From Fraud to Recovery: Restoring Integrity in Small Business Programs

I call the Committee on Small Business and Entrepreneurship to order. Nearly six years ago, the Small Business Administration's pandemic relief programs provided a much-needed lifeline for small businesses in Iowa and across America. Millions of small business owners and their employees were saved from closure and mass layoffs thanks to paycheck protection program and economic injury disaster loan funds awarded by the SBA. But as we've seen time and again, when government funds seemed free for the taking, bad actors are ready to steal and scam. Government programs should never be able to be exploited at the American taxpayers' expense in the first place. However, the lack of oversight mechanisms in SBA's COVID relief programs coupled with the quick disbursement of funds to save shuttered businesses, allowed swindlers to rob talk taxpayers of two hundred billion dollars in pandemic relief loans. The Pandemic Response Accountability Committee, or PRAC, sounded the alarm years ago on how allowing applicants to self-certify their eligibility increases fraud. Self-certification allows the government to rely on an applicant's promise that they meet program requirements. The SBA Office of Inspector General repeatedly echoed their concerns about this system. Unfortunately for taxpayers, the Biden administration ignored repeated watchdog warnings, allowing blanket forgiveness without additional verification on PPP loans under one hundred and fifty thousand dollars and potentially allowing a large swath of fraud to meaningful scrutiny scrutiny. Self-certification was known to be a major problem as more pandemic relief programs were created. Consider the Restaurant Revitalization Fund, or RRF, and Shuttered Venue Operators Grant, the SOVG programs. These opened a menu of fraud for the taking. In twenty twenty four, music artist Chris Brown exploited these awards to the tune of ten million dollars. Half of these funds were paid directly to the singer himself. Additional funds were spent on an eighty thousand dollar birthday party. The SBA never should have been running a drive-through for fraudsters. However, even though the RRF program had a twenty location limit for franchisees, restaurant chain Core Life Eatery with twenty-nine locations still got served seven point eight million dollars from our taxpayers, that it never should have been allowed to receive. But talk about fast fraud made to order. One Oregon dentist known for illegally distributing pharmaceuticals used his personal address and fictitious restaurant names in Florida to generate nearly eight million dollars in RRF payments. To date, the PRAC has diligently helped law enforcement partners expose more than two point four million or excuse me billion with a B, two point four billion dollars in estimated fraud loss. IG Kirk's recent appointment as PRAC Chair highlights how critical it remains to claw back these funds especially across SBA programs. Last J- July, the SBA OIG flagged an astonishing five hundred and forty-four million dollars of potential improper payments in the SVOG program, yet the Biden administration continued ignoring the program. Ultimately, officials from the previous administration did not refer a single case to the treasury. Fraudsters can't be left off the hook just because time has passed. Congress must pass my SBA Fraud Enforcement Extension Act to extend the statutes of limitations for SVOG and RRF programs and give investigators the time they need to continue going after crooks. Without my legislation, as soon as April, fraudsters who stole funds will escape justice. You heard me right folks, in just a little over a month, many of the swindlers who took advantage of some SBA COVID relief programs can no longer be prosecuted. The good news is my statute of limitations bill has already passed the House and this committee. It is now pending before the full Senate. I call on Democrats to stop blocking this legislation so there can be real accountability. I am grateful the current administration knows that the job is not finished. The SBA is conducting manual reviews of more than ten thousand RRF awards totaling over three billion dollars. Just over one thousand doll- one thousand of these did not submit the required post award report documenting how the money was spent. SBA also sent demand letters to an additional eight thousand awardees who were not a part of the manual review, and never submitted a post award report, totaling over one point two billion dollars in RRF disbursements. Additionally, last year the SBA issued hundreds of demand letters to SVOG grant recipients. The total grant value of recipients who have not responded totals over one hundred and fifty million dollars. The SBA has been belt dealt an incredibly difficult hand, reviewing the entirety of both programs before the statutes of limitations end and referring all fraud to investigators. This critical work must continue. A few weeks ago, Administrator Loeffler suspended more than one hundred and ten thousand California borrowers who took home over eight point five billion dollars in potentially fraudulent COVID relief funds. The recent fraud investigations in Minnesota have uncovered at least nine billion dollars from state and federal programs, including four hundred million dollars in PPP loans, and Administrator Loeffler acted quickly to remedy this issue. committee sent a letter to Administrator Loeffler earlier this year, applauding her work to shut down these schemes. I ask unanimous consent to enter into the record our January eighth letter requesting information from the SBA on its efforts to uncover fraud in the SBA programs. Without objection, so ordered. I look forward to hearing from our federal watchdog partners today on how they are tackling fraud and recovering taxpayers hard-earned dollars. Thank you for your service and I look forward to hearing your testimony. I now recognize ranking member Markey for his opening statement.

