Office testified. This isan hour and 20 minutes. I thank everybody for joining us today. Both virtually and in the hearing room. And also like to thank the witnesses for their participation in this important and timely oversight hearing. Before we begin id like to take this opportunity to note some important requirements. Let me begin by saying that Standing Health and Committee Roles at practice will continue to apply during hybrid proceedings. All members are reminded that theyre expected to adhere to these standing rules and put in a courtroom. During the period designated by the speaker the committee will operate in accordance with House Resolution 965 and subsequent guidance from the rules committee and canada respects the rights of all members to participate. House regulations require members to be visible through a video connection throughout the preceding though please keep your cameras on. Also, please remember to remain muted until you are recognize to minimize background noise. If you must participate in another proceeding please exit this want and log back in later. In the event a member has technical issues that prevent them from being recognized for their questioning, ill move to the next member of the same party and i will recognize member of the appropriate time slot provided they have returned to the proceedings. Those numbers physically present today, will also be following the health and safety guidelines thissued by the attendingphysicians. 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. I think you in advance for your commitment to a safe environment for all heretoday. The covid19 pandemic is fundamentally altered the way Small Businesses operate. Mandatory closures to protect Public Health have significantly affected their bottom line and visibility. To help Small Businesses whether the pandemic, congress has passed aseries of legislative passages. On march 6, Coronavirus Preparedness response supplemental appropriation became law and authorized Disaster Assistance program fused available funds to issue Economic Injury disaster mode or idol. The Small Businesses affected by the pandemic. On march 27, the fairfax was signed into law and created the paycheck Fiction Program for ppp and the economic recovery disaster loan emergency advance. And fda acted extremely quickly to implement these relief programs in order to deliver emergency funding to Small Business owners to keep them afloat. Over the past six months, more than 5. 2 million ppp loans in approximately 3. 5 million idol applications have been approved. Thats an incredible amount of federal assistance to americas Small Businesses and i commend sca staff or creating infrastructure is set up these programs so quickly. Sba was asked to undertake an enormously challenging task to implement these programs in just a few days and this committee recognizes that some mistakes were expected but Tthe Congress and the American People must have confidence that the administration is taking seriously their responsibilities to mitigate pause and ensure this assistance is available to all eligible Small Businesses. Today i hope to learn more from the sba Inspector General and Government Accountability office about your findings and discuss ways to improve the delivery of sba services to Small Businesses. The sba office of Inspector General released a report detailing potential incidence of fraud in the idol program. Initial investigation found tens of millions of dollars in duplicate loans about suspected fraud including accounts established with stolen identities and award transfers to foreignaccounts and deposits into personal accounts that have no evidence of business activities. And without swift action from sba these fraudulent activities will only become more widespread as Congress Debates legislation to allocate more assistance as the impact of the pandemic stretches on. I understand that sba responded to this report by stating they have internal controls in place to address these types of fraud. Yet government oversight casts doubt on how effective these internal controls are. The pogo report stated antifraud policies were not only implemented during the idol processing. Software was not uptodate sca was struggling in mid august to handle fraudulent applications. As the chairwoman of the investigations oversight regulations subcommittee, im concerned with these reports and hope we can have a constructive discussion to address these findings today. In addition, to the it report, the gao release reports on august 31 and september 21 detailing concerns that sbas oversight of theppp and their ability to collect and interpret applicant data. The september report outlines extremely them concerning gaps in the availability of demographic information serious data reliability issues area the report also details fopotential fraud sba referred to both the ip and the Poor Department of justice. More than 40 on related cases arecurrently under investigation. Additionally, the report finds sba has failed to adequately prepare borrowers, lenders or the dep forgiveness process. Demonstrating the seriousness of this problem. Lastly sca announced they had received 96,000 forgiveness applications representing less than two percent of loan