hearing is adjourned. thank you. >>

next, a hearing on the challenges facing the small business administration in the coming year. topics included pandemic relief programs for small businesses and staffing and resource leads but.

[indistinct conversation] good morning, i call this meeting to order. without objection, chair [inaudible] at anytime. i would like to begin by [inaudible] some important requirements. when we begin by saying that standing house and give it rules and broadcasts will continue to apply during hybrid proceedings. all members are reminded that they are expected to adhere to these standing rules, including your. house regulations require members to be visible through a video connection throughout the proceeding. so please keep your cameras on. also, remember to remain muted until you are recognized to minimize background noise. in the event a member encounter technical issues that prevent them from being recognized for

their questioning, i will move to the next available member of the same party, and i will recognize that member at the next appropriate time slot provided they have returned to the proceeding. for those members and staff physically present in the committee room today, in accordance with the attending physician's most recent guidance, all members and staff who attend this hybrid hearing in person will be required to wear masks in the hearing room. and now i will move to my opening statement. first, i would like to welcome inspector general cuellar. thank you for being here today. your work has been indispensable throughout the covid crisis that you should be proud of your efforts to improve programs critical to small businesses. the [inaudible] office are staffed [inaudible] on the top management and

performance challenges facing the small business administration every year. what's this your report covers many outstanding issues, it also calls attention to the biggest challenge facing the agency, the pandemic relief programs. since 2020, the sba has distributed nearly one trillion dollars in economic relief to small firms. this figure surpasses the amount of money distributed in all other years of sba existence combined. this is an enormous achievement and help keep millions of small businesses afloat during the pandemic. however, with any emergency effort of this magnitude, programs will invariably problems will invariably occur. in courting two investigations, the covid [inaudible] and check professional programs

have been falling rubble to fraud. much of this potential fraud could be traced back to the early gaze days of the pandemic, when programs [inaudible] volume was high, and it's a need to get the most out quickly was the priority. in new report also notes that in 2020, the previous administration relaxed internal controls, adding significant stress to the system and creating an environment right for fraud. this committee has worked diligently to conduct oversight and institute legislative fixes to address this these problems. we have conducted hearings, written letters, helped held briefings, and passed bills. ensuring money is going to small businesses that need it the most and not about actors. since taking office in january, the biden administration has

also demonstrated its commitment to rooting out fraud and abuse. administrator goodman [inaudible] many recommendations from the oig. under her leadership, the administration has closed out 70 oig recommendations this year alone. sba took steps to shore up fraud protections for critical pandemic programs. this includes implementing a mask if you plan for known [inaudible] for generous applications in the previous year program, and allowing the agency to poll finds that anytime in the idle progress. the agency now also requires that all borrowers are not on the treasury department's do not playlist. these are just a few of the actions that help reduce roger. so i look forward to continuing

our work with the administration on this front. at the same time, the ig's reports cover the other issues are really due to pandemic relief. these include challenges to small business contraction, i just, what access to capital, and disaster assistance. addressing these problems will require sustained work on a by partisan basis from this committee. i hope that today's bridging will allow us to take a closer look at all of these issues and discuss bipartisan solutions to fix them. i now would like to yield to the ranking member, mr. hawk meyer for >> his opening statement. >> thank you madam chair and thank you for calling for the hearing, welcome inspector. it's always good to have you before us to explain what's going on.

i want to thank the chairman for him the order and which witnesses have an important announcement. likewise, and members will appreciate going back to the message that were voted on in the rules package. i like to take this time to recognize the committee chief counsel. it has been a business for years, they've worked in the public service for decades. now, they're working in the white house and on the services committee. the guidance in counselor for the past 30 years has always been welcomed by the several chairman, committee members if she had served. jan, thank you for the thoughtful and said analysis on all issues including -- especially those pertaining to regulation. as well as an impact on small businesses, thank you very much.