Yep. Thank you, Madam Chair. Um, last night President Trump declared a war on fraud. While fraud must be taken seriously, the Trump administration has shown it is only interested in weaponizing fraud for political gain. And last night was a clear example of that. Trump said the Somali community in Minnesota is plundering America and has pillaged nineteen billion dollars from the American taxpayer. You know, Trump lied in cynically weaponized fraud to demonize immigrants. Trump is falsely pointing the finger at immigrants while facing no accountability for his own behavior. denim Richards himself and his family. Trump said last night, if we're able to find enough of that fraud, we'll actually have a balanced budget overnight. That level of fraud does not exist, and it should trouble every American because what it really means is that Trump will use isolated incidents of fraud to punish his perceived enemies. And the attacks have already begun. Last month, the Trump administration used fraud as a pretext for freezing funding for child care and low income assistance programs, threatened to withhold federal Medicaid funds and ordered a review of federal funding for democratic controlled states. These are not actions of a president fighting fraud. This is a president determined to make life miserable. for anyone who doesn't support him. All the while, Doge has been accessing American's sensitive data. We re- we really s- we recently learned Doge employees illegally funneled voter data to an organization pushing disproven conspiracy theories of widespread election fraud. We still don't know if sensitive data at SBA was compromised. by Doge because our committee has never been briefed on Doge's activities at the SBA. And that is unacceptable. If the president cared about fraud, would he be doling out billion dollar contracts to his cronies? Would he solicit donations from his gold-plated uh ballroom, from companies that do billions of dollars of business with the federal government? Would he grant pardons to criminals convicted of money laundering? bank fraud and wire fraud who have connections to him and to his administration. And we are just one year removed from the night President Trump illegally fired seventeen independent watchdogs, including Mike Ware at the SBA. Are these the actions of a president serious about fraud? Or are those the actions of an administration where corruption and self-dealing are the norm? There's an old saying that hypocrisy is the tribute that vice pays to virtue. And so, yeah, we now have Donald Trump paying vice, paying tribute uh to the rooting out of fraud, while at the same time that is what is a good way of describing the entirety of his administration. And that's the hypocrisy I think that really bothers people, even if they see the president uh up there trying to demonize a small number of people. and promising that eradicating that level of fraud will balance the budget. When he knows that is not true. Today's hearing is about fraud at the SBA. And we know that bad actors took advantage of some of these COVID programs. We don't deny that. And we must hold them accountable. Absolutely. But let's be very clear about when that fraud occurred. Take the economic injury disaster program or the EIDL program, for example. of the approximately four million loans issued during the pandemic, more than three point seven million of those loans or more than ninety percent of the loans were approved in twenty twenty by the Trump administration itself ninety percent of the loans that we're gonna be looking at. So when we hear about fraud today, let's keep in mind who was on watch when it happened and Democrats and Republicans should stand up and acknowledge actual fraud were wherever and whenever it it occurs and not just when it is politically convenient to do so. So if we're serious about protecting taxpayer dollars, policing fraud, uh, should not become a farce where those in power give themselves a pass and use investigations to exact revenge on their political counterparts. The Trump administration abuses of Minnesota and other democratic-led states, like my home state of Massachusetts, uh who he mentioned last night demonstrate exactly why we need real independent oversight at all levels of government. So I thank you Madam Chair, I thank you for holding this hearing and I look forward to hearing from our witnesses.

