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 imp