[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


 OFFICE OF INSPECTOR GENERAL REPORTS TO CONGRESS ON INVESTIGATIONS OF 
                              SBA PROGRAMS

=======================================================================

                                HEARING

                               BEFORE THE

       SUBCOMMITTEE ON OVERSIGHT, INVESTIGATIONS, AND REGULATIONS

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION
                               __________

                              HEARING HELD
                             APRIL 19, 2023
                               __________

                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                               

            Small Business Committee Document Number 118-009
             Available via the GPO Website: www.govinfo.gov
             
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
51-813                     WASHINGTON : 2023                
             
             
                   HOUSE COMMITTEE ON SMALL BUSINESS

                    ROGER WILLIAMS, Texas, Chairman
                      BLAINE LUETKEMEYER, Missouri
                        PETE STAUBER, Minnesota
                        DAN MEUSER, Pennsylvania
                         BETH VAN DUYNE, Texas
                         MARIA SALAZAR, Florida
                          TRACEY MANN, Kansas
                           JAKE ELLZEY, Texas
                        MARC MOLINARO, New York
                         MARK ALFORD, Missouri
                           ELI CRANE, Arizona
                          AARON BEAN, Florida
                           WESLEY HUNT, Texas
                         NICK LALOTA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                          JARED GOLDEN, Maine
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                          GREG LANDSMAN, Ohio
                       MORGAN MCGARVEY, Kentucky
                  MARIE GLUESENKAMP PEREZ, Washington
                       HILLARY SCHOLTEN, Michigan
                        SHRI THANEDAR, Michigan
                          JUDY CHU, California
                         SHARICE DAVIDS, Kansas
                      CHRIS PAPPAS, New Hampshire

                  Ben Johnson, Majority Staff Director
                 Melissa Jung, Minority Staff Director

                             C O N T E T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Beth Van Duyne..............................................     1
Hon. Jared Golden................................................     2

                                WITNESS

Hon. Hannibal ``Mike'' Ware, Inspector General, United States 
  Small Business Administration, Washington, DC..................     5

                                APPENDIX

Prepared Statement:
    Hon. Hannibal ``Mike'' Ware, Inspector General, United States 
      Small Business Administration, Washington, DC..............    16
Questions and Answers for the Record:
    Questions from Hon. Williams and Answers from Hon. Ware......    28
    Questions from Hon. Bean and Answers from Hon. Ware..........    34
    Questions from Hon. Van Duyne and Answers from Hon. Ware.....    46
    Questions from Hon. Mfume and Answers from Hon. Ware.........    47
    Questions from Hon. Velazquez and Answers from Hon. Ware.....    50
Additional Material for the Record:
    None.

