prevent waste and fraud and business loans provided by coronavirus relief legislation.

>> good morning. i call this hearing to order without objection. the chair is authorized to declare a recess at anytime. let me begin by saying that standing house and committee rules and practice will continue to apply during private proceedings. all members are reminded that they are expected to adhere to the standing rules. how is regulations require members to be peaceful throughout the proceeding. please keep your cameras off. also, please remember to remain muted until you are recognized to minimize background noise. if you have to participate in another proceeding, please exit hand walked back in later. in the event a member counters

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 physician. that includes social distancing and specially the use of masks. members and staff are expected to wear a mask at all times while in the hearing room. i think 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, and the sba has approved 9.9 million ppp loans worth 762 billion 3.7 7 million had a loans, for approximately 195 billion, and has dispersed 5.8 million idle advances amounting to 20 million dollars. 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. i commend sba staffed who have worked around the clock, often

seven 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 the committee's work to take a hard look at this effort and learn lessons for the future. i hope to examine the progress made by our nations watchdogs and hear about sba's effort to address them. since the inception of the pandemic, the government accountability office and sba 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, ppp and idle were headed to the high risk list identifying the economic program as being at high risk for waste, fraud, and

abuse. this report is sobering, and called for action. to that end, in the last congress, i worked closely within 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 would work effectively for americas small businesses. and it's my hope that in this congress, the committee can put our partisan differences aside and work together to support the new administration to receive much needed economic assistance at americas small businesses. it's important to know 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 a ppp and idle. the agency implemented a long review plan, maximizing program integrity. in 2021, before issuing an sba loan number, they would conduct front and compliance checks on new first dropped ppp applications, using a modified version of the automatic screening tool and information from the department of the treasury. i applaud the new administration for taking this concern seriously and acting quickly to prevent emergency loans from going to bad actors. but as i always say, if something isn't perfect, let's

see what we can do to make it better. i want to thank you for joining us today, and i now yield to the ranking member for his opening statement. every american social nations small thank you, madam chair. the covid-19 pandemic has thrown never before obstacles in front of every american, especially our nation's small businesses. the devastating state and local shutdowns, to the struggle to find sufficient capital and employees to survive, our country has never faced a destructive problem like this. regardless of who has held the gavel, congress has long held view that small businesses are vital to the health of this nation's economy and security. small business act of 1953 and the small business investment act of 1958 established the sba's function to aid, counsel, assist, protect, and as far as

possible support all small business concerns. it continues to hold true nearly 70 years later. equally important is the need to maintain vigorous oversight of its own programs. we have seen numerous blunders, and i use the term politely, as the sba hasn't uncollected to be good stewards of our constituents tax dollars. we've seen countless stories of how the paycheck protection program and the advances have benefited small businesses, kept employees under payroll, and helped pay mortgage and utilities. without these, millions of employees would be out of work. that's the good news. the bad news is that the sba has mismanaged the programs and open them up to unprecedented levels of waste, fraud, and abuse, squandering taxpayer dollars to help the economy move forward. this is unacceptable. we will hear from the inspector

general and governor watchdog and accountability office during the hearing, citing specific examples of troubling failures by the fda to administer lifesaving programs. we've been working diligently to rectify these problems. 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 improve the covid programs. we offered amendments that would significantly increase the appropriation for sva's office of inspector general, for business to expand oversight of programs, specifically calling on the administrator to closely examine waste, fraud, and abuse within the eidl programs. while my colleagues have many kind things to say about most of the ideas at the time, not one democrat voted for any of these. perhaps after the subsequent events that have taken place, my friends on the side of the

aisle will come to the table and work with us on these serious issues. do we really need another alert about the impending doom of another espy program like the one published hours before the program went live and quickly crashed? no one should want that level of dysfunction to occur again. the fda had more than three months to put this together, and they couldn't do. it's small business owners have been waiting a long time for these funds. they want those who qualify to get the money as expeditiously as possible with the necessary safeguards in place for all programs before american taxpayer dollars are dispersed. in addition, we are still waiting for details like the specific launch date for the restaurant revitalization for containing president biden's partisan 1.9 trillion dollar covid package. we tried having more money to support reconciliation, but again, it goes forward in a

partisan manner. if my friends across the aisle can agree we can't afford another bungled rolled out of the program like we saw in the other venues, we need to be actively issuing legislative vehicles to ensure this dysfunction does not occur again. moving forward, the committee must focus on these three areas. first, we need to prioritize eliminating waste, fraud, delay new programs until the fbi has the oversight controls in place, and third, we need to take a hard look and restructure the fbi as a whole. that's a question that needs to be answered. i yield back. >> thank you and 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 will have five minutes to provide a statement and each committee member will have five minutes for questions. please ensure that your microphone is on when you begin speaking and that you return to mute when finish. with that, i will introduce our witnesses. our first witness is mr. bill shear. he is the director of financial markets and community investment. he leads gao and works in addressing the sba community and economic development programs, and native american housing issues. as part of his portfolio, he oversees the moderation of sba contracting, disaster assistance, credit, and counseling programs. he has a masters degree in public policy and a ph.d. and economics, both from the university of chicago. welcome, mr. shear. her second witness is the honorable mike we are, inspector general of the sba. he was sworn in as inspector

general in may 2018 and has been an effective leader in the role and an asset to the committee. he has 28 years of experience in the ig community, rooting out fraud, waste, and abuse. welcome, mr. weir. mr. scheer, you are recognized for five minutes. >> thank you, chair woman velasquez and members of the committee. i'm pleased to be here this morning to discuss our son espy's paycheck protection program and the economic injury disaster loans program. as he has made a guarantee of 19 million loans and grants through these programs, providing about 970 billion dollars to help small businesses adversely affected by covid-19. in april 2020, the fbi moved quickly to help small businesses survive during the pandemic. the sba and isha lee put -limited controls in place, leaving both programs

susceptible to program integrity issues and fraud. since june 2020, we've made eight recommendations to sba to improve the programs. in addition, we included these programs as a new area in the high risk list in march 2021 because of their potential for fraud, significant integrity risk, and need for much-improved program management and better oversight. we also cited the results of espn's most recent financial statement audit, in which the auditor issued a disclaimer on the fda's financial statements because the sba was unable to provide adequate documentation to provide a significant number of transactions and account balances related to ppp and eidl. further, 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'm glad to report

that we have received a significant amount of information and data from sba, and it's contractors over the past two and a half months. here, i will quickly summarize the steps the 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. november 2020, we recommended that sba expeditiously estimate proper payments for ppp and report estimates. he sba has now developed a plan for testing needed to estimate improper payments. in january 2021, we recommended that sba conduct portfolio

level analysis to detect potentially ineligible applications. sba has not announced plans to implement this recommendation. in march 2021, we recommended that sba implemented comprehensive oversight plan for eidl to ensure program integrity. sba agreed to implement 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 in the 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 data on the ppp and eidl loan processes. in addition, we've obtained additional information from a survey of ppp participating