Yeah, thank you, member uh Ranking Member Markey. I do want to extend a warm welcome to our witnesses and I am thankful that you took time out of your busy schedules to share your expertise and insight with this committee. And first, Mister William Kirk serves as the Inspector General for the Small Business Administration. Mister Kirk was sworn in as SBA Inspector General in early January, and has extensive experience in strengthening internal controls and combating fraud, waste, and abuse, in his three decades of leadership across higher education. Also, private enterprise and the federal government, so, yeah, thank you for your service. Uh, he earned his Bachelor of Business Administration in Accountancy and Juris Doctorate degrees from the University of Notre Notre Dame. Mister Kirk, I would also like to congratulate you on your recent appointment as Chair of the Pandemic Response Accountability Committee, effective March first. I am confident that you will continue to shine a spotlight on the pandemic error relief programs and work across the investigative community to recover funds and bring fraudsters to justice. Next, Mr. Ken Dieffenbach. Mister Dieffenbach serves as the third Executive Director of the Pandemic Response Accountability Committee or PRAC and brings over twenty-eight years of experience in the oversight community. As Executive Director, Mister Dieffenbach leads the PRAC's efforts to support and co- coordinate oversight of the pandemic response, enhance transparency, and use data to detect fraud, waste and abuse. Mister Dieffenbach earned his bachelor's degree in business from the Citadel and a graduate degree in criminal justice from the University of Alabama at Birmingham. Thank you again. Briefly, I'd like to take a moment to explain our lighting system to our witnesses. There are three lights in front of you, green means go, yellow means you need to wrap it up pretty quick, and red means to conclude your remarks. I ask unanimous consent that the witnesses' full statements be included in the record. And without objection, so ordered. As your written testimony has been made part of the record, the committee asks that you limit your oral remarks to five minutes. And with that, Mister Kirk, you are recognized for five minutes for your testimony.

Thank you. Chair Ernst, Ranking Member Markey, and distinguished members of the committee, thank you for the opportunity to appear before you today. It is a great honor to represent the Office of Inspector General at the US Small Business Administration, and the dedicated auditors, sworn law enforcement investigators, analysts, and support professionals who work every day to protect taxpayer dollars and promote integrity across SBA's programs. The SBA OIG operates independently under the Inspector General Act of nineteen seventy-eight. Our mandate is straightforward but consequential. We conduct objective oversight, grounded in evidence, to detect and defer fraud, deter fraud, waste, and abuse, and to strengthen SBA program integrity through actionable recommendations and transparent reporting. While the acute economic phase of the COVID-19 pandemic has passed, oversight has not. The scale and speed of SBA's pandemic response was unprecedented. To avert an economic crisis caused by lockdowns, business closures, and other impediments, SBA dispersed approximately one point two trillion dollars in pandemic economic assistance. The response delivered critical relief to millions of legitimate small businesses, but it also created opportunities for fraudsters to exploit internal control vulnerabilities. Fraudsters stole identity information, created synthetic identities, duplicated information to exploit programs, all this to exploit uh, to - to - they exploited programs meant to help those in need. Today I'm gonna focus on three areas central to the committee's oversight responsibilities. First, the systemic risks within the eight-A business development program and the importance of eligibility oversight. Secondly, the underperformance in post-award monitoring within the Restaurant Revitalization Fund, also known as RRF, and the Shuttered Venue Operators Grant, known as SVOG or SVOG awards, and the recovery of funds that were improperly or fraudulently dispersed. Third, the necessity of extending the statute of limitations to ten years for RRF and SVOG fraud, which would match the statute enacted for the Paycheck Protection Program, PPP, and COVID-nineteen, Economic Injury Disaster Loan, or EIDL, fraud. These issues are interconnected. They all reflect the same underlying principle. When program eligibility is not rigorously verified, when red flags are not fully resolved, or when enforcement timelines are misaligned with investigative realities, the American taxpayer bears the risk. Our office has continued to identify indicators of potential ineligibility, unresolved fraud flags, and delayed recovery actions in certain pandemic programs. At the same time, we have seen the benefits of strengthened controls, improved inter-agency data sharing, and enhanced investigative coordination through partnerships such as with the Pandemic Response Accountability Committee known as the PRAC. Oversight is not about revisiting the urgency of twenty twenty. Rather, it is about ensuring that the structural lessons from that period translate into stronger controls today and in the future. Under my leadership, SBA, OIG will continue to exercise independent judgment, pursue complex fraud investigations wherever the evidence leads us, will issue recommendations to strengthen internal controls, and we pledge to keep this committee fully informed of risks, corrective actions, and measurable outcomes. The work before us requires persistence, sufficient time to investigate potential fraud, and a sustained commitment to integrity. I appreciate the committee's engagement on these matters, and I look forward to discussing them in greater detail. Thank you very much.

