[House Hearing, 118 Congress] [From the U.S. Government Publishing Office] OVERSIGHT OF THE SMALL BUSINESS ADMINISTRATION ======================================================================= HEARING BEFORE THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTEENTH CONGRESS FIRST SESSION ---------- HEARING HELD MARCH 23, 2023 ---------- [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 118-005 Available via the GPO Website: www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 51-442 WASHINGTON : 2023 ----------------------------------------------------------------------------------- HOUSE COMMITTEE ON SMALL BUSINESS ROGER WILLIAMS, Texas, Chairman BLAINE LUETKEMEYER, Missouri PETE STAUBER, Minnesota DAN MEUSER, Pennsylvania BETH VAN DUYNE, Texas MARIA SALAZAR, Florida TRACEY MANN, Kansas JAKE ELLZEY, Texas MARC MOLINARO, New York MARK ALFORD, Missouri ELI CRANE, Arizona AARON BEAN, Florida WESLEY HUNT, Texas NICK LALOTA, New York NYDIA VELAZQUEZ, New York, Ranking Member JARED GOLDEN, Maine KWEISI MFUME, Maryland DEAN PHILLIPS, Minnesota GREG LANDSMAN, Ohio MORGAN MCGARVEY, Kentucky MARIE GLUESENKAMP PEREZ, Washington HILLARY SCHOLTEN, Michigan SHRI THANEDAR, Michigan JUDY CHU, California SHARICE DAVIDS, Kansas CHRIS PAPPAS, New Hampshire Ben Johnson, Majority Staff Director Melissa Jung, Minority Staff Director C O N T E N T S OPENING STATEMENTS Page Hon. Roger Williams.............................................. 1 Hon. Nydia Velazquez............................................. 3 WITNESS Hon. Isabella Casillas Guzman, Administrator, United States Small Business Administration, Washington, DC........................ 4 APPENDIX Prepared Statements: Hon. Isabella Casillas Guzman, Administrator, United States Small Business Administration, Washington, DC.............. 37 Questions and Answers for the Record: Questions from Hon. Williams to Hon. Guzman and Answers from Hon. Guzman................................................ 42 Questions from Hon. Van Duyne to Hon. Guzman and Answers from Hon. Guzman................................................ 55 Questions from Hon. Bean to Hon. Guzman and Answers from Hon. Guzman..................................................... 56 Questions from Hon. Velazquez to Hon. Guzman and Answers from Hon. Guzman................................................ 60 Additional Material for the Record: FTA - Financial Technology Association....................... 74 NADCO - National Association of Development Companies........ 78 NAFCU - National Association of Federally-Insured Credit Unions..................................................... 81 SCORE for the Life of your Business.......................... 83 Documents Submitted by Hon. Scholten......................... 86 OVERSIGHT OF THE SMALL BUSINESS ADMINISTRATION ---------- THURSDAY, MARCH 23, 2023 House of Representatives, Committee on Small Business, Washington, DC. The Committee met, pursuant to call, at 2:30 p.m., in Room 2360, Rayburn House Office Building, Hon. Roger Williams [chairman of the Committee] presiding. Present: Representatives Williams, Luetkemeyer, Alford, Stauber, Meuser, Bean, Van Duyne, Ellzey, Mann, LaLota, Velazquez, Golden, Mfume, Phillips, Landsman, McGarvey, Gluesenkamp Perez, Scholten, Thanedar, Chu, Davids, and Pappas. Chairman WILLIAMS. Good afternoon. Sorry for the lateness. I want to thank everybody for being here. And before we begin, I am going to take a moment to ask for Dan Meuser to lead us in opening prayer and the Pledge. Mr. MEUSER. Thank you, Mr. Chairman. If you all would just please bow your heads. Dear Lord, we appreciate you bringing us all together here today to discuss the important matters facing our wonderful country. We appreciate the administrator of the Small Business Administration being here with us, and we ask your blessings as we try to bring wisdom and intelligence and just simply doing for our small businesses and our country. Amen. Stand for the pledge. 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. Chairman WILLIAMS. Okay. I now call the Committee on Small business to order. Without objection, the Chair is authorized to declare a recess of the Committee at any time. I now recognize myself for my opening statements. Today's hearing will focus on the much needed oversight of the Small Business Administration. And first, I want to thank our witness, Administrator Guzman, for joining us today, a fellow Texan. Thank you. And as someone with ties to the great State of Texas, it is a pleasure to have you here today. I hope this is the first of several productive hearings we will have with you at this Congress. So I appreciate you making the trip to speak with us today. This hearing could not come at a more important time for Main Street America. And our nation's small businesses are facing unprecedented levels of inflation, interest rates that are being raised at the fastest pace since the '80s, and a labor shortage that have windows plastered with help wanted signs across our country. As a small business owner, I have been working with these economic headwinds. This Committee must ensure that the Small Business Administration is focusing their attention on ways to help them get through these daunting challenges. During the COVID-19 Pandemic, the SBA was asked to step up in ways that they had never had to do before. While they were able to get money out the door quickly, the After Action report showed there were serious problems within the Agency. A disorganized management structure and a lack of basic guardrails to prevent fraud led to unacceptable amounts of waste of taxpayer dollars. And in the Economic Injury Disaster Loan Program, that office, the Office of Inspector General, found potentially $78 billion in loans and grants were fraudulently obtained. Criminal opportunists took advantage when the SBA was overwhelmed with the sheer volume of work they were asking to do, and the taxpayers were the ones left holding the bag, as usually happens. While there were many past findings that showed what could have been done to prevent fraud, there are other recommendations that were made in the last few months that could have remedied some of these crimes. And unfortunately, it looks like the SBA is not taking these recommendations seriously. For example, against the OIG's advice, the SBA has decided to end their collection, forgive all PPP loans with an outstanding balance of $100,000 or less. While I support ensuring that the forgiveness process is as seamless as possible for small business owners, you cannot help but wonder how many illegitimate entities were able to walk away with tens of thousands of taxpayer dollars because of this decision. Given all the problems the SBA had during the pandemic, we must have a serious discussion on the role the SBA should be playing in the future. The President's budget proposal and some rules currently being developed by the Agency make it very clear that this Administration thinks the SBA did a great job over the past few years and deserves more responsibilities. I completely disagree with that assessment. With such high levels of fraud that occurred during the pandemic and the most recent failures of large banks in California and New York, I have serious concerns about expanding the government backed 7(a) loan program and increasing the SBA's role as a regulator. Additionally, I am very concerned that the President's budget request diverts resources away from the programs that have bipartisan support and a proven track record of helping main street to duplicate programs with unclear performance metrics. And finally, we continue to hear how the customer service of the Agency continues to fail our constituents. We must ensure the Agency is capable of handling their current task before they expand into more areas. Main Street America has been forced to endure profound challenges over the last couple of years, and I hope this hearing can serve as the starting point to get the SBA back on track. Too much is at stake for America's small businesses to be not taken seriously. And I want to thank you all again for being here with us today. And I am looking forward to today's conversation. And with that, I want to yield our distinguished Ranking Member from New York, Ms. Velazquez. I now recognize the distinguished Ranking Member for her opening remarks. Ms. VELAZQUEZ. Thank you, Administrator Guzman, for testifying before the Committee today. It has been 2 years since you were confirmed as SBA Administrator. In those years, SBA delivered more than a trillion dollars in pandemic relief, saving countless jobs and small businesses from permanent closure. There have been a record number of small business applications, thanks in large part to an historic investment in not just the nation's economic recovery, but also its future. This effort unlocked opportunities for Americans, leading to a surge in entrepreneurship, which is vital to our economy. Small businesses have the power to spark economic growth and create good paying jobs in our local communities. They can turn main street into a vibrant destination, where retailers, restaurants, and personal service businesses can thrive. Entrepreneurship can spark innovation, bringing new ideas and solutions to the marketplace. Looking ahead to the next 2 years, I hope to learn more about your vision for the Agency, in particular, how SBA's fiscal year 2024 budget plan will nurture our nation's 33 million entrepreneurs and innovative startups while creating a landscape that will be ripe for local economic growth. Part of that discussion will inevitably include SBA's IG and GAO's reports and recommendations on the pandemic relief programs. Their investigations have identified billions of dollars in potential fraud, and it is important for the Committee to hear the steps you have taken to address fraud and save taxpayers' dollars. Finally, I want to hear from you about the two proposed rulemakings, which could lead to major changes in how the 7(a) program operates. The stated intent of the two rules is to fill a gap in underserved markets, and it goes without saying that ensuring support for minority owned small businesses and entrepreneurs from underserved communities is a top priority of mine. With that said, I have been disappointed with the SBA's initial lack of engagement on the proposed rulemakings. Questions remain that I hope can be answered prior to finalizing the rules. Put simply, the Agency should slow down and address issues with fraud in the Paycheck Protection Program before moving forward with major policy changes to the 7(a) program. As you know, the IG identified 70,000 potentially fraudulent PPP loans totalling more than $4.6 billion, and a disproportionate share of these loans were made by FinTechs. These entities are not subject to the same prudent lending rules as traditional banks and credit unions, and lifting the moratorium on SBLCs to allow non-regulated entities to participate in SBA flagship lending programs may not be the best way to reach under bank communities. Congress put the moratorium in place 40 years ago to safeguard the 7(a) loan program and make sure the Agency had the resources to supervise lenders effectively. We do not have any assurances that SBA has the bandwidth to manage these new unregulated entities, even though we have been asking. Major policy changes cannot be made hastily. The Agency should be working with this Committee and stakeholders to improve the program while still protecting its integrity. Let me finish by stating there may be areas of disagreement throughout this hearing, but that is part of the legislative process. Today's hearing will give us an excellent opportunity to closely examine the achievements we have made for small businesses, but also to discuss the challenges they face and learn how best to support them through our bipartisan efforts. I look forward to our discussion, and I yield back, Mr. Chairman. Chairman WILLIAMS. Thank you, Ranking Member. And it is my honor today to introduce our witness, Small Business Administrator Guzman. Administrator Guzman is a graduate of the University of Pennsylvania Wharton School of Business. In March 2021, she was confirmed as the 27th Administrator of the Small Business Administration. Prior to being becoming SBA administrator, Ms. Guzman served in various capacities in the Agency for 9 years, including as deputy chief of staff and senior advisor at the SBA. Ms. Guzman also served as a small business advocate for the State of California. Administrator Guzman is tasked with ensuring that the SBA's programs and services are available to all small businesses, no matter who or where they are, so they can have access to capital, revenue growth opportunities and support networks all entrepreneurs need to start, grow, and lead our economy. As the person tasked with the leading the SBA during such an important time for America's small business, we have brought Administrator Guzman here to address growing concerns, as you have heard of the Agency's effectiveness, priorities, and issues facing Main Street America. Administrator Guzman, thank you for joining the Committee today, and I am looking forward to your important conversation with you. And so I now recognize Ms. Guzman for her 5 minute opening remarks. STATEMENT OF THE HONORABLE ISABELLA CASILLAS GUZMAN, ADMINISTRATOR, UNITED STATES SMALL BUSINESS