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Home Source documents H. Rept. 118–219: No SBA Assistance to Convicted Individuals

H. Rept. 118–219: No SBA Assistance to Convicted Individuals

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Congressional materials
Document type
Crpt 118Hrpt219
Case
Crpt 118Hrpt219

Summary

House Report 118-219 from the Committee on Small Business of the 118th Congress, submitted by Mr. Williams of Texas on September 26, 2023, to accompany H.R. 5427, a bill to prohibit individuals convicted of defrauding the Government from receiving any assistance from the Small Business Administration. The report recommends passage without amendment and states that the committee ordered the bill reported on September 14, 2023, with no amendments offered. It cites a June 2023 SBA Office of Inspector General report finding more than $200 billion in potentially fraudulent pandemic loans, and describes the bill as barring anyone finally convicted of COVID-19 assistance fraud from SBA business loans for life. It notes a July 13, 2023 hearing, shows changes to Section 16 of the Small Business Act, and closes with minority views signed by Ranking Member Nydia M. Velázquez.

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Full text

                                                                                118TH CONGRESS                                                                                           REPORT
                                                                                               " HOUSE OF REPRESENTATIVES                                                        !
                                                                                   1st Session                                                                                           118–219




                                                                                TO PROHIBIT INDIVIDUALS CONVICTED OF DEFRAUDING THE GOVERN-
                                                                                 MENT FROM RECEIVING ANY ASSISTANCE FROM THE SMALL BUSINESS
                                                                                 ADMINISTRATION, AND FOR OTHER PURPOSES



                                                                                     SEPTEMBER 26, 2023.—Committed to the Committee of the Whole House on the
                                                                                                    State of the Union and ordered to be printed




                                                                                     Mr. WILLIAMS of Texas, from the Committee on Small Business,
                                                                                                       submitted the following

                                                                                                                                R E P O R T
                                                                                                                                   together with

                                                                                                                             MINORITY VIEWS

                                                                                                                            [To accompany H.R. 5427]

                                                                                  The Committee on Small Business, to whom was referred the bill
                                                                                (H.R. 5427) to prohibit individuals convicted of defrauding the Gov-
                                                                                ernment from receiving any assistance from the Small Business
                                                                                Administration, and for other purposes, having considered the
                                                                                same, reports favorably thereon without amendment and rec-
                                                                                ommends that the bill do pass.
                                                                                                                                       CONTENTS
                                                                                                                                                                                                           Page
                                                                                     I. Purpose and Bill Summary ........................................................................                    2
                                                                                    II. Need for Legislation ....................................................................................            2
                                                                                   III. Hearings .......................................................................................................     2
                                                                                   IV. Committee Consideration ...........................................................................                   2
                                                                                    V. Committee Votes .........................................................................................             2
                                                                                   VI. Section-by-Section of H.R. 5427 .................................................................                     5
                                                                                  VII. Congressional Budget Office Cost Estimate .............................................                               5
                                                                                 VIII. New Budget Authority, Entitlement Authority, and Tax Expenditures                                                     5
                                                                                   IX. Oversight Findings & Recommendations ..................................................                               5
                                                                                    X. Performance Goals and Objectives ............................................................                         5
                                                                                   XI. Statement of Duplication of Federal Programs ........................................                                 6
                                                                                  XII. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
                                                                                          Benefits .....................................................................................................     6
                                                                                 XIII. Federal Mandates Statement .....................................................................                      6
                                                                                  XIV. Federal Advisory Committee Statement ...................................................                              6
                                                                                   XV. Applicability to Legislative Branch ...........................................................                       6
                                                                                  XVI. Statement of Constitutional Authority ......................................................                          6
                                                                                 XVII. Changes in Existing Law, Made by the Bill, As Reported ......................                                         6




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                                                                                XVIII. Minority Views ............................................................................................          11
                                                                                      39–006




