Friends dont have to be rare. This is joe. When youre connected youre not alone. Cox, supports cspan as a Public Service. Along with these other television provirs. Getting you a front row seat to democracy. Next a look at the covid19 Small Business administration fraud report. The Inspector Generals report found that about 200 billion of pandemic loans were potentially fraudulent. In contrast with the s. B. A. Administrators estimate of 36 billion. The Inspector General testified before a House Committee on the report. The administrator of the s. B. A. Did not attend reportedly due to previously scheduled commitments. Before we begin were going to take a moment to have an opening prayer and the pledge. I recognize congressman dean. We know theres businesses that put food on the table and provide jobs for americans. We know its scary out there, we know its a challenge to run a Small Business. Today we ask a bless, thank you and protection for these businesses. May they thrive. Theyre the backbone of america. Its we ask leaders to do the right thing and continue to make this the greatest country on the greatest country to continue to do great things. Around the world. All this we ask your name ahman. Please join me in the pledge of allegiance. I pledge allegiance to the flag of the United States of america and to the republic for which it stands, one nation, under god, indivisible, with liberty and justice for all. Good afternoon, i now call the committee on Small Business to order. The chair is authorized to declare a recess of the committee at any time. I recognize for my opening statement. Welcome to todays hearing which will focus on two recent reports examining fraud in the covid19 pandemic lending programs. These contradicting reports, one from the s. B. A. s office of Inspector General and the other from the Small Business administration were released within hours of one another on june 27. The s. B. A. Inspector general concludes the s. B. A. Disbursed more than 200 billion in potentially fraudulent loans while the s. B. A. Reported fraud in these programs is closer to 36 billion. This large discrepancy more than 160 billion certainly demands answers. Given the drastically different figures in these reports and lack of an adequate plan to recoup stolen taxpayer funds we invited s. B. A. Administrator guzman to join us here today but as you can see by her empty seat she declined the offer. You would think that a report from a nonpartisan watchdog claiming hundreds of billions of dollars of criminal activity would warrant her showing up to this committee today but that obviously isnt the case for administrator guzman. During the pandemic, the s. B. A. Oversaw an unprecedented amount of lending. While there was an understanding that getting money out quickly could lead to higher levels of fraud nothing of this magnitude was ever imagined. The o. I. G. Report estimates that roughly one in five loan, i repeat, one in five loans disbursed through the pandemic programs have been labeled as potentially fraudulent. This afteraction report shows the s. B. A. Was not up to the task when the American People needed their help the most and we must have this track record in the back of our minds as the agency looks to take on additional responsibilities. The American People need accountability and transparency and as a Small Business accounts receivable were as high as the s. B. A. s theyd take all actions possible to get this money back. It belongs to them. Unfortunately, it does not appear that the s. B. A. Is taking every action possible to give get these stolen funds back from taxpayers. So we cannot sweep this under the rug or write it off write off all this fraud as a loss for the taxpayers bottom line. Inspector general ware, thank you for taking time to join us today and we look forward to your examination of these reports and their discrepancies. Also the honorable guzman is not here but her chair is there. We understand the fail dwhroifers s. B. A. Are independent of you and your office but on behalf of main street america it is our responsibility to hear about your findings and work toward a solution to combat freud moving forward. We must obtain a better understanding of what went wrong, how to fix these issues and what we can do to recover these stolen taxpayer dollars which we must begin to go forward and recover what we can. We stand ready to work to ensure the s. B. A. Has the oversight met ribs in place to correct their past mistakes and restore integrity in the agency. In closing, i would like to note that the s. B. A. Included a formal letting declining our invitation in which they accused the o. I. G. Of overestimating the fraud and misleading the public. I ask unanimous consent for that letter as well as the two reports well be discussing today, one from the o. I. G. And one from the s. B. A. To be entered in the record. Without objection, so ordered. So i also ask unanimous consent to waive the chairman of the select subcommittee on the coronavirus pandemic, dr. Brad wenstrup for the purpose of asking questions in his hearing. Without objection, that will be so ordered. So with that, i will yield tour distinguished Ranking Member from new york, ms. Velazquez. Ms. Velazquez thank you, chairman williams. Welcome back to the committee, mr. Ware. First, let me thank you for your work for the office of Inspector General. The past three years have been extremely challenging for the s. B. A. And your office as well. The agency executed 14 years of lending in 14 days to help keep Small Businesses afloat in a pandemic. It is important to note the impact of the agencys efforts on american Small Businesses. Since President Biden took office, entrepreneurs have started a Record Number of Small Businesses who have created jobs at a rapid pace. This has paved the way for some of the lowest unemployment rates in recent times and we got more good news yesterday as inflation dropped to its lowest rate since 2021, to 3 . Despite this, any program of the magnitude of s. B. A. s covid lending measures is bound to encounter serious issues. And your office has been working around the clock issuing reports and launching investigations to combat the potential fraud in the Pandemic Relief Program. Turning to your report, your office estimates that there is 200 billion in potentially fraudulent covid loans which is unsettling. The s. B. A. Issued a report the same day and found that 36 billion of the 1. 