[House Hearing, 117 Congress] [From the U.S. Government Publishing Office] UPDATE ON SBA'S PANDEMIC RESPONSE PROGRAMS ======================================================================= HEARING BEFORE THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTEENTH CONGRESS FIRST SESSION __________ HEARING HELD APRIL 20, 2021 __________ [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 117-008 Available via the GPO Website: www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 44-271 WASHINGTON : 2021 -------------------------------------------------------------------------------------- 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 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.......................................... 3 WITNESSES Mr. William Shear, Director, Financial Markets and Community Investment, United States Government Accountability Office, Washington, DC................................................. 5 Mr. Hannibal ``Mike'' Ware, Inspector General, Office of the Inspector General, United States Small Business Administration, Washington, DC................................................. 6 APPENDIX Prepared Statements: Mr. William Shear, Director, Financial Markets and Community Investment, United States Government Accountability Office, Washington, DC............................................. 36 Mr. Hannibal ``Mike'' Ware, Inspector General, Office of the Inspector General, United States Small Business Administration, Washington, DC............................. 58 Questions and Answers for the Record: Question from Hon. Fitzgerald to Mr. Hannibal ``Mike'' Ware and Answer from Mr. Hannibal ``Mike'' Ware................. 72 Additional Material for the Record: CUNA - Credit Union National Association..................... 73 EIDL Validations and Internal Controls....................... 75 NAFCU - National Association of Federally-Insured Credit Unions..................................................... 79 PPP & EIDL Oversight Info.................................... 81 UPDATE ON SBA'S PANDEMIC RESPONSE PROGRAMS ---------- TUESDAY, APRIL 20, 2021 House of Representatives, Committee on Small Business, Washington, DC. The Committee met, pursuant to call, at 10:02 a.m., in Room 2360, Rayburn House Office Building. Hon. Nydia Velazquez [chairwoman of the Committee] presiding. Present: Representatives Velazquez, Crow, Davids, Phillips, Newman, Bourdeaux, Chu, Evans, Delgado, Houlahan, Kim of New Jersey, Craig, Schneider, Luetkemeyer, Williams, Hagedorn, Stauber, Meuser, Tenney, Kim of California, Van Duyne, Donalds, Salazar, and Fitzerald. Chairwoman VELAZQUEZ. Good morning. I call this hearing to order. Without objection, the Chair is authorized to declare a recess at any time. 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, please remember to remain muted until you are recognized to minimize background noise. If you have to participate in another proceeding, please exit this one and log back in later. 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 will recognize that Member at the next appropriate time slot provided they have returned to the proceeding. For those Members physically present in the Committee room today, we will also be following the health and safety guidelines issued by the attending physician. That includes social distancing and especially the use of masks. Members and staff are expected to wear a mask at all times while in the hearing room, and I thank you in advance for your commitment to a safe environment for all here today. The COVID-19 pandemic sparked a once-in-a-lifetime crisis for American small businesses. The pandemic hit small firms the hardest, resulting in the most significant reduction in business ownership in U.S. history. Facing an unprecedented wave of small business closures, Congress acted by creating economic relief programs to help businesses stay afloat through the crisis. Since the passage of the CARES Act, the SBA has approved 9.9 million PPP loans worth $762 billion, 3.77 million EIDL loans for approximately $195 billion and has disbursed 5.8 million EIDL advances amounting to $20 billion. This was a tall order for a small agency like SBA. It administered more aid during the COVID crisis than it had for all other disasters combined during its 67-year history. I commend the SBA's staff who have worked diligently around the clock, often 7 days a week for over a year now. Their dedication and work, while not perfect, have made a difference in the lives of millions of small business owners and workers. Now is the time to continue this Committee's work to take a hard look at this effort and learn lessons for the future. I hope to examine the problems uncovered by our nation's watchdogs and hear about SBA's efforts to address them. Since the inception of the pandemic, the Government Accountability Office and SBA's Office of the Inspector General have combined to release 16 reports calling attention to SBA's management of these programs. In fact, just last month, GAO added PPP and EIDL to its annual ``High-Risk List,'' identifying the economic relief program as being at high risk for waste, fraud, and abuse. These reports are sobering and a call for action. To that end, in the last Congress, I worked closely with then Ranking Member Steve Chabot and the Members of this Committee to conduct a robust oversight of the SBA. We held hearings with the administrator and other high-level officials in charge of the economic relief programs. We sent letters to the agency, placed numerous calls, and requested countless briefings. We were relentless in our pursuit of making sure these programs were working effectively for America's small businesses. It is my hope that in this Congress the Committee can put our partisan differences aside and work together to support the new administration to deliver much needed economic assistance to America's small businesses. It is important to note that the administration inherited a number of open recommendations from GAO and the IG. In the first couple of months in office, the Biden administration has heeded those recommendations and made it a priority to restore program integrity in PPP and EIDL. The agency implemented a long review plan, maximizing program integrity. In 2021, before issuing an SBA loan number, the agency began conducting front-end compliance checks on new First Draw PPP and Second Draw PPP applications using a modified version of the automated screening tool and information from the Department of Treasury Do Not Pay lists. I applaud the new administration for taking these concerns seriously and acting quickly to prevent emergency loans from going to bad actors. As I always say, if something is not perfect, let's see what we can do to make it better. I want to thank Mr. Ware and Mr. Shear for joining us here today and I now yield to the Ranking Member for his opening statement. Mr. LUETKEMEYER. Thank you, Madam Chair. And good morning to all, and a special thank you to Mr. Shear and Mr. Ware for taking time to speak with us today. The COVID-19 pandemic has thrown never-before-seen obstacles in front of every American, especially our Nation's small businesses. From the devastating state and local shutdowns to the struggle to find access to sufficient capital and employees to helps survive, our country has never faced a disruptive problem like this. Regardless of who has held the gavel over the years, Congress, and specifically this Committee, has long held the view that small businesses are vital to the health of this Nation's economy and security. The Small Business Act of 1953 and the Small Business Investment Act of 1958 established that the U.S. Small Business Administration's function is to aid, counsel, assist, protect insofar as possible the interests of all small business concerns. This continues to hold true today nearly 70 years later. Equally important to these roles is the need of the SBA to maintain vigorous oversight of its own programs. Unfortunately, we have seen numerous blunders--and I use that term very politely--as the SBA has neglected to be good stewards of our constituents' tax dollars. Over the course of the last year we have seen countless stories of how the Paycheck Protection program, Economic Injury Disaster Loan program (EIDL), and the EIDL advances have benefitted small businesses, kept employees on their payroll, and helped pay their mortgage, rent, and utilities. Without these critical programs, more of our country's smallest firms would have been closed permanently and millions of employees would have been out of work. That is the good news. The bad news is that the SBA has mismanaged these programs and opened them up to unprecedented levels of waste, fraud, and abuse, limiting their effectiveness and previously squandering taxpayer dollars that could help our economy move forward. This is unacceptable. We will hear from the SBA's Inspector General and Federal Government's watchdog, the Government Accountability Office during this hearing citing specific examples of troubling failures by the SBA in administering these lifesaving programs. Those of us on this side of the aisle have been working diligently to help rectify these problems. Over the initial months of the 117th Congress, Small Business Committee Republicans offered numerous constructive amendments to President Biden's COVID Relief Bill that moved through Congress via the reconciliation process. More specifically, we offered amendments that would enhance and improve the oversight of SBA's COVID programs. For example, we offered amendments that would significantly increase the appropriation for SBA's Office of Inspector General to expand oversight of the SBA programs, specifically calling on the administrator to closely examine waste, fraud, and abuse within the EIDL programs. And while my colleagues on the other side of the aisle had many kind things to say about most of our ideas at the time, not one Democrat voted for any of our amendments. Perhaps after this hearing and the subsequent events that have taken place at the SBA, my friends on this side of the aisle will come to the table and actually work with us on these serious issues. Do we really need another OIG alert detailing the impending doom of another congressionally-mandated SBA program like the one published hours before the Shuttered Venue Operators Grant program went live and quickly crashed? Nobody should want that level of dysfunction to occur again. The SBA had more than 3 months to pull this program together and they could not do it. Small business owners have been waiting a long time for these funds to get out the door and we want those who qualify to get the money as expeditiously as possible, but the necessary safeguards need to be in place for all SBA programs before American taxpayer dollars are disbursed. In addition to the SVOG program, we are still waiting for the majority of details, like the specific launch date, for the Restaurant Revitalization Fund Program contained in President Biden's partisan $1.9 trillion COVID package. We tried adding more money and oversight protections to this important program during reconciliation markup, but again, the Democrats chose to go without this in a similar partisan manner. I hope that all my friends across the aisle can agree that we cannot afford another bungled rollout of the restaurant program like we saw in the Shuttered Venue. We need to be accurately pursing legislative vehicles to ensure that this dysfunction does not occur again. Moving forward, the Committee must focus on these three areas. First, we need to prioritize eliminating existing fraud within these programs. Second, we need to delay implementation of all new programs until the SBA has the oversight controls in place to protect against waste, fraud, and abuse. And third, we need to take a hard look at restructuring the SBA as a whole. Should they be a direct lender? That is a question that needs to be answered. I thank the Chairwoman for calling this timely hearing, and I yield back. Chairwoman VELAZQUEZ. Thank you, Mr. Luetkemeyer. The gentleman yields back. If Committee Members have an opening statement prepared, we will ask that they be submitted for the record. I would like to take a moment to explain how this hearing will proceed. Each witness gets 5 minutes to provide a statement, and each Committee Member will have 5 minutes for questions. Please ensure that your mic is on when you begin speaking and you return to mute when finished. With that, I would like to introduce our witnesses. Our first witness is Mr. Bill Shear. Mr. Shear is the director in GAO's Financial Markets and Community Investment Team. He leads GAO in addressing the SBA Community and Economic Development programs and Native American Housing issues. As part of his portfolio, he oversees evaluations of SBA contracting, disaster assistance, credit and counseling programs. He has a master's degree in Public Policy and a Ph.D. in Economics, both from the University of Chicago. Welcome, Mr. Shear. Our second witness is the Honorable Hannibal ``Mike'' Ware, Inspector General of the SBA. Mr. Ware was sworn in as the