>> not start your second session on the congress, it is critically important that we begin the discussion and oversight. one trillion dollars in assistant provided to the nation's most firms through the small business administration. we must exercise our oversight responsibilities wisely and often. it isn't just dollars and small businesses, there are new programs that require attention. that is why i'm thankful we have today's conversation with inspector general wire. congress moved quickly in the spring of 2020 to support the nations economy with hundreds of millions of dollars for small businesses. some of these programs, like the paycheck protection program, which is driven by the private sector sanders focused heavily on the nation workers. other workers that were administered through the s.p.a. were a bit slower. they were overall a successful. fraud took place, taxpayer dollars were continue to be wasted. this is unacceptable. members have approximately 4.6

billion to protect -- the economic program, also known as idle, is food fraudulent activities. the private sector institutions, idle program was not. the spca acted as a sole and only gatekeeper to the auto program. it is a major problem for the idol. >> differences on how this is wrong to not be overstated. they should serve as public policy debates and how the sba should run its programs. asking the fda to unanswered direct lending ability would be counter to the facts. beyond this, we know the fbi has struggled with identifying risks the capital programs, overseeing contracting programs

and the information technology needs for years. the covid emergency period has compounded these four s.p.a.. i would say that when you put something under stress, that is when you find a way real problems are. obviously, with this covid situation on the sba taking on a tremendously increased program, when you are a lot of problems are. therefore, the fba must be ready to serve small businesses all the while protecting taxpayer dollars and conserving the top -- small business owners don't have time to, wastes they're facing cultivating christ breezes -- unfortunately, it doesn't end there. they continue to support their planning and vaccine mandates ever present. now, more than ever the federal government program cannot be depleted, wasteful or counterproductive. only for hearing more on where

fraud stands today. update on all recommendations and it's a significant amount of fraud clogging the process for businesses. it will not end here. this will require ongoing effort, efforts for years to come. i continue to work with the inspector general, this is a list and we can give that to your staff. . this letter which is a list of some of the witnesses and topics that i think would be impactful, for helpful to us. if we alleges it had been oversight work. we look forward to working with you in the coming year. >> thank you, the gentleman yields back. with that, i will now introduce our distinguished witnessed, the honorable -- the inspector general the s.p.a.. mr. blair was learning to be an

effective leader and his role in an asset to this community. you have nearly 30 years of experience in the community welcome and you are recognized for five minutes. >> thank you and good morning, and distinguished members of the committee. thank you for inviting me to speak with you today however the pandemic has been lasting with ever-changing challenges. as we have played a pivotal and unprecedented role and stable in the u.s. economy, in doing to the men and women who have been on the frontlines and know directly met the needs of millions of small businesses

have sacrificed their time and work long hours to have this work on unprecedented scale. not only do we think them for their hard work with their countless whistleblowers who have come forward to shine the light of transparency with the taxpayers dollars. i think them for their hard work, courage and sense of duty to the nation. the men and women in my office have been working diligently to provide oversight of the spf response. there's struggle of the small business owners and employees we are keenly aware that nothing short in the oversight efforts. we've already issued 18 reports to address the pandemic efforts with dozens of recommendations for correcting. our investigative work to date has resulted in a 366

indictments, 294 arrests and 140 convictions related idler ppp. the savings from our oversight condemn across ponce there are 4.2 billion dollars. the workers really just begun. it is significant amateur supplemental funding will be exhausted by the end of 2024, which will coincide with hundreds of billions of idle loans coming to payment. it will be a key moment for realizing the true scope of broad -- they will provide necessary sba challenges and the years beyond the pandemic response. notwithstanding the challenge, the opportunity will be more effectively and efficiently carrying out the mission. we provided oversight in

realtime, produced reports in under two months. and doing so, the ig community took no -- it's oig's. the result is that we proudly cut the congress and it is fully informed of sba's pandemic response efforts. i'm also happy to report that they've taken significant strides in beta analytics to look at these portfolios. we are book moving from the leveraging artificial intelligence, machine learning to get in front of fraud. dealing with sba's leaders, i've never had a reason to doubt the nation small businesses. in terms of characterization of fba's response to the findings related to the pandemic response, it is my perspective

that they missed opportunities to recalibrate and implemented in a timely manner at the outset of the espy avery spots. this has since changed significantly as we work more closely to implement proper controls from the onset of new programs start-ups. we are committed to having an objective oversight of spf programs in operations. and in doing so, we shine the light of transparency more diligently to keep everyone informed. thank you for the opportunity to speak to you today, i'm happy to answer any questions you may have. >> thank, you i now recognize myself. administrator guzman indicated that this administration is sincere and implementing the accommodations and that s.p.a. has made great strides with multiple recommendations.

is this administration cooperating with ongoing audits and investigations? can you respond about how you plan to resolve these accommodations? >> yes, thank you for the question. i could say unequivocally that the leadership team and sba is currently taking recommendations seriously moving quickly to resolve them. >> thank you. >> thank you, you indicated that 15 recommendations made by the oig related to ppe remained open. at this time, how many remain open? >> at this time i believe that number could be 20. i can get back on the exact

number. but i do know is that half of the number that remains open does not come due to be closed. another set of them passed december 31st. we may have information on, but we have not reconciled that information yet to give on what was closed. >> speed was imperative at the beginning of the pandemic leading to fraud controls being removed. the current administration put guardrails back in place to prevent further fraud and abuse has your office evaluated whether any of this since most of the audits audits have focused on performance of the ppe and covid idle programs under the previous administration.