 
 OFFICE OF INSPECTOR GENERAL REPORTS TO CONGRESS ON INVESTIGATIONS OF 
                              SBA PROGRAMS

                              ----------                              


                       WEDNESDAY, APRIL 19, 2023

              House of Representatives,    
               Committee on Small Business,
                         Subcommittee on Oversight,
                           Investigations, and Regulations,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:13 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Beth Van Duyne 
[chairwoman of the Subcommittee] presiding.
    Present: Representatives Van Duyne, Williams, Luetkemeyer, 
Mfume, Golden, and Perez.
    Chairwoman VAN DUYNE. Good morning, everyone, I now call 
the Committee on Small Business to order. Without objection, 
the Chair is authorized to declare a recess of the committee at 
any time. The committee will hear testimony today from the 
Small Business Administration's inspector general.
    Before my opening statement, I ask unanimous consent for 
the Congressman from Missouri, Mr. Luetkemeyer, to participate 
in today's hearing. And without hearing objections so ordered.
    I now recognize myself for my opening statement. I want to 
welcome everyone here to today's hearing which will focus on 
the Office of the Inspector General's investigation of Small 
Business Administration programs. First, I want to thank our 
witness, Inspector General Ware, for joining us today. I hope 
this is the first of several productive hearings that we will 
have with you in this Congress and I appreciate you speaking 
with us today.
    This hearing could not be coming at a more important time. 
I have heard from countless small businesses in north Texas who 
have faced difficulties in dealing with the SBA and the waste 
and mismanagement that we have seen from the agency is a 
complete disservice to our job creators and their employees. 
Some of the most egregious examples of SBA mismanagement came 
in the form of pandemic-related funds and programs. As the SBA 
dispersed an unprecedented amount of money, they relaxed 
internal controls and failed to be a responsible steward of 
taxpayer dollars.
    While the SBA was overwhelmed with an increased workload, 
they left the door wide open for criminals to abuse pandemic 
relief programs. Who ultimately the pays the price? Hardworking 
American taxpayers. The SBA's disorganized management structure 
and a lack of basic guardrails to prevent fraud led to wasted 
taxpayer dollars.
    The OIG identified nearly 71,000 potentially fraudulent PPP 
loans totaling more than $4.6 billion, and that may only be the 
tip of the iceberg. In the Economic Injury Disaster Loan 
program alone the inspector general found $78 billion in loans 
and grants that were potentially fraudulently obtained. Tens of 
bills of dollars of apparent fraud. That was from just one 
program.
    Again, against Inspector General Ware's advice, the SBA 
ended collection on and forgave all PPP loans with an 
outstanding balance of $100,000 or less. This sets a horrible 
precedent of allowing fraudsters to avoid facing repercussions.
    While billions in pandemic relief funds were misused, the 
SBA neglected to implement simple fraud mitigation measures 
until the first round the PPP loans were approved. We could 
have prevented much of this fraud and still can for future 
programs. But the SBA has ignored proposed reforms. Right now 
our nation's small businesses are facing runaway inflation, 
rising interest rates at a fastest pace since the 1980s and a 
labor shortage. This committee is prioritizing the needs of our 
small businesses and their employees and we stand with them.
    I hope this hearing can help gauge how Congress can take 
steps to improve the integrity, accountability and performance 
of the SBA. Inspector General Ware has done a commendable job 
on shining a light on waste, fraud, and abuse within the SBA. I 
am hopeful that this hearing with our committee will help us 
better understand how we can help our job creators get the 
support they need and deserve from the SBA.
    And with that, I yield to our distinguished Ranking Member 
who is actually not with us yet so we are going to go ahead and 
recognize Mr. Golden, from the wonderful State of Maine for 5 
minutes.
    Mr. GOLDEN. Well, look at that right there, folks. On 
queue.
    Chairwoman VAN DUYNE. We are going to yield to our 
distinguished Ranking Member Mr. Mfume, from the wonderful 
State of Maryland.
    Mr. MFUME. Madam Chair, Members of the Committee my 
apologies. As all of you know, these are the days when we are 
having for some reason committee meetings that all run 
simultaneously. So I apologize. I had to be in the Oversight 
Committee hearing and deal with an issue of an Afghanistan 
withdrawal. But I am happy to be here. And I want to welcome 
Inspector General Ware. Thank you very much for your presence 
today.
    The past 3 years have been extremely challenging, and we 
commend you for your oversight of the pandemic relief programs, 
as well as making sure that the Small Business Administration's 
core programs are working effectively as well for small 
businesses. Every year your office issues the top management 
challenges report and the semiannual report to the United 
States Congress. Both of those reports call attention to long-
standing issues and identify some of the biggest challenges 
facing the agency.
    As the Ranking Member of the Oversight, and Investigations 
and Regulations subcommittee, I want you to know that your work 
with guide this committee throughout the year as it conducts 
and as it should its oversight of the SBA. I anticipate that 
much of the discussion today will focus on pandemic relief 
programs. Since 2020, SBA has distributed more than $1 trillion 
in economic relief to small firms. And while the economic aid 
was vital in keeping millions of small businesses afloat during 
the pandemic, we know that your work and through your work that 
