[House Hearing, 117 Congress] [From the U.S. Government Publishing Office] REVIEW OF SBA'S TOP MANAGEMENT AND PERFORMANCE CHALLENGES IN FISCAL YEAR 2022 AND SBA OIG'S SEMIANNUAL REPORT TO CONGRESS ======================================================================= HEARING BEFORE THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTEENTH CONGRESS SECOND SESSION __________ HEARING HELD JANUARY 12, 2022 __________ [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 117-042 Available via the GPO Website: www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 46-712 WASHINGTON : 2022 ----------------------------------------------------------------------------------- HOUSE COMMITTEE ON SMALL BUSINESS NYDIA VELAZQUEZ, New York, Chairwoman JARED GOLDEN, Maine JASON CROW, Colorado SHARICE DAVIDS, Kansas KWEISI MFUME, Maryland DEAN PHILLIPS, Minnesota MARIE NEWMAN, Illinois CAROLYN BOURDEAUX, Georgia TROY CARTER, Louisiana JUDY CHU, California DWIGHT EVANS, Pennsylvania ANTONIO DELGADO, New York CHRISSY HOULAHAN, Pennsylvania ANDY KIM, New Jersey ANGIE CRAIG, Minnesota BLAINE LUETKEMEYER, Missouri, Ranking Member ROGER WILLIAMS, Texas JIM HAGEDORN, Minnesota PETE STAUBER, Minnesota DAN MEUSER, Pennsylvania CLAUDIA TENNEY, New York ANDREW GARBARINO, New York YOUNG KIM, California BETH VAN DUYNE, Texas BYRON DONALDS, Florida MARIA SALAZAR, Florida SCOTT FITZGERALD, Wisconsin Melissa Jung, Majority Staff Director Ellen Harrington, Majority Deputy Staff Director David Planning, Staff Director C O N T E N T S OPENING STATEMENTS Page Hon. Nydia Velazquez............................................. 1 Hon. Blaine Luetkemeyer.......................................... 2 WITNESS Mr. Hannibal ``Mike'' Ware, Inspector General, Office of the Inspector General, United States Small Business Administration, Washington, DC................................................. 4 APPENDIX Prepared Statement: Mr. Hannibal ``Mike'' Ware, Inspector General, Office of the Inspector General, United States Small Business Administration, Washington, DC............................. 35 Questions and Answers for the Record: Questions from Hon. Velazquez and Answers from Mr. Ware...... 46 Questions from Hon. Chu and Answers from Mr. Ware............ 50 Questions from Hon. Luetkemeyer and Answers from Mr. Ware.... 51 Questions from Hon. Hagedorn and Answers from Mr. Ware....... 61 Questions from Hon. Van Duyne and Answers from Mr. Ware...... 65 Additional Material for the Record: NAFCU - National Association of Federally-Insured Credit Unions..................................................... 68 REVIEW OF SBA'S TOP MANAGEMENT AND PERFORMANCE CHALLENGES IN FISCAL YEAR 2022 AND SBA OIG'S SEMIANNUAL REPORT TO CONGRESS ---------- WEDNESDAY, JANUARY 12, 2022 House of Representatives, Committee on Small Business, Washington, DC. The committee met, pursuant to call, at 10:00 a.m., in Room 2360, Rayburn House Office Building and via Zoom, Hon. Nydia Velazquez [chairwoman of the Committee] presiding. Present: Representatives Velazquez, Golden, Davids, Mfume, Phillips, Newman, Bourdeaux, Carter, Chu, Evans, Delgado, Houlahan, Mr. Kim, Craig, Luetkemeyer, Williams, Stauber, Meuser, Tenney, Garbarino, Mrs. Young Kim, Van Duyne, Donalds, and Fitzgerald. Chairwoman VELAZQUEZ. Good morning. I call this hearing to order. Without objection, the Chair is authorized to declare a recess at any time. I would like to begin by noting some important requirements. Let me begin by saying that standing House and Committee rules and practice will continue to apply during hybrid proceedings. All Members are reminded that they are expected to adhere to these standing rules including decorum. House regulations require Members to be visible through a video connection throughout the proceeding, so please keep your cameras on. Also, remember to remain muted until you are recognized to minimize background noise. In the event a Member encounters technical issues that prevent them from being recognized for their questioning, I will move to the next available Member of the same party and I will recognize that Member at the next appropriate time slot provided they have returned to the proceeding. For those Members and staff physically present in the Committee room today, in accordance with the attending physician's most recent guidance, all Members and staff who attend this hybrid hearing in person will be required to wear masks in the hearing room. Now I will move to my opening statement. First, I would like to welcome Inspector General Ware. Thank you for being here today. Your work has been indispensable throughout the COVID crisis, and you should be proud of your efforts to improve programs critical to small businesses. The IG's office is tasked with reporting on the top management and performance challenges facing the Small Business Administration every year. While this year's report covers many longstanding issues, it also calls attention to the biggest challenge facing the agency, the pandemic relief programs. Since 2020, the SBA has distributed nearly $1 trillion in economic relief to small firms. This figure surpasses the amount of money distributed in all other years of SBA's existence combined. This is an enormous achievement and helped keep millions of small businesses afloat during the pandemic. However, with any emergency effort of this magnitude, problems will inevitably occur. According to investigations, the COVID- EIDL and Paycheck Protection Programs have been vulnerable to fraud. Much of this potential fraud can be traced back to the early days of the pandemic when programs were new, loan volume was high, and the need to get the loans out quickly was the priority. Your report also notes that in 2020, the previous administration ``relaxed internal controls,'' adding significant stress to the system and creating an environment ripe for fraud. This Committee has worked diligently to conduct oversight and institute legislative fixes to address these problems. We have conducted hearings, written letters, held briefings, and passed bills, ensuring money is going to small businesses that need it most and not the bad actors. Since taking office in January, the Biden administration has also demonstrated its commitment to rooting out fraud and abuse. Administrator Guzman inherited many open recommendations from the OIG. Under her leadership, the SBA has closed out 70 OIG recommendations this year alone. SBA took steps to shore up fraud protections in critical pandemic programs. This includes implementing a master review plan for loan and forgiveness applications in the PPP program and allowing the agency to hold funds at any time in the EIDL process. The agency now also ensures that all borrowers are not on the Treasury Department's ``Do Not Pay'' list. These are just a few of the actions that help reduce fraud. I look forward to continuing our work with the administration on this front. At the same time, the IG's reports cover other critical issues unrelated to pandemic relief. These include challenges in small business contracting, IT security, access to capital, and disaster assistance. Addressing these problems will require sustained work on a bipartisan basis from this committee. I hope that today's hearing allows us to take a close look at all of these issues and discuss bipartisan solutions to fix them. I would now like to yield to the Ranking Member, Mr. Luetkemeyer. Mr. LUETKEMEYER. Thank you, Madam Chair. And thank you for calling today's hearing with Inspector Ware. Welcome, Inspector. Always good to have you before us to explain what is going on. Before I begin, I also want to thank the Chairman for the announced changes in the order in which Members will question the witnesses. This is an important announcement. I am thankful for your action. Likewise, I know Members will appreciate going back to regular order and the methods that were voted on within the rules package. Additionally, I would like to take this time to recognize and congratulate the Committee's chief counsel, Jan Oliver, on her upcoming retirement. Jan has been a stalworth for small businesses for years and has worked in public service for decades. From her time with now-Senator Portman to working at the White House and to her time and her services committee, her steady guidance and counsel for the past 31 years has always been welcomed by the several Chairmen and many Committee Members that she has served. Jan, thank you for the thoughtful insight, analysis on all issues, including and especially those pertaining to regulations and its impact on small businesses. Thank you very much. Now, as we start the second session of the 117th Congress, it is critically important that we begin with a discussion on oversight. With roughly $1 trillion in assistance provided to the nation's smallest firms through the Small Business Administration, we must exercise our oversight responsibilities wisely and often. It is not just dollars flowing to small businesses. There are new programs at the SBA that also require our attention. That is why I am thankful we have today's conversation with Inspector General Ware. Congress moved quickly in the spring of 2020 to support the nation's economy with hundreds of billions of dollars for small businesses. Some of these programs, like the Paycheck Protection Program, which was driven by private sector lenders, focused heavily on the nation's workers. Other programs that were administered directly through the SBA moved slower and were overall less successful. Fraud took place and taxpayer dollars were and continue to be wasted. This is unacceptable. The numbers presented by the inspector are significant. While the IG reports approximately $4.6 billion in possible fraudulent activity within the Paycheck Protection Program, the Economic Injury Disaster Loan Program, also known as EIDL, is enmeshed in roughly $84 billion in potentially fraudulent activity. The PPP was administered by private sector financial institutions. The EIDL program was not. The SBA acted as the sole and only gatekeeper to the EIDL program. That any theft or businesses and individuals illegally entered the program is a major problem for the EIDL program. Differences on how these programs were run cannot be overstated and they should serve as case studies for future public policy debates on how the SBA should run its programs. Asking SBA to expand or enhance their direct lending ability would be counter to the facts that we have on the ground. Beyond the COVID relief programs, we know that the SBA has struggled with identifying risks within their access to capital programs, overseeing their contracting programs, and updating and keeping pace with their information technology needs for years. The COVID emergency period has compounded all these programs and challenges for SBA. I always say that when you put something under stress, that is when you find out where your real problems are. And obviously with this COVID situation and the SBA taking on a tremendously increased workload, we now know where a lot of problems are. Due to PPP and EIDL, more businesses know about the services and functions of SBA than ever. Therefore, the SBA must be ready to serve and assist small businesses, all the while protecting taxpayer dollars and preserving the integrity of the existing programs. Small business owners do not have time to waste. They are facing significant price increases and they are having trouble finding workers. Unfortunately, it does not end there. Supply chain issues continue to thwart their planning and uncertainty surrounding a vaccine mandate is ever present. Now more than ever, the federal government programs cannot be duplicative, wasteful, or counterproductive. I look forward to hearing more from Inspector Ware on where fraud stands today with the COVID relief programs, an update on all recommendations, and what programs his office will be examining next. With such a significant amount of potential fraud clogging the process for small businesses, I know the discussion will not end here. This will require ongoing efforts for years to come. With that, Madam Chair, I look forward to working with you this year, and I look forward to continuing to work with the Inspector General. To that end, I want to give you this letter which is a list. And we can give that to your staff. This letter which is a list of some of the witnesses and topics that I think would be impactful for and helpful to us in our legislative and oversight work. With that, Madam Chair, I yield back and look forward to working with you this coming year. Chairwoman VELAZQUEZ. Thank you, Mr. Luetkemeyer. The gentleman yields back. With that, I will now introduce our distinguished witness, the Honorable Hannibal ``Mike'' Ware, Inspector General of the SBA. Mr. Ware was sworn in as the inspector general in May 2018 and has been an effective leader in his role and an asset to this Committee. He has nearly 30 years of experience in the IG community rooting out fraud, waste, and abuse in federal programs. Welcome, Mr. Ware. You are recognized for 5 