ADMINISTRATION Ms. GUZMAN. Thank you so much, Chairman Williams, Ranking Member Velazquez, as well as the distinguished Members of this Committee. Thank you so much for giving me the opportunity to come and discuss the U.S. Small Business Administration and the impact that we have on the entrepreneurial community, as well as the continuous improvements that we have made in helping small businesses start and grow. The entrepreneurial spirit of the American people, as you have seen, their trademark grit, determination, and agility have really made small businesses in our nation the most important driver of job growth, competition, and innovation. America's entrepreneurs have not only helped deliver an incredible economic expansion, but they are also powering a surge in new businesses--'21 to '22, 10.5 million new business applications were filed, the most in any 2 year span on record. Our nation's small businesses continue to need support as they position to grow their businesses and pivot to continue to adapt to remaining supply chain challenges, inflationary pressures, and the tight labor market. They consistently share that funding is one of their biggest challenges, especially as we see they are facing rising interest rates and tightening credit standards. Access to affordable capital is one of my key priorities at the SBA. In 2022, SBA delivered more than $43 billion across our capital programs and finally reversed a 5 year decline in small dollar lending, but we continue to see large gaps in this space, especially in loans under $150,000. This funding gap truly limits entrepreneurial growth, especially for the smallest of the small, as well as for minority, veteran, rural, and other historically underserved small businesses. To effectively address this market gap, the SBA must streamline its regulations and its capital programs. First, we need more competition and capacity in small business lending. That is why we propose expanding our distribution networks by revitalizing the existing Small Business Lending Company or SBLC program. The SBLC Rule will make the Community Advantage Pilot program permanent and provide certainty to the over 100 nonprofit mission lenders who have been effectively lending to underserved communities through this program in the 7(a). With permanence, the SBA can expand the number of these mission lenders serving the hardest to reach small businesses through a new Community Advantage License. We will also lift the cap on regular SBLC licenses, enabling SBA to admit new non depository lenders aligned with the Agency's mission in the 7(a) program. Second, we will modernize our loan products and meet our businesses where they are by cutting red tape and complexity that exists in our 7(a) and 504 programs through our proposed affiliation rule. Based on extensive feedback from our lending partners over the past decade, we will streamline affiliation roles which lenders have shared are burdensome. We will also align with existing lender best practices on credit underwriting. As we implement, we will prioritize maintaining the core integrity and oversight of SBA's lending programs. Based on past oversight performance and existing structures and processes, we can both improve our support for underserved communities and fill capital gaps, as well as ensure program integrity at the same time. Third, we will add a provision to help owners with business transitions to employee ownership, an issue many of the Members of this Committee have supported. SBA is finding ways for its products to help finance partial buyouts so that an owner can sell their business to employees, for example, for a successful exit. Finally, a bipartisan interest of this Committee has been to attract more private investment capital to innovative startups critical to our national economic competitiveness and our national defense. Our proposed rule, Modifying the Small Business Investment Company, or SBIC program, will add a new accrual SBIC license to incentivize patient and growth capital. It will also expand investment in rural and underserved communities by ensuring a diversified portfolio across the nation and streamlining and improving the licensing process. These three rules will help the SBA more effectively address capital gaps so we can power entrepreneurship. As we move forward with these updates to our capital programs, we will continue to build on the lessons learned through managing the biggest disaster response in our Agency's history. Our COVID relief helped millions of small businesses navigate the pandemic and preserve jobs recover quickly. However, while these programs have ended, the SBA's portfolio has changed and we continue to support small businesses through ongoing loan servicing, grant reporting, and PPP forgiveness processing. We will work with Congress to ensure the Agency has the necessary resources to serve these small businesses. The SBA has implemented the Biden Harris Priority effort to combat fraud and pandemic relief. Aligned with the Inspector General and the GAO recommendations, we have instituted standard fraud protections to deliver funds with not just speed, but also certainty. We also improved SBA operations by implementing the GAO recommended fraud risk framework, and we continue to collaborate with the Inspector General to recover stolen funds. The SBA is more strongly positioned than ever to combat fraud, waste and abuse, and this strengthened position enables us to better serve the 33 million small businesses and disaster survivors into the future. So I appreciate your time, and I do look forward to diving into more detail with your questions regarding all of SBA's critical programs around capital and technical assistance. Chairman WILLIAMS. Thank you for being here. Now we will now move to the Member questions. And I recognize myself for 5 minutes. Businesses need long-term certainty. I am a small business owner, and you have to deal with certainty as they make decisions on where to invest in their operations. In the next few years, some major components of the Tax Cuts and Job Act will be expiring. Specifically for small businesses organized as pass through entities, there will be a large increase for their tax liability because these businesses pay individual income tax rates instead of the corporate tax rate. Administrator Guzman says now 80 percent of all small businesses are organized as pass throughs. Will you commit to working with the President to make sure that these small businesses won't have their taxes increased when this provision expires? Ms. GUZMAN. The President has demonstrated that he is committed to lowering costs for families and small businesses. And we recognize the Trump tax cut did not make permanent the small business tax assistance, only the corporate. So as a lot of small businesses, of course, are not corporations, we remain committed to providing the advice and being that voice of small business. Chairman WILLIAMS. You are recommending to him that he keep that component, ma'am? Ms. GUZMAN. You know, obviously, Congress makes the tax policy. Chairman WILLIAMS. Right. Ms. GUZMAN. And I know the President has---- Chairman WILLIAMS. He supports---- Ms. GUZMAN.--committed to working with Congress to ensure that we can help ensure that--a vibrant economy okay. Chairman WILLIAMS. Okay. There has been bipartisan concerns over the proposed changes to the SBA's flagship 7(a) lending program. Now, given the recent failures of some large banks in California and New York, it does not seem wise to change some of the prudential underwriting standards of this lending program while simultaneously opening up to more companies, whose sole federal regulator will be the SBA. The 7(a) portfolio is backed by the government, so if something goes wrong, the taxpayers are on the hook. And so, Administrator Guzman, how do you justify relaxing the underwriting standards of this program when we just experienced the second largest bank failure in our country's history? And secondly, does the SBA even have the authority to transition pilot program participants into full time 7(a) lenders without an act from Congress, as the rule does? Ms. GUZMAN. So the SBLC program is an existing program. It is been four decades long, and we have 14 SBLCs currently. We have passed over those licenses multiple times. They have had different 60 different licenses as well. Across those licenses, there was a moratorium put in place. We are recommending lifting the moratorium so that we can allow for more competition and a broader distribution network, as we saw with PPP. You know, with this, we plan to implement strong controls within this program, as we have been doing for the past 4 decades. We have strong credit risk management processes and controls in place to ensure that these SBLCs, as well as our Community Advantaged lenders can perform. And that includes in credit underwriting as. Chairman WILLIAMS. Well, you want to make sure you tighten up the overseers. That is important. Before any business makes an investment decision, they must have a general understanding of the return they will see on dollars spent. And I think it is responsible for the government to do the same thing. So kind of return on investment. So I want to go over some numbers in the Office of the Budget request to see if they make sense in terms of ROI for the taxpayers. In the SBA's budget request, it states, the Community Navigators program spent $131,000,000 in fiscal year '22, which started 422 new businesses and serviced 16,312 new clients. This means it cost the taxpayers over $300,000 for each new business started and over $8,000 per client serviced. During the same period, the SBDCs performed similar services at a cost of $7,064 per new business started and $319 per client serviced. The numbers don't lie. It is very obvious which one of these programs is a much better return on investment ROI for the taxpayers. However, the budget request seeks a 400 percent increase for Community Navigators and a 10 percent budget decrease for the SBDCs. So, Administrator Guzman, I will be sending you a letter to get more information on this program, but I wanted to ask, why are you looking to transfer funds from a program that is more effective and has a bipartisan support to an ineffective program that was passed along party lines? Ms. GUZMAN. At the SBA we try to look holistically at the entire entrepreneurial ecosystem. We are increasing by $14 million our entrepreneurial development programs, you know, leaning into supporting our veterans, as we just launched this successful Vet Certification program, leaning into contracting and capital assistance. We provide grants to organizations to help get businesses capital ready and contract ready, as well as all of our incredible resource partners. They all serve a different function. During the pandemic, we saw huge gaps in the initial rounds of PPP. For example, businesses that were the smallest of the small or underserved were unable to access relief. They didn't know how to navigate the system. And so, clearly, we need to ensure that we have a strong ecosystem that works together. The purpose of the Community Navigator program, and we are happy to share more data to demonstrate that it has strong results, they have been working with existing businesses to fortify them. We see that there is less performance because of a lack of investment across women and minority founders, as an example. We want to make sure that they can deliver for the economy, just as all our businesses. So it is a comprehensive approach. And I welcome further discussion in your letter. Chairman WILLIAMS. Invest money, make money. My time is up. I am sorry. And I now recognize the Ranking Member for 5 minutes of questions. Ms. VELAZQUEZ. Thank you, Mr. Chairman. Administrator Guzman, I have a lot of questions, so please try to be brief. Associate Administrator Kelly assured us that SBA was working to improve lending to ESOPS and co-ops. However, last December, we heard testimony that the SBA proposed rule does nothing to improve lending to ESOPS. When will the Agency finally implement changes to expand 7(a) loans to ESOPS and co- ops? Ms. GUZMAN. We have implemented some changes, but clearly we need to continue to go further. And so we are hoping with this affiliation rule, with the partial buyout, that will help assist. We have also launched an SBIC that is focusing on ESOPS in particular. So we are continuing to try to work with the industry to address issues. Ms. VELAZQUEZ. And what is that? The proposed rule doesn't provide anything. Ms. GUZMAN. The affiliation rule allows for partial buyout. So, for example, if an owner wanted to transition to some of their employees right now, they would not be able to do that. It calls for a full exit. And so with this, it allows for an owner to stay in place, transition to employee ownership as a potential exit strategy, since it is difficult to sell your business, and then that way, you know, allow for more employee ownership. Ms. VELAZQUEZ. Okay, thank you. I just need a yes or no answer on these questions. Is it true SBA intends for FinTechs to participate in the 7(a) program when the SBLC moratorium is lifted? Ms. GUZMAN. We intend for non depository, so that could include FinTech, along with others. Ms. VELAZQUEZ. Okay. Have you heard concerns with allowing unregulated companies, some