there was a significant amount of potential fraud. And I have 
stated my disgust with that in previous hearings both at full 
committee level and at another subcommittee.
    I think most of us are concerned about that, particularly 
as it relates to the Paycheck Protection Program and the 
Economic Injury Disaster Loan program. Much of this potential 
fraud can be traced back I think to the early days of the 
pandemic when programs were new, when the loan volume was high 
and there was a need to get loans out of the door quickly. 
Those priorities unfortunately in many respects created the 
possibility of potential fraud.
    This committee took steps to address the problems and to 
make sure that the money went to small businesses that needed 
it and that it did not go to a bunch of bad actors who we are 
all incensed about. To that end I support a bipartisan 
legislation to extend the statute of limitations for fraud in 
the Paycheck Protection Program and the Economic Injury 
Disaster Loan program in the last Congress.
    Both of those bills which became law we believe sent a 
strong message to the unscrupulous behavior by a number of 
people and that behavior would no longer be tolerated and that 
those who committed the fraud would be held accountable in the 
years to come. And we all hope that there are fewer years than 
more years in order to make sure sure they are held 
accountable.
    The SBA under the leadership under leadership of 
Administrator Guzman has taken steps to combat fraud in the 
pandemic relief programs. And today it will be important for 
all of us to hear your perspective on the progress of the 
agency and on the progress that we believe has been taking 
place since that time and to hear more about your combined 
efforts to recover the stolen funds, which really at the end of 
the day looms as a significant undertaking.
    Oversight of the pandemic relief programs will be a top 
priority for all of us for years to come. And your office will 
play a central role, obviously. I recognize that you will need 
additional resources in order to be able to investigate the 
fraud and to bring bad actors to justice. And I expect to hear 
more about that in your fiscal year 2024 budget request. It is 
a reality unfortunately, but we have got to find a way to hold 
people accountable. And we have got to be able to have the 
resources to do that.
    It is also important to know what is working well with the 
agency and how it is working well and what more needs to be 
done to ensure that core SBA programs are in fact working 
effectively. So I am committed to working with my colleagues on 
this committee, the administration and your office to root out 
fraud, to bring fraudsters to justice, to find bipartisan 
solutions to make the SBA run for effectively. And I want to 
again thank the distinguished Chairwoman who has called us 
together for this particular hearing.
    I apologize, Madam Chair, for my in and out on this as I am 
dealing with two other committee meetings quite frankly. Thank 
you.
    I yield back.
    Chairwoman VAN DUYNE. Thank you very much.
    I now yield to Chairman Williams for a brief opening 
statement.
    Mr. WILLIAMS. Thank you. And good morning, General Ware. 
Thank you for being here. We appreciate that.
    I want to thank my fellow Texan, Beth Van Duyne, for 
holding today's subcommittee hearing with the SBA's Office of 
Inspector General. Today's hearing is a critical component to 
examining the competency and performance of the SBA, especially 
after the pandemic forced the agency to take on a more 
prominent role which exposed many shortcomings.
    For nearly 71,000 fraudulent PPP loans as we have talked 
about already to $78 billion in fraudulently obtained loans and 
grants to the Economic Injury Disaster Loan program the SBA 
failed to implement adequate guardrails to protect taxpayers' 
dollars. And this allowed criminals and illegitimate entities 
to have a payday after payday while legitimate small businesses 
struggled through pandemic.
    The change is needed and we hope that you, General Ware, 
can help lead the way in fighting the success of waste, fraud, 
and abuse so Main Street America who we represent cannot 
continue to allow the recommendations that you have made for 
the agency to be ignored. There must be significant changes 
made to improve the integrity and accountability of the agency.
    And with that, I am looking forward to today's discussion 
and hope we can create a sense of urgency for the SBA to listen 
to your suggested changes.
    So thank you, Chairman Van Duyne. I yield back.
    Chairwoman VAN DUYNE. Thank you very much.
    It is an honor today to introduce or witness, the honorable 
Hannibal Mike Ware, Inspector General Ware is a native of the 
U.S. Virgin Islands and holds a bachelor of arts degree in 
accounting from the University of the Virgin Islands. In May 
2018, following his confirmation from the U.S. Senate, 
Inspector General Ware was sworn in as inspector general of the 
Small Business Administration. Prior to his appointment, Mr. 
Ware served as deputy inspector general. Mr. Ware has over 30 
years of experience within the OIG community.
    In 1990, he joined the Department of the Interior OIG 
Virgin Islands' field office as an auditor and later became the 
field office supervisor. Mr. Ware later moved to the DOI OIG's 
office of management and served as the deputy assistant 
inspector general for management. In this capacity he executed 
the DOI OIG's independent operating budget and managed the 
logistical concerns to the offices nationwide presence.
    In his current role as inspector general, Mr. Ware's 
responsible for independent oversight for Small Business 
Administration's programs and operations, which normally 
encompass more than $100 billion in guaranteed loans and nearly 
$100 billion in federal contracting dollars.
    Inspector General Ware, thank you for joining the 
subcommittee today and I am looking forward to our 
conversation.
    I now recognize Mr. Ware for his 5-minute opening remarks.