Thank you very much. Mister Dieffenbach, you're recognized for five minutes for your testimony.

Thank you. Chair Ernst, Ranking Member Markey, members of the committee. It is an honor to be here today to discuss the Pandemic Response Accountability Committee or PRAC, and our work to investigate fraud and improve fraud prevention across federal programs, including funds intended to help small businesses. PRAC's success would not be possible without strong partnerships like the one we have with the Small Business Administration, OIG. Thanks to Congress, the one big beautiful bill act extended the PRAC and its data analytics capability until twenty thirty-four, provided eighty-eight million dollars in funding, and expanded our jurisdiction to programs funded in the law. Operating on an annual budget of approximately eighteen and a half million dollars, to date the PRAC has helped recover well over five hundred million dollars for the taxpayer. As Executive Director of the PRAC, an entity Congress created to oversee over five trillion dollars in relief funding, I work with a phenomenal team that is leveraging artificial intelligence to collect, organize, and analyze data to rapidly provide insights into fraud risks. This proactive approach is clearly needed so that fraud is prevented before funds are dispersed. This past summer, the PRAC issued two fraud alerts that identified over seventy-nine billion dollars in potential fraud that could have been prevented with pre-award vetting, and cross-agency coordination. To address these issues, the PRAC is developing an artificial intelligence enabled fraud prevention engine, trained on five million pandemic applications and other data, The tool can quickly identify anomalies, trends, patterns, and hidden connections in applications before payment. Our access to law enforcement, sensitive and other unique data, over one hundred and nineteen million applications for pandemic aid, and over a hundred and twenty-seven thousand known or suspected pandemic fraud cases can reveal powerful new insights and serve as an early warning system of organized, often transnational, criminal conspiracies and other emerging threats. Had our fraud prevention engine been in existence in March of twenty twenty, pre-award vetting would have flagged at least tens of billions of dollars in fraudulent claims for further scrutiny allowing agencies again to prevent fraud. One of the many lessons of the pandemic is that fraudsters rarely target just one government program, they exploit vulnerabilities wherever they exist. This is why the PRAC uniquely focuses on cross-program and cross-agency. risks. For example, in one project we found over forty thousand instances where the same person appears to have reported a low income to obtain housing benefits and also a high income to obtain small business administration benefits. These anomalies indicate potential fraud in more than eight hundred and sixty million dollars in PPP loans, and they were likely caused by identity theft or other types of fraud schemes in one or both of the programs. Now most importantly, it also means that legitimate beneficiaries likely lost out on benefits that they needed and deserved to have. The PRAC also works across works with OIGs to develop analytics tools that provide new insights and prove effectiveness of oversight. For example, we recently developed a risk dashboard for the Pension Benefit Guarantee Corporation OIG that to date has contributed to them recovering over two hundred and sixty million dollars. And we just launched a similar dashboard for the Federal Communications Commission, OIG, which aggregates data related to eleven billion dollars in disbursements to fourteen thousand entities that will allow them to provide more effective oversight. The project also provides investigative support to more than fifty law enforcement partners related to twelve hundred investigations with twenty-four thousand subjects, and well over the two point four billion dollars, chair, that you referenced in your opening statement. In one of the tens of thousands of pandemic fraud cases, we identified one PPP scheme involving more than four hundred and fifty applications from over a hundred individuals across twenty-four states. This is but one example where the proactive use of data and technology could have prevented or aided in the early detection of a scheme, mitigated the need for a resource-intensive investigation and prosecution, and helped ensure taxpayer dollars went to the intended recipients and not the fraudsters. Every dollar that goes to a fraudster does not go to the recipients that Congress intended the programs to help including small businesses, the unemployed, and veterans. With the support of Congress, we'll continue our work on behalf of the taxpayers to investigate fraud and demonstrate the value and effectiveness of fraud prevention. Thank you again for the opportunity uh to be here today and for your continued support of the PRAC the IG community and independent oversight. This concludes my prepared remarks. I look forward to answering your questions.