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                                                                                                             I. PURPOSE AND BILL SUMMARY
                                                                                  On September 13, 2023, Rep. Williams and Rep. Mfume intro-
                                                                                duced H.R. 5427. The purpose of H.R. 5427 is to prohibit anyone
                                                                                convicted of defrauding the government during the COVID–19 pan-
                                                                                demic from ever receiving a loan through the Small Business Ad-
                                                                                ministration.
                                                                                                                II. NEED FOR LEGISLATION
                                                                                  A report released by the U.S. Small Business Administration’s
                                                                                (SBA) Office of Inspector General (OIG) in June 2023 concluded
                                                                                that the SBA disbursed more than $200 billion in potentially fraud-
                                                                                ulent loans in the pandemic relief programs. In order to provide ac-
                                                                                countability, this legislation will prohibit anyone convicted of de-
                                                                                frauding the government during the COVID–19 pandemic from
                                                                                ever getting another SBA loan.
                                                                                                                         III. HEARINGS
                                                                                  In the 118th Congress, the Committee held one hearing exam-
                                                                                ining the issues covered in H.R. 5427. On July 13, 2023, the Com-
                                                                                mittee held a hearing titled ‘‘Reviewing the SBA and OIG Reports
                                                                                of Fraud in Pandemic Lending Programs.’’ Inspector General Han-
                                                                                nibal ‘‘Mike’’ Ware testified on the Office of Inspector General find-
                                                                                ings. Administrator Isabella Guzman was invited to testify but did
                                                                                not attend.
                                                                                                             IV. COMMITTEE CONSIDERATION
                                                                                  The Committee on Small Business met in open session, with a
                                                                                quorum being present, on September 14, 2023 and ordered H.R.
                                                                                5427 reported favorably to the House of Representatives. During
                                                                                the markup no amendments were offered.
                                                                                                                   V. COMMITTEE VOTES
                                                                                   Clause 3(b) of rule XIII of the Rules of the House of Representa-
                                                                                tives requires the Committee to list the recorded votes on the mo-
                                                                                tion to report legislation and amendments thereto. The Committee
                                                                                voted to favorably report H.R. 5427 to the House of Representatives
                                                                                at 11:49 AM.




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                                                                                                       VI. SECTION-BY-SECTION OF H.R. 5427
                                                                                Section 1. Assistance prohibited after fraud conviction
                                                                                   This section debars anyone finally convicted of a crime related to
                                                                                financial misconduct or making a false statement with regards to
                                                                                COVID–19 assistance from the federal government from receiving
                                                                                a business loan from the SBA for the remainder of their lifetime.
                                                                                   Debarment is an action that excludes an individual from future
                                                                                eligibility for certain government benefits or opportunities.
                                                                                   Finally convicted means that an individual has exhausted all op-
                                                                                portunities to appeal a conviction or that a conviction can other-
                                                                                wise no longer be appealed because the time for appealing a convic-
                                                                                tion has expired.
                                                                                            VII. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE
                                                                                  Pursuant to clause 3(d)(1) of House rule XIII, the Committee
                                                                                adopts as its own the cost estimate prepared by the Director of the
                                                                                Congressional Budget Office pursuant to section 402 of the Con-
                                                                                gressional Budget Act of 1974. The Committee has requested but
                                                                                not received from the Director of the Congressional Budget Office
                                                                                a cost estimate for the Committee’s provisions. Once available, the
                                                                                cost estimate will be published in the Congressional Record.
                                                                                     VIII. NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND
                                                                                                       TAX EXPENDITURES
                                                                                   Pursuant to clause 3(c)(2) of rule XIII of the Rules of the House
                                                                                of Representatives and section 308(a)(I) of the Congressional Budg-
                                                                                et Act of 1974, the Committee provides the following opinion and
                                                                                estimate with respect to new budget authority, entitlement author-
                                                                                ity, and tax expenditures. While the Committee has not received an
                                                                                estimate of new budget authority contained in the cost estimate
                                                                                prepared by the Director of the Congressional Budget Office pursu-
                                                                                ant to Sec. 402 of the Congressional Budget Act of 1974, the Com-
                                                                                mittee does not believe that there will be any additional costs at-
                                                                                tributable to this legislation. H.R. 5427 does not direct new spend-
                                                                                ing, but instead reallocates funding independently authorized and
                                                                                appropriated.
                                                                                                  IX. OVERSIGHT FINDINGS & RECOMMENDATIONS
                                                                                  In accordance with clause 3(c)(1) of rule XIII and clause 2(b)(1)
                                                                                of rule X of the Rules of the House of Representatives, the over-
                                                                                sight findings and recommendations of the Committee on Small
                                                                                Business with respect to the subject matter contained in H.R. 5427
                                                                                are incorporated into the descriptive portions of this report.
                                                                                                     X. PERFORMANCE GOALS AND OBJECTIVES
                                                                                  With respect to the requirements of clause 3(c)(1) of rule XIII of
                                                                                the Rules of the House of Representatives, the performance goals
                                                                                and objectives of H.R. 5427 are to prohibit individuals convicted of