2 trillion in pandemic relief was likely obtained fraudulently. Further, 86 of the fraud occurred in the first nine months of the pandemic, under the Trump Administration. The findings in these two reports are widely different and quite frankly, confusing. I understand there will be discrepancies in the report bug im concerned about the degree to which the estimates vary. If our committee is going to conduct proper oversight of the s. B. A. , we need to be assured that the reports we are receiving, whether from the o. I. G. Or s. B. A. Are measured and accurate. I also look toward to continuing to work with the g. A. O. On expanding of the nonpartisan entity. It is our duty to drill down to ensure we are prepared in the event of another global catastrophe. Today, your oversight and investigative work has resulted in over 1,000 indictments, over 800 arrests and nearly 500 convictions. An opportunity 30 billion in aid was seized or returns. More needs to be done to hold wrong doers accountable and recover taxpayers dollars. As you know, i sponsor Bipartisan Legislation to extend the statute of limitations for fraud in the programs which became law. This sent a strong message that unscrupulous behavior will not be tolerated and those that committed fraud will be held accountable in the years to come. Cocapitalize on these two new law, i understand youll need the full f. Y. 2024 budget request. Unfortunately, republicans in Congress Want to pare fund back to f. Y. 2022 levels and the most recent proposal provides 32 million for the o. I. G. , hindering your ability to recover fraudulent funds. I appreciate your oversight and investigative work and thats why im supporting i am supportive of the president s increed funsing for for your office. Im fully committed to work withing working with my colleagues to oppose any shortsighted cutbacks. With that, i fully expect youll work closely with the s. B. A. To further respond refine this data and help close the gap between the two estimates. In closing, i would like to request that the s. B. A. s response to your invitation to testify before the committee today and their response to the o. I. G. s white papers be entered into the record. Mr. Chairman. Thank you, and i yield back. Mr. Williams thank you. Its my honor to introduce our witnesses. Our first witness, isabela Isabella Guzman chose not to come today. She was asked more than once to attend, to defend her position. So she chose not to do that. We have an empty seat for her. Secondly, the honorable mike ware is here. And Inspector General ware holds a bachelor of arts degree in accounting from the university of ve the Virgin Islands. In may of 2018, following his confirmation by the u. S. Senate, he was sworn in as Inspector General of the Small Business administration. Prior to his appointment he served as deputy Inspector General. He has over 30 years of experience in the o. I. G. Community. In 1990 he joined the department of interior of o. I. G. s field office in the Virgin Islands and became the field office supervisor. He later moved to d. O. I. Of Inspector General, office of management and served as Deputy AssistantInspector General for management. In his current role, mr. Ware are spe is responsible for the oversight of the Small BusinessAdministration Programs and operation which is normally encompass more than 100 billion in guaranteed loans and more mrd before the committee in april. Inspector general ware. Im looking forward to our conversation. Our office knew from the offset that s. B. A. Would prevent widespread fraud and disbursing relief funds. The biggest concern for our office was quick delivery to qualifying Small Business without first establishing internal controls. We issued two reports prior to the first p. P. P. Loan stressing the to mitigate the risk of fraud. To address the easy that created golden opportunity. To date we have should 33 pandemicrelated reports with dozens of recommendations and provided 100 congressional briefings. Both to supply corrective action and strengthen internal environment. Over the course, cab disbursted funds. Using our investigative case work, and analytics and additional review procedures, we estimate s. B. A. Had 200 billion in fraudulent loans. This estimates 17 of disbursed funds in those programs. In conducting the review, our office unleashed the data. Fueled by the expertise and experience of our criminal investigators auditors and analysts, the report identified 11 fraud indicators that we use to signal potential fraud. I have the report in my written statement. Our office was able to reduce false positives by using link analysis. This allowed us to focus on loans highly suspected of being fraudulent. They conducted additional reviews using sampling and professional judgment taking into consideration Prior Experience and investigative case work across the entire Law Enforcement spectrum. The transparency afforded by the fraud landscape report and our well founded recommendations served to mitigate fraud. S. B. A. Made progress and prevent further losses. We look forward to continueing to partner with s. B. A. To stop fraud. This has resulted in 30 billion in covid funds being seized or returned to s. B. A. With our Law Enforcement partners we have taken it to the step of wrong doers. 