Thank you very much to our witnesses, and now we will move into the question answer uh session, and I will recognize recognize myself for five minutes. Um, so, Mister Kirk, we'll start with you. Uh, reports from your office state SBA identified five hundred and forty-four million dollars in potential improper payments in the SVOG or SVOG program. and five hundred and twenty-two million dollars in the RRF program, yet not one recipient had been referred to Treasury for recovery, not one. Um, this is actually pretty appalling. Your testimony also identifies more than nine point five billion dollars of RRF awards in need of review. Given the scope of potential fraud across the two programs, Will you be able to investigate all credible leads before the statutes of limitations expire in April for the SVOG program and May for the RRF program?

Thank Thank you, Senator, for the question. Um there is no possible way that our office would be able to investigate all of the outstanding referrals and cases that we have received in the SVOG and the RRF program. Um I will acknowledge that the work of the SBA OIG to this point in the RRF and SVOIG investigations has been underwhelming, uh, quite honestly. There's lots more work we can do. Um, I can only say that that was probably as a result of resource allocation on other programs. Um, uh, the investigators and auditors have done tremendous work, but the scope of the work is such that we would need much more time, which is why I am strongly supportive of the idea of extending the statute of limitations to allow for more time to investigate and resolve and return money to the federal fit.

No, I I really appreciate that, and does that mean that the ongoing investigations as well would time out?

I believe so. I I I believe that the uh handful of investigations, quite honestly it's an embarrassing number of investigations that we currently have underway uh those would probably time out as well if we could not bring them to

Yeah, so even though you've invested time and resources through the department, uh they could not continue if the statute of limitations runs out for the programs.

Indeed, it's my understanding that uh that work would be for naught.

Okay, which is exactly why we do need to extend the statute of limitations, so thank you. Um, Mister Dieffenbach, the PRAC has produced over fifty-seven billion dollars in monetary findings and over twelve hundred indictments. resulting in over four hundred and fifty convictions. Is it safe to say you're aware of the time and energy it takes to investigate pandemic fraud?

Yes, very safe to say. I spent the bulk of my twenty-nine year career doing fraud and public corruption investigations in the OIG world, and it takes uh time to identify the bad actors, track them down, and to do the necessary work to to serve uh the purpose of justice, yes.

So if Congress extends the statutes of limitations by an additional five years. How much additional SVOG and RRF fraud do you realistically believe could still be uncovered and prosecuted?

So, Terrence, I can't provide you a numerical estimate for that, again, because there's so many factors involved, but I can assure you that with additional time we will identify more bad actors and more losses, and and it'll lead to more convictions and more arrests. Yes.

Okay. Thank you. And, uh, maybe for both of you. in the remaining time that I have. The Biden administration shows automatic forgiveness for paycheck protection program loans under one hundred and fifty thousand dollars, effectively waiving through potential fraud. What front-end control should have been mandatory before forgiveness was granted? And and if we could start with you, um, General Cook.

Sure. Uh, thank you, Senator. First off, the the front-end control that would have, um, certainly avoided many problems would be the avoidance of the use of self-certification of eligibility. Um, that's a real problem. There are ways to cross-check, uh, that self-certification, but certainly self-certification i- is problematic. Um, I - I would defer to my colleague if there are others that he's aware of. Um.

Mm, great. Thank you.

Sure.

Yes.

So, the PRAC has done a tremendous body of work in lessons learned and we've produced a - a - a program - a blueprint for program integrity uh, it includes program certification. The - the biggest point I'd make to you is that agencies own this risk. And they have to do risk assessments, and they have to identify how are we verifying eligibility, uh what are the terms and conditions of the award, what is the the law as laid out by Congress, and how are we ensuring that we're mitigating a broad range of risk. And every program has different risk, overlapping risk, but first and foremost agencies have to pay attention and devote resources to those activities.

OK, thank you. Now I recognize ranking member Markey.

Thank you, Madam Chair, um very much. Um. The um the uh the questions that I'm gonna begin with uh uh refer to the pay tech uh the the pay check protection program or PPP and the economic injury disaster loan program or IDLE uh which helped save millions of businesses during the pandemic. The SBA and Congress should be learning from our experiences to improve programs, uh keep fraudsters out, and target help to deserving small businesses. However, Republicans seem more intent on blaming the Biden administration than anything else. Uh, twenty twenty three, SBA report found that eighty six percent of the fraudulent loans came under Trump during the first nine months of the first pandemic relief programs. So, Mr. Kirk, your office's own twenty twenty three report on pandemic fraud states that many of the SPA's improvements to stem fraud, quote, were made after much of the damage had already been done, and that fraudsters egregiously exploited SPA's weekend controls during the first year of the program, meaning during the Trump administration. So, Mr. Kirk, when were most PPP and EIDL loans made?