Inspector General in May of 2018 and has been an effective leader in his role and an asset to this Committee. He has 28 years of experience in the IG community rooting out fraud, waste, and abuse in Federal programs. Welcome, Mr. Ware. Mr. Shear, you are now recognized for 5 minutes. STATEMENTS OF WILLIAM SHEAR, DIRECTOR, FINANCIAL MARKETS AND COMMUNITY INVESTMENT, UNITED STATES GOVERNMENT ACCOUNTABILITY OFFICE; HANNIBAL ``MIKE'' WARE, INSPECTOR GENERAL, OFFICE OF THE INSPECTOR GENERAL, UNITED STATES SMALL BUSINESS ADMINISTRATION STATEMENT OF WILLIAM SHEAR Mr. SHEAR. Thank you. Chairwoman Velazquez, Ranking Member Luetkemeyer, and members of the Committee, I am pleased to be here this morning to discuss our work on SBA's Paycheck Protection Program and the Economic Injury Disaster Loan program. SBA has made or guaranteed about 19 million loans and grants through these programs, providing about $970 billion to help small businesses adversely affected by COVID-19. In April 2020, SBA moved quickly on these programs to help small businesses survive during the pandemic. SBA initially put limited controls in place, leaving both programs susceptible to program integrity issues, improper payments, and fraud. Since June 2020, we have made eight recommendations to SBA to improve the programs. In addition, we included these programs as a new area on our high-risk list in March 2021 because of their potential for fraud, significant program integrity risk, and need for much-improved program management and better oversight. We also cited the results of SBA's most recent financial statement audit in which the auditor issued a disclaimer of opinion on SBA's financial statements because SBA was unable to provide adequate documentation to support a significant number of transactions and account balances related to PPP and EIDL. Further, as we reported multiple times, SBA's failure to provide us with data and documentation in a timely manner impeded efforts to ensure transparency and accountability for the programs. However, I am glad to report that we have received a significant amount of information and data from SBA and its contractors over the past 2-1/2 months. Here, I will quickly summarize steps SBA has begun to take to address initial deficiencies. In June 2020, we recommended that SBA develop plans to respond to PPP risk to ensure program integrity, achieve program effectiveness, and address potential fraud. SBA has developed a loan review process and added upfront verifications before it approves new loans. In November of 2020, we recommended that SBA expeditiously estimate improper payments for PPP and report estimates in error rates. SBA has now developed a plan for testing needed to estimate improper payments. In January 2021, we recommended that SBA conduct portfolio- level analyses to detect potentially ineligible applications. SBA has not announced plans to implement this recommendation. In March 2021, we recommended that SBA implement a comprehensive oversight plan for EIDL to ensure program integrity. SBA agreed to implement such a plan. In March 2021, we made four recommendations, two for each program, for SBA to conduct a formal assessment and develop a strategy to manage fraud risk for each program. SBA said it would work to complete fraud risk assessments for both programs and continually monitor fraud risk. We continue to review information SBA recently provided, including data on PPP loan forgiveness and details on the PPP and EIDL loan review processes. In addition, we have obtained additional information from a survey of PPP participating lenders, interviews with SBA's PPP contractors, and written responses to questions provided by SBA's EIDL contractor and subcontractors. This concludes my statement. I would be pleased to respond to any questions you may have. Chairwoman VELAZQUEZ. Thank you, Mr. Shear. Mr. Ware, you are now recognized for 5 minutes. STATEMENT OF HANNIBAL ``MIKE'' WARE Mr. WARE. Good morning. Chairwoman Velazquez, Ranking Member Luetkemeyer, and distinguished members of the Committee, thank you for inviting me to speak with you today and for your continued support of my office. I come before you today in the midst of a historic challenge to the Nation, a challenge in which SBA has a pivotal and unprecedented role in stabilizing the U.S. economy. The men and women in my office have been working diligently to provide oversight of SBA's pandemic response. I am always proud to represent them publicly and to speak to you about our important work. We share in the Nation's grief for those lost in the pandemic and are keenly aware that nothing short of the public's trust is at stake in our oversight efforts. SBA's [inaudible] trillion in lending authority through the PPP and the EIDL programs with the most recent tranche of lending authority being contained within the American Rescue Plan Act (ARPA). As with OIG, the men and women of SBA have been running at a sprinter's pace; however, the race we are running has been more of a marathon. Nonetheless, we have sought to have an aggressive and focused approach to our oversight to ensure our work is properly calibrated and relevant. Congress recognized that the oversight required of the pandemic response was outsized for existing oversight resources [inaudible] government to include my office. We have received three supplemental appropriations to increase our oversight capacity. Initially, we focused on the recruitment of a mix of auditors, analysts, and criminal investigators to provide immediate and timely insight into these programs. In December, we received funding directed to oversight of the EIDL program that seeks to address the rampant fraud identified by my office. These funds are being used to increase our investigative staff and enhance our data analytics capacity. We received our most recent supplemental increase a couple of weeks ago, and those funds will be used to further increase our investigative capacity to combat fraud. Fraud investigations will be a decades-long effort due to the performance of these loans within SBA's portfolios and the statute of limitations on fraud. Our office will have approximately 40 percent more staff onboard after our hiring surges for EIDL and ARPA conclude than we had before March of 2020. Even still, we recognized from the beginning that the level of oversight required would take a whole of government approach. We partner with law enforcement entities across government and join multiple taskforces to multiply our reach. Since the outset of the pandemic response, our strategy has been to prevent and deter fraud, waste, and abuse, and to identify and combat instances of the same. The first step was the issuance of three reports sharing risks and lessons learned from our past oversight work. Principally, that most closely related, which is of the American Recovery and Reinvestment Act of 2009. These reports, as well as a fraud and scam alert were published before SBA made the first PPP and EIDL loans. Recognizing the speed at which lending was occurring in both these programs, we developed innovative report products to provide timely insight to our stakeholders. Our first flash report was published just a little over 30 days of PPP's implementation. Our next report will come out in July, which found significant deficiencies in internal controls and rampant fraud within the EIDL program. We have issued 13 reports on SBA's pandemic response oversight with two more near issuance. Most recently, we issued a management alert on serious concerns about SBA's control environment and the tracking of performance results in the Shuttered Venue Operators Grant Program prior to the program launch. In light of having to plan a program under tight constraints, it is imperative that SBA design the program in a way that provides for a balanced audit risk framework, consistent application of Federal regulations for grant management, clearly defined performance goals and adequate resources to effectively administer the program. While our audit work was ongoing, our criminal investigators were aggressively pursuing fraud. On May 5, that is a little over a month after the first PPP loans, the first in the Nation fraud charges were announced against an individual fraudulently seeking a PPP loan. We have since initiated over 420 investigations, and together with our law enforcement partners, the Department of Justice has announced over 100 indictments against individuals committing fraud against the PPP and EIDL programs. We have received over 150,000 complaints on our hotline since March of last year. This is over 150 years' worth of complaints when compared to prior years. We have sought and obtained assistance from the Pandemic Response Accountability Committee (PRAC), the catalogue complaints being received outside of our online complaint submission system, and we are employing data analytics to further triage these efforts. I look forward to discussing our most recently published works surrounding implementation of PPP, EIDL, and SVOG. 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 will begin recognizing myself for 5 minutes. Mr. Ware, the Biden administration has taken steps to restore program integrity, including implementing front end compliance checks on PPP loans. What other steps have been taken by the new administration to improve program integrity? Also, how effective will these steps be? You are muted. Mr. WARE. Yes. I had to figure out the mute button. Thank you. Thank you for that question. This administration has implemented quite a bit of front- end controls to include addressing our recommendations that have to do with IP address deconfliction, checking on those accounts that have at the last second changed the bank account information, and many of the other controls that we asked them to put in place, specifically with our December memo to the administrator. Chairwoman VELAZQUEZ. Thank you. Mr. WARE. Yes. Chairwoman VELAZQUEZ. Mr. Shear and Mr. Ware, has the new administration been responsive to your requests? Has SBA, under the leadership of President Biden and Administrator Guzman increased the level of cooperation and transparency? Has the new administration been more forthcoming with information? Mr. SHEAR. Yes. Definitely. As in my written statement and my oral statement, since the beginning of February, in terms of access to people, having in-depth discussions with SBA officials and their contractors, in terms of providing us data and information, providing us details about the oversight plans particularly for PPP, I am glad to report that it has become much better. Chairwoman VELAZQUEZ. Thank you. Mr. Ware? Mr. WARE. I also agree. I did not have many of the problems that GAO encountered, but this administration has been very upfront, very transparent, very interested in implementing the recommendations, or at least taking steps to move in that direction, and very interested in hearing what the Office of Inspector General has to say. Chairwoman VELAZQUEZ. I would like to submit for the record a list of improvements to SBA programs that have been made by the Biden administration. Without objection, so ordered. Mr. Shear and Mr. Ware, were the loans mentioned in your report made during the last administration or since March 16th when the new administrator was sworn in? Mr. Shear? Mr. SHEAR. The loans that we are referring to are over a period that goes into the beginning of 2021. But for the most part it was loans over the period during the previous administration. Chairwoman VELAZQUEZ. Mr. Ware? Mr. WARE. Pretty much the same. Like, we started from before the first loan even went out. So that work is still ongoing, but the majority of our work informs what happened in the past in order to set up what is to happen in the future. Chairwoman VELAZQUEZ. Thank you. Mr. Ware, your office issued a management alert on April 7, 2021, the night before the launch of the Shuttered Venue program citing a number of concerns but you missed the main issue, the technical issues that throttled the system on the day of the launch. What happened on your end and why did you not flag these concerns earlier? Mr. WARE. Thank you for that. So, a management alert or advisory, the purpose of it is to present interim engagement results or share information as quickly as we can during a broad scope review. So we are assessing the program and we saw this at the onset of the program and thought let's stop and get this information in their hands right now while they still had time to improve the control environment. At that time we had not yet got to those controls. Chairwoman VELAZQUEZ. Mr. Ware, is it not customary to alert Congress and the agency of such concerns in a timely manner? Mr. WARE. It is. But the alert, right, is a part of a broader scope review. So in terms of alerting timely, this is what we alerted timely on. This is what we had known for certain at the time in the review. So the review on this program is still ongoing. These were the concerns that we thought we should raise immediately. Chairwoman VELAZQUEZ. Thank you. My time has expired. Now I recognize the Ranking