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                                                                                defrauding the federal government from receiving financial assist-
                                                                                ance from the SBA.




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                                                                                          XI. STATEMENT OF DUPLICATION OF FEDERAL PROGRAMS
                                                                                  Pursuant to clause 3(c)(5) of rule XIII of the Rules of the House
                                                                                of Representatives, no provision of H.R. 5427 is known to be dupli-
                                                                                cative of another Federal program, including any program that was
                                                                                included in a report to Congress pursuant to section 21 of Public
                                                                                Law 111–139 or the most recent Catalog of Federal Domestic As-
                                                                                sistance.
                                                                                      XII. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND
                                                                                                      LIMITED TARIFF BENEFITS
                                                                                  With respect to clause 9 of rule XXI of the Rules of the House
                                                                                of Representatives, the Committee finds that the bill does not con-
                                                                                tain any congressional earmarks, limited tax benefits, or limited
                                                                                tariff benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI of
                                                                                the Rules of the House of Representatives.
                                                                                                        XIII. FEDERAL MANDATES STATEMENT
                                                                                  The Committee adopts as its own the estimate of Federal man-
                                                                                dates prepared by the Director of the Congressional Budget Office
                                                                                pursuant to section 423 of the Unfunded Mandates Reform Act.
                                                                                                  XIV. FEDERAL ADVISORY COMMITTEE STATEMENT
                                                                                  No advisory committees within the meaning of section 5(b) of the
                                                                                Federal Advisory Committee Act were created by this legislation.
                                                                                                    XV. APPLICABILITY TO LEGISLATIVE BRANCH
                                                                                  The Committee finds that the legislation does not relate to the
                                                                                terms and conditions of employment or access to public services or
                                                                                accommodations within the meaning of section 102(b)(3) of the Con-
                                                                                gressional Accountability Act.
                                                                                                  XVI. STATEMENT OF CONSTITUTIONAL AUTHORITY
                                                                                   Pursuant to clause 7 of rule XII of the Rules of the House, the
                                                                                Committee finds that the authority for this legislation in Art. I, § 8,
                                                                                cl.1 of the Constitution of the United States.
                                                                                XVII. CHANGES IN EXISTING LAW, MADE BY THE BILL, AS REPORTED
                                                                                  In compliance with clause 3(e) of rule XIII of the Rules of the
                                                                                House of Representatives, changes in existing law made by the bill,
                                                                                as reported, are shown as follows (existing law proposed to be omit-
                                                                                ted is enclosed in black brackets, new matter is printed in italics,
                                                                                and existing law in which no change is proposed is shown in
                                                                                roman):
                                                                                      CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
                                                                                  In compliance with clause 3(e) of rule XIII of the Rules of the
                                                                                House of Representatives, changes in existing law made by the bill,




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                                                                                as reported, are shown as follows (new matter is printed in italics
                                                                                and existing law in which no change is proposed is shown in
                                                                                roman):




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                                                                                                               SMALL BUSINESS ACT