Uh, thank you, uh, ranking member, for the question. I appreciate it. Um, as, as you described, the vast majority of the loans were made, uh, in the year twenty twenty, uh, and twenty twenty one. Uh, so they were in that time frame. That's when the, the pandemic occurred.

Yep.

So the relief that the country needed, uh, was at that time. And those, that's when the loans were made.

Right. So ninety-three percent of the EIDL grants were made

Yes.

in twenty twenty when President Trump was in office. Mr. Kirk, do you agree with your predecessor's finding that the vast majority of fraudulent PPP and idle loans were made during the first Trump administration? It seems that you do. Mr. G- Mr. Kirk and Mr. Dieffenbach

Uh

i- Excuse me?

No, I was going to say that that was the the time place, uh, time when the pandemic occurred. It was in twenty twenty and the economic relief that the country needed was at that time. So that's when the loans were were dispersed.

Yeah. And I think I heard you say, Mr. Dieffenbach, that um if pre-award vetting had been in place uh in twenty twenty we would have saved tens of billions of dollars is that what you said

correct ranking member Markey um had we had the data systems the authorities jurisdiction in place we certainly could have identified uh significant amounts of potential fraud for which the proper due diligence could have been accomplished before the money went out the door

right so back in twenty twenty if we had put those programs in place, we wouldn't be chasing fraud, we would have prevented the fraud in the first place.

Correct.

Right, thank you. So, uh, do you agree with that, uh, Mr. Kirk?

Uh, thank you, Senator. Yeah, I agree that, uh, had different, uh, measures been taken, I think you learn an awful lot in hindsight. But because the pandemic was raging at that time and there was a strong desire, a bipartisan desire to try to, uh, save the economy, that's when those loans were made.

And and what program should the trump administration have put in place because as you're saying you live life forwards but you understand it backwards so what what what program should have been in place in order to um uh prevent against the faulty implementation of that um those laws

uh i'm sorry i i'm not what the program the pandemic the p p p

you you agree with mister dieffenbach that we should have had those those checks in right from the get-go you do agree with that

the protocols in place to prevent.

Uh, it would, uh, again, hindsight is is wonderful. Uh, I think there were significant controls put in place, but the fraudsters were were very capable and they were able to get by some of them. Uh, I, as I said, the, I think there was bipartisan interest in rescuing the economy from the ravages of the pandemic. And so the, uh, loans and grants that were made were intended to save the economy.

I could

Obviously in hindsight we can

Yeah, I just, I'm just trying to get the time line down in terms of what when that fraud

Sure.

you know began and uh

the the fraud has continued in in the past five years as well

i i i appreciate that but the the the but as we just heard earlier if the safeguards were in place initially we would have saved tens of billions of dollars and that's just the testimony that we received and just a few weeks ago the new york times reported about a huckster who had been convicted of peddling bogus energy drinks in twenty nineteen but was then pardoned with the help of one of the president uh trump's former lawyers as he concluded his first term in twenty twenty one And just last year, that same huckster was convicted again of another fraud scheme that cost victims millions of dollars. So what did the president do? He granted another pardon to that same huckster. So, mister Dieffenbach, as someone who has devoted nearly three decades of your life to fighting fraud, how does it feel to see convicted fraudsters let off the hook not once but twice because they happen to have a line into the president?

So ranking my my market, I'm not familiar with that matter at all. Um, but I can look into it if the law is followed throughout, um, then it's followed throughout. I, I don't, I don't know the facts.

Okay. Thank you. Thank you, Mr. Donald Shul.

This might be an instance where both ranking member Marky and I agree that if we had had the proper protocols in place um for that very bipartisan bill, uh the Paycheck Protection Program and EIDL uh that we probably would have saved a lot of a lot of taxpayer money. And we wouldn't be in this situation today, but I would remind everybody. probably everybody on this committee voted in favor of those programs because we did want to save our uh small businesses back home. Um, but, you know, if we had instituted DOGE, Department of Government Efficiency, at that time we probably would have had the proper protocols in place. Um, so next we have uh Senator Hawley, you are recognized for five minutes.

