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Statement of the Hon. Nydia M. Velazquez on Review of SBA’s Top Management and Performance Challenges in Fiscal Year 2022 and SBA OIG’s Semiannual Report to Congress

First, I’d like to welcome Inspector General Ware. Thank you for being here today. Your work has been indispensable throughout the COVID crisis, and you should be proud of your efforts to improve programs critical to small businesses.

The IG’s office is tasked with reporting on the top management and performance challenges facing the Small Business Administration every year. While this year’s report covers many long-standing issues, it also calls attention to the biggest challenge facing the agency - the pandemic relief programs. 


Since 2020, SBA has distributed nearly $1 trillion in economic relief to small firms. This figure surpasses the amount of money distributed in all other years of SBA’s existence combined. This is an enormous achievement and helped keep millions of small businesses afloat during the pandemic. However, with any emergency effort of this magnitude, problems will inevitably occur. According to investigations, the COVID-EIDL and Paycheck Protection Programs have been vulnerable to fraud.


Much of this potential fraud can be traced back to the early days of the pandemic when programs were new, loan volume was high, and the need to get the loans out quickly was the priority. Your report also notes that in 2020, the previous administration “relaxed internal controls,” adding significant stress to the system and creating an environment ripe for fraud.  


This committee has worked diligently to conduct oversight and institute legislative fixes to address these problems. We’ve conducted hearings, written letters, held briefings, and passed bills. Ensuring money is going to small businesses that need it most and not the bad actors. Since taking office in January, the Biden administration has also demonstrated its commitment to rooting out fraud and abuse.


Administrator Guzman inherited many open recommendations from the OIG. Under her leadership, the SBA has closed out 70 OIG recommendations this year alone. SBA took steps to shore up fraud protections in critical pandemic programs. This includes implementing a Master Review plan for loan and forgiveness applications in the PPP program and allowing the agency to hold funds at any time in the EIDL process.


The agency now also ensures that all borrowers are not on the Treasury Department's “Do Not Pay” list. These are just a few of the actions that help reduce fraud. So, I look forward to continuing our work with the administration on this front. At the same time, the IG’s reports cover other critical issues unrelated to pandemic relief. These include challenges in small business contracting, IT security, access to capital, and disaster assistance.


Addressing these problems will require sustained work on a bipartisan basis from this committee. I hope that today’s hearing allows us to take a close look at all of these issues and discuss bipartisan solutions to fix them.

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