lenders, interviews with sba contractors, and responses to questions provided by eidl contractors and subcontractors. this concludes my statement. i would be pleased to respond. thank you. mr. weir, you are now recognized for five minutes. >> good morning. chairwoman velasquez, ranking member lucas meyer and distinguished members of the committee. thank you very inviting me to speak with you today and for a continued support of the office. that comes before you today in the midst of a historic night challenge of the nation a challenge in which the fbi has a pivotal and unprecedented ruling stabilizing the u.s. economy. the men and women of my office have been working diligently to provide -- them always proud to represent them publicly and to speak to you you about our important work. we share the nation's grief of those lost in the pandemic and are keenly aware of nothing short of the public's trust is at stake and our oversight efforts. espy is managing over a

trillion dollars in authority to the ppp and the idle programs, the most recent -- being contained within the american rescue plan act. as with oig, men and women of spca have been running at a sprinters pace, however the race we are running has been more of a marathon. nonetheless, we sought out in aggressive and focused approach for our oversight for trinchera or his properly calibrated and relevant. congress recognized that the oversight required that the pandemic response was outside for a cross government to include my office. we have received three supplemental appropriations to increase our oversight capacity. initially, we focused on the recruitment of the mix of auditors and analysts and criminal investigators to provide immediate and timely insight into these programs. and december of, we received funding directed to oversight of the other program which -- these funds are being used to increase our investigative staff and enhanced 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 come back. fraud investigations will be a decades long effort due to the performance of these loans within sba's portfolios, and under the statute of limitations of fraud. our office will have a proximity 40% more staff on board after our hiring search are to conclude, then we have before march of 2020. even still, we recognize 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 task force us to multiply our reach. since the outside of the pandemic response, our strategy has been to prevent and deter fraud and abuse and to identify a combat of the same. the first step was the insurance of -- shedding risks and lessons learned from our past oversight work. principally, that most closely related which is of the american -- these reports, as well as a

fraud and scam alert were published before spca, made the first ppe and eidla loans. recognize that the speed of which these programs, we this to provide to our stakeholders. our first report was published just a little over 30 days of bibi peace presentation. our next report would come out in july, which found significant efficiencies and internal controls on rampant fraud within the eidl program. we have issued 13 reports on sba's pandemic response oversight with two more constituents. most recently, we issued a management alert on serious concerns about spca's controlled environment and the tracking of performance result in operators grant program. prior to the program launch. in light of having to plan a program under tight constraints it's imperative that spa the veranda program that has audit risk framework, consistent application of federal regulations of land management,

clearly defined perform schools and adequate resources to effectively administer the program. while our audit work wasn't going, our criminal investigators were aggressively pursuing fraud. on may 5th, just a little over a month after the first ppp loans, the first of the nation challenges 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 is now over 100 indictments against individuals committing fraud against a ppp. we have received over 150,000 complaints on our hotlines 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 -- outside of our online complaints submission system, and we are employing data analytics to further triage and guide these efforts. look forward to discussing and our most recent published works of implementation of ppp, eidl

and -- thank you for the opportunity to speak you today, i am happy to answer any questions you may have. >> thank you. i will begin recognizing myself for five minutes. mr. weir, the biden administration has taken steps to restore programming peg, including implementing from in compliance checks on ppp loans. what other steps have been taken by the new administration to improve program integrity and how effective will these steps be? you are muted. >> 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 and controls to include addressing our recommendations that have to do with ip address, confliction, 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. >> thank you. >> yes. >> mr. scheer, mr. weir, have the new administration been responsive to your requests? has sba, under the leadership of president biden, and administrator with men increased the level of cooperation and transparency? as the new administration been more forthcoming with information? >> yes. definitely, as in my written statement admiral statement, since the beginning of february, in terms of access to people having indefinite discussions

with spf officials and their contractors, in terms of providing as data and information, providing us details about the oversight plans for particularly for ppp, i'm glad to be glad. >> mr. weir? >> i also agree. i did not have many of the problems that gao had. 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 officer general has to say. >> 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 order.

mr. scheer and mr. weir, where the loans mentioned in your report made during the last administration, or since march 16 when the new administration we are sworn in? mr. shear. >> the loans that we are referring to is over a period that goes into, i think it's the beginning of 2021. but for the most part, it was for the period during the previous administration. >> mr. weir? >> pretty much the same. 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's happening in the future. >> thank you. mr. we are, your office issued

a management alert on april 7th, 2021, the night before the launch of the venue program. citing a number of concerns, but you missed the main issue, the technical issues that further the system on the day of the launch. what happened on your end and why did you not flagged these concerns earlier? >> thank you for that. a management alert or advisory, the purpose of it is to present interim engagement results or sheer information that 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 controlled environment. at that time, we hadn't yet adapted to those controls. >> so mr. weir, is it customary

to alert congress on the agency of such concerns in a timely manner? >> it is. but the alert, right? it is part of a broader scope review. so in terms of alert and timely, this is what we are alert and 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. this or the concerns that we thought we should raise immediately. >> thank you. my time has expired. and now i recognize the ranking member, mr. luke meyer for five minutes. >> thank you madam chair. i think we need to sort of set the stage here a little bit with regards to what we are talking about this morning. from standpoint, you know ppp program was implemented in a very quick fashion, in a way that we knew we had our economy

at risk, our jobs at risk, businesses at risk and we do this moves probably that the perfect way of going about the dispensing dollars. and i think as ba did a great job of getting those dollars out the door in the hands of folks who need it. i think the numbers that we come back with concerns about some of these loans, as a former regulator, i can tell you that whenever you're looking at a loan file, and you see something that my daughter tina crossed in, there you take it for technical exception. i think -- in discussing in this issue was some of the ig and ngo folks, i think that's where we are with some of the stuff that's in his reports. that being said, there has been documented fraud in there as well. and i think that's the concern that i have is that we make sure that we go back and cover those dollars. make sure that there is an effort to make aid to stop those folks from getting out those dollars and setting up the new programs, which are the

eidl here with the recharge your money, as well as the restaurant program and venue program. and make sure those programs are set up so this doesn't happen again. and this is my concern, this morning. from the standpoint that the eidl program and i quote mr. weir, you called it a lamp and fraud in the eidl program with the identity theft. that's not that big compared to the amount of money that's going out with regards to identity theft. and, i have you seen any kind of controls put in place by the spa with regard to identity theft, because i think the shared venue program was going to be operated very similar to, if i'm not mistaken, the way the eidl program is. have you seen anything put in place that could be considered protection against that kind of activity? >> yes. i actually we have. sba and in particular, in this