Th- thank you Madam Chair, thanks to the witnesses for being here. Mister Kirk, if I could just start with you, help me understand the scope.

That is correct, Senator. Uh, thank you for the question. Yes, we're running it down.

Yes.

We're running it down. I will acknowledge that, uh, I will acknowledge that, uh, I've only been in place seven weeks or so. Uh, I have learned that really there's been an inadequate attention paid to investigating RRF and SVOG fraud. Uh, we can do much better. I commit to you we will do much better. Uh, we have only a handful of investigations underway. Uh, to me it's an absolute priority. But it will be critically important for us to have an extension of the statute of limitations to be able to uh continue those investigations.

Yeah, you say only a handful of investigations have

Yes, Senator, uh, there's potential fraud in the billions of dollars.

Billions with a B.

Yeah.

That's incredible. I'm reading from your written testimony, you say " OIG in in one review identified thirty-three thousand, one hundred and sixty-eight restaurant revitalization recipients who had also received PPP loans that had been marked as potentially fraudulent, or ineligible, these recipients received nearly, not quite, eleven billion in RRF funds. And you go on to outline that a bare minimum of these, a tiny percentage, have had any kind of substantive review. It sounds like there's a lot to be done here.

We have our work cut out for us, and we will make good use of the additional time in the statute of limitations. Indeed, there is a tremendous amount of fraud that has been uncovered, identified, potential fraud, not all of it has been proven. Uh, obviously we have work to do to ensure that fraudsters are brought to justice, but But it is billions of dollars, Senator.

You say that your recommendation called for review of more than sixty-one thousand RRF awards totaling almost ten billion dollars. I mean, that's quite substantial.

That's correct.

Why is it that there's been so little investigation done before now? Do you have a sense of that?

Thank you, Senator. I, I, uh, the, the magnitude of work available to us to do is significant. I have come to know that the investigators and auditors that are in the SBA OIG right now are are really dedicated professionals. I believe that, um, uh they were performing their duties in other areas. The pandemic and idle fraud is significant. We have so much work to do. Having said that, we can't ignore one area of fraud just because we've got fraud in in others. Um uh we are gonna attack this fraud, we're gonna do it diligently. I'm really um honored to be named to the pandemic uh uh recovery accountability committee because I selfishly will uh look forward to using the PRAC to be able to identify more of the fraud. Uh, for example, it's, it's, it would be impossible for our, our staff to review manually sixty-one thousand loans. Uh, but with the data analytical capability of the PRAC, we'll be able to do a much better job of that and return far more money to the, to the taxpayer. We need that time, though. We need the extension of the statute of limitations to undertake that work.

And remind us when it r- runs out one more time, Mister Kerr, when does the statute come?

Uh, some of them as early as March or, or April.

Oh, very, very soon.

It's, it's very s-

We need to, we need to act immediately.

Yes, sir.

Um, I'm glad that you're making this a top priority. Obviously we've seen in recent weeks, I think just the scope of the pandemic era fraud that has continued into the present. I had a testimony at another committee. Uh, one expert suggested that we could be looking at as much as a trillion dollars in fraud every year. Not all of that pandemic fraud, of course. But that's an astounding, astounding number. I think the American people are astounded and also sickened by the fact that their tax dollars are being used to fund fraudsters by private. planes, luxury yachts. In one case, uh, uh, there was twelve thousand pounds of one hundred dollar bills smuggled out of suitcases in the city of Minneapolis. I mean, this is outrageous stuff. Any dollar of fraud is outrageous. But the scale that you're talking about here is truly alarming. What's the first order of business for you? We get this statute extended, which is what we've gotta do. What's the next order of business for you in terms of tackling this?

Oh, thank you, Senator. Um, as I mentioned to our staff, our our focus is fraud, fraud, fraud. I mean, there's three things we're concentrating on. Uh, we need to dedicate our investigative capabilities to identify the fraud, to return the, uh, dollars to the - to the - to the taxpayer. We - our - the first priority really is to leverage data analytics, because when you're talking about billions, even trillions of dollars, and - and - and hundreds of thousands of loans, it's simply not possible to do manual reviews in these cases. We have to use data analytics. We ha- the fraudsters are taking advantage of the technology. We need to be able to do so as well.