associated with significant fraud, into a federally guaranteed program? Ms. GUZMAN. I don't share those concerns because I know that the SBA has a rigorous application process for the SBLC program and intends to hold any business that wants to participate to account to their performance, to their underwriting standards, to transparency, to borrower protections, and to extreme oversight. Ms. VELAZQUEZ. That is what we heard from the big banks and here we are with two banks going underwater. I have been telling you that you have got to do due diligence, and I hope that you are doing so. Can you tell me what are the type of steps that you are taking to protect the integrity of the 7(a) program? Ms. GUZMAN. Most definitely. I mean, obviously, that is our first and foremost priority. We deliver a zero subsidy. That is true for this rule as well. And we will be able to continue to provide fee relief across our loan products. You know, we hold ourselves to a high count in terms of ensuring performance. That is why we do quarterly reviews of our entire portfolio. We have great technology and great systems to do so. Ms. VELAZQUEZ. Thank you. Four years ago, the director of the Office of Credit Risk Management testified that the Office was increasing its personnel to 42 FTEs to better fulfill its mission. Currently there are 29 FTEs in OCRM. How does the Agency plan to conduct oversight over the new SLBCs with fewer employees in OCRM? How much of your budget will be dedicated to hiring more OCRM personnel? Ms. GUZMAN. Yes, we have 29 individuals, but we also have 7 contracts that support our Office of Credit Risk Management with personnel and with technology. We did a thorough analysis to see what our capacity for growth and competition would be and we assessed that we would do no more than 30 nonprofit lenders, an additional 3 non depository institutions. Ms. VELAZQUEZ. So you are telling me that the 29 FTEs will be enough with the contractors that you are bringing in? Ms. GUZMAN. Based on our analysis of what the Office would have capacity to deliver, yes. And we are committed to continuing to, you know, review our resources and support our OCRM because obviously it is a critical function at the Agency. Ms. VELAZQUEZ. I understand late last year, the Agency abruptly cancelled a public briefing on the issuance of new SOPs that detailed lender responsibilities. When do you intend to issue this SOP? Ms. GUZMAN. We are working right now to finalize our three rules for capital access and investments. And we alongside obviously are wanting to put in all the processes in place, so the SOP as well. So hopefully as soon as we can get through all that internal review. Ms. VELAZQUEZ. Will you commit to briefing the Committee on the details of the SOP and any other proposed rules that make significant changes to the SBA program in a timely manner? Ms. GUZMAN. Yes. Ms. VELAZQUEZ. I yield back, Mr. Chairman. Chairman WILLIAMS. Okay. Ms. VELAZQUEZ. Thank you. Chairman WILLIAMS. Thank you very much. And I now recognize Mr. Luetkemeyer from Missouri for 5 minutes. Mr. LEUTKEMEYER. Thank you, Mr. Chairman. Ms. Guzman, welcome. We have had a lot of discussions over the last couple of years, and one of them last term was about your employees showing up for work. So today, how many people that work for the SBA are working from home? Ms. GUZMAN. We have about 1 percent of our full-time employment, our full-time employees in remote stance. However, we do have a mission based, mission aligned remote work policy overall. And so I believe I shared with you that, you know, we have employees working up to 2 days per pay period. And while many more come in more frequently and obviously I said mission based remote status, some offices are 5 days a week, some offices are 3 days a week, we still are trying to position---- Mr. LEUTKEMEYER. No offense, that is not acceptable. Everybody should be back at work. COVID is over. President himself said COVID's over. We don't need people working from home. We need people in the office so you can oversee them to make sure we get the job done. How many applications are you behind right now? Ms. GUZMAN. Applications behind? Mr. LEUTKEMEYER. For loan applications. Ms. GUZMAN. The SBA's performance has been remarkable over the years that we have been---- Mr. LEUTKEMEYER. I am not looking at how remarkable it was over the years. I was asking you how many are past due right now. Ms. GUZMAN. Now, even today we have been able to streamline services around our certifications to increase the rate of certification during this this time. Mr. LEUTKEMEYER. Ms. Guzman, I sit on the Financial Services Committee. I have to put up with the Federal Reserve Chairman coming in every so often. And I have listened to three or four of them. You are really good at, just like they do with the Fed, two step. You don't answer my question. I ask you how many people today are at home working? Can you give me an answer, or do I need to write you a letter about this? Ms. GUZMAN. No. We have just over 2,800 full-time employees. And as I said, 1 percent are fully remote. The rest of them are in this flexible, remote position. Mr. LEUTKEMEYER. Okay. Ms. GUZMAN. And so, as the President's Declaration of the pandemic expires in May, we continue to work towards solutions for the future of---- Mr. LEUTKEMEYER. Okay. Next question. A minute ago the Ranking Member asked you a question with regards to FinTechs. You are looking to do FinTech expansion, or expand into FinTech's ability to access your programs. Who was the biggest problem with regards to fraud in the PPP program? Ms. GUZMAN. Studies have shown that, you know, FinTechs and banks were high performers as well as some---- Mr. LEUTKEMEYER. Oh, Ms. Guzman, come on now. We had the IG report from the guy sitting in your chair. And most of the problems in the PPP program were the FinTech companies. Why are you denying that? Because what you are doing is expanding to the very people who are the problem children. They do not perform the kind of auditing and oversight over themselves that the banks do. Why do you want to expand into the very people who are the problem children in the programs that we have already gone through? Ms. GUZMAN. Again, as shared, those three SBLCs that I would have available when lifting the moratorium would have to go through a rigorous review process at the SBA. We would not be aligning with anybody that was identified during the Oversight Panel, which included banks and FinTechs. Mr. LEUTKEMEYER. So Anybody who has had a PPP problem in the past will now be somebody who can't access the program? Is that what you just said? Ms. GUZMAN. I am sorry, could you repeat that? Mr. LEUTKEMEYER. So any FinTech company that had a problem with the PPP program would be somebody who can't access these programs, the rest of your programs? Is that correct? Ms. GUZMAN. In fact, we have banned the two FinTechs that were identified within the climate report from ever participating with SBA. Mr. LEUTKEMEYER. Very good. SBA's fiscal year '24 request is $10 million for climate change administrative expenses so the SBA can hire experts to update policies on climate issues. Money that could be used to address your vast amount of fraud and servicing needs is instead going towards climate change experts. Not only that, according to Job Creators Network poll from last month, small Businesses across the nation are most concerned about over regulation, cutting taxes, foreign competition, of course, inflation. I don't see climate change on the list. Explain to me how $10 million for climate change expenses will help a small business in Missouri address 6 percent inflation or any other real concerns they have. Ms. GUZMAN. The $10 million will be used within our Office of Capital Access programs to help get out effectively capital access for businesses to position themselves for resilience. We know from FEMA, their data shows that if a business is impacted by a natural disaster and they don't reopen within 5 days, they will close within a year. And so we are working hard to build up their resilience. Mr. LEUTKEMEYER. That's not climate change, you are talking about a FEMA responsibility there. Ms. GUZMAN. I am talking---- Mr. LEUTKEMEYER. That has nothing to do with what I--the question I just asked. Ms. GUZMAN. I can respond to the question. Mr. LEUTKEMEYER. I got one quick question before my time runs out here. I have asked you this question before. Do you talk to the President very much? Ms. GUZMAN. The President has been remarkable by ensuring that the Cabinet Member---- Mr. LEUTKEMEYER. Do you talk to the President at all? Ms. GUZMAN. Yes, I do. Mr. LEUTKEMEYER. Okay. How many times have you talked to him in the last--since the beginning of the year? Ms. GUZMAN. The President convenes his cabinet regularly and participates in--and is prioritizing small businesses---- Mr. LEUTKEMEYER. How many times have you talked to the President since the beginning of the year? Ms. GUZMAN. Again, my conversations with the President are private, as are any frequency or---- Mr. LEUTKEMEYER. So my question is, have you explained to him about the problem that we are having with taxes right now with his proposal? Ms. GUZMAN. This proposal is focused on lowering costs for small businesses and families---- Mr. LEUTKEMEYER. So you haven't talked to him about it then. You just told me that you did not do that. That is dereliction of duty, madam. You are advocate for small businesses from everything, from all the rules and regulations to the tax policy. I yield back. Chairman WILLIAMS. Thank you. I now recognize Mr. Phillips from Minnesota for 5 minutes. Mr. PHILLIPS. Thank you, Mr. Chairman. Administrator Guzman, I want to thank you for what you are trying to do to help small businesses after 3 terrible years for all of us, for small business owners. And I know nothing is perfect, but I know your head and heart are in the right place and I want to thank you. I want to thank you for coming to Minnesota just last week, spending time with me, did an on the job with Dean at Tierra Encantada, had lunch at Duke's on 7, a recipient of PPP loans, and then had a great roundtable where you heard directly from a number of stakeholders, and particularly about my personal mission to help expand employee ownership of enterprises. So I would like to begin by simply asking you about your perspective on employee ownership, what the SBA and you are doing to promote it. I believe it is an extraordinary intersection between Democrats and Republicans to build wealth for hardworking people who contribute to economic success. And as all the evidence indicates, it actually is accretive to business performance. So just love your thoughts on the subject and what the SBA is doing, and most importantly, what we can do to help you do more to incentivize, promote and support employee ownership. Ms. GUZMAN. Well, thank you for that. The employee owners ownership, for sure, is definitely a benefit to small businesses who will deploy it. Studies have shown that they have a stronger performance as the employees are vested and committed to the mission in a whole new way. I would say that on employee ownership, from the SBA's perspective, you know, we view that it is a very effective succession plan, as well as businesses look to exit. So from multiple fronts, we help to help support small businesses in this regard. We have done it both on the technical assistance side, trying to provide knowledge and assistance, sharing information about employee ownership, and ESOPS through our network of resource partners to small businesses directly who are seeking alternatives. In addition, within our lending program, it has been challenging for employee owners to access the program, so we are constantly looking for ways to improve the program, not only on the lending side, but on the investment vehicles as well. And so I am hopeful, with the changes that we are making, as well as with the new interest in our SBSC program, to see progress on the capital access front. Mr. PHILLIPS. To that end, I mean, access to capital is the foremost challenge, as the Chair and Ranking Member ably pointed out. You know, the main street program, the 2018 program, I think, has only resulted in 17 7(a) loans to conversions. I think that is too few. I think the SBAS acknowledge that. Would love to see incremental support for that. I am also hearing from some that losing preferred contracting status, which is something that came up in Minnesota, is an impediment. The fear that if they convert to an employee ownership model or a co-op, that they might lose preferred status. Can you speak to that? And are there some ways, perhaps, that we might work together to eliminate that risk and ensure to promote that we can promote employee ownership? Ms. GUZMAN. Most definitely after flagged by the constituents in your district I am looking into it further in terms of the contracting and certification side of SBA, the entry point for contractors. And then, in addition, interested in observing and tracking the pilot the Department of Defense has deployed to try to be more inclusive of employee ownership in contracting specifically. Mr. PHILLIPS. Is there something you might need from us to accomplish that? Ms. GUZMAN. At this point, I don't believe it is any statutory block, but I will, you know, definitely follow up to see if there is a pathway on the certification specifically that could be more specific and give us language that would help power a more inclusiveness around our certification programs for government contracting. Mr. PHILLIPS. Okay, I appreciate that. And I just extend an invitation, a warm invitation to my colleagues on both sides to look for ways that we can use this platform of ours and the SBA to encourage more ownership. I see no reason why it shouldn't be a mutual goal, one to which we can work in unison. And I simply extend that invitation. Ms. VELAZQUEZ. Will the gentleman yield? Mr. PHILLIPS. I will surely yield. Ms. VELAZQUEZ. I don't know for how long--since we passed my legislation, we have been working hard to get more lending, because this is the problem. If we don't provide access to capital---- Mr. PHILLIPS. Exactly. Ms. VELAZQUEZ.