 STATEMENT OF HONORABLE HANNIBAL MIKE WARE, INSPECTOR GENERAL, 
                 SMALL BUSINESS ADMINISTRATION

    Mr. WARE. Thank you very much. Thank you, Chairman Van 
Duyne, Ranking Member Mfume, and distinguished Members of the 
Subcommittee. And Chairman Williams and Congressman 
Luetkemeyer, thank you for being here. And thank you for the 
opportunity to appear before you today.
    I am as always super honored to represent the dedicated men 
and women of the SBA's Office of Inspector General and their 
work to provide oversight of SBA's programs aimed at bolstering 
the nation's small businesses to include more than a trillion 
dollars at stake as part of the pandemic response programs. I 
am confident that much of our discussion today will focus on 
the challenges SBA faced and experience in delivering critical 
funds that stem from the economic ruling as a result of the 
pandemic are oversight efforts span SBA's other programs.
    To a significant degree, the strain of the pandemic 
response laid bare SBA's systematic management and performance 
challenges. My office knew from the onset of pandemic relief 
that SBA would face a delicate balancing act of preventing 
widespread fraud while ensuring timely disbursement of relief 
funds to Americans in immediate neat of assistance.
    The biggest concerns for our office was SBA's quick 
delivery of capital to qualifying small businesses without 
first establishing the internal controls necessary to decrease 
risk. This was why we issued three reports prior to the first 
PPP loan or EIDL being disbursed, stressing the importance of 
up front program controls to mitigate the risk of fraud.
    Notwithstanding these early warnings, SBA's internal 
controls challenges engendered the biggest fraud in a 
generation. It was immediately clear that pandemic relief 
efforts had drawn the attention of unscrupulous and greedy 
criminals. Complaints from lenders and allegations of misuse of 
funds overwhelmed our hotline. Over 100,000 complaints in the 
first year alone, which has swelled to more than 240,000 and 
counting.
    We actively engaged SBA's leaders throughout the duration 
of the pandemic to notify them of preliminary findings so they 
could respond in real-time to prevent loss to the taxpayer. At 
the same time, we launched criminal investigations and audits 
to root out the fraud and abuse engendering these critical 
resources.
    There are is no higher priority than addressing the top 
management and performance challenges facing SBA, which is the 
pandemic response. We have unleashed the power of data 
analytics in our oversight, fueled by the expertise and 
experience of our criminal investigators, auditors and 
analysts. To prioritize our work and to bring fraud that is 
hidden in plain sight within the vast portfolio, we have indeed 
embedded data analytics into the hearts of those efforts. We 
have been able to responsibly use machine learning and 
artificial intelligence to identify outliers in a portfolio for 
review and investigation.
    To date, we are have issued 30 pandemic-related reports 
with dozens of recommendations for corrective actions to the 
agency. Additionally, since March of 2020, we have initiated 
over 1,000 investigations involving complaints of fraud 
resulting in arrests, indictments and convictions. Our 
investigative work has resulted in 860 indictments, 687 arrests 
and 486 convictions as of March. And those numbers continue to 
balloon.
    Through our oversight OIG has provided taxpayers an 
exponential return in investment. In the past 2 years alone our 
work has resulted in more than $9 billion in accomplishments, 
over $8 billion in EIDL funds also have been returned to SBA by 
financial institutions and another $20 billion by borrowers. We 
have played a key role in the return of those funds to working 
with our law enforcement partners and financial institutions.
    With swift congressional action last year the President 
signed into law an increase in the statute of limitation for 
fraud in PPP and EIDL to 10 years. It is vital that sufficient 
resources are available to my office to confront the fraud 
landscape. The President has sought a $63.3 million in total 
budget authority from my office in fiscal year 2024.
    Budget scenarios such as return to the fiscal year 2022 
funding levels for us would be detrimental to instilling 
integrity in SBA's program and promoting accountability for 
wrongdoing. Reducing our funding to fiscal year 2022 enacted 
would decrease our investigative and fraud enforcement 
capabilities nearly equivalent to staffing levels that we had 
following sequestration in 2013, which is less than 100 total 
positions. Such a funding scenario simply does not allow us to 
provide effective oversight.
    We are able to provide information to you to ensure 
adequate resources are made available to promote the public 
trust and instill integrity in SBA's programs. The nation can 
depend on my office to provide independent, objective and 
timely oversight of SBA.
    Thank you for the opportunity to speak to you today. I am 
happy to answer any questions you have of me.
    Chairwoman VAN DUYNE. That was exactly 4 minutes and 59 
seconds. Congratulations. Thank you very much.
    We will now move to Member questions under the 5-minute 
rule and I recognize myself 5 minutes.
    On April 17, 2022, the SBA decided to formally end 
collections on remaining defaulted PPP loans with an 
outstanding balance of $100,000 or less. Your office noted in a 
September 2022 report that this decision lacked evidentiary 
support. Do you still stand by that analysis?
    Mr. WARE. Thanks for the question. I definitely stand by my 
analysis. Feel strongly that there are many steps that could be 
taken. And I believe it sends a detrimental message for any 
future emergency programs or any programs period across 
government.
    Chairwoman VAN DUYNE. So as of September 30, 2022, the 
value of $100,000 and under loans no longer being pursued was 
approximately $1.1 billion. Do you have the current total 
dollar amount of these loans that are no longer being pursued?
    Mr. WARE. I could get back to you on the exact total. I 
could give you a general right now. The general on it is about 
$8 billion that it has gone up to. I believe that is what it 
is.
    Chairwoman VAN DUYNE. Okay.
    Mr. WARE. I have it in front of me. I can find it.
    Chairwoman VAN DUYNE. All right. Thank you. We were just 
looking for--if you could find that out and follow up with me 
after that would be great.
    The committee sent a letter to the SBA on March 15, 2023, 
expressing our concerns about the SBA's decision not to collect 
on these loans and the taxpayer dollars being abandoned. The 