minutes. STATEMENT OF HANNIBAL ``MIKE'' WARE, INSPECTOR GENERAL, OFFICE OF THE INSPECTOR GENERAL, UNITED STATES SMALL BUSINESS ADMINISTRATION Mr. WARE. Thank you, and good morning. Good morning, Chairwoman Velazquez, Ranking Member Luetkemeyer, and distinguished Members of the Committee. Thank you as always for inviting me to speak with you today and for your continued support of my office. It was my hope that my next appearance before this Committee would occur with the pandemic in our rearview mirrors. However, the pandemic has been lasting with everchanging challenges. SBA has played a pivotal and unprecedented role in stabilizing the U.S. economy. In doing so, the men and women of SBA who have been on the frontlines and who have directly met the needs of millions of small businesses, they have sacrificed their time and worked long hours to implement these programs on an unprecedented scale. Not only do we as taxpayers thank them for their hard work, but there are countless whistleblowers who have come forward to my office to shine the light of transparency on matters that they believe were of concern to stewarding the taxpayers' dollars. We thank them not only for their hard work but for their courage and sense of duty to the nation. The men and women of my office equally have been working diligently to provide oversight of SBA's pandemic response. We have never lost sight of the struggles of the small business owners and their employees who toil not only with financial hardship but in many cases personal loss as a result of the pandemic. We are keenly aware that nothing short of the public's trust is at stake in our oversight efforts. We have already issued 18 reports addressing SBA's pandemic efforts with dozens of recommendations for corrective action. Our investigative work to date has resulted in 366 indictments, 294 arrests, and 142 convictions related to EIDL or PPP. The monetary recoveries and savings from our oversight investigations pandemic response efforts in fiscal year 2021 alone were $4.2 billion, with Congress investing just $50 million in supplemental funds to facilitate our oversight efforts. And the work has really just begun. A significant portion of our supplemental funding will be exhausted by the end of fiscal year 2024 which will coincide with hundreds of billions of dollars in EIDL loans coming due for payment. We anticipate this will be a key moment for realizing the true scope of fraud in the program which already is expensive. We believe our annual resource levels will need to be right sized to match this fraud landscape and to provide necessary oversight of SBA's management challenges in the years beyond the pandemic response. Notwithstanding the challenge, OIG has sought opportunity to more effectively and efficiently carry out our mission. We have provided oversight in real time, producing reports in under 2 months. In doing so, the IG community took note and used our oversight model to develop an agile products toolkit for OIGs across government. The result of our innovation is that we proudly kept the Congress, the administrator, our stakeholders, and the public currently and fully informed of SBA's pandemic response efforts. I am also happy to report that OIG has taken significant strides in leveraging data analytics to oversee these vast loan portfolios. We are moving from a reactive data analytics posture to leveraging artificial intelligence and machine learning to get in front of fraud and expand the reach of our oversight. In OIG's dealing with SBA's leaders throughout the pandemic, I have never had a reason to doubt their commitment to providing assistance to the nation's small businesses. In terms of characterization of SBA's response to our findings related to their pandemic response, it is my perspective that there were missed opportunities to recalibrate internal controls and implement corrective action in a timely manner at the outset of SBA's pandemic response efforts. This has since changed significantly as we work more closely to implement proper internal controls from the onset of new program startups. We are committed to providing independent and objective oversight of SBA's programs and operations. And in doing so, we will continue to shine the light of transparency and work diligently to keep everyone informed. Thank you for the opportunity to speak to you today. I am happy to answer any questions you may have of me. Chairwoman VELAZQUEZ. Thank you, Mr. Ware. I now recognize myself for 5 minutes for questions. Mr. Ware, Administrator Guzman indicated that this administration is sincere in implementing the IG's recommendations and that SBA has made great strides in satisfying most recommendations. Is this administration cooperating with ongoing audits and investigations, and can you expand on your relationship with the administrator in resolving the IG's recommendations? Mr. WARE. Yes. Thank you for the question. I could say unequivocally that this, well, the leadership team at SBA currently is definitely taking recommendations seriously and moving quite quickly to resolve them. Chairwoman VELAZQUEZ. Thank you. In your July briefing with the Committee, you indicated that 50 recommendations made by the OIG related to PPP and COVID-EIDL remained open. At this time, how many remain open? Mr. WARE. At this time, I believe that number is, it could be 20. I could get back to you on the exact number. What I do know is that half of the number that remain open have not quite come due yet to be closed. And the date for another set of them passed just December 31st and we may have the information on it but we have not reconciled that information yet to give an update as to which ones can be closed. Chairwoman VELAZQUEZ. Thank you. Speed was imperative at the beginning of the pandemic leading to fraud controls being removed. The current administration put guardrails back in place to prevent further fraud and abuse. Has your office evaluated whether any of the new safeguards are achieving their intended goals since most of the audits and investigation have focused on the performance of the PPP and COVID-EIDL programs under the previous administration? Mr. WARE. So there are a few ways to look at that. To answer the question directly, we are in the process of reviewing those. And as a matter of fact, two reports should be out addressing those questions more directly within the next 30 days I believe. I hope; right? That is what we are looking at. But I could tell you this, what was done differently in terms of this leadership team was an upfront focus on the internal control environment that included an actual sit-down to determine what was best to be put in place prior to setting anything else up. Chairwoman VELAZQUEZ. Thank you. Mr. Ware, Congress created the COVID-EIDL program to provide quick working capital to small businesses suffering economic injury due to the COVID-19 pandemic. In creating this program, Congress acknowledged that the private sector will struggle to deliver relief funds to small dollar borrowers quickly. Given the COVID-EIDL emphasis on the fast delivery of funds and the approach the private sector took to focus on larger businesses and existing clients with PPP, do you believe it is fair and appropriate to compare COVID-EIDL to the 7(a loan program? Mr. WARE. Being that they are two totally completely different animals, it is difficult, based on the evidence that we have, to make a comparison of the two in terms of how delivery is. Certainly, the body of work definitely says that the direct lending programs have had issues in terms of a fraud environment, but so has the 7(a) program as well. We have our own issues with them. To make up a comparison of the two when speaking about direct lending, I do not believe that we have a body of work that can make that because there are so many different aspects that have to be considered. And we have focused primarily based on fraud risk. Chairwoman VELAZQUEZ. Okay. So is it fair to compare new direct lending programs to the COVID-EIDL given the stark differences and goals in the two programs? Mr. WARE. I believe that a whole lot of angles have to be considered if you are going to do a comparison. From an Inspector General perspective, from my perspective, either way there is the control environment that will tell the tale. Chairwoman VELAZQUEZ. Thank you. Mr. WARE. A proper control environment could---- Chairwoman VELAZQUEZ. My time has expired. Mr. WARE.--a lot of issues that we have seen. Chairwoman VELAZQUEZ. Thank you. Mr. WARE. Thank you. Chairwoman VELAZQUEZ. Now I recognize the Ranking Member, Mr. Luetkemeyer, for 5 minutes. Mr. LUETKEMEYER. Thank you, Madam Chair. And again, welcome, Inspector. Good to see you again. I would like to start today by discussing some of the numbers that your reports identified when it comes to fraud. In total it looks like there is approximately $80 billion in potentially fraudulent EIDL activity and another $4.6 billion potentially fraudulent activity within the PPP. These two programs have different mechanics as you have just described but I think contrary to the point of the Chairman, that there is some similarities here in that they are direct lending programs, money going out the door, but they were done in a different fashion from the standpoint that the PPP had the private sector, the banks, credit unions and some fintech folks delivering those funds versus SBA and their folks delivering that. And so I think the difference there, correct me if I am wrong here, but this is my question. It would appear to me that the rules, regulations, processes, procedures, controls were not followed by the SBA folks when it comes to the EIDL program and some of the other direct programs, 7(a) programs that they implement versus the banks and credit unions who have `` know your customer'' rules in place, laws in place that minimized. When you look at $4.6 billion in PPP, that is roughly 5 percent fraud rate. Eighty billion is over 30 percent fraud rate in the EIDL program. That is a significant difference between the two and I think there is a significant difference in the way that they were adjudicated by the SBA. Would you agree with that? Mr. WARE. I would agree that the 7(a) program in dealing with the lenders meant that they had more of a relationship and they were able to let us know from the onset where the issues were and to work with us to call back a whole lot of the money. In terms of EIDL oversight initially with the focus being solely on speed, initially and guardrails being lowered, it is just, that was the reason. That was the reason that we ended up with what we have. Mr. LUETKEMEYER. Okay. So it begs the question then, have the guardrails been put back up? Mr. WARE. Have they? That is what you are asking me? Mr. LUETKEMEYER. Yeah. You said the problem with the fraud was the guardrails were taken off. Have they been put back up? Mr. WARE. Yes. Many of the guardrails have, and many of our recommendations to that regard have been put in place. Mr. LUETKEMEYER. I am going to follow up with regards to the PPP. We had this discussion before and we found that a lot of the fraud that was in the PPP program was in the fintech folks. They did not have the `` know your customer'' law in place that the banks and credit unions do, or the banks have in place, and did not really take the precautions to make sure that those dollars were actually going to a real person and that this was not duplicative actin on the part of the borrower. And so you were telling me in earlier conversations and your other reports that the fintechs were really kind of the problem children here. Have you seen that continue to be the situation? Do you see something different now or where are we at with this? Mr. WARE. What I told you at the time was that our investigative work was finding that where we were seeing the most fraud in terms of our arrests, convictions, indictments and everything else, there was a great deal, a percentage of those that had to do with fintechs. Not saying that if the proper control environment is in place that would be the case but that is what the evidence demonstrates. Mr. LUETKEMEYER. Okay. I know that the Chairman asked a number of times about the recommendations that you are making and it seems that they are making some progress, which is great. I know the last time we talked there was some concern that one of the problems was you make recommendations and the SBA administration would put them in place but their staffs would not execute on those recommendations. Have you seen that improve? Is that still going on? Is it getting worse? What are you seeing? Mr. WARE. I am actually happy for that question because I wanted to clarify something. What I needed to clarify in this regard is that these things normally take time to happen in earnest. So somebody conducting a loan review and what my folks brought me up to speed on was this. It is not every person conducting a review that did not follow what is currently in place; right? We are finding that in some instances it happens; in