>> so there are few ways to look at it, we can answer the question directly we are in the process of revealing those. as a matter of fact, to reports should be addressing those questions more directly within the law that 30 days of believe and hope. that is what we are looking at. but i can tell you this, what was done differently in terms of this leadership team was in up front focus on the internal control environment that included actual sit-down to determine what was best to be put in place prior to setting anything else up. >> thank you congress created a covert idol program to provide quick work for small businesses suffering i cannot be inquiry to the covid-19 pandemic. so, in creating this program

congress acknowledged the private sector would struggle to deliver relief funds to people quickly. that's given the fast delivery and the approach the private sector took to businesses, the existing compliance with ppe. do you believe that it is inappropriate to compare this to the program? >> being that they are two totally different animals it is difficult based on the evidence that we have to make a comparison of the two in terms of how delivery as. certainly, the body of work says that the direct lending programs have had issues in terms of environment. but so has the seven a program

as well. we have our own issues with them. making up a comparison of the two and speaking about direct lending, i don't believe that we have a body of work that can make that. there are so many different aspects that have to be considered. we are focused primarily based on fraud risk. >> okay, so is it fair to compare new london programs to the covid idol? given the differences the differences between the two programs? >> i believe that a whole lot of angles have to be considered if you're gonna do a comparison. and from my perspective, either way the control environment will tell the tale. -- >> thank, you my time has expired. >> there are a lot of issues we've seen. >> thank you. >> and i recognize the ranking

member for five minutes. >> thank you madam chair and welcome inspector, it's good to see you again. i'd like to start today by discussing the numbers up to reports that edified looks like there are 80 billion dollars in potential fraudulent activity in the 4.6 billion in the ppe. these two have different -- i think contrary to the point of the chairman, there is some similarity here and that they are direct lending programs with money going out the door. they are done in a different fashion, the standpoint that the ppe and the credit unions and fintech folks versus s.p.a.. and so, i think that the difference they're --

cracking from wrong there but i think it appeared to me that the rules, regulations, processes, procedures are not followed by the fba folk by the other seven a programs that they implemented versus the banks and credit unions. we know the laws in place that minimized when you looked at 4.6 billion in ppp that is roughly over 30% fraud rate in the idle program. that is a significant difference between the two and, i think there's a significant difference in the way they were adjudicated. would you agree with that? >> i would agree that these seven a program dealing with the lenders meant that that they had more of a relationship and that they were able to let us know from the onset where the issues were, and to work with us to call back a whole lot of the money.

in terms of eidl oversight, initially, with the focus being solely on speed, initially and guardrails being lowered, it is just -- that was the region. that was the reason that we ended up with what we have. >> okay, so it begs the question, then, if had the guardrails been put back up? >> pardon me? that's what you're asking me? >> yeah. the problem with the fraud was the guardrails were taken up. have they've been put back up? >> yes, many of the guardrails have, and many of our recommendations in that regard have been put in place. so -- >> on top with regards to the ppp. i had this discussion before, and we found that a lot of the fraud that was in the ppp program was in the frantic folks. they didn't have the [inaudible] customer law in place a

[inaudible] the banks have in place, and didn't really take the precautions to make sure that those dollars were actually going to a real person and that this wasn't reflective action on the part of the borrower. and so you were telling me in early conversations and your other records that different acts were kind of the problem children you. have you seen that continue to be the situation or are [inaudible] . >> but i told you at the time is that our investigative work was finding that where we were seeing in the most fraud in terms of convictions and indictments in everything else there was a percentage of those that had to do with fintechs. not saying that give the proper control this environment is in place and, that would be the case, but that is what the evidence demonstrated. >> okay, i know that the congress, the chairman asked a number of times about the