dispersed. But they still have not processed as single one. Perhaps most troubling to me are reports that gao has had difficulty even completing their audit objectives of sba have not been forthcoming with documentation and access to data. Today id like to learn more about where sba stands and implementing internal controls, where the deficiencies live and what the subcommittee can do to support sca and their efforts to prevent fraud in both idol and ppd. Again, i want to thank the witnesses were participating both virtually and in person and i now yield to the Ranking Member, mister spada for his Opening Statement. Acumen chairwoman you chair for holding todays hearing. The Economic Impact of the coronavirus, this committee has worked to create and optimize Economic Relief programadministered by the sca. The bipartisan cooperation te and interagency negotiations we created a Paycheck Protection Program for pe. Revitalize a preexisting r Economic InjuryDisaster Loan Program, idl. Id like to take a moment to thank everyone for their work both rams have now a lifeline for our nation will businesses as it august 2020 the day that the program reached its authorized deadline sca had approved 5. 2 million loans totaling more than 525 billion dollars. The average loan size was around 100,000 and there were nearly 5500 participating lenders. A Small Businesses received 432,000 dep loan for a total of 32 billion. And in my district florida safety district 10,254 businesses received 304 million loans and he area these loans have Small Business owners keep the lights on. Keep their employees onthe payroll. I talked with many Small Business owners since the launch of the ppe, how , owner of older athletic wear in flex a florida, a manufacturer of womens athletic wear in my district. The loan was absolutely essential and crucial for mister powells business because it provided the critical capitalnecessary to retain employeesthrough the retail closures. In addition to creating the new program , the subsequent legislation expanded the preexisting idol program administered by the sca Disaster Loan Program and as of september 13, 2020 sca has approved report 5 million idol. [a 190 dollars and average loan sizes. The i have strength which is not required to be paid back by 6 million Small Businesses with 20 million in grants. Florida Small Businesses approximately 150,000 loans approved were nearly 20 billion. With only the basic statistics thomas cannot fully measure the impact of these programs. Thats for assure. We need to ensure loans went to the intendedbusinesses and that the loan proceeds were used properly. Fortunately we have fantastic allies to the sbas office of Inspector General and Government Accountability office. Today each office has sent a representative to represent their initial or to present i should say their initial reviews of ppp and idl. We look forward to working together to make sure that taxpayer dollars are spent appropriately and to reduce waste, fraud and abuse in these critical fda release programs and withthat madam chair i yield back. Mistress bono. The gentlemanyields that. Other subcommittee however numbers have an Opening Statement i would ask that they submitted for the record. Id like to take a moment to explain how this hearing will proceed. Each witness will have five minutes to testify and each member will have fiveminutes for questions. Ensure your microphone is on when you begin speaking and you returned to me when finished. Id like to introduce our witnesses. Our first witness is the honorable animal mike ware, Inspector General of the sba. Mister ware was sworn in as the Inspector General in may 2018 and has been an effective leader in his role and an asset to the community. He has 20 years of experience in the ig community rooting out fraud, waste and abuse in federal programs. Hes received numerous awards throughout his career including several from the council of the Inspector General on integrity and efficiency in recognition for significant portfolio of oversight work. Welcome mister ware. Thank you. Our assistant witness is mister williamscheer , director of Financial Markets and Community Investment team of the Government Accountability office. Theleads in gaos Work Community and Economic Development , Small Business and sbas response programs. Mister shearer joined gao more than20 years ago. He has a masters degree in Public Policy and a phd in economics from the university of chicago. He also served as an adjunct to the member and the graduate program in city and Regional Planning in the university of pennsylvania welcome , mister scheer. Id like to begin todays hearing by recognizing mister where for five minutes area. Ranking member expanded, members of the subcommittee, thank you for inviting me to speak with youtoday for your continued support. The men and women of the office of Inspector General have been working diligently to provide oversight of sba Pandemic Response. I am always proud to ff represent them publicly and to you about our important work. I come before you today in the wake of a historic crisis posed by the pendant and ensuing unprecedented role or sca to mitigate damages to the nationseconomic crisis. Scas managing over 1 a trillion in Lending