--it is not going to work. Ms. GUZMAN. And if I could add on that, and we did discuss this, but one of the big issues flagged is the personal guarantee. Mr. PHILLIPS. Yup. Ms. GUZMAN. And SBA, you know, cannot move forward on removing a personal guarantee that is core to our program. So that would be something that would need to be statutory. Mr. PHILLIPS. So, most of all, thank you for listening. Thanks for coming to Minnesota. I know you are traveling the country. I encourage other Members of the Committee to extend that invitation to you, too, and hear the same thing. Thank you. I yield back. Chairman WILLIAMS. Thank you. I now recognize Mr. Stauber, who also is from Minnesota, for 5 minutes. Mr. STAUBER. The northern part of Minnesota. Thank you, Mr. Chair. Administrator Guzman, thanks for being here again. And, you know, as a former small business owner, I remain extremely concerned about the nearly $320,000,000,000 of additional regulations this Administration has put on small businesses and our farmers. This number is set to only get worse when the disastrous WOTUS Rule takes effect. Last year, as you know, you and I spoke about the need for agencies to consider the negative impacts that this rule would have on American small business owners, farmers and manufacturers. And I asked you to ensure that a SBREFA panel was held to better understand their concerns and the significant economic negative impacts of the WOTUS Rule. Did this happen? Ms. GUZMAN. No. The---- Mr. STAUBER. In fact, to make matters worse, the EPA and Army Corps made the claim WOTUS wouldn't have significantly impacted small businesses and the entities without even talking to them. Did you have conversations with them, as the administrator, the protector of small businesses across the United States? Ms. GUZMAN. Within the SBA, actually, the Office of Advocacy, which is an independent office within the SBA, is the one responsible for ensuring regulatory compliance and that they can assess the small business impacts. Mr. STAUBER. So SBREFA wasn't--a panel wasn't put together on the WOTUS Rule. You allow the EPA and the Corps to make that decision? Ms. GUZMAN. The Office of Advocacy is the entity responsible by statute for implementing SBREFA. Again, I respect their independence, but in talking to the Office of Advocacy regarding this, they did do a couple of roundtables, and we are in constant contact with EPA, but a SBREFA panel was not done. Mr. STAUBER. I can tell you that. I have had roundtables across northern Minnesota, and their biggest concern is the regulations, including WOTUS. And so we needed you to be the protector. And I gave you a heads up last year on protecting the small businesses and the farmers. That was one of the biggest pieces of conversation that I took from those meetings. So tell me the reason why SBREFA panel was not held before the WOTUS Rule was finalized as required--as required by law. Ms. GUZMAN. As I believe you stated within your earlier statement that the SBREFA panel was not implemented because EPA had certified that there was not significant impact. And Office of Advocacy---- Mr. STAUBER. Do you agree with that? Ms. GUZMAN. I am not the one who and analyzes it, oversees it, so---- Mr. STAUBER. You can't do the Texas two step here, although Mr. Williams would love you to do the Texas two step. Do you believe that the WOTUS Rule does not affect small businesses and farms? Ms. GUZMAN. I have not done the analysis myself. Mr. STAUBER. Extremely concerning that we are witnessing federal agencies implement this rule without the protection-- rather protecting our small businesses, and you are at the point to protect them. And I think in this instance, on the WOTUS rule, you failed at protecting the small businesses. I am also extremely concerned that we are witnessing federal agencies implement ESG policies under this Administration. As you know, the SBA is responsible for the licensing and regulating SBICs. In 2022 the SBA licensed 29 SBICs. That is supporting over $2 billion--that is with a ``B'', $2 billion in capital. My question do any SBICs consider ESG factors when choosing small businesses to invest in? Ms. GUZMAN. As all of the large financial institutions recommend, and as Wall Street has supported, not considering ESG is a mistake and something that could lead to financial risk. So, you know, I am sure that many of my SBICs responsible for their fiduciary responsibility to their investors are looking all risk. Mr. STAUBER. So you agree putting forth ESG factors are important when choosing--SBICs choose small business to invest in. Do you agree with that? Ms. GUZMAN. I agree with the Wall Street experts who have determined that that is a financial risk and it is something that all fiduciaries should be looking at, yes. Mr. STAUBER. Can you tell me for a fact that the SBA does not consider ESG factors when determining what SBICs to license? Ms. GUZMAN. We do not restrict any SBICs who do not consider ESG. And so we have 300 SBICs today, and we are continuing to look at to expand our SBICs across the country. And so---- Mr. STAUBER. My last question, because I am running out of time, do you think $320,000,000,000 in new regulatory costs on American small businesses is good or bad? Ms. GUZMAN. Look, much of the regulation, especially the over 60 regulations that we are putting forward, are about simplification. So just because regulations are being put out there, that doesn't mean that it isn't about cutting red tape and simplifying our current system. Mr. STAUBER. Yeah, with all due respect, I disagree with your assessment on the $320,000,000,000 is good for small businesses, because it is not. And I yield back. Chairman WILLIAMS. I now recognize Mr. Golden from Maine for 5 minutes. Mr. GOLDEN. Thank you. Administrator Guzman, in the past, some of us on the Committee have held hearings and also expressed concern that the Community Navigators program should not be duplicative of the work of Small Business Development Centers, Women's Business Centers, SCORE, or the Veterans Business Outreach Centers. And obviously a lot of testimony we received was that they would act more as a force multiplier than being in competition with these existing resource partners that are out there and have been out there for a long time working with small businesses around the country. The President's budget directs a $30 million increase to the Community Navigator program, but also makes cuts to the-- would make cuts to the Small Business Development Centers, roughly a 14 percent cut, as well as a 40 percent cut to the SCORE program. When you add these two together, it almost equals the amount that you are proposing an increase to the Community Navigators. The most recent metrics that we have available to us demonstrate that both the SBDCs and SCORE are over performing. They are more than meeting their stated targets when it comes to job creation, number of people assisted, amount of capital that they have brought into the business community. And we are really lacking in any kind of data or metrics as it relates to the Navigators. So I guess my question is why would, at this point, the President propose cutting funds from partners who we can see are meeting their targets and even over performing their targets, who have long standing relationships out in the business community, particularly the SBDCs, which we see from the metrics enjoy 93 percent satisfaction rating from the clients that they do provide services to. It is almost as if they are getting punished for succeeding. And we are being asked to make a big shift here in putting such a large increase into a program for which we are lacking similar data. What is the justification for both the cuts and the increase? Ms. GUZMAN. And again, we see an increase overall in our entrepreneur development, but we are faced with the challenge of having evolved---- Mr. GOLDEN. I am interested in shifting of funds rather than the top line of---- Ms. GUZMAN. Yes. So as we are trying to evolve and prioritize inclusion in a way that reflects that. At the beginning of the pandemic, as I mentioned, many communities were left behind. And so we do an incredible job reaching small businesses through our resource partners, over 750,000, but we have 33 million small businesses with constant births and deaths. It is an insurmountable challenge. If I had enough resources--you know, obviously I feel strongly that the SBDCs, the WBCs, the VBOCs, all of them are doing incredible job reaching small businesses. But there are gaps that we are trying to fill and create a more cohesive ecosystem that is inclusive. And so I would also state that the Navigators program has also outperformed. And we have seen incredible work from the Institute for IVMF, the Institute for Veteran Military Families, the Ethnic Chambers, the LISC that focuses as well on rural. So we have seen incredible performance in building trust and building bridges, and great referrals and collaboration amongst the network as well. So the hope is to increase the amount of reach that we have across our network, work in new ways to build trust in communities so that we don't leave people behind. Mr. GOLDEN. Thank you. Well, I haven't seen any metrics in front of the Committee in regards to how the Navigators are performing, but are you not worried that by shifting resources into this program to fill any gaps that you see, that you are going to create gaps amongst those communities that are working very closely with SBDCs or VBOCs or Women Business Centers? Ms. GUZMAN. Clearly, I mean we are obviously working with limited resources. You know, these are all great programs that I would love to see funded, but I do need to continue to prioritize some of the other elements as well. Like I said, the veterans, the contracting, as well as the access to capital, and the Navigators as a new source of building an ecosystem. We incentivize and provide a base structure for a lot of these resource partners who are able to then get additional support in the community. And I hope to see them all continue to thrive. Mr. GOLDEN. Well, this just recalls for me a hearing that we had in the last Congress in this Committee where we expressed concern about how the Community Navigators may draw away from our existing resource partners. And I think that is unfortunate to see that reflected in the budget and, of course, have an interest in working with my colleagues on the Committee to try and address that in a way where we don't have to take from one successful program in order to try and address a gap within a new program. Ms. GUZMAN. Thank you. Chairman WILLIAMS. All right, thank you. And I now recognize Mr. Meuser from Pennsylvania for 5 minutes. Mr. MEUSER. Well, thank you very much, Mr. Chairman. Thank you, Administrator, for being with us. So less than 2 years ago--I am going to go back to the non federally regulated lenders and related to the SBLCs--but less than two years ago the SBA stated they do not have the administrative resources needed to oversee non federally regulated lenders with the nationwide 7(a)a lending platform in addition to the 14 SBLCs it currently regulates. What has changed? Ms. GUZMAN. I am not familiar with those statements that you are referencing, but we have now a strong system in place with the 7 contracts that I referenced, as well as the 29 employees. Just in 2020 to 2021, we have done over 2,200 risk assessments in the portfolio. And again, we assessed what our capacity would be and limited our expected growth based on that to just 3 non depositories. Mr. MEUSER. So you don't think there is going to be a so called subsidy rate impact as a result of this expansion for non federally regulated SBLCs? Ms. GUZMAN. No. In fact, the rules are baked in to the current subsidy modeling. And so as a result, they will not have an impact on subsidy. Mr. MEUSER. If there are, will anybody get terminated? Will anybody be accountable for making bad decisions that cost taxpayers? Ms. GUZMAN. We do. The lenders are held accountable to, obviously, giving loans with a strong ability to repay. And so we have an opportunity to continue to track performance, as we do on a quarterly basis and throughout the year. And if we identify problems, we have the power to revoke a license at any time. Mr. MEUSER. I am sorry, it has been as we stated, because that was the history, certainly, with the EIDL and the PPP, so you could understand the level of concern. Ms. GUZMAN. And what I would share is that the PPP was such a different program, I