Senate hearing (118th Congress), EXAMINING FEDERAL COVID-ERA SPENDING AND PREVENTING FUTURE FRAUD (PDF)
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The printed record of a November 14, 2023 hearing of the Subcommittee on Emerging Threats and Spending Oversight of the Senate Committee on Homeland Security and Governmental Affairs, S. Hrg. 118–242, titled Examining Federal COVID-Era Spending and Preventing Future Fraud. Opening statements come from Senators Hassan, Romney, Scott, Ernst and Ossoff. Witnesses are Michael E. Horowitz, Chair of the Pandemic Response Accountability Committee and Justice Department Inspector General; Hannibal "Mike" Ware, SBA Inspector General; Brian D. Miller, Special Inspector General for Pandemic Recovery; and Rebecca Shea of GAO's Forensic Audits and Investigative Service.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
S. Hrg. 118–242
EXAMINING FEDERAL COVID–ERA
SPENDING AND PREVENTING FUTURE FRAUD
HEARING
BEFORE THE
SUBCOMMITTEE ON
EMERGING THREATS AND SPENDING
OVERSIGHT
OF THE
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
NOVEMBER 14, 2023
Available via the World Wide Web: http://www.govinfo.gov
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
(
U.S. GOVERNMENT PUBLISHING OFFICE
54–421 PDF WASHINGTON : 2024
COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
GARY C. PETERS, Michigan, Chairman
THOMAS R. CARPER, Delaware RAND PAUL, Kentucky
MAGGIE HASSAN, New Hampshire RON JOHNSON, Wisconsin
KYRSTEN SINEMA, Arizona JAMES LANKFORD, Oklahoma
JACKY ROSEN, Nevada MITT ROMNEY, Utah
JON OSSOFF, Georgia RICK SCOTT, Florida
RICHARD BLUMENTHAL, Connecticut JOSH HAWLEY, Missouri
LAPHONZA BUTLER, California ROGER MARSHALL, Kansas
DAVID M. WEINBERG, Majority Staff Director
WILLIAM E. HENDERSON III, Minority Staff Director
LAURA W. KILBRIDE, Chief Clerk
ASHLEY A. GONZALEZ, Hearing Clerk
SUBCOMMITTEE ON EMERGING THREATS AND SPENDING OVERSIGHT
MAGGIE HASSAN, New Hampshire, Chairman
KYRSTEN SINEMA, Arizona MITT ROMNEY, Utah
JACKY ROSEN, Nevada JAMES LANKFORD, Oklahoma
JON OSSOFF, Georgia RICK SCOTT, Florida
JASON M. YANUSSI, Majority Staff Director
ALLISON TINSEY, Majority Senior Counsel
SCOTT MACLEAN RICHARDSON, Minority Staff Director
JOHN POULSON, Minority Professional Staff Member
KATE KIELCESKI, Chief Clerk
(II)
CONTENTS
Opening statements: Page
Senator Hassan ................................................................................................. 1
Senator Romney ................................................................................................ 2
Senator Scott ..................................................................................................... 13
Senator Ernst .................................................................................................... 15
Senator Ossoff ................................................................................................... 21
Prepared statements:
Senator Hassan ................................................................................................. 29
WITNESS
TUESDAY, NOVEMBER 14, 2023
Hon. Michael E. Horowitz, Chair, Pandemic Response Accountability Com-
mittee Inspector General, U.S. Department of Justice ..................................... 4
Hon. Hannibal ‘‘Mike’’ Ware, Inspector General, U.S. Small Business Admin-
istration ................................................................................................................. 6
Hon. Brian D. Miller, Special Inspector General for Pandemic Recovery U.S.
Department of The Treasury ............................................................................... 7
Rebecca Shea, Director, Forensic Audits and Investigative Service U.S. Gov-
ernment Accountability Office ............................................................................. 9
ALPHABETICAL LIST OF WITNESSES
Horowitz, Hon. Michael E.:
Testimony .......................................................................................................... 4
Prepared statement .......................................................................................... 31
Miller, Hon. Brian D.:
Testimony .......................................................................................................... 7
Prepared statement .......................................................................................... 59
Shea, Rebecca:
Testimony .......................................................................................................... 9
Prepared statement .......................................................................................... 67
Ware, Hon. Hannibal ‘‘Mike’’:
Testimony .......................................................................................................... 6
Prepared statement .......................................................................................... 45
APPENDIX
Minority Report ....................................................................................................... 94
Flush with COVID–19 aid, schools steer funding to sports exhibit .................... 112
Vaccine bonuses, aid to businesses and a golf course? ......................................... 113
Documents: CT City used COVID relief funds to hire a marching band ............ 114
Biden Admin to Fund Crack Pipe Distribution to Advance Racial Equity ......... 115
Follow-up to SIGPR Subcommittee Appearance ................................................... 116
(III)
EXAMINING FEDERAL COVID-ERA SPENDING
AND PREVENTING FUTURE FRAUD
TUESDAY, NOVEMBER 14 2023
U.S. SENATE,
SUBCOMMITTEE ON EMERGING THREATS AND
SPENDING OVERSIGHT,
OF THE COMMITTEE ON HOMELAND SECURITY
AND GOVERNMENTAL AFFAIRS,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:46 p.m., in room
SD–562, Dirksen Senate Office Building, Hon. Maggie Hassan, pre-
siding.