Member, Mr. Luetkemeyer, for 5 minutes. Mr. LUETKEMEYER. Thank you, Madam Chair. I think we need to sort of set the stage a little bit here with regards to what we are talking about this morning from a standpoint that the PPP program was implemented in a very, very quick fashion. In a way that we knew we had our economy at risk. We had jobs at risk. Businesses at risk. And we knew that this was probably not the perfect way of going about dispensing those dollars and get them out in a hurry. And I think SBA did a great job of getting those dollars out the door and in the hands of folks who needed it. I think the numbers have come back with some concerns about some of these loans. As a former regulator, I can tell you that whenever you are looking at a loan file and you see something that there is an I dotted or T not crossed in there you kick it out for what they call a technical exception. In discussing this issue with some of the IG and GAO folks, I think that is where we are with some of this stuff that is in these reports. That being said, there has been some documented fraud in there as well, and I think that is the concern that I have is that we make sure we go back and recover those dollars. Make sure that there is an effort made to stop those folks from getting at those dollars and setting up the new programs, which are the EIDL program here with a recharge of money, as well as the restaurant program and the venue program, make sure those programs are set up so that this does not happen again. And this is my concern this morning from the standpoint that the EIDL program, and to quote Mr. Ware, you called it rampant fraud in the EIDL program with regards to identity theft. This program was not that big compared to the amount of money that is going out with regards to identity theft. Have you seen any kind of controls put in place by the SBA with regards to identity theft? Because I think the Shuttered Venue program was going to be operated very similar to, if I am not mistaken, the way that the EIDL program is. So have you seen them put anything in place that could be considered protection against that kind of activity? Mr. Ware? Mr. WARE. Yes. Actually, I have. Yes. Actually, we have. SBA, and in particular, the Office of Disaster Assistance-- since we are talking about EIDL, they have been at the table quickly implementing the upfront controls. At least they are stated; we have not tested them as yet. We trust that they are doing it but we always verify. The alert on Shuttered Venues, for example, never addressed the upfront controls for fraud. That we found that they had in place, at least what we had asked them to implement. What we were talking about was relative to measuring the program and having enough people to actually oversee the program on the backend so that we know that the program met its intended purpose. Mr. LUETKEMEYER. Well, with regards to that, according to you two all's reports, there was not that much identity theft of a problem in the PPP program comparatively to the EIDL program. So it begs the question, the difference between the EIDL program and PPP program is that the banks basically were the ones that went through the program and got these dollars out the door. And they have a ``know your customer'' law in place to make sure that they know who the person is who is contacting them, the business that they are working with, and yet in the EIDL program, those sort of safeguards had not been in place. And maybe they are now, but it would seem to me and to beg the question, if SBA is going to stop that sort of fraud, they need to change the way that they do lending and let the lending be direct as it was in the PPP program or they become just a guarantor of the loan versus the actual lender of those dollars. And so I guess my question to you is, are you satisfied that the controls in place are such that you would not want to see perhaps a third party actually get those dollars out the door so there is another level of safeguards in place, especially when the banks are there and used to I dotting and T crossing, collecting information, collecting forms and doing it in a very efficient manner? Would you consider that something that we need to be taking a look at? Mr. WARE. My oversight is to the criteria based on the way that the programs are set up. In order for me to say that I would be satisfied with the controls, we would have to test the controls, which we have not done yet. Mr. LUETKEMEYER. Okay. Mr. WARE. We believe in what we have recommended to SBA and we believe that if properly implemented it would stem the tide of fraud in these programs. Mr. LUETKEMEYER. Excuse me, Mr. Ware. I would like for Mr. Shear to get in on the question. What would be your opinion on that? Mr. SHEAR. I would agree with Mr. Ware that the mechanisms from the programs are different. With respect to PPP and the role of the banks, there is some information that comes out of it. We have suspicious activity reports that are used with that type of arrangement but banks also made suspicious activity reports on EIDL as well but they are of a different nature. So there is some control in place, ``know your customer'' type of controls that also affects who was able to get in and get the loans from the banks. So there are certain tradeoffs here in terms of who is being served. So there is a mechanism there through, as you say, through banks. But just like Mr. Ware said, we have not tested controls and we are looking for the details now on the oversight of the banks themselves and we are going through the information which is quite extensive that we have been getting to look at what the oversight of the banks is. Mr. LUETKEMEYER. Okay. Thank you very much. I yield back. Chairwoman VELAZQUEZ. The gentleman yields back. Now we recognize the gentleman from Colorado, Mr. Crow, Chairman of the Committee on Innovation, Entrepreneurship and Workforce Development, for 5 minutes. Mr. CROW. Thank you, Chairwoman. Thank you to the witnesses for coming here today. Mr. Ware, I have a question regarding data and the integrity of data. Last year it was discovered that the Miter system that the database had significantly data disparities. So just as one example, the zip codes and the congressional data, the district data did not match up. And the SBA itself had found we were doing 500 PPP loans over the $150,000 threshold, that 111 of those did not match the state code for the loan. So it was nearly a 22 percent disparity. We actually did our own analysis in our office and found significant loans that had been allocated to other districts that actually occurred within our district, hundreds of loans, in fact, and had our staff do that. So did you all see that same disparity in your review? And have you been able to track any trends as to whether or not that data disparity is getting cleaned up? Mr. WARE. Thank you very much. Yes, we actually found the very same thing in terms of our data analytics unit. It kept reporting that some of the data is dirty. That is the term that they use. It is not good. But I know that they were able to work with SBA to rectify some of those challenges, which means that SBA is able to clean the data once they know that it is incorrect. So I know it is something that they are working on. They are working on making sure that they have clean data. Mr. CROW. Can you give me some sense, I mean, I always kind of bristle at this notion, they are like, oh, we are working on it. And the problem for us is I am sitting here and we all represent districts. And I literally want to know what loans have been given in my district. Like, I want to know where those loans went, what the loan numbers are, and I just do not have trust right now that I understand that. That any one of us sitting here today can pull that data up and trust that data and actually understand what is going on in our own communities. So can you give me some sense as to when we can have that trust and a date by which we can say this is the data, this is what is going on in our community? Mr. WARE. So, as you know, that data belongs to SBA, not to SBA-OIG. So I know that question would be best posed to the program, which is SBA. I could tell you that when we look at the data---- Mr. CROW. No, Mr. Ware, you are the watchdog of SBA, right? So I am asking you as the watchdog, the person that is charged with internal oversight, what you think the timeline is for when they are going to clean this up. Mr. WARE. Like I was saying, as I am not on the program side of things, I cannot give you a definitive date on which they would clean their data up. What I can tell you---- Mr. CROW. I am not asking for a definitive date, Mr. Ware. I am sorry, I am not asking for a definitive date. Can you give me an estimate as to the glide path that they are on to cleaning this up? Are we talking about a week? Are we talking about a year? Are we talking about somewhere in between? Can you give me any sense as to where they are at? Mr. WARE. It is real difficult for me to give you a sense of where they are at in that. What I could tell you is this; what my office reviews, we clean to make sure that the data that we are putting out in our reports is indeed accurate. Mr. CROW. Okay. I understand. That does not help us, unfortunately. Mr. WARE. Right. Mr. CROW. It does not help us. And you can tell I am frustrated because we do not even know what is going on or have trust in the data fully in our own communities because the data is dirty, as you say. And we need answers to when it is going to be clean. So I think I made my point here. This needs to be fixed and we would expect you to push hard and we would like better answers from somebody as to when this is going to be fixed. Madam Chair, I yield back. Chairwoman VELAZQUEZ. The gentleman yields back. The gentleman from Texas, Mr. Williams, Vice Ranking Member of the Committee is recognized for 5 minutes. Mr. WILLIAMS. Thank you, Madam Chair. On April 8, small business across the country were devastated to see the Shuttered Venue Operator Grant portal shut down within 2 hours of launching, and I was the Republican lead on the House side so I am very disturbed on what I see. These businesses have already suffered enough economic injury while waiting 4 months for this program to be open. So Mr. Ware, you mentioned in your testimony that you have serious concerns about the SBA's control environment over SVOG program, Save Our Stages program. Can you elaborate on specific internal controls that need to be implemented within the SBA regarding waste and fraud within the SVOG program, and are you confident that the changes outlined in your initial report will be solved by the time the application portal reopens? We have businesses across the country that are closing every day because this was approved into law on December 8th and we are still not there yet. So what can we do to fix that? Mr. WARE. Thank you for your question. First off, the alert that we put out raised the attention of serious concerns with the control environment and the tracking of performance results. We need them to reduce or eliminate risk by implementing controls to address the misuse to Federal funds. In this case it was the way that they wanted to go about identifying the vulnerabilities commensurate with the expected volume of applications that they were going to get. We wanted them to clearly establish 2 CFR 200 criteria for the program to ensure compliance. It is important for me to point out that this is a grant program, not a lending program. Grant programs come with specific rules and regulations that need to be followed in order to determine the impact of program funds. We did not feel that they had sufficient resources available to implement or oversee the program from the onset. Relative to the fraud risk side of it, this did not address that because we found that they had implemented the recommendations that we had been given all along in terms of what checks should be in place to mitigate the risk of fraud. Mr. WILLIAMS. Okay. I spoke with Administrator Guzman the other day after the OIG report, and it seems like they are claiming the report was released prematurely as a result of miscommunication and that many of the concerns had already been addressed. So even if that is true, it raises serious concerns about the agency's ability to carry out similar programs in the future if they cannot even get on the same page with their communications with the Office of Inspector General. So Mr. Ware, what improvements need to be made to solve these communications issues so we can have confidence that all the programs being run out of the SBA are doing so with the proper levels of oversight? And again, I remind you, many, many people are waiting to get on these programs to save their businesses. Mr. WARE. Right. This is a little surprising to me, kind of news to me, catches me a little bit off guard. Internally, before we release anything there are quite a bit of meetings that are taking place between our audit teams and the program staff. And even in those, not necessarily a communication issue. It was an understanding of what we mean by you have to establish criteria that is different because this is a grant program and not a lending program. And that we did not think that you could shut off certain requirements of CFR 200 that governs these programs. So that was the main thing. But relative to communication, the administrator is new. We are building our relationship. Right now I think that is off to a much better start, especially after this was issued. We now have stated rules of engagement for how we go forward to make sure that they---- Mr. WILLIAMS. Okay. Mr. WARE.