can't even cross-reference the performance on PPP or COVID EIDL---- Mr. MEUSER. But 85 percent came from the FinTechs. And I don't have a problem necessarily with FinTechs. I really have the problem with that they are not federally regulated. Why not have a federally regulated FinTech and invite them into the 7(a) program once that got established? Once it gets established? Ms. GUZMAN. Well, we have demonstrated results on our SBLCs as well as in our SBA Express program that gives us data to know that we can move forward with expanding access to capital. And main street I don't think can wait for us to try to figure out capital. I would argue that by inserting the SBA programs into any FinTech operation, you are actually going to get stronger oversight and regulation because they are going to have to meet the SBA's programs of terms and---- Mr. MEUSER. No, no, there seems to be a strong leniency towards this, and I am just trying to figure out why. Now, the OCRM--you testified yesterday in the Senate, stated that the capacity to take on more--well, regarding the capacity to take on more lenders, but the OIG, the SBA OIG publicly disagrees, stating in a report released just this past Tuesday that the OCRM resources are threadbare with 38 percent vacancies. That doesn't build confidence. Ms. GUZMAN. Well, my understanding is that report too is based on 2015 to 2017. So a lot has happened at the SBA. We have scaled dramatically to meet the needs of small businesses during the pandemic. And obviously, those learnings, the GAO risk framework that we have put in place at the SBA, all the controls that we put in place, position the SBA to be much stronger, to be able to strengthen---- Mr. MEUSER. Seems to be a bit of an irrational exuberance for heading into added players such as FinTechs that are not federally regulated. So we will continue to watch that. So the SBDCs, which just came up by one of my colleagues, they have been performing so well and yet, as he stated, they are being punished by their budget being reduced. I have got several in my district. Why? Ms. GUZMAN. This is not a punishment. I think the SBDCs are strong performers within the ecosystem, to be clear. And obviously working within limited resources, we wanted to ensure that we were investing where small businesses have shared concerns around capital access, around---- Mr. MEUSER. I would like you to try to look into that, because that would really be unfortunate for a lot of businesses and certainly for those organizations themselves and for many parts of my district, frankly. Back to the WOTUS question. The SBA's mission is to protect the interests of small business. And the SBA Office of Advocacy say that the EPA should withhold this rule and other rules that do not properly consider their effect on small businesses. I mean, will you consider advocating against this WOTUS Rule that every one of my farmers has serious issues with? Family farms. Ms. GUZMAN. I value the Office of Advocacy deeply. And obviously, their independence is really important. That is the way they were structured, to report to me, Congress, as well as the President. They are continuing to do SBREFA panels across the board, including multiple---- Mr. MEUSER. My time has run out. Thank you, Administrator. I yield back, Mr. Chairman. Chairman WILLIAMS. Thank you. Next. I recognize Mr. Mfume from the State of Maryland. Mr. MFUME. Thank you very much, Mr. Chairman. Administrator Guzman, I want to go back to this matter of fraud. I can't get away from it because there are so many people who believe, rightly or wrongly so, that we don't do enough to protect the government and taxpayer dollars from the vicious people who come up with schemes to defraud the government. And in May of last year, the Office of your Inspector General found that the SBA didn't have adequate fraud protection prevention and the mechanisms were not there. Their assessment was that some of it had to do with the speed of the rollout of PPP, and that some of it had to do with what is unfortunately, a continuous and rapid discovery of new and different fraud schemes. So I was listening when the Ranking Member asked the question about full-time employees, with the assessment being that there should be at least 42, reality being as it is that there are 29. So I don't understand that gulf. If the recommendation was made, it seems to me there was adequate justification for it. And if we are not there, what is the adequate justification for being not there? Ms. GUZMAN. The Office of Credit Risk Management does not oversee fraud at the SBA. They strictly monitor our portfolio of loans within the Office of Capital Access. More broadly than that, we have hundreds of people working on fraud on an ongoing basis. And so we have a fraud risk management framework that was implemented during the Biden-Harris Administration, as recommended by the GAO. We have also taken efforts to implement all IG recommendations across the board. We have strong performance in terms of complying with those. Mr. MFUME. Including the recommendations against self- certification? Ms. GUZMAN. On the contracting programs? Mr. MFUME. Mm-hmm. Ms. GUZMAN. We continue to try to evolve our contracting programs to meet---- Mr. MFUME. Is that a yes or a no? Ms. GUZMAN. Not across the board. We continue to try to work through what exactly we can do to ensure that our self- certification program, the Women Owned Small business program specifically, I believe---- Mr. MFUME. It just seems to me that self-certification in and of itself begs for misuse. And since that has been a problem with a number of Inspector General reports, why is it the SBA won't move to eliminate that? Ms. GUZMAN. We always look for technology and solutions to improve our programs, as we have done with the Vet Cert program is our gold standard now in terms of performance, which the IG has agreed is a strong system of controls. And so we are focused on making sure that we can translate those learnings across our certification programs. Mr. MFUME. But the IG also considers self-certification the wrong way to go about doing things. So if we are implementing their suggestions, why aren't we implementing that one? Ms. GUZMAN. Specifically on that one, first, to be clear that we still look at size standards. We have them attest to their size within that program, but we still are able to look at some controls for size. Obviously, 99.9 percent of all businesses are small. We are talking about a very small fraction of businesses that we have to ensure do not get into our programs. Mr. MFUME. I don't have a lot of time, but seems to me if all I have to do is self-certify to cross the hurdle, I am going to continue to do it. That is the worst thing that I have ever heard of, particularly now in light of how much fraud has come about. Can you provide an update on the operations of the Risk Management Board, briefly? Ms. GUZMAN. Sure. The Fraud Risk Management Board was put into place--it is a GAO recommendation across the federal government and the SBA deployed that it includes ensuring that cross collaboration across our program offices, that senior leadership sit on this Fraud Risk Management Board so that we can share best practices around the Agency, but ensure controls are put in place from our CFO, SCO---- Mr. MFUME. And it is a very important board, it is a very important board. I understanding there is a detailee that is running the board. Is that correct? Ms. GUZMAN. A detailee that is running the board? Mr. MFUME. Mm-hmm. Ms. GUZMAN. Our CFO is Chairing the Board, that is a Senior Executive Service Member. And so---- Mr. MFUME. The program manager. Ms. GUZMAN. The program manager position was open for filling, and it might have already been filled at this point, and in the meantime---- Mr. MFUME. My information is that it has not been filled. But why is it taking--if it ha not been filled--so long if we consider this a priority? Ms. GUZMAN. Is a priority, and that has not been questioned. The GAO comptroller general, who I meet with quarterly, as well as the IG, who I meet with bi-weekly, have recognized the work that we have done. Obviously, in setting up a new program at the SBA, we have to take the resources, the best and the brightest all across the Agency. Mr. MFUME. My time is expired. Administrator, I hope that the seriousness of these questions goes beyond just this hearing. Ms. GUZMAN. Thank you. Mr. MFUME. I am not going to let go of this one. Chairman WILLIAMS. All right. Mr. MFUME. That is a very important position Ms. GUZMAN. Thank you. Yes. Chairman WILLIAMS. I now recognize Ms. Van Duyne from Texas for 5 minutes. Ms. VAN DUYNE. Thank you very much, Mr. Chairman. And I really appreciate my colleagues questioning on the fraud, the amazing amount of fraud that we have seen. Administrator Guzman, you are painting a picture that small businesses across the country are thriving, but I don't see that being any farther from the truth. Every single small business that I talk to in North Texas is struggling from high inflation and an overburdensome regulatory environment. Mr. Leutkemeyer's questioning, are you talking to the President, it wasn't sarcastic. He asked that question because we legitimately want to know who is talking to the Administration, who is the voice of small businesses in the President's ear. Because what I am seeing, at least in my district, and I'll tell you, we have had a lot of people who have come to these small business hearings and have told us the exact same thing, their wishes, their concerns, their priorities are not being reflected in this Administration's priorities or their agenda. In fact, they are being immediately hurt. Inn your testimony, you said under your leadership that you put guardrails to stop fraud, and yet the SBA decided to stop collecting PPP loans that exceeded a balance of $100,000. Not grants, but loans that led to $4.6 billion in potentially fraudulent PPP loans. We have seen $78.1 billion in potential fraud in EIDL loans and then $1.1 billion in SBA loans. And you are refusing to collect on that. Do you think that should stop fraud? Ms. GUZMAN. I can address that last part first. Those loans, $100,000 and under, first off, would separate fraud from those $100,000 and under any loan, whatever size, will be for fraud. And we continue to flag all of those loans for the IG. for pursuit? Ms. VAN DUYNE. How do you know? Ms. GUZMAN. We have actually reviewed all of our 12 million loans within the PPP program to ensure that we identify---- Ms. VAN DUYNE. Since you looked at every single one of them and you know which ones are fraud and which ones aren't, how much is fraudulent? Ms. GUZMAN. We are still continuing to flag loans and refer them over to the IG. We have so far to date referred tens of thousands. But just because a loan has an indicator of fraud, that does not mean that it is going to be fraud. And so there is a lot of work and analysis that has to go in play. And so we will know as time moves on. Ms. VAN DUYNE. But how do you know if you are not even going back? If you are counting them as grants and not loans, how do you even know? Ms. GUZMAN. They continue to have a flag so they are not forgiven, they are not removed until we can identify whether or not they are fraud. Ms. VAN DUYNE. Okay. Ms. GUZMAN. And I will speak, though, to the $100,000 and under and just let you know that obviously we take fraud seriously, as well as those who misuse the program. We also have to be good prudent---- Ms. VAN DUYNE. And I appreciate that. Do you think you are ever going to get this money back? Ms. GUZMAN. We have been able to successfully---- Ms. VAN DUYNE. How much of the nearly $85 billion in fraud have we gotten back? Ms. GUZMAN. Overall, inclusive of all clawbacks, is $29 billion that the IG reports---- Ms. VAN DUYNE. So the $85 billion we have received $29 billion back? Ms. GUZMAN. I don't know the $85 billion and what specifically that includes, but what the IG reports---- Ms. VAN DUYNE. $4.6 billion PPP loans, $78.1 billion in EIDL, and $1.1 billion in SBA loan. Ms. GUZMAN. What the IG says is that we have been able to recover $29.5 billion across PPP and EIDL in collaboration with the banks as well as the Secret Service. Ms. VAN DUYNE. So what are they what are they doing with that service? Ms. GUZMAN. The funds either initially went back to the SBA or to the Treasury, but of course, all those funds, as the program has been closed for quite some time, have been returned. Ms. VAN DUYNE. So we have got $29 billion that we need to-- -- Ms. GUZMAN. No, that actually has already been clawed back, and I know that it has been used and already either redirected to another program or taken back to Treasury. So there are more funds at the SBA to use. Ms. VAN DUYNE. Okay. So the SBA received $3.4 billion at the beginning of the pandemic that was to be in assistance for COVID relief programs, right. When you took office, half of that hadn't even been spent yet. So, as of January 21, right before you took office, SBA had hired 6,000 temporary employees for the office that runs the EIDL program, they had hired an additional 400 for the PPP program. How are we looking at $85 billion worth of fraud when we hired all of those people and we are still trying to get those dollars back? And what are you doing to make sure that doesn't happen again? Ms. GUZMAN. Yeah. And