consensus we talk about eidl, they have been at the table, quickly implementing the upfront controls. we have been tested them as yet, we trust they've been doing it but we always verify. but, the alert on short venues, for example, never address the upfront controls or fraud. that we found that they had in place, at least what we had asked them to implement. what we were talking about with relative to mandarin new program and having enough people to actually oversee the program on the back end, so we know that the program met its intended purpose. >> well, with regards to that. i don't think -- according to you to also reports, there was not that much identity theft of a problem in the ppp program,

comparatively to the idle program. so it begs the question, the difference between the eidl program and the ppp programs is the banks have -- basically where the ones that went through these programs and got these dollars out the door. and they have a customer lawn place to make sure that they know who to, the person is, who's contacting them, the business is that they're working with. and yet, in the eidl program, those start with safeguards that are not in place but it seems to me, if sba it's going to stop that kind of fraud, they need to change the way that they do landing and let the landing peter wrecked 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 at the patrols in place or such that you wouldn't want to see perhaps if third-party actually get those dollars out the door, so there's another level of

safeguards in place. especially when the banks are there and used to i dotting and he crossing, collecting information, collecting forms and doing it in a very efficient manner. when you consider that something that we need to be taking a look at? >> 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 haven't done yet. we believe in what we have recommended to sba, and we believe that if they properly implemented, it would stem fraud. >> what would be your opinion on that? >> i would agree with mr. weir that the mechanisms from the program is different with respect to ppp and the role of the banks.

there is information that comes out of it. we have suspicious activity reports and are used to that kind of arrangement, but they also made suspicious activity reports in eidl as well. there is some control in place, know your customer kind of controls, that also effect two was able to get in and get the loans. there are certain trade-offs here in terms of who is being served. there is a mechanism there through, as you say, banks. but just like mr. weir said, we haven't tested controls and we are looking for the details on the oversight of the banks themselves. we are going through the information, which is quite extensive, that we have been getting to look at what the oversight of the banks as.

>> thank you very much. i yield back. >> the gentleman yields back. we now recognize the gentleman from colorado. you have five minutes. >> thank you, chairwoman. thank you to the witnesses for coming here today. mr. weir, i have a question regarding data and the integrity of data. last year, it was discovered that the database had significant data disparities. this is one example. the zip codes and congressional data, district data, did not match up. the sba itself had found in reviewing over 500 ppp loans over the hundred 50,000 dollar threshold that 111 did not match the state code for the

loan. a 22% disparity. we did our own analysis and found significant loans that had been allocated to other districts that occurred within our district, hundreds in fact. so did you all see that same disparity in your review? have you been able to track any trends as to whether the data disparity is getting cleaned up? >> thank you very much. yes, we actually found the very same thing in terms of our data. it kept reporting that some of the data was dirty, the term they use. it's not good. but i know they were able to work with the sba to rectify some of those challenges, which means sba is able to clean the data once they know that it's incorrect. that's something they are

working on. they are working on making sure we have clean data. >> can you give me some sense? i bristle at the notion that we are working on it. the problem for us is i'm sitting here, and we all represent districts, and i literally want to know what loans have been given in my district. i want to know where those loans went, what's the lone numbers are, and i just don't have trust right now that i understand that anyone of us sitting here today can pull that data up and trust that data and actually know it's going on in our own communities. can you give us a sense as to when we can have that trust and a date by which we can say this is the data and our community? >> as you know, that data belongs to sba. the question would be best posed to the program, which is

sba. >> but mr. weir, you are the watchdog of sba, right? i'm asking you, as the watchdog, the person that's charged with internal oversight, what you think the timeline is. >> like i was saying, as i'm not on the program side of things, i cannot give you a definitive date on which they would clean up their data. >> i'm not asking for a definitive date. i'm not asking for a definitive date. give me an estimate as to the glide path they have for cleaning this up. are we talking about a week, a year, somewhere in between? can you give me any sense as to where they are at? >> it's real difficult for me to give you a sense of where they are at.

but i can tell you is what my office reviews, we clean, to make sure the data we are putting out in our reports is indeed accurate. >> okay. i understand. that doesn't help us, unfortunately. it doesn't help us, and you can tell i'm frustrated, because we don't even know what's 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 as to when it will be clean. i think i made my point here. this needs to be fixed. i expect you to push hard and we would like better answers from somebody as to when this will be fixed. madam chair, i yield back. >> the gentleman yields back. the gentleman from your texas is recognized for five minutes.

>> thank you, madam chair. on april 8th, small businesses across the country were devastated to see the shuttered venue operator grand shut down within two hours of launching. i was in the republican lead on the house side, so i'm disturbed and what i've seen. these businesses have already suffered enough economic injury while waiting for the program to reopen. you mentioned in your testimony that you have serious concerns about the sba's control over programs. can you elaborate on specific internal controls that need to be implemented regarding waste and fraud? and are you confident that the changes outlined in your initiald5■ report -- by the time the portal reopens? we have businesses closing every day. what can we do to fix that?

>> thank you for your question. the alert that we put our raise the attention of serious controls within the controlled environment and performance results. we need them to eliminate risk by implementing controls to address the misuse of federal funds. in this case, it was the way they wanted to go about identifying the vulnerabilities commensurate with the expectations they would get. we want to clearly established criteria for the program to ensure compliance. 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 didn't feel they had sufficient resources available to implement or oversee the

program. relative to the fraud risk side of it, this did not address that, because we found they had implemented the recommendations that we had been giving all along in terms of wet checks should be in place to mitigate the risk of fraud. >> okay. i spoke with administrator groomsmen the other day, after the oig report, and it seems like they are claiming the report was released prematurely as a result of miscommunication. many of the concerns have already been addressed. even if that's true, it raises concerns about the ability to carry out programs in the future if they cannot get on the same page as the office of inspector general. what improvements need to be made to solve these communications issues so we can have confidence that all the programs being run by the sba are doing so with the proper levels of oversight?

i remind you, many, many people are waiting to get on these programs to save their businesses. >> this is a little surprising to me. you are catching me a little bit off guard. program staff and >> internally, before we release anything, there's quite a few meetings that take place between our audit teams and program staff. and even in, not necessarily a communication all issue, it was understanding of what we mean by you have to establish criteria that's different, because this is a grant program and not a lending program. we didn't think you could shut off certain requirements, but that was the main thing.

we are building a relationship. we have now stated rules of engagement for how we go forward to make sure they don't feel there is a communication issue. >> let me move on to another question. i recently sent a letter to the sba expressing concerns about the outstanding ppp loan forgiveness application passed the 90-day deadline. the lack of communication coming out of the agency on these outstanding loans and keeping financial institutions and businesses in the dark results and hardworking americans stuck holding enormous liabilities. quickly, what steps need to be taken with the sba so we can clear the backlog of ppp loans waiting to be forgiven? >> it's consistent with putting

in the right internal controls that pay attention to what are the elements that are kind of slowing down the forgiveness decisions? when flags go up, basically, flags of potential fraud, is there a disciplined approach of determining which flags are more important than others? these are the types of things we are looking for in that program. now that we have ppp forgiveness data, we are analyzing it in-depth to make sure how rampant the problems are. i don't have an answer to your question yet as far as whether it's isolated or whether there is a large magnitude to this. >> i yield my time back. >> the gentleman yields back.