other instances, it does not. And I believe though we may find that in just about every program or every industry that sometimes what is in place is not followed. Mr. LUETKEMEYER. Inspector, you just opened up a whole new can of works there. So do we have people that are doing a good job and adhering to the recommendations and now we have other people that are not? Have you identified those other people yet so we can point to them and say these people have to either shape up or ship out? I mean, if we have got some bad apples in the barrel, we need to get rid of them. Chairwoman VELAZQUEZ. Mr. Ware, time has expired but I will let you answer the question. Mr. WARE. Thanks. Mr. Luetkemeyer, I do not believe it is a bad apple situation; right? I believe that it is in terms of expertise. It is in terms of training and it is in terms of having people know exactly what people need to do to the T. We have not found where someone is willfully doing a poor job in terms of loan review. So I would not want to categorize it in that way. And we have work coming out on that that will be coming to you very, very shortly. Mr. LUETKEMEYER. Well, when 40 percent of the program is being fraudulently active, we have got a problem, sir. Thank you. Chairwoman VELAZQUEZ. Time has expired. Now we recognize the gentlelady from Illinois, Ms. Newman, for 5 minutes. Ms. NEWMAN. Thank you, Madam Chair, and thank you Ranking Member. This is a great discussion today. Thank you, Mr. Ware, for being here, and thank you for executing this very daunting task. It does not fall short on us that this is a complicated action that involves actions that took place 2 and 3 years ago, so this forensic taskforce has really been helpful but realizing that it is tough. I want to make one comment and clarify something because I just want to clarify with you, you are investigating potential fraud and those numbers are relative to potential fraud, not proven fraud; correct? Mr. WARE. So investigations and audits, two different things clearly. Ms. NEWMAN. Yes. Mr. WARE. So in terms of our audit findings, those were potential fraud. We have not reviewed or completed our review on the entire package, large package to determine what is the actual fraud. We do know anecdotally that what we have called potential fraud is very likely fraud because our fraud cases and criminal convictions and indictments speak directly to the patterns that we document as potential fraud. Ms. NEWMAN. Thank you for clarifying. So I have three areas of question. I hope we can get it in in the five. Tell me a little bit about this right-sizing project. I really like this idea. I have done this in business before so I really like the agile product. Can you just share a little bit about what is in that product kit? Mr. WARE. Great. In the toolkit is a way for you to identify and focus on a single question or to notify management and leadership of serious crucial problems that they need to take action on immediately. So in the case of EIDL, for example, once we started to see the trends, we got to the table with the leadership team here while the team was working on putting together something for public consumption and told them, listen, you need to put a stop to this right now. You need to set up a system of control that can identify these duplicate IP addresses and these bad emails and these things that fall in like three, four buckets. It needs to be addressed right now. And we try to get that so the information is immediate and then the public sees the entire thing that they could respond to within 30 to 60 days. Ms. NEWMAN. Thank you. That sounds like it is working in real time which is what we want right now. We do not want to lose any more time. A couple of other areas. One is data integrity. In our visit, oh, gosh, it was probably in first quarter, it was clear that there were some data integrity issues. Can you share with the Committee here what has been done in the last 3 quarters to address the data integrity issues? Mr. WARE. Great. So what we have found in working with them, initially, of course, the deluge of things that came in completely broke the system; right? So since that time they brought in a third-party contractor that has done a great job in terms of cleaning up the data. And as you know they put out, what, I think monthly they put out the stats. They put out these things. This data has been fixed tremendously. There are some, I think there is one field. I am trying to remember. It has to do with congressional data that we are looking at right now. So we are in the process of determining just how clean it is. Ms. NEWMAN. Good. And I will look forward to that report. And then finally, which of all of the loan programs did you find the least potential fraud and why do you think that fared the best? Mr. WARE. Great. So, the least potential fraud, of course, was found in the Paycheck Protection program. And I believe one of the reasons was because they knew, most of the lenders knew their customers. So they were able to ask the right questions off the bat and to put a stop to it prior to funds being disbursed. We got like within the first week or so like 5,000 contacts from banks where we knew there was a problem. And they were being able to hold and they have been a great partner with us in terms of having the funds seized and returned to the government. Ms. NEWMAN. Well, thank you for that. And thank you for your great work on this. And I will say again, thank you for going back forensically to 2 or 3 years prior to this in solving some of the issues that arose at that time. So appreciate your work. Mr. WARE. Thank you. Chairwoman VELAZQUEZ. The gentlelady's time has expired. Now we recognize Mr. Williams, the Vice Ranking Member of the Committee from Texas. Mr. WILLIAMS. Thank you, Madam Chairwoman, and Ranking Member Luetkemeyer. I am just listening to this. Already as a small business owner it is amazing to me how this Committee and this agency is so political and the main street small business owner is getting squeezed right in the middle. This is going to have to change. Now, Mr. Ware, your report found massive fraud in almost every one of the SBA's COVID relief programs. In the EIDL program we talked about this morning alone there has been nearly $80 billion in fraudulent activity. This leads to us to question the ability of the SBA to carry out or set up new programs in the future if they are unable to properly account for taxpayer dollars when main street businesses need it most and have earned it. The SBA demonstrated their inability to discharge emergency lending at every single turn, yet, my democratic colleagues want to expand the SBA's lending authority and kind of reward bad behavior even when the private sector has proven willing and better suited to take on these efforts. The private sector always does it better. Mr. Ware, why should we expand direct lending authority for the SBA when evidence that you talked about today has clearly proven they were unsuccessful in properly executing their duties in combatting fraud in COVID relief programs? Mr. WARE. Mr. Williams, thank you very much for that question. The question as to why should you do that is really a policy and program question that the IG is prohibited by law from responding to. I could tell you what our body of work talks about in terms of an internal control structure and that a proper internal control structure, regardless of which way this Congress or the administration determines to go from a policy perspective is what is most critical in my eyes. Mr. WILLIAMS. Okay. During the pandemic, various federal agencies were tasked with getting money to the American people as fast as possible. Now, unfortunately, the SBA seemed to be one of the worst in distributing business saving funds for the last 2 years. The Shuttered Venues Operator Grant (SVOG) program, which was created from my bipartisan Save Our Stages Act, took over 6 months from being signed into law before a single dollar was disbursed. Cinemas, theaters, concert halls, and other entertainment venues across the country struggled to stay in business while they were left in the dark by the SBA's Administrator Guzman who has still not been held to account for these catastrophic failures. People lost jobs. Futures were torn apart. So Mr. Ware, based on their fundamentally unprepared to perform their duties, is it your opinion that the SBA setbacks are indicative of greater organizational challenges? Or was it basic incompetence and lack of leadership that caused these embarrassing rollouts of events and lifechanging events for small business owners? That is a pretty simple question. Mr. WARE. Well, I mean, again, I go back simply to the work that we have done. And you know, we put out a management alert on the control environment and tracking performance results in that program, the Shuttered Venue Operators Grant Program; right? And in terms of the risk framework that we asked them to put in place, clearly the five performance goals, we know that they put those items in place. Relative to the rollout of it and what happened and who was to blame and everything like that for the delay, we have not looked into that. We have another report on SVOG that should be out shortly. Mr. WILLIAMS. Well, I look forward to seeing that but you ought to look into it and see who is responsible for delaying this to these businesses that cost so many jobs. So the SBA is tasked with assisting small businesses across the country. I am a small business owner. However, they fail to properly communicate with businesses, borrowers, and lenders and Members of this Committee during important times of need. So when the SBA system disruptions halted the SVOG program in the spring of 2021, businesses were unable to reach anyone at the SBA to get a status update on their applications. And I mean, you could not get anybody. So meanwhile, Members of this Committee such as myself, were being stonewalled and did not receive the answers to our pressing letters until October when our concerns were really pressing. As Members of this Committee, we are charged with overseeing the SBA and I find this lack of communication troubling. So Mr. Ware, do you have any information or data on the SBA's lack of communication with borrowers, lenders, or Members of this Committee? We are customers, too, and you have to take care of your customer. So if not, would your office to commit to looking into the efficiency and the effectiveness of SBA's communication with stakeholders? Mr. WARE. Yes. Well, definitely. Anything that is a concern to this Committee is taken seriously as a concern by my office. And if there is a request that you would like to put forward for us to look into that, we can. Mr. WILLIAMS. Yeah. I just did. Chairwoman VELAZQUEZ. The gentleman's time has expired. Now we recognize the gentlelady from California, Ms. Chu, for 5 minutes. Ms. CHU. Mr. Ware, I am so glad to hear that your office will continue to audit the PPP program and take a focus on fraud in the loan forgiveness process. As you know, in order to qualify for total loan forgiveness, the employers had to expend at least 60 percent of their PPP proceeds on payroll. Well, I have heard from labor unions representing hospitality workers in Southern California who have made very concerning allegations of several major hotels in the area including JW Marriott and the Chateau Marmont. Their Members experienced widespread layoffs at the start of the pandemic, yet the employer still received millions in PPP loans and have applied for forgiveness. It is unclear how they could have met the payroll requirements for the loan after laying off nearly all of their workers so they have submitted complaints to OIG but they have not been contacted yet. So can you talk about the office's process for responding to complaints regarding PPP forgiveness? And with tens of thousands of complaints coming in, will your office need assistance to investigate these claims in a timely manner? Also, let me ask this. I mean, in the hospitality business, the allegations are made of larger employers who received loans worth millions of dollars, so are you planning to establish a dollar threshold over which loan forgiveness recipients will receive more scrutiny? Mr. WARE. Thank you. So, there is a lot to unpack there. Let me start with our hotline process and what we are dealing with. You are correct; there are tens of thousands constantly coming in. Here is what we have done. Clearly, my office, we tried just about everything up front in terms of dealing with all the hotline complaints, including reassigning staff. Including we got help from 10 different IG offices in terms of processing. What we have done now is we have moved to more of a data-driven model in concert with the Pandemic Response Accountability Committee (PRAC). And the PRAC and my office developed a system by which we could take this in and categorize them and do some triaging so we could get these things out to the field. We actually got a public award for innovation for putting that