unfortunately, in 2020, when those programs were deployed, there were not the same controls that we implemented in 2021, including on the EIDL program. Not checking and validating tax returns, not checking the Treasury Do Not Pay list. We implemented those controls. So when you hear records of fraud, it is the entire portfolio. We don't separate from administration to administration. Ms. VAN DUYNE. But you would have dates on the fraud? Ms. GUZMAN. I am sorry, what? Ms. VAN DUYNE. You would have dates on the fraud? Ms. GUZMAN. Correct, correct. And we have implemented---- Ms. VAN DUYNE. You can provide this Committee of the $85 billion potential in fraud when that was committed? Ms. GUZMAN. I don't know what the $85 billion is, but we are happy to work with you closely to figure out---- Ms. VAN DUYNE. I yield back my time. Chairman WILLIAMS. Thank you. And I now recognize Ms. Chu from California for 5 minutes. Ms. CHU. Administrator Guzman, first, I want to thank you so much for joining me in my district last month to visit with the small business owners that surrounded the Monterey Park shooting site in California. Eleven people died last month, and you visited those businesses. Your visit and your ability to provide resources for them was appreciated by the businesses so much. So thank you so much for that. And I commend you on your focus on increasing access to capital for hard to reach underserved small businesses just like this. I share this focus, and I look forward to continuing to work together on this important goal. And that is why I have worked on legislation to codify the Community Advantage pilot program, which is, I believe, one of the strongest tools for reaching underserved businesses. In fact, SBA's own data shows that in 2022, Community Advantage reached significantly more women and minority-owned businesses than the traditional 7(a) program. I believe that codifying it is the best way to make the program work for the people and also to make sure that no future administration can dismantle it. In November, the SBA issued the proposed rulemaking for SBLC and said that lifting the SBLC moratorium is needed to make sure that persistent gaps would be met, especially in Community Advantage. However, just last April, SBA made changes to the Community Advantage pilot program, including allowing new lenders to join the program and increasing the loan limit. So why is SBA not waiting to assess the impact of those changes before declaring that the Community Advantage pilot program needs to be changed? Ms. GUZMAN. The Community Advantage program has been successful for 12 years. We are committed to making sure that it can scale. They do about 500 loans a year, we do typically 50 to 60,000 loans total. We would really like to see, especially these community based lenders who reach underserved markets, expand in our program. And so clearly it is important that they have permanence because their ability to raise capital, to grow their program really depends on that certainty, as any business would face. And so with this program, we feel that the 12 years with us are strong. We also have implemented improvements by extending the program, as you have mentioned, as well as agreeing to expand it within the pilot environment. But a pilot is not permanent, and a pilot really limits their ability to scale and grow, which is so needed right now with huge gaps in small dollar lending, persistent and unmovable. So we hope to continue to serve the needs of those underserved businesses by expanding it immediately by moving them into a special Community Advantage SBLC program that would give them the exact same features. Ms. CHU. Right. Well, that is actually why--I wanted to ask another question about that. I understand that you would create this new Community Advantage or mission based SBLC license and it would make the Community Advantage program permanent, which I applaud you for doing, however, I am very concerned that the proposed rule does not establish a minimum threshold of underserved lending for the new Community Advantage SBLCs. Right is 60 percent that they have to make sure that they serve underserved markets, certain specific ones at 60 percent of their loans. Well, I am very concerned if we don't have a specific goal, that that threshold will not be met. And also if we don't specify underserved markets the types of markets that they have to serve. Are you considering changing this in the final rule and using the same underserved lending requirements already used in Community Advantage within this new Community Advantage SBLC model? Ms. GUZMAN. I am happy to work with your office and discuss it further. The entire 7(a) portfolio doesn't have any specific requirements on it. 58 percent of our loans do go to underserved communities women, veterans, rural, LMI. We are committed to ensuring that the Community Advantage partners, who are CDFIs, who are CDCs, they are mission lenders, continue to perform not only for their mission and achieving their goals with the CDFI Fund at the Treasury as an example, but that they continue to focus on these marketplaces. So I am happy to talk to you further about that. At this time, we were not imposing anything across the 7(a) portfolio. Ms. CHU. But we can continue work on that and make that possibly in the final rule then. Ms. GUZMAN. Exactly. And we actually can prioritize the types of licenses we bring in, again focusing on the 30 nonprofits, but ensuring that they are filling gaps in the marketplace. Ms. CHU. Okay. Thank you. I yield back. Chairman WILLIAMS. Thank you. And I now recognize Mr. Alford from Missouri for 5 minutes. Mr. ALFORD. Thank you, Mr. Chairman and Ranking Member for holding this important hearing today. I appreciate that. And thank you, Administrator Guzman, for being here today. I have a strong affinity for small business, having been a small business owner back in my district. It is really the fabric, as you know, of our society, rich fabric of America, small business, creating prosperity, I think patriotism, unity, things that our country needs right now. I think we can agree on that. But small businesses also need some things. They need clarity, they need certainty, and they need a government and an SBA that works with them and not against them. Small businesses certainly do not need an SBA that is more interested in promoting the far left Biden agenda and wastefully spending, taxpayer dollars. So looking at the summary of changes in the President's budget, we see a request for $1 million to transition the federal vehicle fleet to zero emissions, we see $10 million in climate change administrative expenses, and the SBA will continue to support Executive Order One 14057 to minimize greenhouse gas emissions. How is this helping small businesses flourish in America and prosper as Americans? Ms. GUZMAN. We know that small businesses are affected by the increasing number of natural disasters as a result of climate change. Our focus as the SBA, who comes into play after disaster to provide financial relief to not only small businesses, but the nonprofits, the individual renters who are their consumers and their employees, we see it as a priority to help businesses prepare for and become more resilient to natural disasters and climate change. And so that $10 million allotment will help us, across our capital programs ensure that businesses can leverage those tools to build resilience in their business, fortify, physically their building, if that is the case. And we hope that this will inure to our overall disaster lending portfolio. Mr. ALFORD. Well, I disagree with the whole notion of that, but I know that is going to be a difference that we are not going to agree on here today. I want to get back to this fraud, the PPE. Last year, NBC reporters really got rich from the theft, as much as $85 billion, a little more than 10 percent of the paycheck protection program. This story really hasn't gotten the attention it deserved. I think it is starting to catch on. We have been talking about here in this Committee, and you have talked about some about how we are going to recover it. There is still $59 billion--I am trying to do the math here, I am not great at math--$59 billion left out there that you think that was flagged for fraud. Is that correct? That has not been recovered? Ms. GUZMAN. No. If I could clarify that. Mr. ALFORD. Yes. Ms. GUZMAN. Because I didn't have an opportunity to respond. But the IG has reported that he has been able to recover $29.5 billion. Mr. ALFORD. Right. Ms. GUZMAN. And that might have been businesses who gave it back early on in PPP, you recall some of those reports. And so we do not have a final number yet on fraud. Mr. ALFORD. So you don't know how much money out there is ripped off from the American taxpayers? Ms. GUZMAN. We are still finalizing those numbers. Mr. ALFORD. Can you put a guess on it? A guesstimate here? Ms. GUZMAN. At this point, I cannot. And I continue to work with the IG to work towards a final on this. But clearly, we have done the work to identify fraud indicators, which is what that report is---- Mr. ALFORD. So when an account or a person who has gotten these grants or loans has been flagged, the indication has been put on them, are their accounts frozen? Is that money frozen so they can't spend what they didn't rightfully get? Ms. GUZMAN. Correct. A fraud flag is an indicator to us that we need to do further analysis. And so we have steps following the fraud indicator to analyze the full portfolio and ultimately leading to a manual review and a referral to the IG. Mr. ALFORD. How long is this going to take? Ms. GUZMAN. It was a massive portfolio, a huge scaling of the SBA, obviously, from--we do about $50 billion a year to $1.2 trillion in relief. And so, clearly it is a large portfolio, but we are committed, which is why the President asked for another $100 million in the budget for the IG. W have stepped up the increase for the IG as well as our enforcement arm to pursue fraud. Mr. ALFORD. All right. Last question on the SBLC. This moratorium, is it going to be lifted this week? I know it is been proposed. I know there is a lot of consternation about it. When is my moratorium being lifted? Ms. GUZMAN. I don't have a final time yet because the team internally is still working through the comments. We had 60 days for public comment and quite a bit to work through on both the pro and---- Mr. ALFORD. What is the need for this? Because I have talked to a lot of community bankers and credit unions, they said we have got people covered that want the money. We are there for them. Why is this needed? Spreading the risk out for the SBA in a regulatory fashion? Ms. GUZMAN. Well, Federal Reserve will-report that two thirds of businesses do not get the funding at all or complete their full request. And so there is a huge gap. Mr. ALFORD. All right. Ms. GUZMAN. $10 billion of the funds at the SBA were unused last year, so there are clearly more---- Mr. ALFORD. I appreciate that. Ms. GUZMAN.--opportunities. Mr. ALFORD. Thank you. I yield back. Chairman WILLIAMS. I now recognize Ms. Gluesenkamp Perez from Washington State. Ms. PEREZ. Thank you, Mr. Chair. And thank you, Administrator Guzman, for being here and for your visit to my district. It was really meaningful to small business owners. I am a small business owner. I own auto repair and a machine shop work, an independent shop. We work in the trades. And I actually have a degree in economics. I have an undergrad in econ. And it literally took me a year to fill out the SBA 504. And it is concerning that it is at times overly onerous, that the capital may not be going to where it is going to, but it is also clear that this is a vital avenue of funding for many of us who work in the trades who don't have access to traditional capital. But I actually had a conversation with Michael Larry of Source Climbing Center, who you met with when you visited our district. And Michael was having issues with Pay,gov and CAFS to manage his loan. So I know that you guys have created a new website, MYSBA.gov, and I have heard it is definitely an improvement over the old website, but he says there is still some room for improvement. So I was wondering, what are the opportunities for feedback you have created for small businesses? How is that feedback being incorporated and what is the timeline for launching the new website? Ms. GUZMAN. Yes. And I will say on the 504 program that the regulatory reform that we are embarking on is supported by the NADCO, which is the National Association of Development Corporation. So I am hopeful that we will be able to streamline the 504 program as well. Within the MYSBA structure, we are trying to streamline and give a single point of entry for businesses to come and perform the services that they need. Only half of the loans from EIDL, obviously it is an enormous amount, have been transitioned to date, but we have had over a million supported at this point. There is a strong customer service element, and hopefully this business owner has been able to reach out. But we are continuously taking those customer service issues and translating them into continuous improvement as technology must be. Ms. PEREZ. Thank you. And like so many people in rural America, I do not have broadband at home. I get it from a radio tower. It is not good. And I am just wondering, how is the SBA keeping