SBA responded on March 27 claiming that collection of the 
government is not a cost effective use of taxpayer resources. 
As justification the SBA used historical data from the SBA 
Express loan program which they claim is most analogous to PPP 
loans.
    The SBA claims that because Treasury recovered only .28 
percent of the Express loans referred for further collection, 
that collection on the exponentially greater outstanding PPP 
loan portfolio was futile. Do you agree that these programs are 
a fair comparison and that that collection is futile?
    Mr. WARE. I actually don't agree that it is a fair 
comparison. I actually think it is more like apples to orange 
in that regard. Relative to collection that is not--what they 
are comparing is not the only form of collection, it is not the 
only collection efforts. There is more simple avenues such as 
Treasury offset. Where Treasury offset works that any future 
government funds that would go, it could be a tax return, it 
could be anything would be held to fulfill the debt to the 
government. And these are not--that is not a difficult 
mechanism to deploy at all. On top of it, it would help in 
ensuring that folks who defaulted, who didn't pay for whatever 
reason, it may not have been fraud, it was just that they 
refused to pay, it would help that they don't get access to 
future programs until they are current. So I really don't--it 
is not something that I am in agreement with.
    Chairwoman VAN DUYNE. The SBA had mentioned that they 
provide this analysis to and I am just going to ask if you 
could provide that to the committee when you get a moment.
    Mr. WARE. Sure I could.
    Chairwoman VAN DUYNE. The SBA had mentioned in a briefing 
to the committee staff their attempts to collect this money has 
already been made, including by mailing letters to borrowers. 
Are you aware of these attempts and do you believe they are 
sufficient?
    Mr. WARE. We have not looked into exactly how frequently 
they did that, but they were required to do so. And that is 
what you do prior to going to going to Treasury offset so it 
would be the first step actually.
    Chairwoman VAN DUYNE. But then they did the first step and 
they just dropped it after that.
    Mr. WARE. Well, on that they made a decision that they 
would go away from that.
    Chairwoman VAN DUYNE. Okay. And another questionable 
decision, the SBA has evidently also decided to end collections 
on COVID Emergency Injury Disaster Loans, COVID EIDL, under 
$100,000 which makes up approximately $71 billion of the $303.6 
billion COVID EIDL loan portfolio. Unlike PPP loans, most of 
which were able to be forgiven if certain criteria were met. 
COVID EIDL loans were meant to be repaid. So the SBA has not 
said how many loans are in repayment or experiencing issues 
with repayment. Do you agree with this decision not to collect 
on COVID EIDL loans under $100,000?
    Mr. WARE. I definitely don't agree with that stance. And I 
am pretty public with that. And I am internally public with it 
as well in my discussions.
    Chairwoman VAN DUYNE. Did SBA provide you with any analysis 
for the justification of that decision?
    Mr. WARE. We have a current--an ongoing review right now 
that is ramping up on that. So I believe the audit team has 
their justification, but from what I am being told it is along 
the same lines that they provided for PPP.
    Chairwoman VAN DUYNE. So are you able to provide 
justification for this committee at all?
    Mr. WARE. As soon as the report is finalized.
    Chairwoman VAN DUYNE. Would you be interested in drafting 
legislation to require the SBA actually be--collect those loans 
under $100,000?
    Mr. WARE. So I don't believe in my role I can draft 
legislation.
    Chairwoman VAN DUYNE. No, I am just--if you think that 
would help, if we actually drafted legislation to be able to 
get at least $8.8 billion plus the $78 billion?
    Mr. WARE. I would say this, I would say that I believe SBA 
should make every effort to collect. And that they are pretty 
simple avenues to make an attempt to collect that money. And I 
believe it sends a terrible message relative to how seriously 
we take that.
    Chairwoman VAN DUYNE. Excellent. Thank you very much.
    I yield. And I now recognize Mr. Golden from Maine for 5 
minutes.
    Mr. GOLDEN. Thank you, Madam Chair.
    Mr. Ware, the budget proposal coming out of the White House 
is a reflection of an institution's priorities. So in fiscal 
year 2024 there was a request for an increase from your office 
of nearly $16 million, that is about a 33 percent increase from 
last year's enacted levels. So how does this proposal reflect 
the priorities of the administration to fight fraud as it 
relates to pandemic relief programs?
    Mr. WARE. Thank you. It definitely demonstrates that they 
have a real commitment or high confidence in my office's 
ability to go after bad actors, because the majority of that 
money if you looked at it is for to deal with our criminal 
investigations. And on top of it, it is basically to keep us 
afloat. When we had the supplemental budget that we had, that 
is about to be to finished in 2024. We have quite a bit of term 
investigators who would basically disappear, if not for that. 
We are basically trying to right size that to stay there before 
even going forward.
    Mr. GOLDEN. Okay. So there is proposals out there right now 
to cap discretionary spending levels overall for the 
government, fiscal year 2022 levels, of course that doesn't 
have to be an even cut across every program. So how vital is it 
that that not occur to your budget? What do we stand to lose if 
you actually lost money rather than got more?
    Mr. WARE. If my office lost money or went back to the 2022, 
facing what is happening with my term employees in 2024, I 
wouldn't be able to provide the oversight. The number goes back 
to almost like our 2016 or something like that enacted number.
    Mr. GOLDEN. Sir, I understand the GOP is pending a debt 
ceiling legislation which we may see soon, it may actually 
include a funding government savings to the tune of $50 billion 
related to COVID, part of which is the recovery of fraudulent 
loans. Would you be able to help recover fraudulent loans if 
you took a cut?
    Mr. WARE. No, I don't believe that I would be able to. I 
simply would not have the staffing necessary to do so. But if 
we did recover the funds, it would be at a much smaller clip. 
Look at what we are dealing with. My office--with an office 
that has a budget of 20 something million dollars, we have 
returned what close to $30 billion or played a major role in 
returning close to $30 billion. That is kind of an 
unprecedented return on investment.