together and we are still working on it. As a matter of fact, it is my hope that if I was to be in front of you in 30 days that I would tell you that there is no backlog; that everything has been addressed. That is how aggressively we are moving on it. But that lends itself to a different issue; right? The issue is that I have a finite amount of staff, investigative staff, that we have staffed up. We are at about 180. And my criminal investigators are carrying huge workloads. That is why we are partnering across the entire law enforcement landscape. So the process in terms of getting back to someone on like the people that you spoke about, right, for us is an acknowledgement that we received it but we do not provide updates, case updates to complaints. So that is the process of maybe why they would know that. I hope I touched everything. What did I miss? Ms. CHU. Oh, I also asked about thresholds and how are you ensuring that the larger transgressors are being addressed? Mr. WARE. So as you are aware, all our criminal investigations are run through the Department of Justice, and AUSAs across the nation. These offices set the thresholds for our community. So what we are doing, listen, the focus right now, really, is on the big ones. The ones that were the rings and everything like that. So you might see some that pop up because we have been providing I think monthly, I hope. Monthly, we have been providing you an update with the convictions, the cases and everything like that. You might see some that are a small dollar amount, smaller dollar amount. You see others with large dollar amounts. The small ones would spill into what we are looking at in terms of a ring. They are natural outpourings of that. Chairwoman VELAZQUEZ. The gentlelady's time has expired. Now we recognize the Ranking Member from the Subcommittee on Economic Growth, Tax, and Capital Access, Mr. Meuser, from Pennsylvania, for 5 minutes. Mr. MEUSER. I thank the Chairwoman very much. And I thank our Ranking Member. And Mr. Ware, I appreciate you being here as well. It is unfortunate as this is an oversight hearing that the United States Treasury Department has oversight of PPP as you well know, and Secretary Yellen has been requested along with by law required to appear before this Committee twice on an annual basis and yet has yet to appear. Do you have conversations with Secretary Yellen? Can you inform her perhaps for us since she is ignoring our requests to appear before this Committee and answer some of these important oversight questions, Mr. Ware? Mr. WARE. No, I do not. My oversight is within the Small Business Administration. Mr. MEUSER. Okay. Mr. WARE. I meet regularly, every other week with the administrator here. Mr. MEUSER. Well, PPP obviously falls within your wheelhouse as well. So perhaps her insight and answers would be helpful to you as well as this Committee. So let me continue along related to the EIDL Disaster Loan Program. Perhaps appropriately named, unfortunately. The thing is that, look, there was $80 billion in fraud out of $260 billion in loans. I mean, that is a really outrageous figure here as well as to taxpayers. PPP as you offered and stated honestly was far more effective and successful. Nine hundred billion in loans with $4.6 billion in potential fraud. So a far, far better ratio for legitimate loans. And as you mentioned, Mr. Ware, it is due to the partnership with the private sector. So it would be considered to expand the SBA sole lending vehicles by Members, our colleagues on this Committee, or even your office. Would that be something that you would advocate for, expanding lending vehicles solely through the SBA resources as opposed to advocating for such lending vehicles to be expanded via the partnership of the community banks such as how the PPP loan was handled? Which would you prefer? Mr. WARE. In my role, I do not advocate one way or the next; right? I rely solely on the work that is done by my office to inform this Congress and the people who would set up policies and the people who would set up programs on what you have before you. There are a lot of moving parts in order to make a determination into that. Our focus has been on the fraud environment in terms of---- Mr. MEUSER. Well, you are in charge of it. We need your input on what would be most effectively carried out by the SBA. So please keep that in mind. Let me just ask you this as well regarding EIDL loans. Is it going to get better before it gets worse? Are you comfortable at this point with the loans being made? Have we put, as Ranking Member Luetkemeyer brought up, additional safeguards in place so this fraud does not continue? Mr. WARE. I believe, and I think I have said it on record, and I will say it again here, I believe that SBA's programs have more integrity in them right now than they did at the onset. And I believe that, for example, the major fraud concern, right, initially SBA was dependent on self- certification. There was not sufficient vetting of that information, even when information was clearly illogical. And that led to many of the problems that we found. I think it is the 4506T tax transcripts and the type of data that they are processing from the Internal Revenue Service, I think it addresses much of it and I will tell you, we are in the process of making a determination as to how that fraud landscape changed and what that meant in terms of savings to the American taxpayer. Mr. MEUSER. Thank you, Madam Chairwoman. I yield back. Chairwoman VELAZQUEZ. The gentleman yields back. Now we recognize the gentleman from Pennsylvania, Mr. Evans, for 5 minutes. Mr. EVANS. Thank you, Madam Chair. In the past, you have reported that many missions critical and senior positions at SBA are staffed by federal employees nearing retirement. How has the SBA been dealing with the alleviation of the workforce challenges? And can you please share with the Committee the progress that has been made in this area? Mr. WARE. Thank you for that question. This is one of them that I hate to have to say I believe I am going to have to get back to you on that because I do not believe I have current work that informs it. But I do know that my people ask questions like this regularly. I know I have seen from the chief human capital officer here, Elias Hernandez, that they have put together some plans to address that. We have not reviewed those plans as yet. Mr. EVANS. Let me ask this question. Many small businesses in my district are interested in contracting with the government. Such contracts can help the businesses grow and expand. In recent years, the federal government has been successful in achieving the statutory goal of awarding 23 percent of all contracts primarily to businesses. Can you tell us exactly how is that process proceeding? Mr. WARE. The process of determining whether or not the mandate has been met in terms of the percentage? Mr. EVANS. Exactly. Exactly. Mr. WARE. Well, over the past, at least since I got in, long before I got here in 2016, we have been going back and forth with the agency on how they actually calculate those percentages. And including how they run the numbers. They have been, actually, the one change that they have made is that they have been transparent to everyone in what goes into the denominator or what goes into the numerator and coming up with that percentage. So at least they are doing that. But it is within, remember, they are responsible for ensuring that all other government agencies are calculating the same way in terms of making their percentage. The improvement that they have made is that we all know how they do it. Mr. EVANS. Thank you. Thank you, Madam Chair. I yield back the balance of my time. Chairwoman VELAZQUEZ. The gentleman yields back. Now we recognize the gentleman from Florida, Mr. Donalds, for 5 minutes. Mr. DONALDS. Thank you, Madam Chair. And Mr. Ware, thanks so much for making yourself available to the Committee on such an important topic and for all the work of you and your staff that you have been doing here. I was taking some in-depth time reviewing your written statement and you identified several challenges for the SBA in the financial year 2022. Challenge 3. The SBA's economic relief programs are susceptible to significant fraud risks and vulnerabilities. Challenge 2. Inaccurate procurement data and eligibility concerns in small business contracting programs undermine the reliability of contracting goal achievements. Challenge 3. SBA faces significant challenges in IT investment, system development, and security controls. Challenge 4. SBA risk management and oversight practices need improvement to ensure the integrity of loan programs. Challenge 5. SBA's management and monitoring of 8(a) business development program needs improvement. Challenge 6. Identification of improper payment in SBA loan programs remains a challenge. Challenge 7. The SBA's Disaster Assistance Program must balance competing priorities to deliver prompt assistance and prevent fraud; and Challenge 8. The SBA needs robust grants management oversight. Mr. Ware, these challenges are significant for any lending institution, let alone the SBA. Based upon all of this, does the SBA have frankly the necessary infrastructure and wherewithal and capacity to embark on direct business lending considering all the challenges the agency still faces? Mr. WARE. That is a good question. Our goal and the goal of all IGs, because all of us have to put out the top management challenges facing whatever agency or department that we are responsible for. In all of this, I believe that the men and women of the Small Business Administration are up to the task. I do believe that there needs to be the type of systemic changes that we have detailed in this document put in place and then I believe that the programs could run and we could have an assurance that there is more integrity in these programs. I think it is probably better that I stop there. I do believe that the Small Business Administration has the capacity to be able to run the programs that they are charged with running. Mr. DONALDS. Mr. Ware, what I will tell you is that could they run their existing programs? I believe it is a maybe. But in the world of lending, and I spent, you know, many years as a loan underwriter, in the world of lending, maybe is what costs you your customers money. And with respect to the SBA, maybe is what is going to cost taxpayers money. I mean, I think the core question for the Committee, and frankly for the American people overall, is that if the SBA has a track record with direct business lending that they have already had with the EIDL program, who is going to actually carry the losses when the SBA gets it wrong because of so many systemic challenges they have in their infrastructure? Like, who bears the real burden of losses from the SBA if they do not have basic, you know, underwriting capacity that has been outlined in your report? Mr. WARE. You are asking me who bears it? Mr. DONALDS. Yeah. Who bears the responsibility? Who is going to bear the responsibility for dollars lost? Mr. WARE. Well, for dollars lost it is the taxpayer; right? But that is in all the programs. That is in the direct lending program. That is in the 7(a) program because the agency pays the guarantee. Mr. DONALDS. Well, and honestly, it is a statement, frankly, Mr. Ware, that I think we both know but I think it is important for all the Members of the Committee, no matter what side of the aisle that you are on, for us to understand that even though there are some good intentions that the Members may want to have or want to see SBA engage in for the benefit of various business in our country, the reality is that the SBA is nowhere near capable from an institutional standpoint, from an infrastructure standpoint, from a capacity standpoint to address those needs, especially considering the fact that what they already have on their books with respect to the EIDL program and the PPP program and the existing loans in the 7(a) program. There is a lot of work to be done over at the SBA. They are nowhere close. And to, in my view, radically change the mandate into direct lending would actually cause significantly more problems and exacerbate those programs. It will not fix them and we will be right back here having more hands just like this one. I yield back. Thank you so much, Madam Chair. Chairwoman VELAZQUEZ. The gentleman yields back. Now we recognize the gentlelady from Pennsylvania, Ms. Houlahan, for 5 minutes. Ms. HOULAHAN. Thank you, Madam Chair. And thank you so much for being here today and for your diligent work, Mr. Ware, to oversee SBA's unprecedented response to COVID and the COVID-19 pandemic. And I wanted to take my time and opportunity to ask for your insights on how we can possibly apply lessons that we have learned from the pandemic and the pandemic response to future disaster relief programs. Many small businesses in my community have also been seriously impacted by the damage that was recently caused by Hurricane Ida. In fact, my community is under a federal State of Emergency. While