--do not feel like there is a communication issue. Mr. WILLIAMS. All right. Let me move on to another question. I recently sent a letter to the Small Business Administration expressing concerns about the outstanding PPP loan forgiveness application past the 90-day deadline. The inaction and lack of communication coming out of the agency on these outstanding loans are keeping financial institution businesses in the dark. The result is that hardworking Americans are stuck holding enormous liabilities. It prevents them from investing in business growth as we recover from COVID. So Mr. Shear, quickly, what steps do we need to be taking with the SBA so we can clear this backlog of PPP loans waiting to be forgiven? Mr. SHEAR. Part of it is consistent with putting in the right internal controls that pay attention to what are the elements that are slowing down the forgiveness decisions, such as when flags go up. I will call it flags of potential fraud. When flags go up, is there a disciplined approach of determining which flags are more important than others are? So I think that these are the types of things that we are looking for in that program. Now that we have PPP forgiveness data, we are really analyzing it in depth to try to see how rampant these problems are. So I do not have an answer to your question yet as far as whether it is isolated or whether there is a large magnitude to this. Mr. WILLIAMS. I yield my time back. Chairwoman VELAZQUEZ. The gentleman yields back. 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 to you and to the Ranking Member for holding this hearing today. And of course, to Mr. Shear and Mr. Ware for your critical oversight work. As of earlier this month, the SBA had approved over 13 million loans totaling approximately $964 billion through the Paycheck Protection Program and the EIDL Program. And these programs have been absolutely essential lifelines to small businesses across the country, and we know there is more to be done to support our small businesses until the end of this pandemic. But part of that support definitely has to include the exact thing we have been talking about so much today, ensuring the integrity of the programs, of preventing further fraud and abuse from frankly wasting taxpayer dollars. And I know the Office of Inspector General and the GAO reports have highlighted persistent fraud in both the PPP and EIDL programs. In the Kansas 3rd, which I represent, a local newspaper was able to share some information about 35 cases of relatively easy-to-identify fraud in just one of the counties in our district. And that was mostly fake farming enterprises in a largely suburban and residential area. And in addition to wasting taxpayer dollars, these cases are, of course, defrauding innocent people through identity theft and it is obviously urgent and critical that SBA is able to root out this type of fraud really quickly. I know I have urged, and I know others have, too, for the SBA to adopt the OIG recommendations that we have already seen so that the victims of identity theft are not held at fault. Mr. Ware, I would love to ask you my first question. In your testimony, you mentioned the ongoing review of SBA's response to allegations of identity theft. And I know the Chairwoman kind of touched on this a little bit ago. But can you give us an assessment? I know you indicated that there is some new frontend controls, but can you give us a sense of how the SBA is handling these types of cases? Mr. WARE. In terms of identity theft? Ms. DAVIDS. Yeah, identity theft, particularly as it relates to PPP and EIDL. Or the EIDL is the one that seems to have the most impact in the district that I represent based on the data we have. Mr. WARE. Correct. Well, we have an ongoing review right now. As a matter of fact, that report, I think the response from SBA to this report is due today if I am not mistaken--I think it was the 20th--and will be issued shortly thereafter provided they do not ask for an extension being that the administrator is new. But in that, we are reporting publicly on what SBA has done to address what is happening with identity theft because, like you, we have heard countless stories and complaints involving identity theft. And just so we are clear, SBA-OIG does not have principal jurisdiction on investigations involving identity theft. That belongs to the Federal Trade Commission. But we have a direct link on our hotline page in hopes of helping victims. We share those complaints with SBA so they can take appropriate actions, and we view this as a significant matter for SBA to address, one that is tied to internal controls within the programs. So it is something that we are taking very seriously and many of our active investigations have to do with this identity theft issue. Ms. DAVIDS. Yeah. So that is helpful context. I am curious if you are able to give any kind of indication about, now that the EIDL loan repayments have been delayed by another year, some of those victims of identity theft are going to have other parts of their lives disrupted. Do you know if SBA, or have you made recommendations about how SBA might be able to reduce down or solve that issue so that people who have been the victim of identity theft through these EIDL loans are not negatively impacted in a bunch of other aspects of their lives? Mr. WARE. Right. We have provided recommendations. The thing is, it is still in draft so it is not a completed work that I can speak about publicly. Ms. DAVIDS. Okay. Mr. WARE. Like in this setting. Ms. DAVIDS. Yeah, so actually, so we will follow up with you based on your answers today. Thank you so much. Chairwoman, I yield back. Mr. WARE. Thank you. Chairwoman VELAZQUEZ. The gentlelady yields back. The gentleman from Minnesota, Mr. Hagedorn, is recognized for 5 minutes. Mr. HAGEDORN. Thank you, Chair. I appreciate this opportunity. And thanks to the witnesses. Mr. Ware, I think you have been around government a little while and you kind of realize that this was quite an avalanche of lending that was going on by SBA through their partnerships with financial institutions and others. And quite something that the Congress and the president could get a bill enacted and then 7 days later they would actually have regulations on the books in order to move the program along. Usually I think regulations like that would take 3 to 6 months, maybe even longer. So I understand there are going to be some issues. We do not want any of that. But in looking at your testimony, it seems to be a big difference here between the Paycheck Protection Program and whatever monies might have gone out the door that were not supposed to be. And then compare that with the EIDL program. And you know, Congressman Luetkemeyer, our ranking Republican member was making the point that, boy, the EIDL program had substantially less money and yet there seems to be a lot of issues. In your testimony you account for about $75 billion that may have been inappropriately sent to ineligible businesses, but those numbers are from back in July of last year; right? Mr. WARE. Yes. The numbers at that time were from back then. Mr. HAGEDORN. So since then have you been able to update those or do we have some idea that this is way less than it was before or they have reclaimed some of those monies on all these other things? Mr. WARE. That is a good question. We have been working diligently, of course, to claw back money that has gone to folks that it should not have gone to. I think we are up to a total between us and SBA, our partners, $1.9 billion. We are continuing to move along those lines. We do have updated figures. I just do not have them at my fingertips right here. Mr. HAGEDORN. All right. Mr. WARE. It would take me a couple. Mr. HAGEDORN. I mean, it looks here, this looks terrible but hopefully there is something that accounts for that and the problem is not this big. But it seems to me again that where you had lenders, financial institutions and others working with customers where they have to know their customers, there was not as big of an issue, as big of a problem. But then we get in to where the government is dealing with these folks directly there is all this identity theft and so forth. So what was the most serious broad scheme that they had targeting these EIDL loans? What is your experience on that? Mr. WARE. Before that there are two important things to point out here. When we were providing context as to what was going on in terms of fraud, the Office of Capital Access deals with PPP. They were very quick to implement controls that we thought were missing, very, very quick. And we know that is a big reason why there was a lot less that we found in that area. ODA took a much longer time to implement. That is a fact. Secondly, in terms of identity theft, we are starting to see more of it raise its ugly head on the PPP side with the bringing on of the Schedule Cs. And so, I mean, we are still at the very beginning of this. We are starting to see the trends start to take shape. And so it might turn out to be a different story a little bit later. But you asked about the schemes; right? Mr. HAGEDORN. Yeah. What is the role of the most prevalent scheme? Mr. WARE. One of the most prevalent schemes, particularly for the EIDL Advance program was where people were being contacted by, I do not know, fraudsters who would say the government is giving out free money and all you have to do is have us sign up for you and SBA will give you a check for up to $10,000 and it will be deposited into your account and you just have to pay us out a portion of it. And that is what we were seeing with the multiple IP address hits. It would be like one computer handling all this for maybe 200, 300, 400 different loans and just really bombarding base controls with that. Mr. HAGEDORN. So people were literally just handing over their basic information to the fraudsters and then they were going ahead and making those applications and taking the money. Should the government have not figured out some way that all these things were coming from the same addresses? I mean, were there not any controls that were in place before this started out? Mr. WARE. That argument that we were faced with was, well, multiple loans came from a single IP address doesn't mean it is fraud. And I would say maybe there might be a real reason for it but until you check you would not know. Mr. HAGEDORN. You might want to look into that; right? Yeah. Check into it. I do not know how much time I have. I am not seeing the computer. If I have just another minute---- Mr. PHILLIPS. Mr. Hagedorn, your time has expired. Mr. HAGEDORN. Okay. I yield back then. Thank you. Mr. PHILLIPS. All right. The gentleman yields back. And now I recognize myself for 5 minutes. I want to thank our witnesses for being here today, and I believe I speak for all of my colleagues on this Committee when I say we are deeply troubled by the reports of rampant fraud and abuse within the PPP and EIDL programs. Congress established these facilities to be a vital lifeline to American businesses in their darkest hour and now we are bringing some much needed sunlight as a disinfectant for corruption. I am also troubled by the frenzied environment that gave birth to the programs with all their shortcomings, and I would hope today's hearing stands as a lesson to those of us in Congress to return to regular order, and those of us in the administration, to exercise the very highest standards of ethics in implementing and enforcing the law which ought to be amongst our highest priorities. Mr. Ware, on February 2nd, the Biden administration published a fact sheet detailing new measures to prevent fraud in the PPP and EIDL programs. These measures provided that loan guarantee approval would now be contingent on passing SBA fraud checks, Treasury's Do Not Pay database, and public records. While implementing these checks at the late stage has somewhat slowed the processing of loan applications, these safeguards could have been implemented from the very beginning. In fact, on the day that lenders began processing applications for PPP loans last year, you issued a white paper outlining lessons learned from previous stimulus loan programs. In that document you warned that ``increased loan volume, loan amounts, and expedited loan processing timeframes may make it more difficult for the SBA to identify red flags in loan applications.'' You urged the agency to put sufficient controls in place then. Did administrative officials at the agency heed your warnings at that time, sir? Mr. WARE. At that time, no. Mr. PHILLIPS. Okay. And