recommendations that you are making and it seems that they are making some progress, which is great. i know the last time we talked there was some concern that one of the problems was you make recommendations and the sba administration would put them in place but their staff wouldn't ask to execute on those recommendations. have you seen that improve? is that still going on? is it getting worse? what's your -- what are you seeing? >> i'm actually happy for that question. because i wanted to clarify something. which i needed to clarify in this regard is that these things normally take time to happen in earnest. so somebody conducted a loan review, and one of my folks brought me up to speed on what this, it's not every person conducting every few that are going to follow what is currently in place, right? we are finding that in some

instances it happens, and other instances it doesn't. and i believe, though, we may find that in just about every program, more than every industry, that sometimes [inaudible] it is invasive followed. >> inspector [inaudible] . yeah, you just opened up a whole new kind of worms there. so do we have people that are doing a good job and adhering to the recommendations? and now we have other people that [inaudible] identify these are the people yet so we can point to them and say, these people have to either shape up or ship out? i mean, we've got some bad apples in the barrel. we need to get rid of them. >> mr. ware, time has expired, but i will let you answer the question. >> thanks. mr. luetkemeyer, i don't think it's a bad apple situation, right? i believe it is, it is my expertise, in terms of having people know exactly what people need to do to the tee. i don't believe that somebody

is -- we have not found where somebody is willfully doing a poor job in terms of loan review. so, i wouldn't want to categorize it in that way. we have work coming out on that that will be coming to very, very shortly [inaudible] . >> your time has. >> [inaudible] be fraudulently are we. have a problem, so. thank you. >> time has expired. now, we recognize the gentlelady from [inaudible] miss newman, for five minutes. >> thank you madam chair, and thank you ranking member. this is a great discussion today. thank you, mr. ware for being here, and thank you for executing this very daunting task. it does not fall short on us that this is a complicated action that involves actions that took place two and three years ago, so this forensic task force is really been helpful but realizing that it's tough. so i want to make one comment and clarify something because i

just want to color if i with you, you are investigating potential fraud and these numbers are relative to potential fraud and not preferred, correct? >> so, in terms of -- so, investigations and audits, two different things clearly. so in terms of our audit findings, those were potential fraud. we have not reviewed or completed our review on an entire package yet, large package, to determine what is the actual fight. we do know anecdotally that what we have called potential fraud is very likely fraud because our fraud cases and criminal convictions and indictments speak directly to the patterns that we document as potential fraud. >> thank you for clarifying. so, i had three areas of question i hope we can get into the five. tell me a little bit about this right sizing project. i really like this idea. i've done this in business before, so i really like the agile product about. can you just share a little bit about what's in that quote like

it? >> in the dual kit is a way for you to identify and focus on a single question or to notify management and leadership of serious, crucial problems that they need to take action on immediately. so, in the case of eidl, for example, once we started to see the trends, we got at a table with the leadership here while they're two months working to put something together for public consumption and told them, listen, you need to put a stop to this right now, you need to set up a system of controls you can identify these -- these duplicate ip addresses and these bad emails and these things that fall in like, three, four buckets. it needs to be addressed right now. so we try to get that. so the information is immediate and the public the entire thing that they could respond to within 30 to 60 days.

>> thank you. that sounds like it's working in realtime, which is what we want right now. we don't want to lose anymore time. couple of other areas. when you stating integrity. and our visit -- oh gosh, it was probably in first quarter -- it was clear that there was some data integrity issues. can you share with the committee here what has been done in the last three quarters to address the data integrity issues? >> great. so, what we have -- but we have found it working with them, initially of course, the deluge of things that came in completely broke that system, right? so since that time, they brought in a third party contractor that has done a great job in terms of cleaning up the data. and as you know, they put out, what? i think monthly, they put out the stats, they put out the things. this data has been fixed tremendously. there are some i, think there's one field i'm -- trying to remember, i think it has to do with congressional data -- that we are looking at right now, so we are in the process of

determining just how clean, clean it is. >> good. and i look forward to that report. and then finally, which of all of the long programs did you find the least potential fraud, and why was that? why do you think that did fare the best? >> right. so, the least potential for it, of course, was found in the pager protection program. and i think, i believe one of the, one of the reasons was because they knew, most of the land just near their customers. so they were able to ask the right questions of off the bat and to put a stop to it prior to fund being dispersed. we're able to -- we've got, like, within the first week or so, like, 5000 contacts from banks. we're we would -- we were -- we knew there was a problem. and they were being able to hold and they've been a great partner with us in terms of having the funds seized and