some have bounced back quickly, others have been less fortunate such as the Veterans Construction and Utility Services Company that is located in Modena. Faced with damages to equipment on top of economic pressures from the pandemic, this veteran-owned and service-disabled small business opted to close its doors for good, informing my office that they simply did not have the capital to apply for an SBA loan, nor the capacity to take on another bill to pay, particularly without the possibility of forgiveness. Unfortunately, this situation is very common. According to FEMA, between 40 and 60 percent of small businesses never reopen their doors after a natural disaster like Ida. Something I heard time and again from small businesses in my community following the hurricane is where is PPP for natural disasters? I agree. Why do we not have loan forgiveness like we did under PPP for small businesses impacted by these natural disasters that are increasingly more and more common. It is our responsibility to take the positive aspects of our SBA COVID assistance programs, making improvements where necessary to address lessons learned and ensure that our small businesses have the support they need to recover from all disasters, whether they be related to public health or climate change. So with this context in mind, I am interested in learning more from you about how we can appropriately balance the need that we have talked about here to get more money into the hands of small businesses quickly in an emergency while understanding certainly that the prevention of fraud can require a much more deliberative and careful review. So my question, sir, to you is has the SBA and has your organization and operation examined what the tipping point is between getting money to businesses in a timely manner while also sufficiently rooting out cases of fraud and abuse? So my specific question is, are you not just looking at cases and addressing whether they are fraud or not, but are you also trying to catalogue what it is that we could be doing to be better at preventing this fraud and abuse to begin with so that we can take the good of the PPP program and apply it to other uses? Mr. WARE. Thank you for your question. Please know that that is a major focus of my office. We have put out 18 different reports on the pandemic programs. From before the very first loan was issued on PPP, we issued a report addressing this very same thing, what needs to be done to balance speed and controls. How you need to communicate to folks so that everybody knows what they are doing. It is a major part of what we are looking at. And I have sought to do this across government in my role on the PRAC. We are going to work on a document that tells the entire disaster story and to make sure that the lessons that we learn this time around are there forever so that we do not make the same type of mistakes again. So, yes, it is a huge focus of my office and has been from the beginning. Ms. HOULAHAN. And of those 18 reports, and I am sure in counting that you are working on right now, are there any aspects of those reports that this Congress and its responsibility can be helpful in terms of changing, modifying PPP so that we could end up with a PPE disaster program? Mr. WARE. Yes. As a matter of fact, we worked closely with Congress on one of the earlier reports on PPP where legislation was put in place to address some of our findings. So this body has actually been on top of it in terms of making immediate changes, changes that move pretty rapidly. Ms. HOULAHAN. So I only have 40 seconds left of time and I would really rather not ask my second question because I do not believe we would have time for an answer but with the very limited time I have left, I am an entrepreneur, a small businessperson, mid-size businessperson as well, and some of the most remarkable things that ever happen, happen under duress, when a company is under duress or when an organization is under duress. And so we have experienced extreme duress in this country due to COVID and the innovations that have resulted are things like the PPP program which arguably, and granted, have definitely, we have seen some abuse. But we really should make sure that we are taking advantage of an innovation such as PPP, figuring out how to take advantage of the neuropathways that we have created between companies and their banking institutions and our SBA, and make sure that we are able to use those innovations for something like the stressors that happen in natural disasters as well. And with that I yield back. And thank you, Madam Chair. Chairwoman VELAZQUEZ. The gentlelady yields back. Now we recognize the gentleman from Minnesota, Mr. Stauber, for 5 minutes. Mr. STAUBER. Thank you very much, Madam Chair, and Ranking Member Luetkemeyer for putting this hearing on. Thank you, Mr. Inspector General for being here to answer our important questions. What number of recommendations that you have made to the Biden administration's SBA in relation to fraud have yet to be closed out? Mr. WARE. So the exact number of the recommendations I could get back to you really quickly on. But I do know---- Mr. STAUBER. Mr. Ware, has the agency explained why they have yet to be closed out to you? Mr. WARE. Oh, no. So it is important for me to note this. The agency has moved rather expeditiously to close out the majority of the recommendations. There are not that many outstanding that have to do directly with what our systemic recommendations were. When you look at it, the numbers are coming back to me, like 110 recommendations but about, what, 60, 70 of them had to do with the financial statement audit. So in terms of the systemic things to move PPP and EIDL and to deal with the Shuttered Venues program that we issued---- Mr. STAUBER. Mr. Ware---- Mr. WARE.--they have pretty much closed those out. There are only a few that are remaining. Most of them the date has not come for when they are supposed to be closed. Mr. STAUBER. Mr. Inspector General---- Mr. WARE. There are a handful that came---- Mr. STAUBER.--because my time is limited, Mr. Inspector General, you mentioned that the SBA has either partially or totally disagreed with some of your recommendations. What procedure is in place that occurs if they do not support your recommendation? Do they remain open or what? Mr. WARE. No. So here is what we have. It is both the agency's and my office's responsibility to get these closed out. So we have a process in place where we go to what we call the audit follow-up official to make a final determination. If the final determination is that, well, we flat out do not agree with you, I raise that with this Committee as an item to determine whether or not you feel---- Mr. STAUBER. And I think, Mr. Ware, I think that some of those suggestions are going to be coming back to this Committee I am quite sure. One of the things that you had mentioned in your previous testimony today, and this is almost a quote, that you do not advocate in one way or the other. Mr. Ware, we need you to advocate one way or the other because when you look at $4.6 billion of fraud in the PPP and $84 billion in the EIDL loan, you see some deficiencies. The SBA needs some changing and so we need you to advocate for those changes. Eighty-four billion, and my guess is as you go, as you look into this further, you are going to see more fraud. And my colleague, Byron Donalds from Florida asked you who pays for this? It is the American taxpayer that pays for this. I understand in this town, millions and billions, and now even trillions is thrown around like it is nothing. Eighty-four billion dollars, Mr. Ware, is exactly what we need you to find and hold these people accountable, so we need your advocacy. That is the priority that your mission statement says as Inspector General, to advocate for the taxpayers. And lastly, lastly because my time is limited, I just want to say in closing, I just want to express my deep concern about this fraud at the SBA. It should be troubling to everyone here that as families are struggling with inflation, higher energy bills and the supply chain crisis, that their hard-earned tax dollars are not being stripped away to pay criminals for fraud. I completely, Mr. Ware, and I want you to understand this, I completely respect the work that you are doing to recover these taxpayer dollars but it is beyond me that my colleagues on the other side of the aisle still are trying to ram through their Build Back Broke program to increase the funds at the SBA when we know that they are not efficient right now. When the safeguards that you have recommended are not even put in place by the SBA. So we need your advocacy in this. We need you to step up and help us. This Committee has full oversight of the SBA and we cannot allow career bureaucrats in the SBA to determine this because when we have done that, like the EIDL, $84 billion. That is with a B. Billion dollars of taxpayer money. I cannot explain that to my constituents in Northern Minnesota but I will tell them we are going to find that money and we are going to prosecute the fraud. We need your help, Mr. Ware. I am asking you to be an advocate for every taxpayer. Chairwoman VELAZQUEZ. Time has expired. Mr. STAUBER. And I yield back. Chairwoman VELAZQUEZ. The gentlelady from Georgia, Ms. Bourdeaux, is recognized for 5 minutes. Ms. BOURDEAUX. Thank you, Chairwoman Velazquez and Ranking Member Luetkemeyer for holding today's hearing. And thank you, Inspector General Ware, for joining us today and for your important work. Since taking office, I have been working to ensure small businessowners in my district have access to the tools they need to apply for and receive loan forgiveness under the PPP program. Can you give us an update on the OIG's work to evaluate the PPP loan forgiveness activity? So how involved have you been in this process? And of particular interest to me was that early on we noticed that there was disparity among different communities in my very diverse district and who was receiving that loan forgiveness and who was not. And so I would ask that you talk to that particular issue as well if you have looked at that. Mr. WARE. Thank you for the question. We have two ongoing reviews right now on the loan forgiveness process. What I do know as of this month probably a week ago or so, 94 percent of the loans have been fully or partially forgiven. The 2020 PPP loans that is. And less than 95 percent of the amount that the loan value for 2020 PPP has been forgiven all or in part. I do know that. So that is what I have so far. The work is in progress. Ms. BOURDEAUX. Okay. Thank you. That should cover everybody pretty much. So on that, so then moving on with this, so the other half of it, of course, is making sure that we are preventing fraud in the loan forgiveness piece. And can you speak to the work you are doing to prevent PPP forgiveness fraud, of course, without holding up forgiveness process for rule following businessowners? Mr. WARE. Great. So I think what I do know, last year, about the middle of last year, that is when SBA changed the way that it was going to do the loan review process for forgiveness status; right? So they decided that they were going to prioritize more manual reviews that were based on fraud risk rather than the status of forgiveness. They have gone to more of a, they say, a machine learning type environment where they are able to determine risk. Know this, getting forgiven does not mean that we cannot review the loan afterward, that we cannot come after a fraudulent actor after. So we are still in the fight for that. Ms. BOURDEAUX. Okay. Thank you. And you are going to be evaluating, it sounds like, sort of a data driven risk program to see if that is really effective? Mr. WARE. Yes. Ms. BOURDEAUX. Okay. Thank you. And then last of all, I know your office has been working on identifying preventing fraud, you know, across different programs. And can you provide some insight into why the agency is further along in addressing the PPP fraud issues as compared to the COVID EIDL issues? Mr. WARE. Is the question why were they further along? Ms. BOURDEAUX. Yes. Mr. WARE. Maybe an answer could be found. And so COVID EIDL was realigned internally in order to address it. They were realigned under the division within SBA that deals with the PPP lending. So it is a familiar, more of a familiarity from the banks, the lending institution private standpoint in terms of the systems that they have in place to address and to catch fraud and to catch things up front that allowed it to be better suited to deal with this attack by fraudsters that came the agency's way. And the lowering of guardrails in the EIDL program in order to focus specifically on speed at the time. Ms. BOURDEAUX. Thank you. I yield back. Chairwoman VELAZQUEZ. The gentlelady yields back and now we recognize the gentlelady from California, Mrs. Young Kim, Ranking Member of the Subcommittee on Innovation, Entrepreneurship, and Workforce Development for 5 minutes. Mrs. YOUNG KIM. Thank you, Chairwoman Velazquez. And