Authority for pe en idol programs. The speed and lower guardrails of these eligibilitys surrounding the ppp and idol lending authorities brought with it substantially increase risk. As indicated in my written statements, we sought to inform sbas efforts through three white paper reports offering known risks implementing pep and idol based on prior oversight of the recovery actand other disasters. At the same time we focus on preventing and determine fraud by raising Public Awareness offraud schemes. The outset, we initiated several reviews to include the ppp and idol reviews. During the course of these alarming findings. Often enough to issue a report on ppe in may management alert on idolin july. That oversight were carried on. We solidified our preliminary results and identified Additional Findings area on september 14, we provided leadership to track reports. One containing our findings related to sbas implementation of ppp and one containing findings of sbas initial disaster resistance is response to covid19. Review standards require that we consider important findings. We anticipate others seeing these reports in midoctober following the 30 day review and Comment Period by fdas leaders. As such my comments today regarding those findings must be considered preliminary so we can account for sbas official comments before finalizing our report. Nonetheless, our findings are significant the need for strengthening internalimcontrol and for combating potential fraud in the program and. Our reports to significant potential fraud in both ppp and idol. Its a remark that the potential only because weve not received each loan associated with the area findings. However, the amount of dollars we cite as potential fraud are not being on projection, rather they are based on loans, meeting criteria for a week internal control environment where in many instances we are in massive criminal investigations of fraud to substantiate concern. Our office has received tens of thousands of complaints around the world on our hotline. Hundreds of investigations involving complaints of fraud have been initiated and are ongoing with no results being reported daily by the United States department of justice which has been a tremendous partner. Among these accomplishments was the first t charges against individualsfraudulently seeking ppp loans which was announced on may. More than 57 defendants have been charged with fraud cares tax passage that the department of justice on september 10. I want to assure sba lending partner and the nations Small Business owner that they follow the guidelines and act in good faith we are not focused on your actions. The findings of the report do not diminish the lending partners. At one point in the crisis, it was reported that sba performed 14 years worth of lending in just 14 days. However, oversight work confirms sba did not pass the controls to address risk and provide ovassurance that the loans and idol grants and loans only be received by eligible recipients. We will continue our efforts to keep administrator this congress currently informed about our findings area we are not alone in this effort. Programs of this magnitude require a whole government response as a statutory member of the council of Inspector General on integrity and efficiency, i am working with my Inspector General colleagues to leverage the collective power of joint oversight efforts to increase transparency of sbas Pandemic Response. Rest assured the men and women of my office understand nothing short of the Publics Trust is at stake as well as the vitalityof the nations economy. Thank you for the opportunity to speak today area i am happy to answer any questions you may have. Thank you mister ware mister shearer, you are now recognized for five minutes. Thank you. I am pleased to be here this morning todiscuss our work on sbas Paycheck Protection Program and economic entry Disaster Loan Program. Through these programs sbas made or guaranteed 14. 5 million loans and grants providing about 729 billion to help Small Businesses personally affected by covid19. In april 2020, sba moved quickly to implement ppp. Given the immediate pneed for these funds, sba worked to streamline the program so lenders could begin discrediting responses as soon as possible. For example lenders were permitted to rely on substantial occasions s that help it the use of loan proceeds and as a result there was significant risk that some fraudulent or inflated applications were approved. In our june report we recommended sba develop and implement plans to identify respond to risk and ppp to ensure Program Integrity and achieve Program Effectiveness and address potential fraud. According to federal internal control standards gaos progress framework managers and executive Branch Agencies are responsible formanaging fraud risk and implementing practices for mitigating those rest. When progress can be identified and mitigated, fraud may be less likely to occur. In june 2020 we reported that reliance on applicant Self Certifications can leave a program vulnerable to exploitation does wish to circumvent eligibility requirements or pursue criminal activities. Since may 2020, the department of justice has publicly announced arches in more than 50 fraud relate