    Mr. GOLDEN. Yeah, I like those odds.
    So just focusing a little bit more on how much we can 
recover and suffice it to say that I think everyone on this 
committee thinks that you shouldn't lose money but rather get 
more and deepen that return on investment. So what do you think 
is a reasonable estimate for SBA to recover in regards to 
fraudulent PPP or EIDL loans over the next let's say 2 years or 
looking further over the next 10 years? What is in the realm of 
possible for a goal?
    Mr. WARE. That is a great question, very difficult to 
answer.
    Mr. GOLDEN. Yes, I know.
    Mr. WARE. Very, very difficult. I don't believe I could put 
my arms around what that could be. Criminal investigations are 
pretty tricky, but I will tell you this, when we go after 
normal fraud before the pandemic I created the footprints in 
sand. So you have to move quickly in order to catch a bad actor 
or it is gone, the evidence is gone. What we have right now is 
footprints and cement. Right? When we get to it, it is found. 
As soon as we open that file it is found. All the records are 
there.
    Mr. GOLDEN. Very good.
    Just thinking about over all expectations, when does your 
kind of confidence on the ROI start to diminish? Surely I mean 
we would love to get every penny back, but that is probably not 
a reasonable expectation. So when do we start to go beyond the 
return on investment?
    Mr. WARE. I don't think you can with my office and I will 
explain.
    Mr. GOLDEN. Your office, sure, but certainly the SBA argues 
that at some point they might use more resources trying to 
recover some of these funds than they would actually get back. 
It is a delicate balance and I know you don't want to send a 
bad message.
    Mr. WARE. I agree that there is some sort of delicate 
balance. I don't believe we are there yet.
    Mr. GOLDEN. Yeah, I agree with that very much. I appreciate 
your testimony and the work that you do, very important.
    Chairwoman VAN DUYNE. Thank you very much, Mr. Golden.
    I now recognize Mr. Luetkemeyer from Missouri for 5 
minutes.
    Mr. LUETKEMEYER. Thank you, Madam Chair. And thank you 
General Ware for being here again and your continued hard work 
to recover these tax dollars from fraudsters.
    One of the things in some of our previous conversations 
that we have talked about were the fintech companies that were 
kind of the main problem children in the PPP program. And it is 
very concerning because the SBA now is trying to enlarge the 
number of entities that can make 7(a) loans to include fintech 
companies. To me this is was very concerning whenever we say in 
the PPP program that the banks and the credit unions were 
basically the good actors and the real problem children were 
the fintech companies and there is about a handful of them. Do 
you have concerns about this program being expanded, 7(a) 
program to be able to include more fintech companies?
    Mr. WARE. Thank you. I have concerns with the inclusion of 
any type, it could be a bank, it could be a fintech, any our 
type of nondepository lender that doesn't have brightly marked 
out rules that they are going to work under, that doesn't have 
an internal control structure in place to deal with it and that 
doesn't have the proper oversight and monitoring mechanism in 
place to go with it.
    Mr. LUETKEMEYER. So you bring up the point that I was 
trying to get to here, in order for these fintech companies to 
be able to do this, do you think it would be a good idea for us 
to put in place some additional requirements for them to be 
able to participate in a program or would that something that 
comes from you as the inspector general saying these folks need 
to have these extra precautions because these things were in 
place for the banks and credit union, which things to be in 
place and then force the SBA to do it that way. So how would 
you recommend us going about this process?
    Mr. WARE. So a couple of ways. One is that we have some 
work that is going on right now, the evaluation of SBA's 
oversight of the fintechs and the Paycheck Protection Program 
that will definitely have recommendations that would get to a 
proper control environment and making sure that SBA properly 
oversees and manages them, because as you know with the 
nondepository lenders, SBA is basically the oversight. They are 
the regulator. So that is of concern to me. But we have also 
had prior work that identified key areas of risk with fintech 
and they also speak to the very same things that I am talking 
about here.
    It is basically a three headed monster up front, rules and 
regs, that is a general thing that doesn't happen well with 
everybody having a level playing field and knowing which rules 
they are playing under and really playing under the same rules 
that the internal control environment and then very important 
the oversight and monitoring.
    Mr. LUETKEMEYER. Thank you for that. And I think it's very 
concerning to us to see that they have done this and there 
doesn't seem to be any additional protocols or procedures in 
place to monitor the fintech. So one of the questions that I 
asked the director the our day when she was here were how many 
people showed up for work everyday? Do you monitor that at all?
    Because she was talking about well, because we know that 
there is a lot of them still working from home. And she talked 
about maybe they are in the office 2 out of 5 days. I mean, I 
think you would go over there and you would see dust on some of 
the desks personally, but do you monitor that at all.
    Mr. WARE. That is not an area that we have looked into. But 
I must self disclose, my office had a as pretty robust telework 
and remote work policy in place currently. The main reason that 
we are in the major fraud fight right now. That work is done in 
courtrooms and U.S. attorney's offices and in the Department of 
Justice across the country. That is where our focus is.
    Mr. LUETKEMEYER. So you people are out in the field doing 
their work. They are not home behind the--in their PJs with 
their feet up, drinking a latte, while they are looking on 
their computer. Is that what you are saying?
    Mr. WARE. I am not saying. I don't know if anyone is doing 
that.
    Mr. LUETKEMEYER. But I am not wrong in my perception of the 
fact that they are not there. We have got people out in the 
field doing their work where they are supposed to be.
    Okay. Just to get a handle again as a follow up on the 
previous two questioners here, what do you see as the total 
amount of fraud that is all there--not that you can recover all 
of that--do you have an idea roughly of about what the amount 
of fraud that is still out there that you would be going after? 