when it became clear that the set up of EIDL, which is directly processed by SBA loan officers also made it particularly susceptible to abuse, you issued a July report containing another warning of ``potentially rampant fraud'' in that program as well. Is that correct? Mr. WARE. This is correct. Mr. PHILLIPS. And then last month, the Justice Department unveiled charges against a former Florida tax collector who allegedly bribed an SBA loan officer to ``use her access to the SBA's computer systems and her access to EIDLs to manipulate the status of EIDLs to trigger the system to extend funding'' for the benefit of the defendant. Mr. Ware, this is not the first instance of questionable behavior by agency employees. So please elaborate, if you would, on why these activities did not trigger red flags in the loan system, and please speak to the OIG report that you issued in October of 2020 concerning SBA employees and contractors who were involved in inappropriately influencing loan approval. Mr. WARE. Well, the control that you are speaking about was not in place to begin with and that was one of the controls that we were talking about, hey, you have to implement these controls. I mean, we were at the table on several instances speaking about this even before the reports were out saying this is a serious issue and there are certain things that need to be implemented. But as I was saying before, it was not I guess the best way to say it. It was not always taken as seriously. So there was always a justification trying to be made that there could be a valid reason for why we were seeing what we were seeing, although we had already made dozens of arrests up to that point using the same red flag indicators. Mr. PHILLIPS. Okay. On the subject of taking things seriously, Mr. Ware, if you could just spend a moment and speak about your knowledge of the staffing challenges at SBA given the workforce needed to administer programs of this scale and any recommendations that you have to ensure that employees are thoroughly vetted moving forward. Mr. WARE. Right. Well, relative to that, as you know, especially in the disaster area, SBA has the authority to very, very quickly ramp up and they did that. Our issue was where the ramping up was taking place. So we wanted them to put more people to address the red flags. More people to check why is there 200 loans from a single IP address. Why did all these loans have a changed bank account? We wanted them to assign folks there and they did. They actually, they did that and that was one of the things that they did rather quickly once they decided that they would review the red flag areas because many of them had to be cleared. So I believe they went from four people to 40 to 250. The numbers probably are not exact but I am pretty positive they are close in terms of how big they moved on that. Relative to that, we have long recommended the importance of not only staffing up but properly training and vetting folks. There are multiple reports with that as a recommendation. Mr. PHILLIPS. All right. Thank you, sir. Duly noted. My time is expired. And now I recognize my fellow gentleman from Minnesota, Mr. Stauber, for 5 minutes. Mr. STAUBER. Thank you very much, Mr. Chair. And to the witnesses, thanks for being here today. Mr. Ware, a couple of questions. Of all the recommendations OIG has made in the various reports over this last year, how many recommendations has the SBA adopted? Mr. WARE. That is a good question. I actually have it somewhere. I am trying to scroll quickly to find the exact number. But I do know that I could get you the number. But they have moved to implement recommendations. We have closed, of the almost I think 24 of them, we have closed six. And are reviewing information necessary to close others. We do know that they have shown us documentation that several of the others, they have addressed them. And to be quite honest, they are moving expeditiously to implement the recommendations. Mr. STAUBER. And Mr. Ware---- Mr. WARE. They are at least addressing them even if they have not had the time to fully put them in place. Mr. STAUBER. Mr. Ware, what has the SBA signaled to you as their reason for not implementing more of the recommendations that you have just suggested? Mr. WARE. SBA, we have resolved all but one recommendation with SBA. I know you are going to ask me which one that is. I do not know the exact one that is. Oh, the one that they did not resolve is one that they agree with but they have a different way that they would like to address the cause of that recommendation, which was fine with us. But we have resolved just about all of them. They are not saying that they are not going to implement them. Some just take a longer time than others. The more critical ones they have moved on. Mr. STAUBER. Thank you, Mr. Ware. And then one last question for Mr. Ware. How would you rate or describe the SBA's ability to prevent new fraudulent behavior in the existing pandemic response programs as it stands right now? Mr. WARE. I would rate it much stronger than it was at the beginning. I believe that we have all, SBA included, learned a lot of lessons from where we were in the past months and that SBA is intent, at least on what they have presented to us, they are intent on making sure that the same errors do not happen again. It is our intent to measure it in terms of where we were before, what got through and where we were, where we are now in terms of what has been prevented. Mr. STAUBER. And Mr. Ware, if you could, could you provide that information to the Committee? Mr. WARE. Yes. Actually, I have it at my fingertips. I mean, it is right here. I have it. Mr. STAUBER. Thank you very much. Mr. Shear, a question for you is, in your opinion, what is the most important recommendation either the OIG or the GAO has made that has yet to be adopted to the SBA? Mr. SHEAR. I will speak to the eight recommendations that we have made and they are all still open. And what I want to emphasize, because four of them deal with fraud risk management is that where Mr. Ware has a very important role to play in terms of being part of law enforcement, our focus is on preventative controls. So what you put in place. So we have four recommendations that were made in our March report that have to do with really developing a disciplined approach, creating clear responsibility and authority in a unit within SBA to carry out those four recommendations. They mirror each other, two for EIDL and two for PPP. So I would probably put those at the top. But then in terms of our role, again, and I will emphasize that we coordinate with the IG, and we do different things. And we are not conducting fraud investigations as a part of law enforcement, but just to back up to what we said originally with PPP, that you just needed an approach that would ensure the integrity of the programs that eligible businesses are participating in. That it is meeting, more broadly, it is meeting the intent of the programs. And so that is a more global approach. So I do not want to forget about what I call the more global recommendation we made, but the four in particular that we made, dealing with fraud risk management I think are probably at the top of the list. Mr. STAUBER. Thank you, Mr. Shear. And I see my time has expired. Back to you, Mr. Chair. Thank you. Mr. PHILLIPS. The gentleman yields back. The gentlelady from Illinois, Ms. Newman, is recognized for 5 minutes. Ms. NEWMAN. Thank you, Mr. Chair. And thank you to Chairwoman Velazquez and Ranking Member for this hearing. It has been very helpful. So we have talked a lot about granular things today, Mr. Shear and Mr. Ware, and I really appreciate that. So let me start by saying that this program was huge and complicated to start out with for the SBA. Given that we had to move very quickly, it is not surprising that there were challenges in 2020. Throughout the year of 2020, many of these challenges were identified and not corrected frequently. So I am glad we are finally getting to a point. And so I have the same question for both of you. I will start with Mr. Shear because it probably is more GAO than it is for Mr. Ware. So it looks to me that while we have all these very significant and severe granular problems, there is a higher level management problem, that the structure of the SBA needs to change. It appears they come in four buckets. There is fraud and litigation issues. That there are categorization review analysis and assessment and data integrity issues. It sounds like there are workforce issues. So given that there are four very systematic issues and they are very large buckets with very granular problems in them it would appear that we need to look at the structure of the SBA from an organizational standpoint and really make some recommendations there so the move forward is working better. So can you speak to that, Mr. Shear? Mr. SHEAR. Thank you for the question. What I think that it really focuses on, some of the reasons why we put SBA, these programs on our high-risk list. And so when we think of, one of the things I was encouraged by, basically starting with the transition team was how would we, meaning SBA, would get ourselves off of the high-risk list? When we said we planned to put these programs on the list, the list came out March 2nd. And we look for certain elements there and it starts with leadership and it involves rigorous strategic planning and just a plan for how do you get from A to B with all of these things? And so it involves assessment. It involves commitment of resources. So for example, among the things we are looking at now is SBA did not have the resources for these programs and we are actually looking now at the use of the supplemental appropriations. We are talking about $3.4 billion for administrative expenses and we are saying how were those funds used? So it was a lot of contractors. And then you start getting into issues of contractor oversight, and we are trying to get more information about what is SBA doing to oversee the contractors who are overseeing these programs? So there are some basic structural issues there that I think you raise a very good point. The other issue I will point to is that SBA has had an office for a number of years called the Office of Continuous Operations and Risk Management. And when we first drafted our recommendations around fraud risk management, we directed it to having that office take the lead. Give it the responsibility and the authority to lead these efforts. And with that they said, well, now we also have a fraud risk council but both of them seem to be kind of--one had become kind of an informal body and the other one was an informal body that was just kind of put together. There is no clear responsibility to carry this out, and authority to carry it out. So this is also a structural type of issue. So those are the parts of what we have done that I think pertain most closely to the very good question you asked. Ms. NEWMAN. So let me follow that up, and I appreciate your answer. And it is complex; right? But what is the plan? If I was looking at this problem I would say that it looks like we need, if it was an organization, an executive VP of fraud and risk management. You know, that we need to look at workforce issue from an HR standpoint. Do we have the right folks that are assessing these things? And then from an information systems standpoint, do we need to have a CTO and CIO change? So for me, who is looking at that broader organizational structural problem? It may not be you, Mr. Shear, and that is okay. That is A-okay with me. But we need someone to look at it. If Mr. Shear could just respond. Mr. SHEAR. Thank you. We had concerns way before the pandemic, in 2015, that there were certain structural problems in just how SBA carries out its mission and we did what we call a general management review where we just looked from soup to nuts, looking across the agency. And we made a number of recommendations, and those recommendations were actually implemented. Part of it had to do with enterprise risk management and the risk management office that I just referred to. There are certain things that are in place that could have been teed up for this and probably still have to be teed up to implement our recommendations. So there are structural issues here and what we are looking for with respect to these two programs is what has to be done to really resolve fraud risk management for these programs, and some of these actions will probably end up leading to some structural change in the agency. One of the things that I am very encouraged by, and I will just refer to one more thing if you can bear with me on this, is that last week I participated in a meeting between the Comptroller General, Gene Dodaro and Administrator Guzman and her chief of staff. And it was a very constructive meeting. It was like, we are seeing some positive signs that Administrator Guzman is stepping up, and certainly the transparency in working with us has improved. So we hope this leads to changes but it is like some of the changes as you bring up will probably be structural. Our focus