returned to the government. >> well, thank you for that. and thank you for your great work on this. and i'll say again, thank you for going back forensically to two or three years prior to this and solving some of the issues that was at that time. so appreciate your work. >> gentlelady's time has expired. now we recognize mr. williams, the vice ranking member of the committee from texas. >> thank you, madam chairwoman and ranking member victor bayer. i just listened to this already tube is as a small business owner, it's amazing to be that this committee at this agency is so political and the mainstream small business owners getting squeeze right into the middle. this is going to have to change. mr. ware, your report found massive fraud in all of the espy of covid relief programs [inaudible] we talked about this, morning alone, there has been over 80 billion in fraudulent activities. this leads to a question the ability of the fbi to carry out or set up new programs in the future if they are unable to

properly account for taxpayer dollars were when main street businesses need it most in america. the fbi demonstrated their inability to just charge emergency landing at every single term, yet my democratic colleagues want to expand the sba's landing authority and counter [inaudible] even when the private sector has proven willing and better suited to take on these efforts. private sector always does it better. mr. ware, why should we expect direct lending authority for the espy when evidence that you've talked about today has clearly proven they were unsuccessful improperly executing their duties in combatting fraud in covid relief programs? >> so, mr. williams, thank you for that question. the question as to why should you do that is really a policy and program question that the ig is prohibited by law from responding to. i could tell you what our body of work talks about in terms of

an internal control structure and that the proper internal control structure, regardless of which way this congress or the administration determined to go from apologies perspective, is what is most critical in my eyes. >> okay. during the pandemic various federal agencies were tasked with getting the money to the american people as fast as possible. and the force of the fba seem to be one of the worst day in distributing business saving funds in the last two years. with chartered venues operating program, the svog which was 24 my bipartisan safe or [inaudible] act, [inaudible] cinemas, theaters, concert halls and other entertainment venues across the country struggled to stay in business when they were left in the dark by the fbi administrator guzman, who has still not be able to

held to account for this catastrophic from. people lost jobs, futures were torn apart. so, mr. ware, placed on they were fundamentally unprepared to perform their duties, it's your opinion the sba setbacks were indicative of good organizational challenges or was it basic incompetence and lack of leadership that caused these embarrassing rollout of events and life-changing events for small business owners? >> >> that's a pretty simple question. >> well, i mean, again, i go back simply to the work that we've done. and you, we put out a imaginative alert on the control environment and tracking performance results in that program, shut a venue operation grant program, right? and in terms of the risk framework that we accept to put in place, clearly the five performance goals, we know that they put those items in place. relative to the rollout of it and what happened and who is to

blame and everything like that for the delay, we have not looked into that. we have another report on refugee that should be out shortly. >> [inaudible] but you ought to look into it and see who is responsible for getting this to these businesses that costs so many jobs. so the fbi tasked with assisting small businesses across the country. i'm a small business owner. whoever the they failed to properly communicate with businesses, already sent members of this committee during important times of need. so the sba at the sba system constructions [inaudible] to the svog program in spring of 2021, businesses were unable to reach anyone had sba to get information on the status of their programs. you can get anyone. some members of this committee, and members like myself, are being stonewalled in the app store question, let us until october, when are concerts were really pressing. as members of this committee,

we are over charged with overseeing the and often this lack of communication troubling. so mr. ware, do you have any information or data on the's lack of communication with bars, vendors, or members of this committee? we are customers to. and you have to take care of your custom. so if not, will your the office commit to looking into the efficiency and effectiveness of sba's communication with stakeholders? >> well, definitely. i think in that is a concern that if this committee is taking seriously as a concern by my office, and if there is a request that you'd like to put forward for us to look into that we can. >> i just did. for five minutes. >> i'm so glad to hear your office will continue to audit the ppp program.

as you know in order to qualify for total loan forgiveness the employers have to extend 60 percent of ppp proceeds on payroll i heard from labor unions with hospitality who made very concerning allegations of several major hotels in the area including marriott members experienced widespread layoffs at the start of the pandemic they get the employer still receive millions of ppp loans and applied for forgiveness. it's not clear how they would have met those requirements after laying off all of their workers so they have complaints to oig but they have not been contacted yet. can you talk about responding to complaints regarding ppp forgiveness and tens of thousands of complaints coming

in will your office need assistance to investigate these claims in a timely manner? also in the hospitality business the allegations are made of larger employers of those worth millions of dollars. so are you planning to establish a dollar threshold over which recipients receive more quick. >> thank you. let me start that you are correct there are tens of thousands. >> we tried everything up front including we assigning staff and help from ten different ig offices.