>> thank, you chairwoman. thank you to you and the ranking member for holding this hearing today, and of course to mr. scheer and mr. weir for your critical oversight work. the fbi had approved over 13 million loans totaling approximately 964 billion dollars through the paycheck protection program and eidl program. these have been absolutely essential lifelines to small businesses across the country. and we know there's more to be done to support small businesses through the end of the pandemic. part of the support definitely has to include the exact thing we have been talking about today, ensuring the integrity of the program, preventing further fraud and abuse, and i know the office of inspector general and the gao reports of

highlighted persistent fraud in both the ppp and eidl programs. the kansas third, 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. it was a largely suburban and residential area. in addition to wasting taxpayer dollars, these are defrauding innocent people through identity theft. it is obviously urgent and critical that sba is able to root out this type of fraud really quickly, and i know i and others have urged for the sba to adopt oig recommendations that we've already seen, so that the victims of identity theft are

not held at fault. mr. weir, 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. can you give us an assessment, i know you indicated that there is some new funding controls. but can you give us pay sense of how the sba it's handling these types of cases? >> in terms of identity theft? >> yeah, identity theft and particularly as it relates to ppp and eidl -- or the eidl seems to be the one that has the most impact in the district that i represent, based on the data we have. >> correct. well, we have ongoing review right now.

matter-of-fact, that report i think the response from sba to this report is due today, if i'm not mistaken. i think it was the 20th. and will be issued shortly thereafter, provided they don't ask for an extension, but we are reporting publicly on wet sba has done to address what's happening, with identity theft. like you, we've heard countless stories and complaints involving identity theft. and just so we are clear, oig doesn't have principle jurisdiction on investigations involved in 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 next urgent matter for sba to

address. one that's tied to internal controls and the programs. so it's something that we're taking very seriously and many of our active investigations have to do with this identity theft issue. >> yeah. so that's helpful context, i'm 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, you know, people who have been the victim of identity theft from the eidl loans haven't been negatively impacted and about other aspects of their lives? >> we have provided

recommendations. the thing is, it's still in draft so it's not a completed work that i can speak about in this setting. >> so will follow up with you based on your answers today. thank you so much chairwoman, i yield back. >> the gentleman from minnesota, is recognized for five minutes. >> thank you chair, i appreciate this opportunity and thanks to the witnesses. mr. weir, you know, i think you've been around government a little while and you kind of realize that this was quite an avalanche of a landing that was going on by sba through their partnerships with financial institutions and others. and it's quite something that the congress and the president can get a bill enacted and then seven days later, they would actually have regulations on the books in order to move the program along. using usually regulations like that would take to the six months, maybe even longer. so understand they're going to

be some issues, we don't want any of that. but in looking at your testimony, it seems to be a big difference here between paycheck protection program and whatever monies might have gone out the door that were supposed to be and then compare that with the eidl program and you know, congresswomen look my, or a ranking republican might remember was making the point that boy, the idol program had substantially less money and yet, it seems to be a lot of issues. in your testimony, your count for about 75 billion dollars that may have been inappropriately sent to an eligible businesses. but those numbers are from back in july of last year, right? >> yes. the numbers at that time was from that date. >> so since then, have you been able to update those or do we have some idea that there is way less than it was before or they've reclaimed some of those

monies and on all of those other things? >> that's a good question. we have been working diligently, of course, to claw back money that has gone to folks that it shouldn't have gone to. i think for up to total between us and sba sba, our partners, 1.9 billion. we're continuing to move along those lines. we do have updated figures, i just don't have them at my fingertips right here. it'll take me a couple of minutes. >> i mean, this looks terrible but hopefully there's something that accounts for that and the -- and it seems to, me again, that where you had lenders, financial institutions and others working with customers, they have to know their customers. there wasn't how big of an issue, as big of the problem. but then we get into the where the governments dealing with these folks directly, there is all this identity theft. so, what was the most serious broad scheme that they had

targeting these eidl loans. what's your experience on that? >> there's two important things to point out here. when we were providing context as to what was going on in terms of fraud, the eight deals with ppp, they were very quick to implement controls that we thought were missing, very quick. and we know that's a big reason why there was a lot less that we found in that area. oh dea took a much longer time to implement. that's a fact. secondly, in terms of identity theft, we're starting to see more of it raised its ugly head ong on of the schedule. so, i mean, we are still at the very beginning of this, we're starting to see the trend, starting to take shape and so, it might turn out to be a different story a little bit later.

but you -- >> what's the most prevalent scheme? >> one of the most prevalent schemes, particularly for the eidl advance program was where people were being contacted by, i don't know, fraud stirs who would say the government, they're giving out free money. and all you have to do is sign up for you and will sba give you a check for up to 10,000 dollars and it will be deposited into your account and you just have to pay a house out a portion of it. that's where we are seeing with multiple ip addresses, it'll be one computer handling all of this, for maybe 200, 300, 400 different loans and just really bombarding the base controls with that. >> 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. shouldn't the government have figured out some way that all these things were coming from

the same addresses? weren't there any controls that were in place before this started out? >> the argument that we were faced with was well, not because somebody has multiple -- the loans came from -- multiple loans came from one ip address means it's fraud. and i would say, maybe there might be a real reason for it but until you check, you wouldn't know. >> you might want to look into that, right? check into it. i don't know how much time i have, i'm not seeing the computer. if i have just another minute. >> sir, your time has expired. >> okay, i yield back then, thank you. >> the gentleman yields back and now i recognize myself for five 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 the eidl programs. congress established these

facilities to be an american lifeline in their darkest hour number bringing some much needed sunlight as a disinfectant for corruption. i'm also troubled by the frenzied environment that gave birth to the programs, with all the shortcomings and i would hope today's hearing stands as a lesson to those in congress to return to regular order and those of us an administration to exercise at the very highest standards of ethics in implementing and enforcing the law which, ought to be amongst our highest priorities. mr. weir, unfair are barely second, the biden administration published a factory detailing new measures to prevent fraud in the ppp and eidl programs. these measures provided that loan guarantee approval will now be contingent on pricing sba projects. treasuries do not pay database and public records. while implementing these checks at the late stage as somewhat slow the de-processing of loan applications, the safeguards could've 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. and that document you won that quote, increased loan volume, alone amount and expedited loan processing timeframes may make it more difficult for the two sba identify red flags in loan applications, and quote. you urged the agency to put sufficient controls in place then. then administrative officials at the agency heed your warnings at that time, sir? >> at that time, no. >> okay, and when he became clear that they set up of eidl, which is directly process by sba loan officers, also make a particularly susceptible to abuse, you showed a july report contains another warning of, quote potentially rampant fraud, and quote, in that program as well, is that correct? >> this is correct. >> and hassan than last month, the justice department unveiled charges against a former florida tax collector who allegedly bribed in sba loan officer to quote, use your access to the sba computer