I would also like to thank our Ranking Member Luetkemeyer for holding this very important hearing. Thank you, Mr. Ware, for being with us and taking time to testify about your findings and help shed light on some of the waste, fraud, and abuse issues taking place at the SBA. We all recognize that your work is indispensable in our efforts to safeguard taxpayer dollars and push the federal government to work more efficiently and effectively for all constituents and small businesses. A lot has been discussed regarding how SBA direct loans have been more susceptible to fraud than loans provided by private financial institutions. And I want to echo many of the same concerns raised by my colleagues on the fraud plaguing SBA's direct loan program. And I have to say that I am very troubled that we are considering expanding SBA's direct loan programs without ensuring internal controls against fraud and, you know, that is working properly before we do anything. So Mr. Ware, since the beginning of the pandemic, the SBA Economic Injury Disaster Loan program has been riddled with fraud and we all know this and we have been talking about this. With fraudulent loans potentially topping $78.1 billion, this program calls into question the efficiency of the SBA in any direct lending. So has SBA leadership done all that it should to combat fraud in the direct lending programs that the administration has administered over the past year? Mr. WARE. I would say yes. They have done a great deal. And there is so much that pops into my head. Remember, at the onset, in the EIDL program, that is when we put out the management alert that was able to capture what type of fraud we were dealing with within the program. And yes, SBA did not move. Leadership did not move at the time as quickly as we would have liked it to stem the tide of that fraud. But since that time, they have implemented quite a bit of our recommendations. Some they even did in real-time, like at the table making a telephone call. One that comes to mind was stop people from changing the bank account information after the verification has already been conducted. That was one way that we stopped it almost immediately, that level of fraud. Addressing the duplicate IP addresses and everything like that. So a lot of controls have been put in place. That is the answer to the question. Mrs. YOUNG KIM. Another concern, and my colleagues' concern about direct lending, given that the SBA has a checkered past in direct lending, would it not seem to call into question whether the SBA has the capacity to undertake more direct lending authority such as originating loans directly through the 7(a) program without opening the door for more fraud? Mr. WARE. What I would say is this, again, the work that I provided on the onset, right, was a completely different control environment. The reason that I said, and sorry to offend, that I do not advocate one way or the next, I think that to have any kind of advocacy that comes from an inspector general is in terms of the evidence that I put before you that shows you what is going on in the programs. Mrs. YOUNG KIM. Well, thank you for your response. I want to move on to another one of your findings regarding the SBA's failure to adopt effective IT systems. Your top management report said SBA was expected to complete work on revising the project scope and improving management areas by the end of 2021. Can you provide us with an update and tell us if SBA was successful in meeting that baseline reviews and completing the functionality of that as certified by the end of 2021 like the report said? Mr. WARE. I can tell you right now that from the information that I have before me currently, the system is basically where it was when we last spoke but we are looking into it. Like you said, it was at the end. We are just at the beginning of 2022 so we are looking at it. My understanding is it still is not working as promised. That Beta Certify--was supposed to be what delivered the woman-owned small business capability and that the application is still in the program sustainment and production mode in other words. So they hope to make a directional decision in the next 2 months. That is what I was told. Mrs. YOUNG KIM. Well, thank you for your response. It looks like my time is up so I will yield back. Chairwoman VELAZQUEZ. The gentlelady yields back. Now we recognize the gentleman from Minnesota, Mr. Phillips, Chairman of the Subcommittee on Oversight, Investigations, and Regulations for 5 minutes. Mr. PHILLIPS. Thank you, Madam Chair. Greetings, Mr. Ware. Moments ago, one of my colleagues insinuated that Democrats seem to not care about the fraud and are reckless with investment in the SBA. I just want to remind everybody that I think we all agree we are all here to provide oversight and ensure that there is no fraud, at least as much as we can. Every dollar that is lost to fraud and fraudsters is a dollar denied to the very small businesses that we are here to serve and a source of understandable disgust by me and every American taxpayer. I just want to make that clear. And there is a lot of work to be done. We all know that. But I applaud OIG's dedication to providing oversight and to the SBA for its diligence in implementing a number of important IG recommendations in recent months. As Chair of the Small Business Committee on Oversight and Investigation, along with Ranking Member Van Duyne let me assure you we are both committed to ensuring that OIG has the necessary resources to conduct proper oversight. Period. And with just $50 million in support from Congress, the OIG recovered $4.2 billion in fiscal year 2021, which is an extraordinary return on investment. So Mr. Ware, with that in mind, what more can Congress do to support OIG and your efforts to ensure even more efficient and effective oversight and recovery efforts? Mr. WARE. Thank you. Thank you for that. Let me first say thank you to this Committee for all the work that you have done with our office to make sure that we get you what you need. But I think a reframing of the question might be do we have enough resources for the oversight that will provide for the pandemic loans that are going to perform many years after the pandemic? So at present, like we demonstrated, we could provide more oversight with more resources. That is not a good argument though. The current level of oversight that we have includes just over 180 positions. The problem is that our nonsupplemental budget authority only provides for 125 and as I said in my opening, the supplemental funds are going to be gone by the end of fiscal year 2024. So I think that it is bad timing in terms of that is going to be a key moment for realizing the true scope of fraud in these programs. But, so I believe that the annual resource level, the ones that we get annual appropriation. You know, I am Executive Branch. I work with the Office of Management and Budget and they work well with me. What I could ask the Committee is to just please support what comes forward in terms of right sizing us to match the fraud landscape. Mr. PHILLIPS. Okay. Thank you, sir. And I encourage my colleagues to give that deep consideration when that request is made. As we all know, PPP was designed to expeditiously distribute funds with much of the fraud and eligibility controls designed to occur not at loan initiation; rather, during the loan forgiveness period. I know OIG has identified I think it is 70,000 loans roughly totaling $4.6 billion in potentially fraudulent PPP loans and stated `` this might the tip of the iceberg.'' So with a large majority of the PPP loans now being partially or fully forgiven, does OIG have a better sense of the extent of total PPP fraud? I do not remember if you gave a specific sense of that. And if not, when will you have a more distinct picture of fraud? Mr. WARE. That work is ongoing. So the work on loan forgiveness, we have I think there are two that are ongoing currently in which we should have at least some indication of what we are looking at. I still think we are going to see where the rubber meets the road on a lot of these that will not come back for loan forgiveness because the numbers are large; right? Even if it is 5 percent, the numbers are still huge. So, and on those that may default early, because we have an early default high-risk lending review program internally. Mr. PHILLIPS. Okay. With my minute left or so, we know there are a number of nonbank lenders that may have been particularly susceptible to processing fraudulent or ineligible loan applications. Is OIG working specifically to identify and investigate those lending institutions, the nonbank lenders? Mr. WARE. Well, we have not focused on any over any. The number that we are dealing with, we have enough from the entire landscape to select from. I mean, our agents have caseloads that are just unimaginable, quite frankly. Mr. PHILLIPS. I imagine. Mr. WARE. So. Mr. PHILLIPS. Okay. Well, with that in mind, you know, my first question was what resources do you need? I trust you will not be shy in asking us because it is our responsibility to ensure you have the resources to provide the oversight that we expect and demand, and so do American taxpayers. So thank you, again, for your service, sir. And with that, Madam Chair, I yield back. Mr. WARE. Thank you. Chairwoman VELAZQUEZ. The gentleman yields back. Now we recognize the gentleman from Wisconsin, Mr. Fitzgerald, for 5 minutes. Mr. FITZGERALD. Thank you, Madam Chair. General Ware, thanks for being here again. You can hear the level of frustration I think in some of the Members' voices as they continue to ask the questions. And it is difficult I think in a 5 minute exchange to kind of get down to the nitty-gritty. Let me just ask you a couple of things here. In the Fall of 2021 Semi-Annual Report to Congress you mention that the OIG had been working diligently with federal, state, and local law enforcement partners over the past year to bring more than 300 PPP or EIDL fraudsters to justice. The result has been reiterated numerous times today. It is $460 million in assets recovered not including the $3.1 billion that the OIG helped financial institutions recover. So I guess my question is, what is the measuring stick that you are using at this point to kind of gauge what you would consider success? You know, those numbers the way the math kind of shakes out is it is just a 3 percent recovery but, you know, what I am wondering is what is that goal that you guys have internally right now and certainly I would love to hear updates on a regular basis given to the Committee so that we know kind of where we are at and what is going on. Mr. WARE. Regarding the updates, there is an update document sent to this Committee that comes out I believe on a monthly basis. Either monthly or quarterly. Yeah, it is monthly. On a monthly basis that goes to this Committee. Relative to measuring the numbers that you are using, do you remember that the Semi-Annual Report covers 6 months; right? So understand that as well. In terms of a measuring stick for success, success is the whole of government approach that we have taken from the onset. We are working with the Department of Justice and with AUSAs across this country in order to pull this together. We are working with the FBI, the Secret Service. Our success is all of our successes. It is really the success of the American taxpayer in terms of how much fraudulent actors we will catch. I do not have a number like we need to catch X amount of people. What I do know is that we are diligently working on bringing fraudulent acts, fraudsters to justice in these programs. Mr. FITZGERALD. Well, I think my concern is that as we go through this process now, and unfortunately, I mean, PPP and the EIDL program, you know, even though they have been great successes, they are tarnished now. And they are tarnished by this high fraudulent number. If there is some way for us to moving forward say this is where you might shutter a program, you may actually make a determination that it is no longer serving its purpose because of the high fraudulent number. I mean, I do not think that is out of the realm and that appears to be something that has happened in the past related to some other SBA programs. So I mean, from my perspective, I think that is something that we should be aware of, we should be watching and, you know, a year from now, let us all get back together and see exactly where we are at because, unfortunately, I think it might mean the end of some programs if it is not characterized this way or if there are not specific hard deadlines on trying to meet some of those goals. And I think it would be in the best interest of obviously the SBA but, you know, your office kind of has the reigns there and you can make that happen. So I am hoping that, you know, with these regular, and if you say it is monthly updates I certainly will pay more attention to that and I hope the communication is free flowing between the Committee and your office. Mr. WARE. Can I say one thing? Mr. FITZGERALD. Yeah, go