so now we have moved to a more data driven model. but my office developed a system where we could categorize and do some triage to get these things out to the field. and to get a public award for innovation and we're still working on it. as a matter of fact, it's my hope if i am in front of you in 30 days i would tell you there is no backlog everything has been addressed. so the issue is we have investigated staff at 180 and my investigators carrying a huge workload across the

entire law enforcement landscape. the process of getting back to someone the people that you spoke about. but we don't provide case updates. so that's the process. >> i also asked about thresholds and how you are insuring. >> as you are aware all that criminal investigation with the department of justice. and then to the thresholds for our community. the focus right now and that

might pop off. monthly providing an update with the convictions may be a small dollar amount and others with large dollar amounts. those would spill into what we're looking at with natural outpourings of that. >> your time has expired. we recognize the ranking member. >> and just as an oversight hearing with united states treasury the department of ppp as you well know secretary

yellen has been requested long required to appear before this committee and twice on an annual basis but has yet to appear. do you have conversations with secretary yellen and informed her that she is ignoring our requests to appear before this committee and answer the important oversight questions? >> no i don't. my oversight is within the sba. and every other week. >> ppp falls within your wheelhouse as well. as far as insight and answers would be helpful as well as this committee. so with the loan program

perhaps appropriately named unfortunately. the thing is was $80 billion in front over $260 billion of loans that is an outrageous figures here as well as taxpayers. ppp as you offered. that was far more successful $900 billion of loans with four.6 billion of potential fraud. a far better ratio for legitimate loans. and with the private sector. and even to expand the sole lending vehicles by members or

colleagues on this committee or even your office that something you expand lending vehicles solely through the sba resources as opposed on advocating for such vehicles to be expanded to the partnership of the community bank such as the ppp loan was handled? which would you prefer? >> in my role and i rely solely on the work by my office to inform this congress and the people who set up policies and those who set up programs on what you have before you. there are a lot of moving

parts to make a determination into that. >> you are in charge. we need your input what is most effectively carried out by the sba. please keep that in mind. let me just ask you that as well. but are you comfortable at this point with the loans being made as brought up with additional safeguards in place so that far does not continue? >> and with the onset and then initially it was dependent on

sub certification. and then the type of data they are processing from the irs directed much of it. and we are in the process to make a determination with that landscape change and to the american taxpayer. >> i yield back. >> thank you madame chair. in the past you quoted many nations critical so how has

the sba in dealing with them with the workforce challenges and please share with the committee the progress that has been made in this area. >> thank you for that question. i think i have to get back to you on that because i don't think i have the current work that informs that but i do know my people ask questions like this regularly. i know i have seen from the chief human officer here that they have put together plans to address that. we have not reviewed those plans as of yet. >> and then contracting with the government and in recent

years to be successful. and 22 percent of all contracts how is that process proceeding? determing me on —- determining the percentages quick. >> exactly. and then to go back-and-forth with how they calculate those percentages. including how they run the numbers. one change that they had been transparent and coming up with

that percentage. >> remember they are responsible for ensuring all government agencies are calculating the same way to make the percentage but the improvement is we know how they do it. >> thank you madame chair. you are recognized. >> you are recognized for five minutes. >> thank you madame chair. thank you so much for making yourself thank, you madam chair. and mr. ware, thank you so much for making yourself available to the committee on such an important topic and thank you to you and your staff for what you've been doing here. i've been taking some in-depth time reviewing your written

statement that you identified several challenges for the sba in financial you're 2200 to. challenge, won the sba's economic relief programs are susceptible to significant forests and vulnerabilities. change number two, inaccurate procured data, [inaudible] a small business contracting programs undermined the reliability of contracting olive treatments. challenge number, three sba faces significant challenges in ied investment, system development and security controls. challenge number for, it's sba risk management and oversight practices need improvement to ensure the integrity of loan programs. challenge number, five sba's management and monitoring of [inaudible] business development program needs improvement. challenge six, identification of improper payments and sba programs remains a challenge. chance number seven, the sba's disaster assistance program must balance repeat competing

priorities to deliver brought this distance and prevent fraud, and challenge number eight, the sba needs robust grants management oversight. mr. ware, these challenges are significant for any zoning is to to shun, that alone the sba. based on all of this, does the sba have, frankly, the necessary infrastructure and wherewithal and capacity to embark on direct business lending, considering all the challenges of the agency still faces? >> i'm sorry that's a good question. our goal and the goal of all i do, because of all this have to put out the top management challenges facing whatever agency or department we are responsible for, in august, i believe that the men and women of this [inaudible] administration are up to the