is on what is really needed with respect to these programs? And some of them will probably require some structural change, if nothing else, to make it clear who is the authority on fraud risk management. Mr. PHILLIPS. All right. The gentlelady's time has expired. Ms. NEWMAN. Thank you. Mr. PHILLIPS. We have to move on. The gentleman from Pennsylvania, Mr. Meuser, is recognized for 5 minutes. Mr. MEUSER. Thank you, Chairman. And thank you, Mr. Shear. Thank you, Mr. Ware for appearing with us here today. So just to add to some perspectives, compared to the average of 65,000 disaster loans, EIDL loans a year as of April, the SBA has approved more than 3.77 million during the COVID time period, EIDL loans totaling more than $200 billion. That is 60 times more than normal. The ratios are the same in Pennsylvania. In testimony, it was referenced that the SBA lowered the guardrails, Mr. Ware, lowered the guardrails, relaxed internal controls to get funds to struggling businesses but that led to increases in potential fraud in EIDL. As well, Mr. Ware, your initial report found that the SBA issued $14.3 billion in potentially fraudulent EIDLs to accounts that differed from the original bank account listed on the application, $62.7 billion to multiple EIDL applicants using the same business and contact information, and $1.1 billion in EIDLs and advanced grants to potentially ineligible businesses. That is $78 billion out of $200 billion, so almost 40 percent was potentially fraud? Is that right? That is pretty staggering. Are those numbers correct? Mr. WARE. Yes. That is what we were saying. Mr. MEUSER. Okay. Yeah, I know. But I just kind of wanted to put it in perspective. Forty percent. So in a private lending institution, if that were to occur, I think we would all agree that they would be out of business, many people would be fired, there would be investigations. So that is just staggering. Does the SBA model itself for fraud controls after private lenders? Mr. Ware, can you comment on that? Mr. WARE. Not---- Mr. MEUSER. No? Well, maybe you should. Mr. WARE. That is a good question. Normally, a good question for the program office how exactly they model themselves because there are a couple of different ways of looking at it. But one of the things relative to context that must be placed here is that the 40 percent was in terms of potential fraud. Right? Meaning that we could not look at all of them in that time to determine whether or not fraud was actually occurring. What we were asking SBA to do though was because these things are under these red flags, the same red flags that we are conducting our criminal investigations on, the same ones that we have arrested many people on, are the same ones. These are the indicators. These are what is showing up and that you need to pay attention to. Mr. MEUSER. All right. Well, despite all of these numerous reports of fraud, the SBA in April raised the loan limit for the COVID-19 EIDL program from 6 months of economic injury with a maximum loan amount of $150,000 up to 24 months of economic injury with a maximum loan of $500,000. Can either one of you comment as to why that would be done with all this potential fraud taking place? Mr. WARE. If I may. Mr. MEUSER. Sure. Mr. WARE. From ODA's perspective it would be that they have instituted the controls that we have recommended. Meaning that they would feel we have not yet verified that the control environment is a lot stronger than it was at the beginning, so that they would be able to act on the flags and stop people from getting into the program who should not be in the program. Mr. MEUSER. All right. Well, we certainly hope, you are not necessarily to blame but somebody is and we certainly hope that you will do the things that we are discussing here to correct this horrible problem. I just want to shift gears here a little bit. Can you comment, can either of you comment on the issues EIDL loans have created for secured lenders? Secured lenders by the EIDL have been very much crowded out. Secured lenders are subordinate to the EIDL loans. The EIDL loans replace other credit lines so as secured lenders cannot use the EIDL for collateral. It has damaged the industry. And in the end, what is more important is that it will damage that small business over time. Just quickly, will this be addressed? Is this being considered by you all? And would you state to me whether or not you could meet with the secured finance network to try to address and resolve this problem? Mr. WARE. Bill, should I go? Mr. SHEAR. No, I will go first. Mr. WARE. Okay. Mr. SHEAR. We have focused a lot on the question of a secondary market with PPP, and so we have interacted with the financial community on that. It has not risen to being an issue with EIDL but we could look into the question that you have. We could look at that. Mr. MEUSER. Could you meet with them? Mr. SHEAR. We meet with trade associations, and what is important for us is to make sure that we are doing that in an objective way in terms of who we meet with but I would think so. Mr. MEUSER. Of course. That is great. Thank you. Mr. Chairman, thank you. I yield back. Mr. PHILLIPS. Thank you. The gentleman's time is expired. And I just ask members and our witnesses to try and be respectful of the 5 minute rule. With that, the gentlelady from Georgia, Ms. Bourdeaux, is recognized for 5 minutes. Ms. BOURDEAUX. Okay. Thank you so much. And I very much appreciate our two witnesses here. Obviously, these are huge programs and have really been very important in shoring up our business community throughout the crisis, but at the same time it is very, very important to make sure that we are good stewards of taxpayer dollars. That this is being spent wisely and well. A lot of questions have already been covered about how we make sure that we put the safeguards in place as we open some of these new programs up and try to make sure that we are cautious on that front and the money is going to the people who need it and into the right spots. One issue, and I know we kind of touched on this in some of the other questions but just to ask Mr. Shear about this because I think Mr. Ware has touched on this, and it is about the targeting of the Restaurant Revitalization Fund. And we know that when we initially launched the Paycheck Protection Program it was not really getting to some of the underserved markets as best we could see, and based on the current guidance issued so far, are you confident that we will be able to resolve this issue and make sure that we get the Restaurant Revitalization Fund to some of the smaller minority-owned businesses across the country? Mr. SHEAR. I will start out by saying that a lot of our focus on both PPP and EIDL is in terms of what are characteristics of the borrowers who are getting these loans? So this is something that has been a close focus of ours, and as we initiate work on the restaurant program, we will be looking at that as well. So it is important to see who the program is serving. It has to do with what is the intent of the program and looking at who is being served by the program. So we will be taking a close look at that. Ms. BOURDEAUX. Okay. We have this 21-day prioritization period. What is your take on how effective that is going to be in making sure that we get to the right people? Mr. SHEAR. We are auditing in real time and we are going to soon begin work on the Shuttered Venue and the restaurant program. So the idea is we are auditing in real time but we are going to be looking at who actually is being served by the program, so I think we will get some indication as far as how well it has worked in terms of serving its intended impact. Ms. BOURDEAUX. Okay. All right. Well, just turning to one more other issue that we have really been watching or trying to see, although the data really is challenging as you all have noted. And I guess this is a question for Mr. Ware or Mr. Shear which is, we have a lot of businesses relying on the PPP loan forgiveness. And I was wondering if you all have discovered any reasons for concern with respect to access to loan forgiveness among small business owners? And what standards are in place to ensure that potentially fraudulent PPP loans are not given but while ensuring that the small mom and pop businesses can still access that loan forgiveness? Mr. WARE. If I may, we are currently conducting an evaluation of the loan review process. And the objective of that was to assess SBA's process for reviewing the loans for eligibility and forgiveness. It is in the early stages and it is designed to set the foundation for a series of projects on SBA's forgiveness of loans under the PPP eligibility. So it is in our 2021 oversight plan, and we will be able to give you real concrete answers on this as soon as that work is wrapped up. Ms. BOURDEAUX. Okay, great. Thank you. Mr. Shear, do you have anything to add to that? Mr. SHEAR. We look very seriously at the recommendations having to do with thinking strategically about fraud risk management because it is not a matter of putting in controls that can slow down the process or can make it difficult for those who are eligible and are being served by the program to get forgiveness. But the idea of coming up with a strategic approach that says, what flags can we pay attention to, do we have to pay attention to, and which flags are of lesser concern? So it is really to come up with an approach that we are looking for. Ms. BOURDEAUX. Okay. Thank you so much. And I yield back the balance of my time. Mr. PHILLIPS. The gentlelady yields back. And now the gentlelady from New York, Ms. Tenney, is recognized for 5 minutes. Ms. TENNEY. Thank you, Mr. Chairman. I want to thank Chairwoman Velazquez and Ranking Member Luetkemeyer for holding this important meeting. Our district was saved, basically, by the PPP program and we are really excited that it was an opportunity to keep some of our small business community alive. Ninety-four percent of the jobs in our district are created by these small businesses, so it was a vitally important issue, which is why I am so disheartened by this fraud, abuse, and waste number that has come up, particularly with the PPP program which really affected us more. And I wanted to address my first question to Mr. Shear. I know that you had said in your testimony that SBA's failure to provide the data and documentation on PPP and also on the Economic Development Disaster Loan program in a timely manner impacted efforts to ensure the transparency and accountability of the programs which I guess has apparently happened. What would you do, and I know you have somewhat answered this question, but if you could answer in another way, could you tell me what you would do to correct the way that SBA could change its practices to get that data to you more efficiently and quickly in the future so that we could make these loans and avoid these sort of astounding fraud numbers that we are seeing? And maybe a best practices guideline. Could you address that quickly, sir, please? Mr. SHEAR. There are two parts to it. One was, when we refer to the lack of transparency and the uncooperative nature of the agency with us, it was getting to the very notion of just like not that they were inefficient in terms of getting us data and information; it was not providing us data and information. It was, I hate to say it but quite intentional. So to get to the question is, how can they get information to us more quickly? We are always working with them to try to get information more quickly and we are certainly doing it now in that there are a lot of outstanding items that we work through with them. We are very busy interacting with them, interacting with leadership at SBA and interacting with the Office of General Counsel in terms of trying to improve the process to get us the information that we seek. And there certainly have been improvements. Ms. TENNEY. That is interesting that you say that you think they maybe intentionally did not give you the information. What reason would they be trying to hide the information from you or what would you attribute your opinion that they were intentionally trying to keep the information from you? Mr. SHEAR. This is one where I do not want to really state an intent because the idea is it is getting into people's minds as far as why was SBA not being cooperative? It was not from lack of effort from our side, and certainly, there were efforts made, not just by my teams but also by our General Counsel, by the Comptroller General, by Members of Congress. So I really do not want to comment on what the mindset was that led to the lack of cooperation. But there certainly was a lack of cooperation and it did impede transparency. Ms. TENNEY. Would you recommend that those people not continue to work in that regulatory agency and that we replace them? Because obviously this is obstructionist in some ways. Meeting the needs that the taxpayers are expecting with these programs. Mr. SHEAR. It was clear that this involved officials at very senior levels. So with the changes that have occurred now you have certainly new people in the associated administrator