If it is, like, $50 billion, we realize you may get 10 percent 
or 5, can you give us an idea of roughly where we are at?
    Mr. WARE. So at the beginning the pandemic we put out these 
numbers that Chairman Van Duyne spoke about. Those numbers were 
at the beginning, those are tiny. Where we are at now, we are 
way past that. I can't give you the exact number now.
    I am telling you that we have a report coming out, our 
fraud landscape report will be out in just a few months. And 
that report I am extremely confident in our methodology, it 
will tell the story of what the true fraud landscape is and it 
is meant to be a living document because as we continue to dig 
in on or data analytics and get access to more data points the 
number could grow.
    Mr. LUETKEMEYER. Thank you for that. I yield back.
    Chairwoman VAN DUYNE. Thank you very much, Mr. Luetkemeyer.
    And I now recognize Chairman Williams for 5 minutes--oh, I 
am sorry. I am so sorry.
    I did not recognize you. I now recognize Ms. Perez, from 
the State of Washington for 5 minutes.
    Ms. PEREZ. Thank you so much, Chairwoman.
    And thank you for your testimony, Mr. Ware. A lot of 
conversation today has focused on how we can prevent and tackle 
fraud in small businesses programs and I agree that is 
critically important. We also need to ensure that SBA dollars 
are not being misspent or defrauded by criminals.
    With my time I would like to focus on the flip side of 
that, making sure that dollars that reach small businesses are 
spent effectively and meeting small business owners where they 
are at. By definition the Small Business Administration deals 
with small businesses, these are often one man or woman shows 
operating with a skeleton crew.
    A small business owner's most valuable asset is their time. 
They don't have time to waste reading mountains of SBA 
paperwork. So when overseeing SBA programs, how do you evaluate 
the small business experience in accessing SBA programs in 
addition to SBA programs.
    Mr. WARE. Right. So thank you for that. And you are 
absolutely right. That is part of our portfolio. We have done 
some work on this in the past, but I don't believe--it hasn't 
been during the pandemic. We have not looked at that or I think 
that as part of the beginning when they were kicking this off 
we were looking at the customer experience and we were looking 
at--and we have done work in a disaster realm where we have 
looked at how much time it takes to get someone at SBA and what 
that experience is like.
    So we have done some work in that area. SBA has some 
challenges in that area, but it is something that, you know, it 
is something that we are always looking, looking for. We were 
thankful for the legislation that allowed to us do general 
surveys. And I know that that is part of our work that we are 
teed up.
    Ms. PEREZ. Great. I know that you closely engage with 
Administrator Guzman, do you also engage with small businesses 
to see how SBA programs are rolling on the ground.
    Mr. WARE. Personally I have not. My teams do----
    Ms. PEREZ. Okay.
    Mr. WARE.--when they are doing their reviews.
    Ms. PEREZ. Okay, I am glad to hear that.
    In general, how can SBA make its resources more accessible 
to the average small business owners, not just the small 
businesses that have this sort of administrative capacity to 
look into the SBA.
    Mr. WARE. Yeah, so I mean they have their whole business 
development group. And the business development group, that is 
what they are charged with, that is part of what they are 
charged with. Our work--I don't know if we have work to that 
regard, but I know that we can get work to that regard, I can 
get you that.
    Ms. PEREZ. That would be great.
    Your states that the SBA has made limited progress in 
servicing EIDL loans. What improvements has SBA made to improve 
customer service and servicing those EIDL loans?
    Mr. WARE. Right. The customer service angle of it has not 
been the angle that I have focused on, but now I realize that 
will have some focus in that area.
    Ms. PEREZ. So the Office of the Inspector General also has 
an important consumer-facing role taking calls and 
investigating complaints. The top management in performance 
challenge report found that the OIG received over 208,000 calls 
on its hotline during the pandemic. How has your office handled 
that increase of calls? What is the current backlog of 
complaints? And what is the average sort of timeframe it takes 
to address a complaint once it is made?
    Mr. WARE. Had you asked this question about a year ago, I 
would have had quite a backlog. But thank goodness for a really 
capable data analytics group that we have that we don't have a 
backlog. We are able to triage these things and to distill what 
is actionable and what is not. What we have actionable right 
new is over 100-year's worth of criminal investigative work in 
the hotline. So there is triage's own process that starts with 
that and then it goes out to the field, but the field has their 
own portfolio, that is why I was talking about the importance 
of resources for our office.
    Our investigators are so dedicated and so driven that I had 
to fight them to reduce their portfolios, because it is not 
sustainable for a single agent to be working 20 something, 30 
something cases at the same time.
    And the ramifications of that means that their supervisor, 
who is supervising ten our agents, would have 25 times 10 
supervising--that is what we are dealing with.
    Ms. PEREZ. Yeah, yeah. Mr. Ware, you have an important role 
in keeping the SBA on track and accountable to taxpayers. I 
know that you take that responsibility seriously and I 
sincerely look forward working with you to improve these 
programs. Thank you very much.
    Mr. WARE. Thank you. I appreciate your questions.
    Ms. PEREZ. Thank you.
    Chairwoman VAN DUYNE. I now recognize Chairman Williams, 
for 5 minutes.
    Mr. WARE. Go frogs.
    Mr. WILLIAMS. Thank you again for being here.
    The SBA has faced major challenges in managing enormous 
financial lending programs, we are talking about that, IT and 
other areas even before the pandemic. Now existing issues were 
exasperated by the sheer volume and lack of controls of SBA's 
COVID-19 related programs and problems continue to surface in 
the aftermath of SBA's pandemic response, particularly around 
identifying the mitigating fraud, balancing the competing 
priority shortcomings and oversight, insufficient reporting 
requirements and failure to meet legislative intent.
    So it seems the agency does not have the ability to manage 
the current loan volume or remedy existing fraud issues, yet 