task. i believe there needs to be the type of systemic changes that we have detailed in this document put in place, and then we i believe that the programs could run and we could have an assurance that there is more integrity in these programs the. thing is is that i think is probably better i stopped here. i do believe that the [inaudible] administration has the capacity to be able to run the programs there have been charged with running. >> mr. ware, [inaudible] kathy when the existing programs? but i believe it's maybe. but in the world of -- as many years as a loan underwriting -- in the low to landing, it may cause to your customers. in the respect to the sba maybe is what's going to cost the taxpayers by the. and [inaudible] for the committee, and frankly for the american people overall, is if the fda has a track record with direct business

lending that they already had with the eidl program, who's actually going to carry the losses when the fbi gets it wrong because of so many systemic challenges they have in their infrastructure? like, who both the real burden of losses from the spf they don't have basic, you know, underlying combat capacity that's been outlined in your report? >> i think you're asking me who bears it? >> yeah, who bears responsibility? we are going to bear the responsibility for knowledge loss? >> well, $4 lost its the taxpayer, right? but that's an all the program. that's in direct lending program, that's in the seven a program, because the agency pays the guarantee. >> well, honestly, it's a statement, frankly, mr. ware, that we both knew. but i think it's important for all of the members of the committee, no matter what side of the aisle that you are on, for us to understand that even

though there are some good intentions that the members may want to have or want to see sba engage in for the benefit of various businesses in our country, the reality is is that the sba is nowhere near capable from an institutional center standpoint, from an infrastructure standpoint, from a capacity standpoint, to address those needs. especially considering the fact with what they already have a debunks respect to the eidl program and the ppp program and the existing loans in [inaudible] program, that's a lot of work to be done over at sba the. they are nowhere close. and so in my view, to radically change the mandate into direct lending would actually cause significantly more problems and exacerbate those programs. it will not affect them, and we'll be right back here having more hearings just like this one. i yield back. thank you so much, madam chairwoman. >> the gentleman wields back. and that we recognize the they'd from pennsylvania, miss

will happen, for five minutes. >> thank you, madam chair, and thank you so much for being here today and for your diligent work, mr. ware to oversee sba's unprecedented response to covid and the covid-19 pandemic. it ida wanted to take my time and opportunity to ask for your insights and how we can possibly apply lessons that we've learned from the pandemic and the pandemic response to future disaster relief programs. many small businesses in my community have also been seriously impacted by the damage that was recently caused by hurricane ida in, fact my community is under federal state of emergency. while some have bounced back quickly, others have been less fortunate, such as the variants construction and utility services company that's located in medina. faced with damages to victims on top of damages from the pandemic, this is a veteran owned and disabled a small business opted to close its doors look at, informing my office that they simply did not have the capital to apply for it is blm nor the capacity to take on another bill to pay,

particularly without the possibility of forgiveness. unfortunately, the situation is very common. according to fema, between 40 and 60% of small businesses never reopen their doors after natural routes after like ida. something i heard from don mcgahn from small businesses my community following the hurricane was, where is ppp for natural disasters? i agree, why don't we have loan forgiveness like we did our new ppp for small businesses impacted by these natural disasters that are increasingly more and more common? it's our responsibility to take the positive aspects of our sba covid assistance programs, making improvements were necessary to address lessons learned, and ensure that our small businesses have the support they need to recover from all disasters, whether they be related to public health or climate change. so with this comey context in mind i'm interested in learning more from you about how we can appropriately balance the needs that we've talked about a year to get more money into the hands of small businesses quickly in an emergency well

understanding certainly that the prevention of fraud can require a much more deliberative and careful review? so my question, so, do you is, has the sba antennas your organization and operation examined about the tipping point is between getting money to businesses in a timely manner while also sufficiently reading out cases of fraud and abuse? so my specific question is, are you not just looking at cases and addressing whether they are fraud or not, but are you also trying to catalog what it is that we could be doing to be better at preventing this fraud and abuse to begin with so that we can take the good off the ppp program and a plate to other uses? >> thank you for your question. please know that that is a major focus of my office. we have put out 18 different reports on the pandemic programs. from before the very first low was issued on ppp, we issued a report addressing this very