Very good. Well, I hope that we can get the statute of limitations extended, uh, so you'll be able to do your work. Thank you for the terrific work you're doing, both of you.

Thank you.

Thank you, Madam Chair.

Thank you, Senator Hawley. Next, Senator Shaheen. Five minutes.

Thank you, Madam Chair, and thank you both for being here and for the work that you're doing. I I appreciate what the chairwoman said about the importance of the programs and what you said, um, Mister Kirk. about the fact that when those programs were designed and as somebody on this committee who helped design the PPP program um there was real urgency about getting that done, about trying to save the small businesses that were going under and the economy and a recognition that fraud needed to be addressed but that it was um secondary to ensuring that businesses were able to continue to operate. So, Mister Dieffenbach, Can you talk about the how long it is taking to develop those, um, pre-fraud measures that you mentioned?

I'm sorry, the pre-fraud measures?

Yeah, what you're talking about.

The pre-reward vetting?

Yeah.

Yes, ma'am. Uh, so thank you for the for the question, Senator. Um, we have developed, again, uh, a artificial intelligence enabled system that can very rapidly,

And how long?

uh, identify patterns, trends, anomalies. We can, uh, we can review once the system is set up, but

No, no, no. How long did it take you to develop?

Oh, to develop it? Uh, we've developed over the last six to seven months.

OK. So, having that kind of, um, a system in place before the program was done was probably unlikely, given the urgency about getting

From March of twenty twenty, correct.

insuring. Correct. OK. I just wanted to be clear as we're looking at time frame here. Um, and one of the things that you said was that we can't ignore I maybe it was you, Mister Kirk, we can't ignore one area of fraud because of fraud in other areas. And Senator Ernst mentioned the Doge um work. Last year we saw reports that Doge had accessed SBA systems that had sensitive information about people and businesses. We requested a review of what they accessed and whether there was any misuse of personal information. Mister Kirk, have you looked into what Doge accessed and whether there there was any tampering with the information at SBA?

Thank you, Senator, for the question. I've just been in place about seven weeks, uh and uh in that time I have not conducted any review of Doge. If I may say though, I was um at the time I was uh a a career employee in the federal government over at the Department of Education, And, um, when I worked with those employees, we understood them to be government employees. Um, certainly they were from the Department of Government Efficiency, I guess the name was. But they were government employees that were vetted and reviewed by the HR processes and procedures.

But in fact they weren't.

Uh, I, I can't speak to that, I don't know, but, but, um, the, the folks that I worked with were, uh, as I understood them to be, uh, members of the federal service.

Is this something you're concerned about looking at, at SBA?

Uh, not currently, no, ma'am.

I would hope that you would do that. And in fact, when when this was happening, we requested on the committee a briefing that I think both Senators Ernst and Markey um said they would try and make sure we received, and yet we haven't gotten a briefing yet.

Uh,

So

thank you, Senator, I would be happy to uh work with your staffs to see if there is additional work that we can assist you in trying to understand that.

That'd be great.

Thank you.

I appreciate that. Um, one of My next question is also about SBA and how it operates, because one of SBA's programs is the state trade expansion program. It helps small businesses that are exporting. Um, it helps them to grow their business. I think that's something that this administration is also very interested in. And Congress provided twenty million dollars for step in fiscal year twenty twenty-five funding last March.

Mm-hmm.

But despite SBA putting out a notice of funding opportunities last May, they have yet to announce any awards from STEP. So I would hope, Mister Kirk, as you're looking into the integrity of SBA and how it operates, that you would also look into why SBA is not getting out the funding that Congress has provided to ensure that those programs that are so critical to our small businesses are actually being funded. Ca- will you commit to looking into what's going on and why um the step program is not funded.

Uh, thank Thank you, Senator, it it appears to me that you might be making a referral to an impoundment issue. Uh, and if so, that that's a matter that uh falls under the Impoundment Control Act. That's a matter for the GAO to address.

Well, I don't I don't know that I'm

Perhaps not, uh, but I'd I'd be happy to try to research that more and understand if that's what you're referring to.

Um, because there are also several other programs, the women's business centers and score where Congress is funded them, but the money hasn't actually gone out from SBA. So, I assume in your position you can check on that and see if SBA is actually funding the programs that Congress determined it should fund.

I'll certainly be happy to work with my staff to try to get answers to those questions for you.