                                                                                          *         *       *        *       *        *        *
                                                                                   SEC. 16. (a) Whoever makes any statement knowing it to be
                                                                                false, or whoever willfully overvalues any security, for the purpose
                                                                                of obtaining for himself or for any applicant any loan, or extension
                                                                                thereof by renewal, deferment of action, or otherwise, or the accept-
                                                                                ance, release, or substitution of security therefor, or for the purpose
                                                                                of influencing in any way the action of the Administration, or for
                                                                                the purpose of obtaining money, property, or anything of value,
                                                                                under this Act, shall be punished by a fine of not more than $5,000
                                                                                or by imprisonment for not more than two years, or both.
                                                                                   (b) Whoever, being connected in any capacity with the Adminis-
                                                                                tration, (1) embezzles, abstracts, purloins, or willfully misapplies
                                                                                any moneys, funds, securities, or other things of value, whether be-
                                                                                longing to it or pledged or otherwise entrusted to it, or (2) with in-
                                                                                tent to defrand the Administration or any other body politic or cor-
                                                                                porate, or any individual, or to deceive any officer, auditor, or ex-
                                                                                aminer of the Administration, makes any false entry in any book,
                                                                                report, or statement of or to the Administration, or, without being
                                                                                duly authorized, draws any order or issues, puts forth, or assigns
                                                                                any note, debenture, bond, or other obligation, or draft, bill of ex-
                                                                                change, mortgage, judgment, or decree thereof, or (3) with intent
                                                                                to defraud participates or shares in or receives directly or indirectly
                                                                                any money, profit, property, or benefit through any transaction,
                                                                                loan, commission, contract, or any other part of the Administration,
                                                                                or (4) gives any unauthorized information concerning any future ac-
                                                                                tion or plan of the Administration which might affect the value of
                                                                                securities, or, having such knowledge, invests or speculates, di-
                                                                                rectly or indirectly, in the securities or property of any company or
                                                                                corporation receiving loans or other assistance from the Adminis-
                                                                                tration, shall be punished by a fine of not more than $10,000 or by
                                                                                imprisonment for not more than five years, or both.
                                                                                   (c) Whoever, with intent to defraud, knowingly conceals, removes,
                                                                                disposes of, or converts to his own use or that of another, any prop-
                                                                                erty mortgaged or pledged to, or held by, the Administration, shall
                                                                                be fined not more than $5,000 or imprisoned not more than five
                                                                                years, or both; but if the value of such property does not exceed
                                                                                $100, he shall be fined not more than $1,000 or imprisoned not
                                                                                more than one year, or both.
                                                                                   (d)(1) Whoever misrepresents the status of any concern or person
                                                                                as a ‘‘small business concern’’, a ‘‘qualified HUBZone small busi-
                                                                                ness concern’’, a ‘‘small business concern owned and controlled by
                                                                                service-disabled veterans’’, a ‘‘small business concern owned and
                                                                                controlled by veterans’’, a ‘‘small business concern owned and con-
                                                                                trolled by socially and economically disadvantaged individuals’’, or
                                                                                a ‘‘small business concern owned and controlled by women’’, in
                                                                                order to obtain for oneself or another any—
                                                                                         (A) prime contract to be awarded pursuant to section 8, 9,
                                                                                      15, 31, 36, or 36A;
                                                                                         (B) subcontract to be awarded pursuant to section 8(a);




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                                                                                         (C) subcontract that is to be included as part or all of a goal
                                                                                      contained in a subcontracting plan required pursuant to sec-
                                                                                      tion 8(d); or