same thing. what it needs to be done to balance speed and controls. how you need to communicate to folks that everybody know what they are doing. it is a major part of what we are looking at and i have sought to do this across government in my role on the track. we are going to work on a document that tells the entire disastrous story and to make sure that the lessons that we learned this time around are there forever so we don't break the same type of mistakes again so. yes, it is a huge focus off my office, it has been from the beginning. >> and of those 18 reports -- adoption counting -- that you're working on right now, other aspects of any of these reports that this congress, that takes responsibility can be helpful in terms of changing, modifying ppp so that we could end up with a ppe disaster program? >> yes. as a matter of fact, we worked

closely with congress on one of the earlier reports on ppp where where legislation was put in place to address some of our findings. so this body has actually been on top of it in terms of making immediate changes that [inaudible] pretty rapidly. >> so i only have 40 seconds left of time, and i would really rather not ask my second question because i don't believe we would have time for an answer. but with the very limited time i have left -- i would not report to her, small business person, small and sized business person as well, and some of the most remarkable things that happened underdressed, or it companies under duress, or where they're an organization is under duress. so, we have experienced extreme duress in this country due to covid. and the innovations that have resulted on things like the ppp program, which arguably, i'm granted, have definitely, we've seen some abuse. but we really should make sure

that we are taking advantage of an innovation such as ppp, figuring out how to take advantage of the bureau pathways that we've created between countries and their banking institutions and our fba, and make sure that we are able to use those innovations for something like the stressors that happen in natural disasters as well. with that area back, and thank you, madam chair. >> gentlelady yields back. that we recognize the gentleman from minnesota, missed a stauber, for five minutes. >> thank you very much, madam chair, and ranking member lucas meijer, for putting this hearing on. thank you, inspector general for being able to, ask and answer our important questions. so just what number of recommendations that you have made to the biden administration's sba relation to fraud have yet to be caused out? >> so the exact number of the recommendations i could get back to you really quickly on,

but i do know -- >> mr. to ware, as the agency explained why they have yet to be closed out to you? >> so it's important for me to know this. the agency has moved rather expeditiously to close out the majority of the recommendations. there are not that many outstanding that has to do direct with what our systemic recommendations were. when you look at it, i believe we have -- the numbers are coming back to me -- like 110 recommendations. but about, what, 60 or 70 of them had to do with the financial statement argent. so in terms of the systemic things to move ppp and eidl and to deal with the shuttered venues program that we issued -- >> mr. ware -- >> pretty much close down. they are remaining. most of the daytime income for when they are supposed to be

closed. >> mr. ware, because my time is limited, mister inspector general. you have mentioned that the fbi has partly over totally disagreed with some of their recommendations. what procedures in place if they don't agree with your recommendation? do they remain open? or what? >> no. so, here's what we have. we have -- it is both the agency's and my office responsibility to get these closed out. so we have a process in place where we go to what we called the audit follow-up official to make a final determination. if the final determination is that, well, we flag out don't agree with you, i read that with this committee as an item to determine whether or not you feel -- >> and i think -- mr., where ware, i think some of those suggestions are going to be coming back to this committee, i'm quite sure. one of the things you had mentioned in the previous testimony today was -- and this

is almost a quote -- that you do not advocate in one way or the other. mr. ware, we need you to advocate one wary or the other because when you point out was the 4.6 billion dollars of [inaudible] and nearly four point $6 in the idle eidl known, we see some deficiencies. the fbi needs some changing, and so we need you to advocate for those changes. 84 billion, in my guess, is as you go, as you look into this for the, you're going to see more fraud. and my colleague, byron donald's, from florida, asked you, who pays for this? it's the american taxpayer that page for this. i understand this town, millions and billions, and now even trillions is thrown around like it's nothing. 84 billion dollars, mr., it's exactly what we need you to find and hold these people accountable so that we need your advocacy. that's the priority that your mission statement says its

inspector general. to advocate for taxpayers. and lastly, lastly because my time, my time is limited, i just want to say, closing, i just want to express my deep concern about this fraud at the s.p.a.. it should be troubling to everyone here that is families as as family so struggling with inflation, her energy goes and a supply chain crisis, that the hard earned tax dollars are not being stripped away to be criminals for fraud. are doing for these taxpayer dollars that my colleagues on the other side ours still trying to ram through to increase the fund at the sba they know they are not efficient right now so the safeguards you recommended are not even put in place. so we need your advocacy in this and step up and help