type of positions and general counsel position. We have a new Administrator. So it is a different environment. Ms. TENNEY. Do you think that any of that intentional, as you put it, do you think that has anything to do with the massive amount of fraud that we have discussed, like the 3.6 billion alone for the PPP program where potentially ineligible recipients receive that money? Is that something that you think there was some kind of underhanded behavior on their part? Mr. SHEAR. I do not want to make the connection to saying that the reason we see so much potential fraud in this program and so much fraud risk is because of the behavior that reduced the level of transparency and our inability to really audit the programs in a rigorous manner. But what I will state to you is that under normal conditions, and I will say this with SBA in terms of their normal programs and things like that, I would like to think that the cooperation leads to improvement of the operations of the agency. And that was an opportunity that was delayed by the lack of cooperation with us. The ability to have us take a look at how they are doing things and to make recommendations for improvement and act on those recommendations. So I am making a more general point. Mr. PHILLIPS. The gentlelady's time has expired. Ms. TENNEY. Can you say that you have a similar issue with the Treasury with the Do Not Pay business center? Mr. PHILLIPS. Ms. Tenney? Ms. TENNEY. Am I out of time? Mr. PHILLIPS. Yeah, your time is expired. I am sorry. Ms. TENNEY. Okay. Thank you. Thank you. Mr. PHILLIPS. Now, the gentlelady from California, Ms. Chu, is recognized for 5 minutes. Ms. CHU. Thank you. Mr. Ware, you provided such valuable testimony to the Oversight Subcommittee hearing that I chaired in October. After our hearing last fall, SBA strongly disagreed with the Office of Inspector General's findings on the level of fraud risk in the EIDL program and asserted that the agency had a robust system with internal controls. However, the third-party audit of SBA's 2020 finances found that despite this internal control system, SBA's loan officers were never formally trained to address flagged applications. So approvals on potentially fraudulent loans and rents continued. Well, today we have a new administration at SBA that is disbursing the targeted EIDL funds that have been appropriated by the American Rescue Plan. So Mr. Ware, you were saying that now SBA has implemented internal controls. But I want to know what the highest priority steps are that SBA can take today to improve the security of the EIDL grant and loan program, considering that these grants are being made as we speak, right now? Mr. WARE. Thank you. The highest priority as we would see it is actually some of the things that they said that they addressed. And we have some indication that they have. And that is reinstituting the rule of two where two people would review the loan, whereas they would stop the amount of batch processing that they would do. Those were big weaknesses in their system that allowed a lot of things to sneak through. Those are two of the biggest ones that come to mind quite quickly. They are doing the IP address checks. They are doing the bank account checks. I know that is a major part of it. Ms. CHU. So is it just implementation of the controls that are there now? Mr. WARE. Right. I believe that, well, the controls that were completely absent. Ms. CHU. Yes. Mr. WARE. Right. The implementation of those should actually help quite a bit. Ms. CHU. Okay, thanks. Mr. WARE. And I have got to tell you, it is a different environment in terms of cooperativeness and in terms of listening and in terms of sitting down to come up with what the best way is to address the fraud risk. Ms. CHU. So it sounds like they have implemented the suggestions, every single one of the suggestions you have talked about? Mr. WARE. Well, they have stated that they have. We have not yet tested them. Ms. CHU. Oh. Mr. WARE. Some we definitely can see that they have. Others, we certainly have not tested as yet. Ms. CHU. Okay. Mr. Ware, also, there is another issue. It has been almost a year since you participated in an oversight forum to discuss the findings of your flash report following the program launch. And during that forum you told me that last year SBA issued no guidance to lenders describing how they should prioritize underserved borrowers and have taken almost no steps to collect data on loan disbursements meaning that it would be nearly impossible to evaluate whether the program was reaching underserved businesses. And that is an important issue to me. Congress is great at set asides for community financial institutions in order to reach these underserved businesses-- data collection reporting we could never know how effective the programs would be at reaching underserved markets or how we can improve the outreach. So since under the last administration the agency failed to act on your recommendations, can you describe what specific steps the SBA can take now to backfill the demographic data on PPP recipients? Mr. WARE. Well, although publicly they disagree, they actually did make some changes to the forms. They did some changes to way that they are going to be measuring. So that was done even under the last administration to make sure that they could capture going forward. But what happened in the past, basically, it happened. So there is no way to capture that initial part of it. But going forward that was something that they did move to correct. Ms. CHU. And how about now in terms of the data collection? Mr. WARE. In terms of data collection, well, if you just use the Restaurant Revitalization program as an example, you are doing it in the pilot to make sure that they get to the people they are supposed to get to up front and to be able to take a deep breath and assess the effectiveness. I think that is a major step forward. And we will be reviewing that pilot program. Mr. PHILLIPS. The gentlelady's time has expired. And now the gentlelady from California, Ms. Kim, is recognized for 5 minutes. Ms. YOUNG KIM. Thank you, Chairman. I also want to thank the Committee for holding this important hearing to discuss the oversight of the SBA's COVID-19 programs. We have heard a lot about the deficiencies that were found through the GAO and IG report and I think we all agree that PPP and the EIDL program have helped countless small businesses. It certainly did in my 39th District. However, in order to explore the PPP and the EIDL continues to provide assistance [inaudible] taxpayer money, SBA [inaudible] better job complying with GAO and Inspector General recommendations. The purpose of this hearing is to let them know that we are watching and they are on notice. But SBA should also take note of the oversight deficiencies of the PPP program to ensure that other programs do not face the same problems. So Mr. Ware, to your knowledge, does the SBA have the right oversight capabilities in place for the [inaudible] program and the Restaurant Revitalization Fund program? Mr. WARE. What I can say is this: Based on what SBA has provided to our office, it is apparent, number one, that they are taking it very, very seriously. And number two, on the surface, that they have built in a control structure that would address all of our recommendations and that should, on the surface because we have not yet tested them, it should mitigate a lot of the fraud risk that we saw in the beginning. Ms. YOUNG KIM. So when do you plan on doing a follow-up inspection? Mr. WARE. Well, for example, on the Restaurant Revitalization program, we will be conducting a review of the implementation of the pilot, for example. At that time we will be able to talk more clearly and succinctly about what controls were in place, what the controls achieved, and whether or not they met the intent of the act. Ms. YOUNG KIM. Mr. Ware, you mentioned the importance of data analytics. So how does data analytics help? Can you provide some examples? Mr. WARE. Sure. Well, it has basically transformed the way we do business. When you have that many loans to review, when you have that many hotline complaints, when you have that many referrals from the agency to the tune of almost like 15,000 a week, the only way that you could focus your attention on what needs to be focused on is through the use of data analytics, through the use of trend analysis to see where the problems are located so that we can assign our investigative staff to pursue it. Or so that we can assign our audit staff to give a more global look in terms of what is going on in these programs. Where the fraud is so that we can move. It is the only thing that has not crippled us. We would have been crippled had it not been for data analytics. Ms. YOUNG KIM. That is fine. I will yield the balance of my time. Thank you. Chairwoman VELAZQUEZ. The gentlelady yields back. The gentleman from Pennsylvania, Mr. Evans, is recognized for 5 minutes. You need to unmute. Mr. EVANS. Thank you. Thank you, Madam Chair. Thank you also for this hearing. I would like to ask a question, Madam Chair, to Mr. Shear and Mr. Ware. The question I would like to ask is, if you had to give the SBA a grade for handling of the programs during the pandemic, what grade would you give it and why? Mr. WARE. Bill? I would like to see how you tackle that one. Mr. SHEAR. Okay. I will give it a try. It is a great question and it makes me think of my former days as a college professor. It is just like how do you grade students. And on this one, we were very accepting when SBA said, going back to last April, we had to get the loans out quickly, there was a pressing need to get the loans out quickly. And so at any rate, they got the loans out very quickly but then when you look at just the problems with administering the program and moving forward and putting the types of oversight in place that was so necessary and just the lack of cooperation with us rather than trying to use us as a tool to try to identify improvements that could be made in the program, it is a poor record. And so these are some of the things that are associated with why we have these programs on our high risk list. Mr. WARE. The role of an Inspector General is to assist our agencies in being the best agencies that they can be in terms of efficiency and effectiveness. As we all know, SBA was charged with setting up a program in a matter of days. They got 14 years' worth of lending out in 14 days basically. And we were along on the ride with them from the very beginning in terms of the three white papers that we put out and in terms of coming to the table and what needed to be set up from the very beginning. I do not know what grade I would give but I know had those been heeded it would be a much larger success story. I cannot give a letter grade. Mr. EVANS. Is that the same deal with Mr. Ware? Can you give one to you or you would rather not to? Mr. WARE. No, that was me. Mr. EVANS. Mr. Shear. I mean, Mr. Shear. Mr. WARE. Oh, yeah, yeah, sorry. Mr. SHEAR. I would just say that personally, my focus is more on this long period of time where there was the lack of transparency, the lack of cooperation and where there was not a demonstration basically that, for example, with PPP, that the loan review process being in place, the lack of information there. So I am not going to give, you know, I do not want to give an exact letter grade but it would not be an A. So, but I really, I really do not want to give it a letter grade. It is not something that we are in the business of doing. Mr. EVANS. Mr. Ware, is that what you are saying, too? You do not want to give it a grade neither? Mr. WARE. Yes. I am saying that it is clear that SBA worked hard. And I am here. I know how hard these employees have worked. And they helped Americans in need. The only thing is in terms of our assurance, or anyone's assurance that the money went to only the eligible. So, no letter grade. Mr. EVANS. I thank both of you. I yield back the balance of my time, Madam Chair. Thank you. Chairwoman VELAZQUEZ. The gentleman yields back. The gentlelady from Texas, Ms. Van Duyne, is recognized for 5 minutes. Ms. VAN DUYNE. Thank you very much, Madam Chair. And to the Ranking Member for holding this necessary hearing. Each of today's testimonies have referenced that amidst billion of dollars of fraud and identity theft and its pandemic relief programs, that the SBA has failed to provide necessary data and documentation on the PPP and EIDL in a timely manner. I have got to tell you. I listened to a lot of blame game going on today and it is frustrating. We have people who are being blamed in leadership that are no longer here to defend themselves. I know that SBA was a $17 billion agency that was expected to put out over a trillion dollars in a matter of months. I am not here to defend them but I think what we need to do, instead of playing the blame game on the last administration that I know elected officials were the ones who were pushing that to make sure that that money got out, for good reason. Governments shut down these businesses and made them insoluble in a number of