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                                                                                        (D) prime or subcontract to be awarded as a result, or in fur-
                                                                                     therance, of any other provision of Federal law that specifically
                                                                                     references section 8(d) for a definition of program eligibility,
                                                                                     shall be subject to the penalties and remedies described in
                                                                                     paragraph (2).
                                                                                  (2) Any person who violates paragraph (1) shall—
                                                                                        (A) be punished by a fine of not more than $500,000 or by
                                                                                     imprisonment for not more than 10 years, or both;
                                                                                        (B) be subject to the administrative remedies prescribed by
                                                                                     the Program Fraud Civil Remedies Act of 1986 (31 U.S.C.
                                                                                     3801–3812);
                                                                                        (C) be subject to suspension and debarment as specified in
                                                                                     subpart 9.4 of title 48, Code of Federal Regulations (or any suc-
                                                                                     cessor regulation); and
                                                                                        (D) be ineligible for participation in any program or activity
                                                                                     conducted under the authority of this Act or the Small Busi-
                                                                                     ness Investment Act of 1958 (15 U.S.C. 661 et seq.) for a period
                                                                                     not to exceed 3 years.
                                                                                        (3) LIMITATION ON LIABILITY.—This subsection shall not
                                                                                     apply to any conduct in violation of subsection (a) if the defend-
                                                                                     ant acted in good faith reliance on a written advisory opinion
                                                                                     from a Small Business Development Center (as defined in this
                                                                                     Act), or an entity participating in the Procurement Technical
                                                                                     Assistance Cooperative Agreement Program defined in chapter
                                                                                     388 of title 10, United States Code; however nothing in this
                                                                                     Act shall obligate either entity to provide such a letter nor
                                                                                     shall the provision of such a letter in any way render the pro-
                                                                                     viding entity liable to the business concern should the Admin-
                                                                                     istrator later determine that the concern is not a small busi-
                                                                                     ness concern. Upon issuance of an advisory opinion under this
                                                                                     paragraph, the entity issuing the advisory opinion shall remit
                                                                                     a copy of the opinion to the General Counsel of the Administra-
                                                                                     tion, who may reject the advisory opinion. If the General Coun-
                                                                                     sel of the Administration rejects the advisory opinion, the Ad-
                                                                                     ministration shall notify the entity issuing the advisory opinion
                                                                                     and the recipient of the opinion, after which time the business
                                                                                     concern may not rely upon the opinion.
                                                                                  (e) Any representation of the status of any concern or person as
                                                                                a ‘‘small business concern’’, a ‘‘HUBZone small business concern’’,
                                                                                a ‘‘small business concern owned and controlled by service-disabled
                                                                                veterans’’, a ‘‘small business concern owned and controlled by vet-
                                                                                erans’’, a ‘‘small business concern owned and controlled by socially
                                                                                and economically disadvantaged individuals’’, or a ‘‘small business
                                                                                concern owned and controlled by women’’ in order to obtain any
                                                                                prime contract or subcontract enumerated in subsection (d) of this
                                                                                section shall be in writing.
                                                                                  (f) Whoever falsely certifies past compliance with the require-
                                                                                ments of section 7(j)(10)(I) of this Act shall be subject to the pen-
                                                                                alties prescribed in subsection (d).
                                                                                  (g) SUBCONTRACTING LIMITATIONS.—
                                                                                        (1) IN GENERAL.—Whoever violates a requirement estab-




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                                                                                     lished under section 46 shall be subject to the penalties pre-
                                                                                     scribed in subsection (d), except that, for an entity that exceed-
                                                                                     ed a limitation on subcontracting under such section, the fine