systems and her access to eidl this committee prelate the data of to extend funding, unquote. for the benefit of the defendant. mr. weir, 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 lone system and please speak to the oh a.g. report that you issued in october of 2020 concerning espy a employees and contractors who are involved in appropriately influencing alone approval. >> 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. and 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 that this is a serious issue and certain things that need to be implemented but as i

was saying before, it wasn't, i guess the best way to say it is, it wasn't always taken seriously. so there was it could be a valid reason of why we are seeing why we're seeing it. although we have already made dozens of arrests -- >> on the subject of taking things seriously, if you could spend a moment about talking about your knowledge of the staffing challenges at sba given the workforce needed to -- any recommendations that you have to ensure that employees are thoroughly vetted moving forward? >> right. relative to that, as you know, especially in the disaster area. sba has the authority to very

quickly ramp up and they did that. our issue was, where the reputable state replace so we wanted them to put more people to address the red flags. more people to check that why is there 200 loans from the single ip address? why did all these loans have a change back account? we wanted them to assigned to folks. 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 250th, and efforts probably for him pretty positive there 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's multiple reports with that as a recommendation. >> thank you sir. duly noted. my time has expired and now i recognize my fellow gentleman from minnesota for five minutes. >> thank you very much mister chair. and to the witnesses, thanks for being here today. mr. weir, 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? >> that's a good question. i actually have it somewhere. i'm going to scroll quickly to find the exact number. but i do know that i can get you the number. but they have moved to implement recommendations. we have closed, of the almost 24 of them, we have closed six. and, are reviewing information

rests 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. they're at least addressing them, even if they haven't had the time to fully put them in place. >> mr. weir, what does the sba signal to you for the reason for not implementing more the recommendations that you have suggested? >> we have resolved all but one recommendation. i don't know what exact one that is. the one they didn't resolve is one 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. we have resolved just about all of them. some just take a longer time than others. >> thank you. and one last question, 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? >> i would rate it much stronger than it was at the beginning. i believe that we all learned a lot of lessons from where we were in the past months, and the sba is intent on making sure the same errors don't happen again. it is our intent to measure it in terms of where we were before, what got through, where we are now in terms of what has

been prevented. >> and if you could, could you provide that information to the committee? >> and yes, i have it at my fingertips. it's right here. >> thank you very much. the question for you is, in your opinion, what's the most important recommendation that either the oig or gao has made that has yet to be adopted to the sba? >> i'll speak today recommendations that you have made, and they are all still open. what i want to emphasize, because four of them deal with fraud risk management, is that where he has a very important role to play in terms of being part of law enforcement, our focus is on preventative control, but you put in place.

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 to carry out those four recommendations. they mirror each other, two four eidl and two for ppp. i would put those at the top. but in terms of our role, i emphasize that we coordinate with the ig and we do different things, and we are not conducting fraud investigations. but just to back up to what we said originally with ppp, you just needed an approach that would ensure the integrity of the programs, that eligible businesses are participating,

that it's meeting more broadly, meeting the intent of the programs. and so that's more global. we don't want to forget about the more global recommendation we made, but the ones we made dealing with fraud risk management are probably at the top of the list. >> i see my time has expired back, thank you. >> thank you, mister chair. thank you to chairman velasquez for this hearing. it has been very helpful. we have talked a lot about granular things today, and i really appreciate that. let me start by saying that this program was huge and complicated to start out with, given that we had to move very quickly. i'm not surprised they were challenges in 2020.

throughout the year 2020, many of these challenges were identified and not corrected frequently. i'm glad we are finally getting to a point, and i have the same question for both of you. 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 are fraud and mitigation issues, categorize a shun, review analysis, and assessment and data integrity issues. it sounds like there are workforce issues. given that there are four very systematic issues, and very large buckets with granular problems in them, it would appear that we need to look at the structure from an

organizational standpoint and make recommendations from. can you speak to that? >> thank you for the question. what i think it really focuses on is some of the reasons why we put these programs on the 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 get ourselves off of the high risk list, when we simply planned to put these programs on the list,. we look for certain elements there, and it starts with leadership, and it involves rigorous strategic planning and a plan of how to get from a to

b with all of these things. it involves assessment, commitment of resources, sba did not have the resources, and we are looking now at the supplemental appropriations, talking 3.4 billion dollars for administrative expenses. you start getting into issues of oversight, and we are trying to get more information about what is sba doing to oversee the contractors who oversee these programs. there are basic structural issues, and i think you raise a very good point. the other one i will point to is the fbi has had an office for a number of years called

the office of continuous operations and risk management, and when we were first drafted, the recommendations of fraud risk management, we directed it to the head office. give it the responsibility and authority to lead these efforts, and with that, they said we also have a fraud risk council, but both seem to be kind of informal, and the other was informal and just kind of put together. there is no clear responsibility, when it's also a structural issue. those are the parts of what we have done that i think pertain most closely to the very good question you asked. >> i appreciate your answer, and it's complex, but what is the plan? what is the plan to, for me, if

i was looking at the problem, i would say it looks like, if it was an organization, that we need to look at a workforce issue from an hr standpoint. do we have the right folks assessing these things? do we need to have a cto and cto change? who is looking at the broader organizational structure? it may not be you, and that's okay. but we need someone to look at it. >> thank you. we had concerns way before the pandemic, in 2015, that there were certain structural problems as to how sba carries out its mission. we did a general management review where we looked across the agency and 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 in place that could have been kind of teed up for this. tthey probably still need to be teed up to implement our recommendations. there are structural issues here, and what we are looking for is with respect to these two programs, what has to be done to really resolve these programs. some of them will probably end up leading to some structural change in the agency. one of the things that i am very encouraged out, and i will refer to one more thing if you can bear with me on this, last week, i participated in a meeting between the contractor

general and administrator guzman, and her chief of staff, and it was a very constructive meeting. we are seeing some positive signs that administrator guzman is kind of stepping up, and certainly transparency and working with us has improved. we hope it leads to changes, but it's like some of the changes you bring up. they will probably be structural. my focus is on what is really needed with respect to these programs. and some of them will require some structural changes, if nothing else, to make it clear who is the authority on this. >> the woman's time is expired. the gentleman from pennsylvania is recognized for five minutes. >> thank you, chairman, and thank you mr. shear, mr. weir, for appearing with us today. just to add to some

perspectives compared to the average of 65,000 disaster loans a year, as of april, the fbi has approved 3.5 seven 7 million during the covid period atalanta totaling 200 billion dollars, 60 times more than normal. the ratios are the same in pennsylvania. in testimony, it was referenced at the fda lowered the guardrails, relaxed internal controlled, to give funds to struggling businesses, but that led to increases in potential fraud in eidl. as well, the initial report found that the fbi issued 14.3 billion in potentially fraudulent idols to accounts that differ from the original listed on the application. 1.1 billion dollars in eidl

advanced grants went to potentially ineligible businesses, 78 billion dollars out of 200 million, almost 40% was potentially fraud. is that right? that's pretty staggering. >> that's what we were saying. >> okay, i know. i just wanted to put it in perspective. 40%. in a private lending institution, if that were to occur, i think they would be out of business. many people would be fired. there would be investigations. so that's just staggering. does the sba model itself for fraud controls after private lenders? can you comment on the? >> tom -- >> no? >> that's a good question.