the Biden administration is trying it expand. And we talked 
about that the SBA's loan portfolio changes to the 7(a) lending 
program. On October 14, 2022, the OIG issued a report stating 
that OIG anticipates the agency will face significant 
challenges managing its loan volume going forward.
    Here is the question, is this still your view? And if so, 
what are your greatest concerns with the new 7(a) loan programs 
that will grandfather in all current community advantage 
lenders as well as bring in more SBLCs.
    Mr. WARE. Yes, thank you. My--I still share those concerns. 
And I share those concerns because of the volume. Now SBA would 
say that they are not adding that much more and that the people 
who actually deal with this oversight have assured everyone 
that they can handle it, because they are intent is to deal 
with more of data analytics to deal with it.
    My problem is data analytics is just what you--the capacity 
is what you build it to be. So if you don't build it with the 
right parameters in place, you are not going to be overseeing 
the right things. You are going to miss the things that you 
actually should be looking at. And I don't have an assurance 
that that has been built in mainly because I haven't seen it.
    Mr. WILLIAMS. The bigger they are, the more we lose is 
probably what the formula is right now.
    The SBA is supposed to be the lender of last resort. 
However we are hearing that the SBA is considering changing 
standard operating procedures to allow for businesses to self 
certify, that they could not find any credit elsewhere in the 
private sector.
    Now in your opinion, how would this major departure from 
the current practice add additional risk to the system or 
deviate away from their current role as a lender of the last 
resort.
    Mr. WARE. In my opinion, and I have stated it just about 
everywhere, I don't believe in any self certification on 
program. After what we just came through with PPP and EIDL, I 
don't see how can we could still be relying on any type of self 
certification.
    Mr. WILLIAMS. I agree with you.
    Mr. WARE. I believe it adds significant risk. And I think 
we have the evidence and the experience to know that it does.
    Mr. WILLIAMS. The SBA has continually said that they 
believe they can leverage technology to make up for staffing 
shortages when the Office of Credit Risk Management would be 
charged with overseeing the new lenders in the 7(a) programs. I 
know what your answer is, but do you share the same opinion? 
And believe the agency is equipped to be the sole federal 
regulator of these new participants.
    Mr. WARE. Even in house for the Office of Inspector 
General, we rely on data analytics a great deal and it has 
really been a force multiplier for us in terms of our 
investigations, but even those we have to back check. Right?
    That is why we still talk about potential fraud because we 
haven't looked at every single one of them. Right? We have 
looked at a lot, enough to validate our data points. So to me, 
that is where the concern lies with the reliance on data 
analytics is do you have enough people still to know for 
certain that you have reduced the mitigating risk in your 
program and is it built correctly.
    Mr. WILLIAMS. Right. Well, we need to get better at what we 
do rather than what we want to do. And I will just ask you a 
question, I am in the car business back in Texas. This money 
that we can't find. Right, that we have talked about, what if 
we people your people on commission, would they be able to find 
it?
    Mr. WARE. Sorry, I don't mean to laugh. Like, wow.
    Mr. WILLIAMS. It is a pretty good idea.
    Mr. WARE. That would have changed my entire career.
    Mr. WILLIAMS. You think about it and let me know.
    Mr. WARE. I will.
    Mr. WILLIAMS. Madam Chair, I yield back.
    Chairwoman VAN DUYNE. I am going to yield 2 minutes to Mr. 
Golden for additional questions.
    Mr. GOLDEN. Thank you, I appreciate it. I know we are 
looking to wrap up here.
    Really more just some feedback, Mr. Ware. First on the 
issue of spending a little bit of time and resources looking 
into the efficiency of these programs rather than just waste, 
fraud, and abuse which is important.
    For those of us that represent rural communities I could 
tell there is a lot of anecdotal evidence that you could find 
ways to improve programs if your staff spent time putting some 
reports out to Congress on those things so I appreciate Ms. 
Perez's questions.
    I just couldn't help, when Mr. Luetkemeyer was talking 
about fraud and how much is out there and you mentioned you 
have got a report coming. And I know that you don't want to, 
like, rush to close something out, but it is pretty timely 
topic. The Republicans are talking about reducing the deficit 
spending, they are talking about a debt ceiling proposal that 
involves the recovery of COVID funds.
    Not all of that I think, but some of it is counting on 
getting some of this fraudulent money back and important 
decisions about what type of budget to give you to help make 
sure that we can actually capture those funds, you know, it is 
pretty timely.
    So could you maybe get an early report out to the committee 
or some kind of preliminary data about how much fraud is 
actually out there and how much you think we might be able to 
recover.
    Mr. WARE. I am so glad you said that, because this is the 
point that I make internally all the time relative to timelines 
and being relevant in this space. So I am so glad you said 
that.
    The issue with providing something early is that it has not 
gone through our independent indexing and independent 
referencing to ensure that what we are reporting is 100 percent 
factual. And I would not be comfortable in releasing something 
that has not gone through that process.
    Mr. GOLDEN. Well, always relevant but like I said the clock 
is ticking.
    Mr. WARE. The clock is ticking.
    Mr. GOLDEN. We would love to have the information 
yesterday.
    Mr. WARE. Man, I can't wait. I am putting those words in 
quotes and putting it up on a board in the office, the clock is 
ticking. That is our new mantra.
    Chairwoman VAN DUYNE. Thank you. I would like to thank our 
witness for his testimony and for appearing before us today.
    Without objection, Members have 5 legislative days to 
submit additional materials and written questions for the 
witness to the Chair. Witnesses to the Chair which will be 
forwarded to the witness. I ask the witness to please respond 
promptly.
    If there is no further business, without objection the 
committee is adjourned.
    [Whereupon, at 10:58 a.m., the subcommittee was adjourned.]

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