind of technology system. I have a question for you. Do you feel at this stage that sba has the tools and funding as oversight as to be able to accelerate your efforts to prevent fraud and waste and if not, what specifically do you need from our subcommittee and the congress to put you in a better position to manage your activity in this agency . Im being told ive got a call on the house [inaudible] i dont know whats going on. So i apologize. When you ask about the resources, are you asking about sba proper . Im asking more general do you or the agency have what you need to be able to do better because obviously if theres technology out there that can help you detect and improve the accountability here, and im asking is there an active effort to make sure that happens because sadly this pandemic is not going away anytime soon, and i suspect unless we are able to effectively suppress this virus, we have to continue to ask to do some very difficult things that obviously they are not in the position to stop fraudulent activities at this moment. We are extremely fortunate Congress Gave us the Data Analytics capabilities and we are fortunate that was made because that group is doing excellent work in identifying the trends and reporting out on the agency. As far as the agency, we are coordinating with other Law Enforcement entities to approach the whole of government manner and as far as the agency like i said earlier initially in the first report where we were talking about all of these thousands saying there is fraudd here we dont know what to do with it how do we get the money back to the government, we pulled everybody dug into a baca meeting and what that required sometimes theres reason things happen we couldnt be eligible of but there were a couple of people assigned and immediately there were 25 people to do that and then i think it was 54 and now i believe that its even higher so they have the bodies necessary and again we havent reviewed. In terms of resources, i cant speak of when sba does things or how they address this. Thank you. It appears my time is expired, so i will yield back to the chairwoman. Thank you. The gentle ladies time is expired and she yields back. Now we have time for a second round of questions. I would like to go a second round and i will start by recognizing myself for five minutes. I wanted to ask about the loan forgiveness process. I would say that the description that you provide. For the lenders processing these applications but as a result what we have is a situation where the sba has announced its received 96,000 forgiveness applications but have yet to process and approve a single one. There are lots of businesses that are hanging on the edge of their seat wondering if they are going to get loan forgiveness, so what specific steps should they take now to improve the quality of the data and what can be done to make sure that there is a loan forgiveness process that is functional . There has to be clear guidance of who is responsible for what and the role of oversight of that process to have certain types of safe harbor thats always been an issue and reliance on the borrowers certification. And we were very receptive to the fact loans had to be out very quickly. But immediately the first report we made a pretty broad recommendation that you needed certain controls in place and there has to be clarity for the participants in the program rather than the sprawling guidance. So there has to be a clear process and procedure that the banks and the borrowers can go on. And with respect to the smallest businesses that might not have the most Resources Available for accounting and Legal Assistance so there has to be greater clarity, and we again wish that they would look at us as an asset trying to improve the integrity of the program and they would let us look like they do at other programs in our experience and be in the position to evaluate and make recommendations for how the process can be improved. Thank you mr. Shear. Now i would like to ask about the ppe being dominated by large borrowers and companies. The guidance to emphasize the economic necessity requirements, but then this came after many Large Companies even publicly traded companies had already been approved. So, first how many publicly traded Companies Returned the money, and what is the dollar amount that this represents and how would you suggest they prevent the Large Companies from accessing a Program Designed for americas Smallest Companies . I dont have the exact figures. I can get back with you in a short period of time, but in terms of what happened is how it was initially set up and that allows some of the Larger Companies within the confines of the law. Now, if you understand its considered a small if the businesses have fewer than 500 employees. So, there is a shoring up of that in the amended order that came out but thats how they can assure and the exact amount of companies and dollars. My time is expired but im very interested in that information. I think so many others would be as well. So, please come back for that information. I yield back and now the Ranking Member from florida is recognized for five minutes. Thank you mr. Chair. What is the percentage of fraudulent loans approved in proportion to the 5. 2 million approved . We dont know. Just realizing we make a big distinction between fraudulent risk and a lot of things we talked about in the hearing have been about Data Analytics and other actions. To look at the fraud Risk Management in so we look at that and we are not a Law Enforcement agency. But one of the things we emphasize is how do you prevent this and set up the framework along the lines that we have actually had a report now since 2015 spelling it out that its widely used by agencies. How did you set it up, because the cost of setting up prevention right out of the starting gate, or even now when you are talking about what happens as we proceed with loan forgiveness and other aspects of the program, prevention tends to be the most efficient thing to do. What is being articulated as the balance that has to be struck between this particular situation getting money out quickly and preventing against fraud. Its important. Weve obviously experienced personally how important that was getting dozens and dozens of calls they said what in the world are you doing. So this push to the sba to get this stuff done quickly. The last thing i want is fraud. But when we acknowledge that there are two competing interests to get out quickly and prevent fraud, it seems to me that important question we should ask and answer that we should have is how many loans were fraudulent, and how much of the over 525 billion was fraudulent. That will help us determine how much if any additional measures should be taken to prevent fraud in the future. Does that make sense . Yes. Let me try to be brief on this. It will be a long time until we know how much fraud there was in the program, and you can think of the education of the department of justice and other Law Enforcement. But part of our emphasis has been very much recognized there was a push to get loans out. But as with the passage of time it becomes much more troubling when the framework is not in place to try to mitigate the risk existing in the program and being practiced and even more generally improper payments occurring because of the lack of oversight that at some point in time what is the statute of limitations under the cares act and i will let