a good question for the program office on how they model themselves. there are a couple different ways of looking at, it but one of the things relative to context that must be considered is the 40% 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 was because these things are under 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 that show up and we need to pay attention to them. >> despite all these numerous reports of fraud, the sba in april raised the loan limit for covid-19 eidl programs from six months of economic activity with a maximum loan amount of 150,000 dollars up to 24 months

of economic injury with a maximum load of 500,000 dollars. can either one of you comment as to why this would be done with all this potential fraud taking place? if i may. >> sure. >> from all the years 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 they would be able to act on the facts and stop people from getting into the program who shouldn't be in the program. >> we certainly hope, you're not necessarily to blame but somebody is. we certainly hope that you will do the things that we discussed in 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 crowded out. secured lenders are subordinate to the eidl loans. the eidl loans replace other credit lines so secured lenders cannot use the eidl for collateral. it's damaged the industry and in the end, but more important is that it will damage small business that overtime, just quickly, will these be addressed is this being considered by wall and would you state to me whether or not you can meet with the security finance network to try to address and resolve this problem? >> they'll? should i go? >> i'll go first. 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 hasn't risen to being an issue with eidl. but we could look into the question as far as -- we could look at that. >> could you meet with them? >> we can meet with trade associations and what's important for us is to make sure that we're doing that in an objective way in terms of who we will meet with. but i would think, so -- >> of course. thank you mister chairman, i yield back. >> the gentleman's time has expired. i just ask the members and witnesses to try to be respectful of our five minute rule. with that, the gentlelady from georgia is recognized for five minutes. >> okay, thank you so much. i very much appreciate

eyewitnesses here. obviously these are huge programs and i've really been really important of showing up in the business community throughout the crisis. but at the same time, it is very important 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 and some of the other questions but a judge to ask mr. scheer about this, because i think mr. weir has touched on this. and it's about the targeting of the restaurant revitalization fund. and we know that when we initially launched the paycheck protection program, it wasn't really getting to some of the underserved markets as best we could see. and based on the current

guidance issues 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? >> i'll start out by saying that a lot of our focus on both ppp end eidl is in terms of whether the characteristics of the people who are going to use loads. so this is been something that has been a close focus of ours and as we initiate work, the restaurant program will be looking at that as well. so, it's important to see who the program is serving. it has to do with what is the intent of the program and who's being served by the program. so we will be taking a close look at that. >> okay. we have this 21-day prioritary is a shun program period.

what is your take on how effective that is going to mean making sure that we get to the right people? >> we are auditing in realtime and we're going to soon begin work on shuttered venue and the restaurant program so, the idea is, we are auditing in realtime but we're going to be looking at who actually is being served by the program. so i think will get some indication, as far as how well it's worked in terms of serving its intended audience. >> okay. all right, and wilder is turning to one more other issue that we've really been watching or trying to see, although the data really is challenging, as we all have noted. and i guess this is a question for mr. weir or mr. scheer which is, we have a lot of businesses relying on the ppp loan forgiveness and was wondering if you all have discovered and the reason for concern with respect to access to loan forgiveness amongst all

small business owners and wet standards are in place to ensure that potentially fraudulent ppp loans are not forgiven but while ensuring that the small businesses can still access that loan forgiveness? >> if i may. we are currently conducting an evaluation of the loan review process. and the objection of that was to assess sba process for alleged ability and forgiveness. it's in the early stages and it's designed to set the foundation for a series of projects on sba forgiveness of loans under the ppp eligibility. so there are 2021 oversight plan and we will be able to give you real concrete answers on this as soon as that work is wrapped up. >> okay, great. thank you. mr. scheer, do you have anything to add to that?

>> we look very seriously at the recommendations having to do with thinking strategically about fraud risk management because it's not a matter of putting in controls that can slow down the process, but can make it difficult for those who are eligible and urban survival program soon forgiveness. but the idea of coming up with a strategic approach that size, what flags can we pay attention to? do we have to pay attention to? and which flags are of lesser concern? so it's really to come up with an approach that we are looking for. >> okay. thank you so much. and i yield back at the balance of my time. >> gentlelady yields back and now the gentlelady from new york, she is recognized for five minutes. >> thank you mister chairman. i want to thank the chairwoman of alaska's and ranking member

look meyer to hold this -- . our b district received by the ppp program, and really excited that it was an opportunity to keep some of our business community alive. 94% of the jobs in our district are created by the small businesses, so bizarre vitally important issue. which is why i'm so disheartened by this fraud abuse and waste number that has come a particular with the ppp program which really affected us more. and i wanted to address my first question to mr. scheer and i know that you had said in your testimony that sba failure to provide the data and documentation of 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 is apparently happened. what we do and i know you've somewhat answered this question but if you could tell me what you would do to correct the way that sba could change its

practices, to get that data to a more efficiently and quickly in the future so that we can make these loans and avoid these astounding fraud numbers that we are seeing? and maybe, a best practices guideline. could you address that quickly, sir, please? >> there's two parts to that. 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 as data and information. and was not providing us a data and information. i hate to see it, it was quite intentional. the ideas that so to the ghetto to question it is, oh can you get information was more quickly. we're always trying to get more information quickly and we're certainly doing it now, and that there's a lot of

outstanding items. and, we are very busy. basically, interacting with them. interacting with leadership at sba and interacting with his office of general counsel in terms of trying to improve the process to get us the information that we seek. and there certainly been some movements. >> that's interesting that you say that you say that they intentionally didn't give you the information. what reason would they be trying to hide the information formula? what would you attribute your opinion you are intentionally trying to keep the information from you? >> this is one where i don't want to really get an intent because the ideas that's getting into people's minds is as far as why wasn't sba being cooperative? it wasn't from lack of effort from our side and certainly, there were efforts made, you know, not just by my teams but

by our general consulate, by the core members of congress so it's like, i really don't 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. >> would you recommend that those people not continue to work in that regulatory agency and that we replace them because obviously this is obstruction and some ways to meeting the needs of the taxpayers are expecting with these programs? >> a was clear that this involved officials at very senior levels. so, with the changes that have occurred now, it's like you have certainly new people and the associated administrator type of positions and general counsel positions.