programs accessible for people who don't have internet or who have bad internet, like we do? Ms. GUZMAN. Clearly, we are looking forward to broadband for everyone as the investments in the broadband infrastructure are implemented over the coming years. But in the interim, obviously, the SBA tries to make an effort to distribute resources around the country. Our district offices try to go into different regions, even if for a few hours, to have some sessions and try to connect with small business owners. And it is partially why we also deployed the Community Navigator pilot program to try to focus on an expansion into communities that are underserved, including rural communities. So it is a constant challenge. I have shared that we have limited reach, obviously, but important reach to those businesses, and we hope to grow it. Ms. PEREZ. Yeah. And so many, many small businesses like mine choose to bank with our small regional banks because we know those bankers, we trust them, we believe in keeping our dollars local. And these past few weeks have put an incredible amount of stress on small regional banks. When people have trust in their bank, they keep their money in the bank, and the bank remains solvent. But I think it is important we remember how critical small banks are in delivering SBA assistance to their communities. So, for example, 67 percent of PPP relief was provided through small community banks, credit unions, and small financial institutions, not the big guys. So I would like to hear from you what impact, if any, the recent Silicon Valley bank collapse has had on small business broadly. Do you see credit conditions tightening for small businesses going forward? Ms. GUZMAN. Credit was tightening before, and obviously with challenges in liquidity across lending institutions, we are seeing it tighten further. I will share that 4,000 of the 4,500 community banks, when doing PPP hadn't done an SBA loan in the last 2 years. And that is what this regulatory reform is about, is trying to make it simpler to navigate our programs, removing the most onerous elements of our regulation to ensure that the lending institutions can start to use SBA products as guaranteed products. They sit in their books in a preferable light and that is a benefit to trying to ensure that limited liquidity doesn't limit our lending as well. So government guarantees are more important now than ever before. And I have heard from multiple community banks expressing confidentially concern as people were concerned initially about their deposits. But I think after repeated actions by the Treasury and the regulators, people are starting to feel confident as well. And we know that community banks serve their businesses and their individuals well, and people will go back for that customer service. Ms. PEREZ. Thank you so much for your time here today. I yield back. Chairman WILLIAMS. Thank you. I now recognize Mr. Bean from Florida for 5 minutes. Mr. BEAN. Mr. Chairman, thank you so much. And good afternoon, Small Business Committee. It is good to see you. And Secretary Guzman, we are glad to have you here today. Do you have any indication by business code? I know we track business codes. Is there any business that is failing or any sector that is failing against the historical rate? Ms. GUZMAN. Well, the only thing that I could share is that obviously some of the industries hit really hard. The travel and tourism restaurants continue to face more challenges with credit access, as they obviously had a lot of debt during that time that their revenues dropped. They are starting to recover and seeing those revenues come back up, but obviously facing continued challenges with inflationary pressures and tight labor markets. So I would say those are the industries that I have heard most concerns from in terms of their continued challenges coming out of the COVID programs. Mr. BEAN. Very good. And I have traveled around and on our off days, including the auto repair shop in northeast Florida that I have visited, several--nine out of ten small businesses right now are struggling getting people to work. What is our plan? Do you have a plan? Or is the SBA saying, this is what we need to do to help small businesses get the labor that they need? What are we doing? Ms. GUZMAN. Yeah, I mean, the workforce issues are a challenge. We always try to provide the technical assistance, the referrals to local workforce development programs, et cetera. So an immediate support for our businesses, but it is a larger issue. The President's budget includes strategies to increase pre-K, increase childcare. These things are challenging for small businesses whose workers can't come because of children at home or other issues as well. So as much as we can get more participation in the workforce that will also help our small businesses. Mr. BEAN. Well, that is the challenge, because as we enter this budget year, we are going to tighten our belt. Is there things that SBA do you think that we could reduce or cut spending on? Is there something that you should offer up now, say this is where if you are going to cut SBA or cut there some fat, this is what I recommend. Is there anything that you could give us today? Ms. GUZMAN. We hope that the proposed budget gets approved. I know that in the past couple of years, there have been additional funding put on top of it for specialized district support. As much as we can continue to support the core programs of the SBA, that is what we prefer. Mr. BEAN. Is SBA still working from home? Ms. GUZMAN. Not fully, no. We have 1 percent of our workforce, our full-time employees, permanent staff are in full remote, the rest of them are admission based remote. So that means a minimum of 2 days per pay period, so 1 day per week. However, other offices have started to move or had already moved throughout the whole process to 3 to 5 days. So obviously, with the end of the pandemic in May, we continue to work through strategies to ensure that we are delivering our mission. Mr. BEAN. Very good. Just a few minutes ago, the gentleman from Maryland, Mr. Mfume---- Ms. GUZMAN. Mm-hmm. Mr. BEAN.--was outraged over the fraud. And there is so much of it. And I think you have noticed a theme here, because we are getting reports. Your report card shows how much fraud has walked out the door and how little it is recovered. So you could say it is bipartisan outrage over the amount of fraud, including the EIDL program, $78 billion were fraudulently obtained. That is according to the inspector. What are we doing? And here I have got a minute and a half left, and I will yield to you the remainder of that. Can you give us assurances that you are making changes? I don't have it yet. I don't have the assurance. I know it is bad, and you have said it is bad, and you said you are trying, but what are we doing to change the culture? Can we stop these programs to begin with because we have lost control of them? But can you give us assurance that things are being changed? That is what frustrates the American people. You can see we are all frustrated up here because everybody else follows the rules and we look at people cheating the system. There are so many other things that we could do. And I have got 50 seconds left. Can you make me or this Committee inspired knowing that there are big changes? That this isn't going to happen anymore. Ms. GUZMAN. All COVID relief programs are closed. And in terms of the fraud implementation that we have been able to successfully do, we have implemented controls across the program. As you know, early efforts focused on---- Mr. BEAN. So we have stopped it. Has anybody gone to jail? Has anybody---- Ms. GUZMAN. Oh, yes. Oh, yes. Mr. BEAN.--gone to jail? Ms. GUZMAN. There have been multiple convictions---- Mr. BEAN. And we have gotten--we have? Ms. GUZMAN. Yes, multiple convictions, multiple funds recovered directly from fraud, multiple indictments---- Mr. BEAN. But still billions out the door, though, that is the thing. Ms. GUZMAN. Still billions out the door that is being assessed clearly. I mean, we do not have a final number on fraud. Again, all these are reports of indicators or fraud. They may have checked one database and said, these could be your potential fraud, but they haven't cross referenced it. You know better than others that small business owners may not always check all the right boxes and have alignment. And so you got to check multiple data sources. Mr. BEAN. And we are counting you to do that. Thank you so much. I yield back, Mr. Chairman. Chairman WILLIAMS. Thank you. And I now recognize Mr. Pappas from New Hampshire for 5 minutes. Mr. PAPPAS. Thank you very much, Mr. Chairman and administrator, it is great to see you again. Thank you again for visiting my district this past January. We had you in Derry and Manchester. We were at the Palace Theater talking with a number of business owners who, almost to a person, said without the support from SBA, they are not sure they would be open today. So we are grateful for that commitment and all the work that is gone on the last few years. Of course, we are in a new phase in terms of this pandemic, and I think the work that the Agency does is as important as ever to provide businesses the support they need in a really uncertain climate. Members have mentioned a number of critical issues to businesses, but I want to build on what Representative Bean was asking in terms of cuts. You said, we hope the proposed budget gets approved, but I have a concern. Included in this budget is a 14 percent cut to the Small Business Development Center. Other Members have mentioned this, but I want to stress how important SBDC is to our frontline businesses in New Hampshire. SBDC is the boots on the ground. They have increased and expanded their mission since the pandemic. They have gone from seeing roughly 862 businesses to about 1,500 businesses a year. That is a more than 70 percent increase since the pandemic began. And so that work continues. But the concern is that they are going to lose about $105,000 of the roughly $778,000 that they receive in a federal allocation. That means they would have to cut two full time advisors. So that would have a direct impact on the ground in terms of the support that is out there for a critical resource partner. And I just want to give you another opportunity to respond to this. Why are we cutting a successful program that provides such important assistance to our small businesses at a time where they need it more than ever? Ms. GUZMAN. And again, what I would re-emphasize is that we are trying to diversify our entrepreneurial ecosystem to be inclusive of all types of providers. The SBDCs do a remarkable job, as does our SCORE partner, as does the Women's Business Centers. And we want to make sure that we are able to incentivize support for these great institutions across the board. And so we do need additional types of support to be more inclusive and make sure nobody's left on the sidelines. And ideally, we have enough resources to continue to support all of our great resource partners at scale, but there has to be some change to reach out to more of these micro small businesses around the country and serve them effectively. Mr. PAPPAS. I appreciate that, but just getting back, one of the important functions of SBDC is disaster assistance. Wouldn't cutting SBDC impact that critical function and other things that we rely on them to do? Ms. GUZMAN. The SBA actually has a full field operation for disaster assistance, which we scale in the events of the disasters. And so, clearly, we need to work on the ground with partners, those are chambers, those are local economic development agencies. Our SBDCs are great partners on the ground as well. And we hope to continue to support a strong field outreach within our disaster programs and expect to continue to partner on the ground with great organizations like the America's SBDC. Mr. PAPPAS. Well, one thing I want to note is that New Hampshire's SBDC participates in the Community Navigator program, but this isn't necessarily the case across the country in terms of what other SBDCs do. So can you provide some additional clarity around the proposal to give more money to the Community Navigators versus initially funding the pilot program at $175,000,000? And will only those tier one national level funding programs be receiving funding moving forward? And is ensuring that resources will be effectively distributed as partners work to continue this program? Ms. GUZMAN. And for clarity, we are requesting $30 million for Navigators, dropping down from that original $175 million, not an additional $30 million on top. So that we intend to ensure that all of our great programs, our Navigators, are successful in connecting all of our resource partners on the ground. They are there to build trust and build lines of communication to all of the entrepreneurs who could benefit from the full suite of SBA's resources on the ground. So I am committed to continue with that effort. Mr. PAPPAS. One final question. I have heard this feedback from a number of small businesses in my district, and it is the frustration around federal procurement policies. And we have seen a sharp decline in the number of small businesses that are participating in federal procurement in that space. And so about what SBA is doing to reverse that trend in the limited time you