cases and we needed to help them as soon as we could. But I am looking moving forward. What are the steps that we are going to take as we are coming out with more money to add to these programs, as we are coming out with more programs of the new administration. Moving forward, what are we doing to make sure that we will be in a position where this fraud is not rampant, where we are having more controls given the fact that we have had a number of months now to get up to speed? So with that, regarding the lack of data and documentation, my question to both of you is, what information is still outstanding and who can provide it? Are we expecting a time period that we are going to look and work with the new administration to say this is actually the numbers that we looked at? I am sure that data exists. How do we get to it? Mr. Ware, go ahead and go first. Mr. WARE. Should I go first? Okay. My issue was a lot different from GAO's, my experience was. All right? I had access for the most part to the data that I wanted. And I had access to the leadership. I sat at the table with the leadership on numerous occasions. As a matter of fact, every week the administrator and I had a standing meeting every week where we would go over these things. So I did not have that same experience. And I do not have anything that is necessarily outstanding that would prevent us from providing the type of fast information that the agency can use to make sure that they are putting out these programs the way they are supposed to. Ms. VAN DUYNE. Mr. Shear? Mr. SHEAR. Our focus is on looking at how SBA is acting to implement our eight open recommendations. So that is a big focus of ours and a lot of that is that we are being provided information and we know that these recommendations are not something that it is just a matter of giving us information, that SBA will have to make some fundamental changes. And I think that they are showing a responsiveness to realize that certain changes have to be made in how these programs are operated. As far as what we are doing is that our next step, we have had these bimonthly reports that are GAO-wide under the CARES Act, and we are going to quarterly reports. And then we are going to have three standalone reports this summer that will focus on for PPP one report looking at who has been served by the program and the lenders and borrowers that have been participating in the program. On PPP, what I have been talking about today has to do with internal controls and looking at the forgiveness process. So we are analyzing a lot of data. We are analyzing a lot of information. We are getting cooperation on that. We are still seeking a fair amount of information on the oversight structure for the EIDL program but we are going to be reporting on the EIDL program in a standalone report that is going to be both on who has been served by the program and looking at questions as far as how is the agency implementing our recommendations. And in doing that, now that we have a lot more information---- Ms. VAN DUYNE. Understand, I have got 5 minutes and I have got a ton more questions so if you could just make your answer a little bit more---- Mr. SHEAR. I will just say we are probably going to have more recommendations---- Ms. VAN DUYNE. Okay. Mr. SHEAR.--now that we have more detailed information on what the agency is doing. Ms. VAN DUYNE. Okay. So we are going to see a lot more reports coming out. But you have got two new programs that are going to come out now, the Shuttered Venue and the Restaurant Revitalization Fund, which are, again, new programs under the new administration, their own challenges. You have already noted that some of these have had horrendous launches. So do you believe that the SBA has put in place enough controls to limit the susceptibility to waste, fraud, and abuse for the new programs? Chairwoman VELAZQUEZ. Time has expired but I will let him answer the question. Go ahead. Mr. WARE. Okay. In response to the question, what we have been presented with to date demonstrates that they are very alert and attentive to the issues that were in place before and intent on making sure that it is not there. They have set up a control environment to address these issues. Ms. VAN DUYNE. Okay. Well, I---- Mr. WARE. We have not tested it yet. Ms. VAN DUYNE. Okay. I look forward to working with Chairman Phillips to hold a hearing in the near future on some of these issues with the OIG's office, GAO's office and SBA. I know that we have got the SBA administrator coming in at our next hearing but I really look forward on our Oversight, Investigations, and Regulations Subcommittee on pulling together a hearing. So thank you very much. Chairwoman VELAZQUEZ. The gentlelady's time has expired. The gentlelady from Minnesota, Ms. Craig, is recognized for 5 minutes. Ms. CRAIG. Thank you so much, Chairwoman, and thank you in particular for holding this hearing today. Mr. Ware and Mr. Shear, thank you for being here, and for keeping this Committee updated and well-informed on the SBA's pandemic response. I know that this has been a significant challenge for the Small Business administration over the last just over a year now and we appreciate the work that the SBA and its employees have undergone to make sure that our small businesses, as many as possible, could survive this public health crisis. It is clear from testimony today though that there have been some internal controls that are lacking, and action in the SBA has resulted in several issues that ultimately harm the people that we are trying to help, those small business owners. While the SBA should certainly work toward corrective actions based on its experience over the last year, we have an opportunity to proactively add more internal controls and address these issues as we stand up new programs such as the Shuttered Venue Operator's Grant and the Restaurant Revitalization Fund. So Representative Van Duyne in her questioning here just a moment ago touched on this at the end but I know she was out of time and you did not get to really expand upon this, but our hardest hit small businesses have been waiting for this assistance for months and we must ensure these funds to get our small business owners the money and not spammers. So Mr. Ware, you noted in your testimony serious concerns with the control and tracking of the Shuttered Venue Operators Grant program that requires immediate action and attention. Could you please provide an update on that work that you are doing with the SBA to strengthen and launch this program? And more specifically, have there been similar conversations, and do you believe that the work you are doing for the Shuttered Venue program will suffice as you launch the Restaurant Revitalization Fund? Mr. WARE. So maybe I will start backwards. So on the Restaurant program, like I said, it is very evident that they are intent on establishing a control structure that would ensure that fraud risk is mitigated in a major way. I believe they have done the same thing on the shuttered venue programs. Those programs, they have shown us the control structures for both of them that go a long way in addressing many, if not all of our concerns. The issue that I reported on with the Shuttered Venue had to do with what happens for the people that get in the right way. Is there proper guidance? Is there any way for you to monitor what those funds are actually going to be used for? Because it is a grant program. It is not a lending program. There are specific rules contained in the 2 CFR 200. And so that was the issue that we thought was critical, that they had to have the control structure on the inside to make sure that we are able to know what the program results were. Ms. CRAIG. Fantastic. Well, I also serve on the Oversight Subcommittee, and we will look forward to continuing to receive your information and I look forward to Chairman Phillips continuing that dialogue. And with that, Madam Chairwoman, I am going to yield back. Chairwoman VELAZQUEZ. She yielded back. I am sorry. Thank you. The gentlelady yields back. The gentlelady from Florida is recognized, Ms. Salazar, for 5 minutes. Ms. SALAZAR. Thank you, Madam Chairman. And thank you very much, Mr. Ware, for your role as Inspector General which is vital to do a good job. And myself, as well as my constituents thank you for your hard work. And I have a few questions which I know they are going to be a little bit uncomfortable but I wanted to just ask you if you the last year the SBA received $3.6 billion in salary and administrative costs, the Inspector General office received $70 million, and it received $50 million extra for audits. But after all this money that I just explained and I just told you right now, still, $82 billion between PPP and EIDL was not used properly. Eighty-two billion dollars. So where were you guys? Were you guys asleep? You had, I am going to repeat, $3.6 billion in salaries and administrative costs, $70 million for the Inspector General Office, and $50 million for audits. Mr. WARE. I am not sure if you realize, I am the Inspector General, so I did not get those funds that you are talking about. My budget is generally $21 million and it is for audits, investigations, and things of that nature. We were far from asleep. We have been---- Ms. SALAZAR. Well, wait a minute. Were you not in charge? Were you not the---- Mr. WARE.--issues of this before the first loan went out the door. Ms. SALAZAR. Let me just interrupt you in a minute. Were you not in charge of making sure that whatever monies the SBA was receiving was properly used? Mr. WARE. I am the Inspector General. My job is to make sure that I point out instances of fraud, waste, and abuse. That is the role of an IG. Ms. SALAZAR. Correct. So when $82 billion were being---- Mr. WARE. Correct. And that is what we did---- Ms. SALAZAR.--dilapidated. Yes, tell me. So where were you? Mr. WARE. We were the ones who reported on the money that is being misused. We are the ones conducting the criminal investigations to make sure criminals are brought to justice. That is our role. I think there is confusion between the role of the Inspector General and the role of the administrator. Ms. SALAZAR. And I am sorry my ignorance. And it is true. Let's suppose that I am ignorant and I am very sorry, but then, what then can we do with your help in order to make sure that those people that did not use these monies properly are going to be held responsible? Mr. WARE. That is my role. To date, we have over 460 criminal investigations going on. We have already recovered, along with SBA, over $1.9 billion. This is what we do. And we have been the ones that have been recommending from the very beginning the proper control environment that needs to be in place up front so that I do not have as many criminal investigations to run on the back end. Ms. SALAZAR. All right. So then you did your job and I commend you for that. So then who do we have to go to right now in order to ask that person these questions? Somebody has to be responsible and that is what I am trying to find out and you are the person that needs to tell us. Mr. WARE. I believe at this point where we are currently, we are in an environment where the control environment is greatly shrinking. We are in an environment where we have partnered across the entire government to include FBI, Social Security Administration, Secret Service, FDIC, everyone, the PRAC working groups, all of us are looking into this at this time. Ms. SALAZAR. All right. So then please keep advising us as to where we need to look at in order to make sure that we do not have another $82 billion wasted. Mr. WARE. Thank you. Ms. SALAZAR. I yield back. Chairwoman VELAZQUEZ. The gentlelady yields back. With that we conclude our important oversight hearing. Let me thank our witnesses for joining us today. Your oversight of SBA is a critical tool for Congress as we seek to limit instances of fraud, waste, and abuse in agency programs. PPP and EIDL have been vital lifelines for the millions of small businesses that have been devastated by the pandemic. However, it is clear that these programs' unprecedented size and scope, in addition to the speed in which the agency processed these loans have opened them up for fraud. The steps SBA has been taking to mitigate fraud are encouraging. However, your testimony today has made it clear that more work needs to be done. This Committee must remain diligent and work to root out instances of fraud, waste, and abuse. To address the problems that we have heard about today, we must conduct this oversight in a fair, bipartisan manner. I look forward to working with Committee Members to ensure that money goes to the small businesses that truly need it and that taxpayers' dollars are protected. I will ask unanimous consent that Members have 5 legislative days to submit statements and supporting materials for the record. Without objection, so ordered. If there is no further business to come before the Committee, we are adjourned. Thank you. [Whereupon, at 12:02 p.m., the Committee was adjourned.] A P P E N D I X [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]