we have a new administrator. so it's a different environment and -- >> 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 discussed, like the 3.6 billion alone for the ppp program where potentially ineligible recipients receive that money? is that something that you think that there was some kind of underhanded behavior on their part? >> i don't want to make the connection to saying that, you know, the reason we see so much potential fraud in this program and so much fraud risk is because of the behavior that we reduce the level of transparency. and our inability to really audit the programs in a rigorous sense. but what i will state that under normal conditions and will say this with us b.a. in terms of their normal programs and things like that, i'd like

to think that the cooperation leads to improvement of the operations of the agency. and, that was an opportunity that was a delayed by the lack of cooperation with us. futility to have us take a look at how they're doing things and to make recommendations for improvement and act on those recommendations. >> the general lady's time has expired. >> after a similar issue with the treasury were lured to that thing, mister senator? >> your time has expired, i'm sorry. >> thank you. >> the general lady from california, miss two is recognized for five minutes. >> thank you. mr. weir, you provided such valuable testimony to the oversight subcommittee hearing that i chaired in october, after hearing last fall, sba strongly disagreed with the office of inspector general findings on the level of

progress in the eidl program. and was sure that the agency had a robust program that the agency controls. however, the third party audit of sba 2020 finances found that despite this internal to control system, sba loan officers were never formally trained to address a flagged applications or approvals on potentially fraudulent lawrence loans and grants continued. well, today we have a new administration at sba that's dispersing the targeted eidl funds that have been appropriated by the american rescue plan. so mr. weir, you are seeing that now sba has implemented internal controlsm■ but, i want to know with the highest priority steps are that sba can take today, to improve the security of the eidl lone, considering these grants are being made as we speak, right now. >> thank you. the highest priority, as you

would see it is actually some of the things that they have addressed. i know we have some indication that they have a nest to institute 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 the system that allowed a lot of things to sneak through. those are two of the biggest ones that come to mind quite7#/. quickly. they are doing the bank account checks, and i know that's a major part of it. >> that's just an implementation of controls that there are now? >> right, i believe that the controls that were completely absent, it was a great

implementation of those to actually help quite a bit it is a whole different environment in terms of cooperative-ness and listening, and in terms of sitting down to come up with what the best way is to address fraud risk. >> it sounds like they have implemented every single one of the suggestions you've talked about? >> they have stated that, but we have not tested them. >> we could definitely see that they have, but we certainly have not tested it yet. >> also, there is another issue. it's been years since you participated in a findings report, and during that, you told me that last year, fbi issued no guidance to lenders

describing how to prioritize underserved borrowers and making steps to collect data. it would be nearly impossible to evaluate if the program was reaching the underserved. that is an important issue to me. congress has to reach underserved businesses, but we can never know how effective the programs will be at reaching underserved markets. the agency failed to act under recommendations under the last administration. can you tell us what they need to do to back filled a democratic data? >> although publicly they disagree, they actually did make some changes to the forums, changes to the way they will be

measuring. that was done even under the last administration, to make sure they would capture it going forward. there is no way to capture that initial part of, it but going forward, that was something they had to correct. >> and how about now in terms of data collection? >> in terms of data collection? if you use the restaurant revitalization program as an example, it's a pilot to make sure that they get to the people they are supposed to get two upfront, and to take a deep breath and assess the effectiveness as a major step forward. >> the gentlelady's time is expired. and now the gentlelady from california, ms. cam, is

recognized for five minutes. >> thank you. i also want to thank the committee for the oversight of the opening of the programs. we have heard a lot about the deficiencies that come, and i think we all agree that ppp and the eidl program have helped small businesses. however, sba has other jobs, for the purpose of this hearing, i would like it noted that sba

should also -- do not face [inaudible] [inaudible] to your knowledge, does the sba have a right to prove -- ? >> what i can say is this. based on what's as ba has provided to our office, it is apparent, number one, that they are taking it very seriously, and number two, on the surface, they have built in a control structure that would address all of our recommendations, and because we have not yet test did them, it should mitigate a

lot of the fraud risk that we saw in the beginning. >> what do you plan on doing as a follow-up i? >> we will be conducting a review of the implementation of the pilot, for example. or we can talk more clearly and succinctly about what control is achieved and whether or not they met the intent of the act. >> you mentioned the importance of data and analytics. how does data analytics -- >> sure. , it is basically transformed

the way we do business. when you have that many loans to review, when you have that many hotline complaints, that many referrals from the agency to the tune of 15,000 a week, the only way you could focus your attention on what needs to be used with data analytics to the trend to see where the problems are located, so that we can assign our investigative staff to pursue, it or that we can sign staff to get a more global look in terms of what's going on in these programs, where the fraud is so we can move. >> i will yield the balance of my time. >> the gentlelady yields back.

the gentleman from pennsylvania, mr. evans, is recognized for five minutes. >> i would like to thank you all. i'd like to ask a question. the question i ask is, if you had to give the sba a grade on the handling of the programs during the pandemic, what grade would you give it and why? >> -- >> i'd like to see how you tackle that. [laughs] >> okay, i will give it a try. it's a great question. and it makes me think of my

former days as a college professor. how do you grade students? 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. they got the loans out very quickly, but then when you look at the problems with administering the program and moving forward and putting the types of oversight in place that were so necessary, and just the lack of cooperation with us and trying to use us as a tool to identify improvements that could be made in the program, it is a poor record.

these are some of the things that are associated with why we have these programs on our high risk list. >> the role of an inspector general is to assist our agencies 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 and 14 days, basically. we were allowed to ride with them from the beginning in terms of the papers we put out, in terms of coming to the table and wet needed to be set up from the very beginning. i don't know what grade i would give, but i know, had those been heated, it would be a much higher grade, a much larger success story.

i cannot give a letter grade. >> is that the same thing with mr. weir? to rather not? >> mr. scheer? >> i would just say that personally, my focus is on this long period of time where there was the lack of transparency, the lack of cooperation, and there wasn't a demonstration that basically that, for example, with ppp that, the lone review process, being in place, the lack of information there, so i'm not going to give, i don't want to give an exact letter grade, but it would not be an a. but i really, it's just one

that i really don't want to give it a letter grade. it's not something we are in the business of doing. >> is that what you are also saying? you won't give a? great >> yes. i'm saying that it's clear that sba worked hard, and i am here. they helped america in need. the only thing is in terms of our assurance or anyone's assurance that the money went to only the eligible. no letter grade. >> i yield back the balance of my time, madam chair. >> the gentleman yields back. the gentlelady from texas is recognized for five minutes. >> thank you very much.