ahead. Mr. WARE. Okay. One of the things I forgot to mention that I think is very important for everyone here to understand is that white collar crime of this type normally takes years to manifest and to really come forward. What we have done is we have expedited this in a way that really has not happened in the past and so what we are seeing is we are only still at the beginning of it because the loan forgiveness process is not even done yet. The EIDL loans have not even come up for repayment yet. So that would be where the real rubber meets the road in terms of fraud cases and everything else. So that is understanding that we are still at the very onset of our oversight. Chairwoman VELAZQUEZ. The gentleman's time has expired. The gentlelady from Kansas, Ms. Davids, Chairwoman of the Subcommittee on Economic Growth, Tax, and Capital Access is recognized for 5 minutes. Ms. DAVIDS. Thank you, Chairwoman. And thank you, Mr. Ware, Inspector General Ware for joining us today to report on the SBA's managerial and programmatic challenges. As you mentioned in your testimony, the Paycheck Protection Program and the COVID EIDL program have unfortunately been susceptible to forms of fraud and abuse, and these programs have been especially vulnerable because of the broad scope and as you mentioned, the rapid implementation during the very beginning of the pandemic. I am particularly concerned about the fraud in the COVID EIDL program involving identity theft because it not only harms the taxpayers and real small businessowners, but also innocent individuals who are not at all connected in that way. So, you know, in your OIG report 21-15 which was released in May, you examined the SBA's handling of identity theft in the EIDL program and raised concerns about the OIG's lack of administrative seizure authority. So I am curious if the lack of seizure authority has impacted the case, you know, what you are seeing now and how that has impacted cases your office is able to pursue. Mr. WARE. Great. So I would say that in terms of impact, it has not stopped anything because we work very closely with the Secret Service. We have a great relationship with them to seize on our behalf because they have, obviously, the seizure authority. Now, if we had it in this instance I believe we would be able to move a little bit faster but that is it. Ms. DAVIDS. Okay. Well, I appreciate that. And that was definitely something that stuck out to me. And then I think I kind of want to switch over to ongoing liability. So you had mentioned many of the initial vulnerabilities of the program had been fixed and I am curious if you could speak to the ongoing liabilities in the Paycheck Protection Program and EIDL programs and what further steps the SBA or even this Committee need to take as we move forward. You know, if you want to speak to that for a minute. Mr. WARE. Can you help me to understand? What do you mean specifically by ongoing liability? Ms. DAVIDS. I guess what I am thinking about is, you know, there were some, you know, guidance to financial institution issues that had occurred earlier on and I am curious if, you know, whether or not there is ongoing, I say ongoing liabilities. I think what I am thinking about is the potential for, you know, additional fraud and those kinds of things. As you said, when the rubber meets the road, you know, those dates have not come up yet so I am curious if you could talk to us a little bit about what is going on or if there are any steps that we need to be taking. Mr. WARE. So the whole landscape would be different because of closed programs; right? So the money at this point is already out. So we are dealing with looking at it from a loan forgiveness perspective of which we have two ongoing reviews that will inform us greatly on what that continued risk is from that standpoint. The same will happen when the loans come up for repayment in COVID EIDL. So in terms of informing, that is the work that is ongoing currently. But it is kind of two different things, if you know what I mean. In terms of the money going out the door is where we were at before. The money is out the door already. Ms. DAVIDS. Yeah. Okay. Well, I appreciate your being here. I appreciate the work you guys are doing over there and I will look forward to if there are any further issues that we are seeing, we will absolutely keep the line of communication open with your office. Mr. WARE. Thank you. Ms. DAVIDS. Thank you, Madam Chair. I yield back. Chairwoman VELAZQUEZ. The gentlelady yields back. Now we recognize the gentlelady from Texas, Ms. Van Duyne, Ranking Member of the Subcommittee on Oversight, Investigations, and Regulations, for 5 minutes. Ms. VAN DUYNE. Thank you very much, Chairwoman Velazquez and Ranking Member Luetkemeyer for holding this hearing today. And thank you, Inspector General Ware for being here and for your continued oversight work. What your office does, especially over the last 2 years has been vital. This has been clear by the $4.2 billion in recovered funds and savings from your oversight of SBA's pandemic response efforts last year. As we are all aware, the December CPI numbers just came out today and they are even worse than expected once again. Gasoline is up 49.6 percent. Used cars and trucks are up 37.3 percent. Rental cars and trucks are up 36 percent. Propane, kerosene, and firewood are up 33.8 percent. This is on the backs of working Americans and on small business employers. Many deserving applicants are being pushed out and being beat out by fraudulent applicants. So if about $80 to $100 billion worth of fraudulent improper payments have been given by the SBA, theoretically, if the SBA was to return that fraudulently obtained money, could they then provide that money to other more deserving applicants? Mr. WARE. I will need to get back to you on that one. That is a complicated question quite frankly and I believe that it has to go through Treasury. There are some rules that need to be followed. I do not believe it is as easy as going back into the program and going back out. But I would need to clarify that. I would not want to give a wrong answer on the record. Ms. VAN DUYNE. I would be interested in hearing the response on that. Because if $100 billion was appropriated to be able to give out in this fund to those deserving applicants and $100 billion was fraudulently given out, it seems to me that you would be able to take that money that was fraudulently given out and be able to help those people who need it the most. That was the purpose. That was the appropriation of those dollars by Congress. So if you could get back with my office on that I would really appreciate it. Mr. WARE. The only issue is that that money is still potential that we do not have our hands on the money to pull back yet. Ms. VAN DUYNE. I think that was part of my question is if you were able to obtain those fraudulent funds. Mr. WARE. Okay. Okay. Ms. VAN DUYNE. That was the assumption. Yeah. It is clear the amount of fraud is incredibly large and the Secret Service's National Pandemic Fraud Recovery Coordinator was quoted saying he has never seen something at this scale. So considering those kind of issues, what would you recommend this Committee, or who would you recommend that this Committee reach out to to expedite getting these funds back and prevent further fraud from occurring? Mr. WARE. To give which funds back? Ms. VAN DUYNE. The funds that have been handed out fraudulently. Mr. WARE. Oh, that have been recovered? Ms. VAN DUYNE. That we have not yet recovered. How can we get those funds back and quickly? How can we expedite the recovery of those funds? Who would you recommend that this Committee call and work with? Mr. WARE. Well, I would believe that that would be with the Department of Justice, but I do believe that the Department of Justice is working hand-in-hand with the law enforcement community, federal, state, and local in that regard. Ms. VAN DUYNE. All right. So the financial institutions that have been involved with this process from the beginning and they have not been able to help return funds. So would it be beneficial for Members of this Committee to work collaboratively with these financial institutions, either by holding hearings or by other means? Mr. WARE. So remember that you are talking about two different programs; right? One, a direct lending program that was done by SBA and the other that was done by banks. And like so many have pointed out, where we found rampant fraud was in the direct lending program. Ms. VAN DUYNE. I am just wondering if you think it would be beneficial for this Committee to be able to work with financial institutions to identify how we could better the program and prevent fraud from happening in the future. Mr. WARE. That is a tough one for me. Perhaps. Ms. VAN DUYNE. Okay. Okay. In your November 30th report you highlighted that your review of a Treasury Department analysis revealed that SBA's lack of adequate framework controls during this period of review led to 75,180 COVID-19 EIDLs totaling over $3.1 billion and 117,135 emergency EIDL grants totaling over $550 million being disbursed to potentially ineligible recipients. Has this lack of control been resolved? Mr. WARE. Yes. Yes, it has. SBA immediately instituted the Do Not Pay check that is now automatic in their process. Ms. VAN DUYNE. Excellent. Mr. Ware, I appreciate your hand work that you and your office continue to do. It will certainly give the Members of this Committee a lot to think about in terms of oversight. I hope the Chairman of the Oversight, Investigations, and Regulations Subcommittee, Mr. Phillips, agrees that we should be holding a hearing on the rampant fraud that we see in these programs and that would be an excellent first step. Thank you very much. I yield back. Chairwoman VELAZQUEZ. Time has expired. Now we recognize the gentleman from Louisiana, Mr. Carter, for 5 minutes. Mr. Carter, you need to unmute yourself. Mr. CARTER. Thank you. Madam Chair, thank you very much. Mr. Ware, thank you very much for your service. Staffing up for major disasters continue to be a top management performance challenge for SBA. The challenge has been even more evident with the current pandemic, and for me in Louisiana, insult to injury is the pandemic as well as the natural disasters that we suffered with with Hurricane Ida. When the agency was forced to hire more permanent and temporary staff than ever before and process millions of COVID EIDLs, Mr. Ware, your office recommended the agency develop an after action plan to assess how the agency staff performed during the pandemic so they could do better with the next disaster. To your knowledge has the agency committed to conducting these assessments? Mr. WARE. They have committed to conducting the assessments. We have not yet seen it. Mr. CARTER. So when do you anticipate, do you anticipate them actually doing it, and what effort do you have to kind of make sure that this actually gets done? Mr. WARE. I do anticipate. I believe that there was a date associated, a deadline for when they were supposed to do that. That deadline has not come up yet I believe. I do not have the exact dates in front of me. I certainly could get that to you but the only way that that recommendation would be resolved is with that document. Mr. CARTER. Will you provide any guidance for them on the best way to conduct this assessment or do you plan to play any role in providing guidance? Mr. WARE. That is the trick part of the job of an inspector general. I cannot build it for them and then review it by law. So what I could do is provide the evidence based on the work that I have done up to that point that they could get from and deal with the recommendation from there. Mr. CARTER. Are there best practices that are out there that does not put you in a potential conflict but that can provide some guidance on best practices on how this could be done? Mr. WARE. The best practices are what we can offer up. I do not recall, because I do not have that particular report in front of me where the recommendation came from but this is definitely something I could get back to you on more definitively. Mr. CARTER. Okay. Mr. WARE. I do not want to speak above it and then have the auditors come after me. Mr. CARTER. That is fair. Are there lessons you could take from FEMA or other agencies on how to rapidly staff up better? Mr. WARE. I certainly could but I also believe they have, because remember that the EIDL program is not new; right? The EIDL program has been around forever. So they have consistently had this challenge. They know how to ramp up. The question is the ramping up, are the folks trained? Are the folks properly vetted? And that is something that we continue to work with them to see that it is done. Mr. CARTER. As a part of your oversight, do you look for and determine if small minority businesses, woman-owned, disadvantaged enterprises are having an opportunity to be a part of that ramp up? Oftentimes we have these ramp ups and we have companies or agencies that are big and by its nature have