800 arrests and 550 convictions and important to note we arent alone. We are on the Justice Department strike force. We continue to work hand in hand with the f. B. I. , the secret service, i. R. S. Criminal investigation, homeland security, the United StatesPostal Office and o. I. G. Too many to to mention. Our oversight capacity is dependent upon the availability of sufficient budgetary resources to continue to address the fraud. Absent the total budgetary resources requested in the 2024 budget we will not have a sufficient budget to combat the fraud or provide trusted oversight over its flagship programs. We wouldnt have a sufficient operating budget to capatalize on the laws extending the statute of limitation for 10 years for fraud. The nation once again can depend on us to provide independent objective and timely oversight of s. B. A. Thank you for the opportunity to speak to you and happy to answer any questions you have for me. Mr. Williams you know the drill, when the light turns red. We will move to the member questions under the fiveminute rule. I recognize myself for five minutes. I am disappointed that the administrator did not show up today. This is a big deal and i would assume she would have an army of her staff here to defend her work and s. B. A. But not even the army is here. But we the hearing with her seat being empty. The s. B. A. Released a statement expressing concern that the o. I. G. Had significant flaws and mislead the public. I dont know if i remember an agency accused their nonpartisan watchdog of misleading the congress. Mr. Ware, did you and all the employees within your office put this report to lie about the pandemic rams . Mr. Ware absolutely not. Our goal is that we be independent and keep an object jeghttive eye so you can see these programs along with us. I am super confident in this report. Mr. Williams the two total fraud numbers are drastically different. The s. B. A. Claims they had a more diligent process that ruled out much of the fraud that your team has flagged. First, who has access to more did ita to find the levels of fraud the o. I. G. Or s. B. A. . Mr. Ware o. I. G. Mr. Williams what was the initial value of the potential fraud you looked at before you got it down to 200 billion . Mr. Ware 650 billion. Mr. Williams have you communicated that to s. B. A. . Mr. Ware we have. Mr. Williams others claim that the number was higher. Rainshower report says the 200 billion is conservative. Are you underestimating rather than overestimating . Mr. Ware as the data becomes available that the number could be calibrated. It could go up, but could go down. We have a cap on where that fraud level is currently and that is a little over 200 billion. Mr. Williams what money was object taped and criminals who took advantage of the taxpayers and give the money back. We are talking about doing this. Good to identify the fraud that has occurred it is going to be in vein if we dont get this money back and just talking about it and dont deliver. It will make it harder to get back some of the illegally obtained funds. Can you tell us what actions the s. B. A. Could take immediately that would get more of these illegally obtained funds back to the taxpayers . Mr. Ware we have partnered hand in hand to pull back the 30 billion that we have pulled back. There is more in the chute right now but we are working through the agency to try to streamline the process for getting the money back. The secret service is working with us on individual cases, we pull back 1 billion. And there are quite a bit still in the chute and working with the Postal Service inspection as well. Mr. Williams that is an awful lot of money. So i now recognize the Ranking Member for five minutes of questions. Ms. Velazquez the s. B. A. Averts that 86 of the likely fraud originated in the first nine months of the pandemic under the Trump Administration. Does your report include such detailed information of when the likely fraud occurred . Mr. Ware no. Ms. Velazquez does your report that the Biden Administration put internal controls in place to combat fraud upon almost immediately . Mr. Ware yes. Ms. Velazquez do you agree the vast majority of the fraud occurred in the first nine months of the pandemic, yes or no . Mr. Ware yes. Ms. Velazquez did the controls that the Biden Administration put into place successfully reduce the potential for fraud . Mr. Ware yes. Ms. Velazquez your approach puts an open limit on the fraud. You may weed out a number of loans that produce a false positive . Mr. Ware yes. Ms. Velazquez could you lower the estimate . Mr. Ware it could go both ways. Im going to tell the truth. Whatever the number is. Ms. Velazquez we are all here for the truth to enact legislation to correct the shortcomings of what was in place. Your estimate of potential fraud is much higher than s. B. A. s estimate. In fact, s. B. A. Expressed concerns that the approach contains serious flaws that significantly overestimates fraud and misleads the public, how do you respond . Mr. Ware the s. B. A. Is mistaken and i think they know that. There are two main reasons for that. One, we are the independent watchdog. We have demonstrated that throughout the pandemic and we have demonstrated that. Secondly, we have access to data sets that they didnt have access to. Ms. Velazquez the