each of the testimonies have referenced billions of dollars of fraud and identity theft in the pandemic relief programs that the fda has failed to provide necessary data and documentation in a timely manner. i listened to a lot of blame going on today, and it's frustrating. we have people who are being blamed in leadership that are no longer here to defend themselves. sba was a 17 billion dollar agency that was expected to put out over a trillion dollars in a matter of months and i'm not here to defend them, but i think what we need to do is they are playing the blame game on the last administration and we have to know elected officials were the ones pushing to make sure that got out for good reason. the government shut down these businesses, and we needed to help them as soon as we could, but i'm looking at moving forward. what are the steps we will take

as we are coming out with more money, as we are coming out with the new administration. moving forward, what do we do to make sure that we are in a position where the fraud is not rampant? we have had a number of months now to get up to speed. with that, regarding the lack of data and documentation, what information is still outstanding and who can provide it? are we expecting a time period to work with the new administration, to say this is actually the numbers we looked at? i'm sure the data exists. >> my issue is a bit different. i had access, for the most part, to the data i wanted. i had access to the leadership. i was at the table with

leadership on numerous occasions. so i didn't have the same experience. and i don't have anything that's necessarily outstanding that would prevent us from providing the type of fast information the agency can use to make sure they are putting out these programs the way they are supposed to. >> mr. scheer? >> our focus is on looking at how sba is working to implement our eight open recommendations. that's a big focus of ours. a lot of that is we are being provided information. and we know these recommendations are not something that is a matter of giving information that sba will have to make fundamental changes. they are showing us a

responsiveness to realize that certain changes have to be made and how these programs are operated. as far as what we are doing, we have had these bimonthly reports under the cares act, and we are going to quarterly reports, and then we will have three stand-alone reports this summer that will focus on one report of who has been served by the program and the lenders and borrowers who have been participating in the program.= would i have been talking about today has to do with internal controls and looking at the forgiveness process. f iwe are analyzing a lot of da, analyzing a lot of information, cooperating on that. we are still seeking a fair amount of information on the oversight structure for the

eidl program, but we will be reporting on the eidl program in a stand-alone report that will be both on who has been served by the program, and looking at questions as far as how is the agency implementing recommendations. in doing that -- >> i have more questions. >> i will just say, we will probably have more recommendations now that we have detailed information on what the agency is doing. >> we will see a lot more reports coming out. you have two programs that are coming down, shuttered venues and restaurant revitalization fund, which are new programs with their own challenges. you noted that some of these -- do you believe the fbi has put

enough controls to limit the susceptibility to waste and fraud and reduced new programs? >> time has expired, but i will let him answer the question. >> okay. in response to the question, what we have been presented with today demonstrates that they are very alert and attentive to the issues that were in place before. they have set up a controlled environment to address these issues. we have not tested yet. >> i look forward to working with you to hold a hearing in the near future on some of these issues. i know we have the administrator coming in, but i look forward to working on the oversight investigations and regulations subcommittee.

>> the gentlelady from minnesota, miss craig, is recognized for five minutes. >> thank you in particular for holding this hearing today. thank you for being here and for keeping this updated and well informed on the pandemic response. i know this has been a significant challenges for the small business administration for over a year now, and we appreciate the work that the sba its employees have undergone to make sure our small businesses, as many as possible, can't survive the public health crisis. it's clear from testimony today that there have been internal controls that are lacking, and the fda has ultimately harmed the people we are trying to

help, those small business owners. the sba should certainly work towards corrective actions based on experiences of the last year, but we have an opportunity to proactively and more internal controls and address the issues as we stand up, such as the shuttered venues operators grant, and the restaurant revitalization fund. she was out of time and didn't really get to expound upon this -- we must ensure these funds get to the businesses and not scammers. it requires immediate action and detention.

can you please provide an update on the work you are doing with the sba to strengthen and launch the program? have there beensimilar conversations? do you believe the work you are doing for the shattered venues program will suffice as you launched the restaurant revitalization fund? >> maybe i will start backwards. on the restaurant program, like i said, it's very evident that the intent in establishing a controlled structure that would ensure that fraud risk is mitigated in a major way, like the shuttered venue 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 shuttered venues had to do with what happens for the people who get in the right way. is there proper guidance? is there any way for you to monitor what those funds will actually be used for? it's a grant program, not a lending program. 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 that we know with the program results were. >> fantastic. i also serve on the oversight subcommittee, and we look forward to continuing to receive your information, and i look forward to chairman phillips continuing that dialog. with that, i will yield back, madam chairwoman. >> >> oh, shield it back.

i'm sorry. the gentlelady yields back, and the gentlelady from florida is recognized for five minutes. >> thank you, madam chairman. thank you very much, mr. weir for your role ads inspector general, which is vital to do a good job, and myself as well as my constituents thank you for your hard work. i have a few questions, which will be a bit uncomfortable, but i wanted to ask you if in the last year, the sba received 3.6 billion dollars in salary and administrative costs. the inspector general office received 70 million dollars, and it received 50 million dollars extra for audits. after all this money that i just explained and told you

about right now, 82 billion dollars between ppp and eidl was not used properly. 82 billion dollars. where were you guys? were you asleep? >> you had 3.6 billion dollars and salaries and administrative costs, 70 million for the inspector general, office and 50 million dollars for audits. talk. >> on the inspector general. i did not get those funds that you are talking about. high budget is generally 21 million, and it's for audits, investigations, and things of that nature. we were far from asleep. >> wait a minute. let me just interrupt you in a minute. or a new in charge of making sure that whatever the money

the sba was receding was properly used? >> i'm the inspector general. my job is to make sure that i point out instances of fraud, waste, and abuse. >> correct. so an 82 billion dollars -- yes, tell me. where were you? >> 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's our role. there is a confusion -- >> i'm story of my ignorance. it's true. let's suppose that i'm ignorant, and i'm very sorry. but then what 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? >> that is my role.

today, we have over 460 criminal investigations going on. we have recovered over 1.9 billion dollars. this is what we do. we have been recommending the proper control environment that needs to be placed out front, so that i don't have as many criminal investigations to run on the back end. >> all right, so you did your job and i commend you for it. so who do we have to go to right now in order to ask that person these questions? somebody has to be responsible, and you are the person who needs to tell us. >> i believe, at this point, where we are currently, we are

in an environment where the control environment is greatly strengthened, an environment where we have partnered across the entire government to include social security, secret service, everyone, working groups, all of us looking into this at this time. >> all right. then please keep on advising us as to where we need to look at in order to make sure that we don't have another 82 billion dollars wasted. >> thank you. >> you yield back? >> the gentlelady yields back. with that, we conclude our important oversight hearing. let me think our witnesses for joining us today.

your oversight of sba is a critical tool for congress to limit instances of fraud, waste, and abuse and agency programs. tpp and idle have been vital life lands for the millions of small businesses that have been devastated by the pandemic. however, it is clear that these programs's unprecedented size and scope, in addition to the speed with which the agency process these loans, have opened them up for fraud. the steps sba has been taking to mitigate fraud, or 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

of today. we must conduct 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 taxpayer dollars are protected. i will ask the unanimous consent that members have five legislative days to submit+++?my [inaudible conversations] [inaudible conversations] [inaudible conversations] i amey

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