the ability to be ready for these kinds of opportunities but because Small Business Administration obviously, we have an interest in making sure that we are providing opportunities for small businesses, truly small businesses to play a role. Any guidance or thoughts as you go through your oversight to determine if, in fact, we are reaching those small businesses so they have an opportunity to partake in the aftermath in the case of a pandemic or other natural disasters? Mr. WARE. That is a good question. I do not believe my office has performed or conducted any work in the area that is in alignment with your question. But it is certainly something that we could look at. I will talk with my team responsible for the disaster programs and get their thoughts on it. Mr. CARTER. That would be very helpful, particularly as I mentioned in my jurisdiction we have a plethora of small businesses that are, in fact, oftentimes on the side watching larger firms get the work, many of which are not in the jurisdiction that the natural disaster took place in and obviously that is very difficult when we are trying to build a small business base and create opportunities for small and emergent businesses. So any assistance that you can give us in that area and provide some guidance and/or resource would be greatly appreciated. Madam Chair, I yield back. Mr. WARE. Thank you. Chairwoman VELAZQUEZ. The gentleman yields back. Now we recognize the gentleman from New York, Mr. Garbarino, for 5 minutes. Mr. GARBARINO. Thank you, Madam Chair and the Ranking Member, for having this hearing. Thank you, Mr. Ware, for being here. I have a question. And I know my colleagues brought it up before and you mentioned the top challenges, there are a couple that SBA is facing in fiscal year 2022 and the first one on the list was SBA's economic relief programs are susceptible to significant fraud risks and vulnerabilities. You have seen the books. You have seen the inner workings of the SBA. And I know a couple people have asked you already if you would advocate that they increase these programs. I am not asking you to say yes or if they should not, but is the SBA prepared to start new direct lending programs or increase the amount of money that they are lending before this challenge is addressed? I am not asking you if they should or not; are they prepared? Mr. WARE. Great. Good question. I believe that SBA is more prepared now than they have ever been in terms of the control environment that is currently in place from a risk perspective. And I look at it in my role from a risk perspective to the taxpayers' funds. So I believe that their control environment is stronger now than it has ever been. And certainly, much stronger than it was at the onset of the pandemic. Mr. GARBARINO. So for risk, you are saying that there still is risk of fraud because I am looking at your comments and you say your audits and investigations continue to find that the agency is facing significant risk of fraud because of the size and scope of its loan programs and related internal control environment. So that still currently exists. They are still facing significant risk of fraud but it is less fraud, risk of fraud than at the beginning when the program started? Mr. WARE. Yes. Let me clarify because it is important for us to understand that fraudsters do what fraudsters are going to do. There will be a risk of fraud to any program; right? Our role is to make sure that that risk of fraud is mitigated to the lowest level possible. Mr. GARBARINO. Is it as mitigated now as it could be? I mean, the reason I ask that is there are 110 open recommendations. Would there be less risk if those 110 open recommendations were taken into account? Mr. WARE. Certainly. Important to understand that more than half of those have to do with the financial statement audit which is dealing with something quite different. Mr. GARBARINO. No, I understand that. So, yeah, I think you said 60 or so are part of it. So there is still 50 out there that could be addressed that would even further reduce the risk of fraud if they were addressed; correct? Mr. WARE. Yes. Mr. GARBARINO. Okay. So---- Mr. WARE. Although not all of the 50 have to do with fraud. But the ones that do, definitely. Mr. GARBARINO. There are some of them, out of these recommendations there are some that would reduce the risk of fraud? Mr. WARE. Yes. Mr. GARBARINO. Okay. So would you like to see those items addressed before any new programs start? Mr. WARE. Certainly. Certainly. I have advocated from the very beginning that certain controls need to be in place before any program is started. I said that before PPP was rolled out; right? Before COVID EIDL was rolled out. We had our report out imploring the agency to take a look at these things before kicking them off. Mr. GARBARINO. Okay. I appreciate that and I do appreciate the work that your office has been doing on these reports. They are very thorough. And I agree, I would love to see the SBA address these risks because I think any risk of fraud, and like you said, bad guys are going not do bad things. They are always going to find a way to do it. We need to stay on top of them to make sure that that risk is as diminished as possible. I just do not think based on what you said, and as you said, your advocacy is what you put in front of us with your reports. That is how you advocate. You are not going to take a position. I think what your reports are saying is clear to every Member on this Committee that before the SBA starts any new direct lending program or increases the amount of money that they do through current programs, they should listen to you and address those issues, those recommendations, because any risk of fraud of taxpayer dollars is unacceptable. Again, I appreciate the work you have been doing. Thank you for your testimony today and I hope the SBA administrators listen to you so less dollars, less taxpayer dollars go to fraud. And thank you, Madam Chair, I yield back. Mr. WARE. Thank you. Chairwoman VELAZQUEZ. The gentleman yields back. Now we recognize the gentlelady from New York, Ms. Tenney, for 5 minutes. Ms. TENNEY. Thank you, Chairwoman, and Ranking Member Luetkemeyer. I just want to say thank you, Mr. Ware, for taking your time for being here. And we are really grateful for your work and what you are doing and exposing some of the issues we have had with the Small Business Administration and how to improve it and make it more friendly to our business community. As a small businessowner, we greatly appreciate that. And we know that they have struggled at times and that is one of the reasons that I actually partnered with Senator Lee to introduce the Transparency and COVID-19 Expenditures Act. And only through the full audit of COVID-19 emergency programs can we really ensure that these mistakes are not made again and we appreciate your effort in trying to get these reports out. We do know that SBA has failed to respond to a lot of these policies that you have set forth in your reports which are highlighting where we need to move them. And as my colleague, Mr. Garbarino said, we want to make sure that we push them in the right direction. I want to specifically first get into an issue that I had with Administrator Guzman when she was here in November. She said she was unaware, and I tried every angle on this question to her, that SBA was illegally providing millions of dollars in Paycheck Protection Program loans to multiple Planned Parenthood affiliates, including a $10 million PPP loan for Planned Parenthood of Greater New York. And as you are aware, it is illegal for these federal funds to be used for abortion and all applicants for PPP must abide by the rules and the size standards. And since Planned Parenthood has over 16,000 employees nationwide, they are ineligible. Have you provided information about the Paycheck Protection loans to Planned Parenthood to Administrator Guzman? Is she aware of these as far as you know or have you provided her with this information? Mr. WARE. I have not personally provided information on Planned Parenthood to the administrator. I believe, I hope that the Committee knows that we have kicked off a job that looks into eligibility of nonprofits that will deal with affiliation and size standards, and Planned Parenthood is a part of that. Ms. TENNEY. Let me ask---- Mr. WARE. So we do have work that is going on right now that addresses it. As a matter of fact, it came as a request I believe from the Senate Small Business Committee. Ms. TENNEY. Great. So are you aware of loans that were made to Planned Parenthood? Mr. WARE. Yes, I am. Ms. TENNEY. Okay. And do you know if those loans were made, if Administrator Guzman was aware of that and if those loans were forgiven? Mr. WARE. No, I do not know either of the two right now off the cuff. Like I said, the work is ongoing. Ms. TENNEY. Right. Mr. WARE. When the team briefs me I will know. Ms. TENNEY. Does Administrator Guzman have access to this information, whether the topline numbers, does she know, does she have access to see this information anywhere as the rest of us would? Mr. WARE. I cannot say definitively that she does. I would guess so. Ms. TENNEY. Do you recommend that SBA change any of its internal controls or anything to make sure that these types of loans, illegal loans that violate either constitutional provisions or the provisions of the PPP program to ensure that SBA does not give these out in the future? That is something that I think through your inspector general role you could do that as far as recommendations to the administrator. Mr. WARE. I believe that recommendations will be forthcoming at the conclusion of our review. Ms. TENNEY. Have there been any---- Mr. WARE. But the review is ongoing. Ms. TENNEY. So if it is ongoing, have there been any preliminary information given to Administrator Guzman? For example, she denied knowing of any of these, and as the administrator I found that quite startling. But would she be aware of those now since it is an ongoing production of information? Mr. WARE. I have not received an update myself from the audit staff as to where we are on this assignment. So I do not have something to provide to the administrator currently. Ms. TENNEY. So nothing is uploaded on any website or no information is in the public domain on this issue other than what we know because there have been loans given and received on their 990 forms? Or what other IRS forms are. It may not be a 990 Form. Mr. WARE. No. My work would never be uploaded before it is fully vetted and completed. Ms. TENNEY. Okay. So there has been nothing disclosed since November that she would know? Mr. WARE. No. I have not had any discussions with her. I meet with her every other week. Ms. TENNEY. Okay. Well, I just want to thank you. I also just wanted to reiterate the concerns that my colleague, Mr. Garbarino had about the customer service issue. We still are receiving information about loans and other things that are not being handled in an efficient and continuous matter. We hope that you will continue as the inspector general to urge the administration to answer customer information complaints faster and more efficiently as many people are out there waiting or have not had loans processed for over a year. But again, I appreciate, I know my time is running out but I appreciate your work in trying to get the correct information to the administration so SBA can work and function better for our communities and our small business community who are struggling through this pandemic. I thank you. And my time is out so I yield back my time. Thank you. Chairwoman VELAZQUEZ. The gentlelady's time has expired. Thank you again, Mr. Ware, for being here today. Your oversight of SBA programs is very important, and it is more important now than ever as we work to address the challenges with the stimulus lending programs and learn valuable lessons for the future. It is vital that we address the systemic challenges at SBA and work together to ensure that internal controls are put in place. Doing so we will make the agency stronger, nimbler, and better able to handle disasters in the future. To that end, it is encouraging to see SBA is heeding your advice and working to close out the outstanding recommendations. Most importantly, your work helps the Committee track challenges all throughout the agency that need to be addressed. If we have learned anything over the last 2 years it is that we need to have a well-functioning, funded, and staffed agency to address the day-to-day needs of small firms and be ready for any catastrophe facing our nation. I truly hope that today's hearing motivates all of us to work to find bipartisan solutions to bolster the agency. Without objection, Members have 5 legislative days to submit statements and supporting materials for the record. If there is no further business to come before the Committee, without objection, we are adjourned. Thank you. [Whereupon, at 11:55 a.m., the committee was adjourned.] A P P E N D I X [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]