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                                                                                       described in subsection (d)(2)(A) shall be treated as the greater
                                                                                       of—
                                                                                               (A) $500,000; or
                                                                                               (B) the dollar amount expended, in excess of permitted
                                                                                            levels, by the entity on subcontractors.
                                                                                          (2) MONITORING.—Not later than 1 year after the date of en-
                                                                                       actment of this subsection, the Administrator shall take such
                                                                                       actions as are necessary to ensure that an existing Federal
                                                                                       subcontracting reporting system is modified to notify the Ad-
                                                                                       ministrator, the appropriate Director of the Office of Small and
                                                                                       Disadvantaged Business Utilization, and the appropriate con-
                                                                                       tracting officer if a requirement established under section 46 is
                                                                                       violated.
                                                                                     (h) FINANCIAL ASSISTANCE PROHIBITION.—
                                                                                          (1) IN GENERAL.—An associate of a small business concern
                                                                                       who is finally convicted of any crime involving or relating to fi-
                                                                                       nancial misconduct or a false statement with respect to a cov-
                                                                                       ered loan or grant shall be ineligible to receive any financial as-
                                                                                       sistance from the Administrator, other than financial assistance
                                                                                       under section 7(b).
                                                                                          (2) BUSINESS CONCERNS.—A small business concern that has
                                                                                       as an associate an individual subject to paragraph (1) shall be
                                                                                       ineligible to receive any financial assistance from the Adminis-
                                                                                       trator, other than financial assistance under section 7(b).
                                                                                          (3) DEFINITIONS.—In this subsection:
                                                                                               (A) ASSOCIATE.—The term ‘‘associate’’ means, with re-
                                                                                            spect to a small business concern—
                                                                                                    (i) an officer, director, or owner of more than 20 per-
                                                                                                 cent of the equity of, or a key employee of, such small
                                                                                                 business concern;
                                                                                                    (ii) any entity not less than 20 percent owned or con-
                                                                                                 trolled by one or more individuals referred to in clause
                                                                                                 (i); and
                                                                                                    (iii) any other individual or entity in control of or
                                                                                                 controlled by such small business concern, except for a
                                                                                                 licensed small business investment company (as de-
                                                                                                 fined in section 103(3) of the Small Business Invest-
                                                                                                 ment Act of 1958 (15 U.S.C. 662(3)).
                                                                                               (B) COVERED LOAN OR GRANT.—The term ‘‘covered loan or
                                                                                            grant’’ means—
                                                                                                    (i) a loan made under—
                                                                                                          (I) paragraph (36) or (37) of subsection (a) of sec-
                                                                                                       tion 7 of the Small Business Act (15 U.S.C. 636);
                                                                                                       or
                                                                                                          (II) subsection (b) of such section in response to
                                                                                                       the COVID–19 pandemic; or
                                                                                                    (ii) a grant made under—
                                                                                                          (I) section 5003 of the American Rescue Plan Act
                                                                                                       of 2021 (15 U.S.C. 9009c); or
                                                                                                          (II) section 324 of the Economic Aid to Hard-Hit
                                                                                                       Small Businesses, Nonprofits, and Venues Act (15




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                                                                                                       U.S.C. 9009a).
                                                                                               (C) FINALLY CONVICTED.—The term ‘‘finally convicted’’
                                                                                            means, with respect to an individual or entity, that such in-




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                                                                                             dividual or entity has been convicted of an offense and such
                                                                                             conviction—
                                                                                                   (i) has not been appealed and is no longer appealable
                                                                                                 because the time for taking an appeal has expired; or
                                                                                                   (ii) has been appealed and the appeals process for
                                                                                                 such conviction is completed.
                                                                                            *           *            *              *            *          *           *