have? Ms. GUZMAN. Yes, we have seen a 40 percent decline in small businesses participating in federal contracting. So the whole of government approach that the Biden-Harris Administration has deployed means including our small businesses in procurement opportunities, creating more small dollar contracts basically for small businesses to participate by giving them category management status. But there is more to do at the SBA. We have simplified our certification program so we get more small businesses in the door, and are increasing our grants, our 7(j) grants, which help small businesses get contract ready to participate in federal procurement. Mr. PAPPAS. Thank you. I yield back. Mr. BEAN. Thank you very much. We have got three questioners left, Davids, Scholten, and Thanedar. So let's go to Kansas, where Ms. Davids is standing by. She is recognized for questions for 5 minutes. Ms. DAVIDS. Thank you. And thank you, Administrator Guzman, for joining us. As we have heard, oversight of the SBA is one of the most important functions that our Committee here serves. And given the unprecedented last few years, it will continue to be very important. And I completely agree, the PPP and EIDL programs were enormously successful at helping to sustain millions of small businesses during the worst months of the COVID-19 pandemic. And it is also unfortunately true that these programs saw high rates of fraud, including in the district that I represent. And just one example is that a business owner in Overland Park, Kansas, had to deal with fraud due to identity theft. And obviously, that was through no fault of their own. And I also want to just highlight and thank your team for helping with some of my constituents to quickly close out their cases, just recently, ensuring that they wouldn't be held liable for these fraudulent loans. But, of course, there is still work to do and we are hearing about that. And so, Administrator Guzman, I was just hoping to hear maybe a broader description of some of the anti fraud efforts, whether it is the PPP or EIDL programs, because I know that that is an area that you all are working on. And I just want to make sure that we have a good understanding of what the anti fraud efforts look like. Ms. GUZMAN. Sure. On the PPP program, there were more limited controls when launched for speed. And so we tried to add certainty to the process and added, of course, the Do Not Pay system review to both COVID, EIDL, and PPP, as well as, of course, on the EIDL program, added the collection of tax returns. We want to ensure, of course, in the Biden-Harris Administration that we limit fraud and abuse. And so we have been following the recommendations of the IG and the GAO around our capital programs to ensure that we implement a fraud risk management framework. Again, we have hundreds of people working on fraud at the Agency, but the collaboration across program offices is key to ensure that they receive the support and structure that is recommended by the IG and the GAO. So we think that the controls, combined with the management framework is what positions the SBA for stronger success outcomes on fraud. And we have seen that come to fruition. The IG has personally commented to the committees that SBA's culture from the top has shifted. We have been implementing, against recommendations, at a steady pace to ensure that we solve for some of the pandemic relief program holes and can deliver certainty and speed at the same time. We have demonstrated that now with the EIDL program reforms. Ms. DAVIDS. Yeah. And speaking of the OIG recommendations related to the SBA's pandemic relief programs, I know you mentioned including tax returns and beefing up the certainty of the programs and the collaboration that has been happening. Can you speak to the number of recommendations that OIG made to address some of the anti fraud efforts that you have been implementing? How many are still pending? And then do you have a timeline for the implementation of those recommendations? Ms. GUZMAN. It is a continuous process. On the GAO side, we have closed six of the eight high risk list items and eight of the fifteen priority, and obviously continue to try to drive towards successful outcomes with GAO. On the IG, we have done 14 of the 21 management challenges and over 100 of their regular enforcement actions. And so we know that obviously, the pandemic relief was a huge portion of all of those findings. We continue to try to drive through that portfolio, identify fraud, and work collaboratively with the IG to ensure that those individuals are prosecuted and those funds collected. Ms. DAVIDS. Thank you. I have limited time left, so I do just want to take a moment to highlight the work that has been going on around Women's Business Centers. It is a very successful program. It is something that I have worked in a bipartisan way with others on this Committee to make improvements to the program and make sure that it can continue to be successful. And I know SBA has recently expanded the number of WBCs across the country, and I would love to do a follow up conversation about the ways that we can be supportive of that effort from the perspective of this Committee. Thank you so much for your time. I yield back. Mr. BEAN. Thank you very much. Let's go to Michigan, where Ms. Scholten is standing by. She is recognized for 5 minutes of questions. Ms. SCHOLTEN. Why, thank you so much, Mr. Chair. I really appreciate that. And first of all, thank you again to Administrator Guzman. Good to see you again. Appreciate your time today, and just want to echo the sentiments of my colleagues in thanking you for leading your Agency through part of the global pandemic, among other extraordinary events. As the Ranking Member for the Small Business Committee on Contracting, I know the importance of the 8(a) program for business development and how much it helps minority small businesses to compete in the federal marketplace. Administrator Guzman, could you please elaborate on some of the ongoing challenges that small businesses face in federal contracting and how the 8(a) program in particular is helping to level the playing field? Ms. GUZMAN. In addition to the decline of citizens participating in government contracting by 40 percent, there has also been a decline of new entrants by 60 percent. So the challenges are on the outset when they are trying to get certified and start to learn about how to participate in federal contracting. And that is where the SBA steps in with its certification program. So the streamlining of our certification programs is really key, including across the 8(a) program. Vet cert is now our gold standard. We just transitioned that successfully from the Veterans Administration. It is unfortunate that less people heard about it because it was such a success. And our veterans are very happy with the program and want to see those reforms implemented across all of our certifications. But it is also about how the agencies source contracts. And so we worked diligently in the Biden-Harris Administration to ensure that we fought for all of our socioeconomic firms, including the 8(a) firms, to have access to category management status, as we call it, tier two. That is our strategic sourcing. So it is often times sometimes large, bundled actions. And so we continue to try to advocate for opportunities for small businesses to have entry contracts and participate in federal contracting. And we believe that will help ensure that more small businesses can participate. But the President took very strong action by creating a 15 percent goal for small disadvantaged businesses, which includes 8(a), a 15 percent goal by 2025. So that is tens of billions of dollars. We are trying to ensure that we ready our 8(a)s with the proper grant funding to support a network of technical assistance providers to position them for success. And we have increased the number of procurement center representatives who connect small businesses to contract opportunities in our field offices. Ms. SCHOLTEN. That is excellent. Thank you so much for your work there. I have three reports here on the 8(a) program, and Mr. Chairman, I would like to request that they be entered into into the record. Mr. BEAN. Without objection, they are so entered into the record. Ms. SCHOLTEN. Thank you so much, sir. I yield back the remainder of my time. Mr. BEAN. Very good. And thank you so much. But let's stay in Michigan, where Mr. Thanedar is standing by. He's got 5 minutes and he is recognized. Ms. SCHOLTEN. Thank you, Chairman, and thank you, administrator, for being here and working with us. I am a firm believer in small businesses and advocate for them at every chance, being a serial entrepreneur myself. Establishing, expanding, and sustaining a business is a difficult job, as I know from my own experience running different companies. Despite obstacles, such as lack of capital, I was able to achieve my American dream. However, the largest corporations received the utmost attention--99+ percent of the businesses in our nation are small businesses. Additionally, small businesses contribute significantly to the economy by hiding, investing, and supporting their respective committees. Nonetheless, the disparity in accessing capital remains silent. Salient for business owners, particularly disadvantaged communities. In my district, Detroit, I have witnessed the challenges presented to business owners seeking capital to grow and sustain their operations. Most of the small businesses in my district make less than $150,000 annually and have limited access to financial advisors and banking relationships, which adversely impact their bottom line. To remedy the inequities, we must look no further than history. Minorities have historically faced steep challenges as business owners. The infamous Tulsa Massacre is one of the numerous examples. On the fateful day of May 31, 1921, an angry mob descended upon the once thriving Greenwood District and unleashed a wave of terror on the black community, destroying businesses and assets worth millions of dollars, without reparations to this very day. Similarly, the Black Bottom neighborhood of Detroit, an area I represent, once possessed a formidable business infrastructure. However, policies such as the National Housing Act of 1949, decimated businesses by constructing Interstate 375. To this end, the business environment is extremely challenging for minorities. During the COVID-19 pandemic, minority business owners lost a disproportionate amount of business and revenues in comparison to their white counterparts. Moreover, SBA relief programs, such as the Paycheck Protection Program, also highlighted stark disparities. According to Harvard University data, black-owned firms were 8.9 percent less likely to receive PPP loan than similar white-owned firms. Small business owners are willing and able to grow our economy, and my goal is for them to reach their entrepreneurial dreams, as I did. The goal of SBA should ensure a cohesive environment to grow access to capital for all. An article in Boston Globe on racial equity stated that eight out of every ten black businesses failed within the first eighteen months. As you know, the first year as a business owner is crucial and capital intensive. The goal of the SBA lending company rulemaking is to help reach the smallest of the small businesses women, minority, and veterans. Administrator Guzman, with that said, what type of gaps would you like to see any new SBLCs fill in small business lending? Ms. GUZMAN. Thank you for that. And non depository lending institutions, as well as our Community Advantage nonprofit lenders during PPP were the institutions that were able to fill gaps. I mean, we know that more than half of black businesses go straight to online services to get capital, skipping the banking system altogether. And there is no protection or set terms and condition product out there until the SBA can expand competition in its marketplace. And so we know that the licensing process for our SBLCs, whether they are Community Advantage SBLCs or regular SBLCs, will be thorough and critical. And we will make sure that we are mission aligned, that they will be filling gaps. That will be one of the key areas. Attract some lenders out there. Obviously, anybody could have bought an SBLC over the last 4 decades, and so the program is open to all now, but we hope to attract some lenders who want to focus on this very important issue, and we think the time is now, based on our strong performance across similar programs. Ms. SCHOLTEN. Thank you. And I yield back. Mr. BEAN. Thank you very much. Members, what a great day it is been in small business. I want to thank all the Members on behalf of Chair Williams for coming prepared. I think we all had a great deal. Everybody here did their homework. I want to thank Ms. Guzman. Administrator, thank you so much for being here. Over 2 hours, 15 minutes. Members, a reminder we have 5 days, if there is no objection, 5 legislative days to submit additional materials, written questions to the Chair, which will be forwarded to the witness, and then she will do her homework and bring it back. So on behalf of Chair Williams, thank you so much. And there is no other business before us. [Whereupon, 4:13 p.m., the committee was adjourned.] A P P E N D I X [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]