you answer that first. If you are making a question for the record, i dont know but if you make a question for the record i would be glad to respond. Mr. Ware, can you answer that question . Normally we are looking at seven to ten years with of these Fraud Investigations and performing in a portfolio over decades so there will be a time to go back and deal with this. The issue with this is in terms of the fraud framework that needs to be in place, we know for a fact that there is fraud mainly because particularly having to do with Identity Theft where people are finding out for the very first time that the identities were stolen that the loan payments are going to be deferred. Ive never had a loan that says this is routine. We are hearing some heartbreaking stories out there and all of these things fall into the same bucket that we are talking about in this environment. Thank you, mr. Ware. I know my time is up that i would say it seems to me if it didnt specify what the appropriate statute of limitations is, thats something we should follow up on and give us the opportunity to be able to plan long term for what the window of time would be which we need to go back after these folks. Thank you, madam chair. I yield back. Thank you. The gentlemans time has expired and now our chairwoman from new york is recognized for five minutes. Thank you very much. Mr. Ware, i would like to ask the same question that i asked mr. Shear but because of technical difficulties, i was unable to ask the same question to you and it is regarding the gao december report that shows 4,226 loans went to businesses with over 500 employees. So, in your work have you been able to examine whether or not the sba has confirmed businesses employed a number of employees stated in the application . Have we confirmed this . Yes our work has confirmed. The thing is i dont have the exact figures in front of me. I definitely can get you that though. With over 500 employees notwithstanding the rule that permitted exemption for the largest output industry. Does your office plan to examine how these companies were eligible to receive these loans . Certainly. It will be reported publicly later in this audit. In the sba response stated and i quote, loan decisions are ultimately made by people mainly loan officers. During your investigation for the process of things if they are adequate training protocols in place. Because money was provided, funding was provided to the agency to execute and implement the ppe programs. Mr. Shear, in the report in september, you stated the department of justice has charges and over 50 fraudulent related case related to the ppe. The cases were reserved to the doj but the agency has yet to implement the internal control to mitigate the risk. Can you respond on the risk they are incurring by not implementing the internal controls or ppe, and what is your assessment as to why to this point weve enacted the money they havent been able to put in place for the control mechanisms . With the lack of information provided to us, we presume that the controls are not in place and we would hope, i dont want to speak for the Inspector General, but i would hope they could view a more constructive way in terms of helping to identify how you can create a better control environment for this. With the passage of time right out of the gate, we felt something very serious was needed with the limited upfront controls and we just dont see it yet. We see references on pages eight and nine of my written statement as far as how they are going to use contractors, but we dont even have contractors now and we as auditors we ask the question what is the agency trying to hide. Theres too many questions that go unanswered. We need to be on the record basically pointing out the attitude of these administrations. You could go out there and we do not deny that the agency must do everything they can to put money into the hands of deserving businesses but not at the expense of compromising the fact that they have to take every control or put in place every mechanism to make sure we avoid mismanagement, fraud and abuse, and it is not happening. Chairwoman, thank you. I yield back. Chairwoman, you are muted. The gentle lady yields back and now the gentleman from pennsylvania is recognized for five minutes. Thank you, madam chair. [inaudible] many lenders in my home city have expressed frustration with the release of the ppe rules. Theres so much confusion about the role in the process and they are supposed to send forgiveness 90 days or receive the decision on the loan forgiveness. The first day they have a little over a month [inaudible] mr. Shear, what do you believe the sba will be able to do to meet this deadline, and if not able to meet the 90 day deadline, will this move lenders from participating in the future . I will first start with saying that sba might actually meet those deadlines. Our concern in meeting those deadlines is that we are looking for some type of control environment under which the forgiveness process will proceed. So, sba could meet the deadline. Its a question of whether it will protect the integrity of the program and how they go about it. So, now if they dont meet those deadlines, then you are creating more uncertainty for the lenders, and the lenders certainly we have spent a lot of time talking to lenders and trade groups and the concerns with the rolling guidance i will call it changes in the program and the whole question of how much the lenders will be held harmless based on certification by borrowers. Its like the situation keeps changing. So, im very cognizant of the strain that this has put on lenders. You could say they are being compensated for it, but in a sense they are being compensated for something that it wasnt clear when they got involved in this what their responsibilities would be. So, i hope that is responsive to your question. Madam chair, thank you and i will yield back the balance of my time. Thank you. The gentleman yields back and now i would like to make a closing statement. I would like to thank the witnesses for joining us both virtually and in person to share their important testimony today. The oversight work of the oig and the gao is vital to ensure that we root out instances of fraud and spend americas tax dollars wisely. Your work helps inform the subcommittee on problems within the sba covid19 programs and gives insight into these issues as they unfold in real time. It is my hope considering what we learned today that the sba will fully cooperate with the gao and the oig to improve these programs before the nations Small Businesses. The Witnesses Today show with proper input and cooperation it can be done. I look forward to continuing our Oversight Effort with all of you as partners. I ask unanimous consent members have five legislative days to submit statements for the record. Without objection, so ordered and if there is no further business before the committee, we are adjourned. Thank you very much. [inaudible conversations] on friday, the house is back at 9 a. M. To consider two nonbinding resolutions, one that condemns the conspiracy theories and another that condemns medical procedures on detainees and others without the full consent of the patient. Thats live on cspan. Later President Trump holds a rally in florida as a part of the Reelection Campaign at 9 a. M. Administrator testifying on future missions and changes at the agency due to the coronavirus pandemic. This is an hour and 40