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                                                                                                               XVIII. MINORITY VIEWS
                                                                                   Over the course of the COVID–19 pandemic, the Small Business
                                                                                Administration (SBA) disbursed approximately $1.2 trillion of eco-
                                                                                nomic aid through the Paycheck Protection Program (PPP) ($792
                                                                                billion), Economic Injury Disaster Loan Program (EIDL) ($405.2
                                                                                billion), Restaurant Revitalization Fund (RRF) ($28.6 billion), and
                                                                                the Shuttered Venue Operators Grant Program (SVOG) ($14.6 bil-
                                                                                lion) to help small businesses adversely impacted by the crisis.
                                                                                   In an effort to disburse PPP and COVID–19 funds swiftly, the
                                                                                SBA weakened and removed internal controls. The Office of the In-
                                                                                spector General (OIG) issued a number of reports early on warning
                                                                                of the importance of strong internal controls to mitigate risk, and
                                                                                a total of 22 reports to identify weaknesses in SBA’s control envi-
                                                                                ronment throughout the pandemic. Beginning in early 2021, long-
                                                                                standing anti-fraud controls were reinstituted, and new safeguards
                                                                                were put into place by the Biden-Harris Administration to reduce
                                                                                the potential for fraud.
                                                                                   On June 27, 2023, the OIG issued a white paper to provide a
                                                                                comprehensive review reporting that SBA disbursed more than
                                                                                $200 billion in potentially fraudulent COVID–19 EIDLs, EIDL Tar-
                                                                                geted Advances, Supplemental Targeted Advances, and PPP loans.
                                                                                SBA also issued a report, entitled ‘‘Protecting the Integrity of the
                                                                                Pandemic Relief Programs,’’ which estimates that $36 billion of the
                                                                                $1.2 trillion in pandemic relief emergency funds was obtained
                                                                                fraudulently. Moreover, the agency asserts that 86% of the likely
                                                                                fraud originated in the first nine months of the pandemic, under
                                                                                the Trump Administration. As of August 15, 2023, there have been
                                                                                1,081 indictments. 884 arrests, 574 convictions related to PPP or
                                                                                EIDL, and 579 ongoing investigations.
                                                                                   The bill is aligned with recent actions taken by the Biden Admin-
                                                                                istration to ensure that SBA loans are not approved for those who
                                                                                defrauded the government during the pandemic or any other time.
                                                                                Beginning on August 1, 2023, SBA began proactively screening for
                                                                                prior government loss and connection to fraud for all business
                                                                                loans. This screening includes utilizing the Treasury Do Not Pay
                                                                                system (DNP). The DNP includes a dataset called CAIVRS, which
                                                                                indicates whether an individual or entity has a delinquent federal
                                                                                debt. The screening also includes a check across SBA’s internal
                                                                                databases for any business connected to pandemic program fraud
                                                                                (e.g., PPP). If a borrower is flagged through these checks, they have
                                                                                an opportunity to clear the hold by resolving the issue, dem-
                                                                                onstrating that it does not apply, or proving it incorrect. SBA does
                                                                                not move forward with an applicant’s loan unless the hold is
                                                                                cleared.
                                                                                   Given that the SBA already has protocols in place to prevent
                                                                                fraud, Committee Democrats believe the single most important ac-
                                                                                tion Congress can take to support the OIG in their efforts to com-




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                                                                                bat fraud is to advocate for their Fiscal Year 2024 (FY 2024) budg-
                                                                                et request. The Administration’s FY 2024 budget plan proposed
                                                                                $47.704 million of discretionary funding, plus a $1.6 million trans-
                                                                                fer from SBA’s Disaster Loans Program, and an additional $14 mil-
                                                                                lion transfer to OIG from a mandatory funding source. The pro-
                                                                                posed mandatory funding source for the $14 million transfer is no
                                                                                longer available following enactment of the Fiscal Responsibility
                                                                                Act of 2023 (P.L. 118–5), which rescinded the unobligated balances
                                                                                in the SBA Disaster Loan Program account.
                                                                                   The OIG budget request would enable OIG to build on its exist-
                                                                                ing oversight capacity as COVID EIDL loans enter into repayment
                                                                                with additional criminal investigators, data scientists, auditors,
                                                                                and professional staff. These investments in data analytics capa-
                                                                                bilities, auditors, and investigative coverage will enable OIG to
                                                                                analyze more data, conduct more audits and reviews, and inves-
                                                                                tigate more cases, promoting public trust and integrity within
                                                                                SBA’s programs and operations.
                                                                                   Unfortunately, the House FSGG appropriations bill provides
                                                                                $32.02 million, which would cripple the OIG, providing budget au-
                                                                                thority for approximately 130 positions, and bringing operations
                                                                                back to pre-pandemic levels. The Administration’s FY 2024 budget
                                                                                provides the necessary funding to enable the OIG to sustain exist-
                                                                                ing oversight capacity and invest in additional necessary staffing.
                                                                                Absent the total budgetary resources requested in the FY 2024
                                                                                budget, the OIG will not have sufficient funding to combat fraud
                                                                                within SBA programs or to provide effective oversight over the
                                                                                agency’s programs. Critically, OIG will not have a sufficient oper-
                                                                                ating budget to capitalize on the new laws (P.L. 117–165 and P.L.
                                                                                117–166), which extended the statute of limitations for fraud in the
                                                                                PPP and EIDL programs to 10 years.
                                                                                        Sincerely,
                                                                                                                         NYDIA M. VELÁZQUEZ,
                                                                                                                                 Ranking Member.

                                                                                                                                    Æ




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