Present: Senators Hassan [presiding], Ossoff, Romney, and Scott.
Also present: Senator Ernst.
OPENING STATEMENT OF SENATOR HASSAN1
Senator HASSAN. Good afternoon. Our hearing today focuses on
Federal spending in response to the Coronavirus Disease 2019
(COVID–19) pandemic, efforts to conduct oversight of those funds,
and opportunities to work together to prevent fraud in the future.
I want to begin by thanking Ranking Member Romney for his work
on these critical issues and for his proposal to hear from our distin-
guished panel of witnesses on how Congress and the Federal Gov-
ernment can strengthen efforts to prevent waste, fraud, and abuse
of emergency spending.
In early 2020, few could have imagined the impact that the
Coronavirus would have had on global health and our economy. It
quickly became apparent, however, that Congress had an obligation
to respond. In those early days, Congress came together to pass the
bipartisan Coronavirus Aid, Relief, and Economic Security Act
(CARES Act). This package included the first round of economic
stimulus payments to individuals and families.
It also established the Paycheck Protection Program (PPP) de-
signed to provide loans to small businesses to ensure that they
could stay afloat and continue to pay their employees. It expanded
access to healthcare and life-saving personal protective equipment
(PPE). As the world grappled with the fallout of the global pan-
demic, over the next 2 years, our country faced additional medical
and economic challenges requiring additional emergency relief
packages that we passed into law. The majority of those funds were
provided in the forms of loans, grants, and direct financial assist-
ance.
1 The prepared statement of Senator Hassan appears in the Appendix on page 29.
(1)
2
These programs were overwhelmingly successful. Investing in
our economy during the pandemic helped limit negative effects on
our economy and prevent a recession. These programs also shored
up supplies and resources for hospitals, expanded access to crucial
medical care, and deployed COVID–19 vaccines to slow the dis-
ease’s rapid spread and save lives. All of that allowed us to get
back to work and to school.
The Federal Government’s response to the pandemic was obvi-
ously unprecedented though in its size and scope. Because of that,
Congress also put in place mechanisms for strong oversight. To-
ward that end, Congress provided funding for the Government Ac-
countability Office (GAO) and inspectors general (IG) across the
government to oversee COVID–19 spending. Congress also estab-
lished the Special Inspector General for Pandemic Recovery
(SIGPR), as well as the Pandemic Response Accountability Com-
mittee (PRAC) to better coordinate oversight and promote trans-
parency among COVID–19 relief programs.
These oversight entities have uncovered hundreds of billions of
dollars in scams, fraud, and improper payments involving pan-
demic relief programs, and are working with law enforcement offi-
cials to hold fraudsters accountable. The staggering amount of
fraud that they have uncovered is outrageous and unacceptable.
With what we know now, it’s incumbent upon agencies and Con-
gress to improve our stewardship of taxpayer dollars. We can and
we must do better.
Again, I thank our witnesses and all of their colleagues for their
tireless work and for appearing today. I look forward to a robust
bipartisan discussion on the Federal Government’s response to
COVID–19, and how we can work together to hold criminals ac-
countable for stealing taxpayer dollars, and how we can prevent
fraud in the future. With that, I will now recognize Ranking Mem-
ber Romney for his opening remarks.
OPENING STATEMENT OF SENATOR ROMNEY
Senator ROMNEY. Thank you, Chair Hassan. I am pleased to see
a number of colleagues that I respect enormously who are here tell-
ing us how we can use our money better and, assure that it is
being spent wisely. I hate taking you away from your work and
having you have to sit here and speak with us, and yet this be-
comes part of our record. As part of that, I guess we each get a
chance to speak, and I apologize for slowing you down by listening
to me speak, but I also want to make this part of the record. Far
be it for me to change the traditions of the U.S. Senate.
We agreed that the CARES Act was critically important for the
country at a critical time. I applaud the efforts that were carried
out then as I do today, but it has become clear, particularly as a
result of the work that you all have done, that the oversight of
funds tied to the CARES Act and other COVID relief legislation
was lacking.
I looked just that better to understand how we can recover some
of the things which have been fraudulently taken, but what we can
do to prevent mistakes like this in the future. In April 2020, a
week after the passage of the CARES Act, Senator Tester and I
wrote a letter to then President Trump, asking him to provide Con-
3
gress with a detailed plan on how the government would execute
the use of those funds and accountability measures that would be
put in place to ensure that our dollars were spent efficiently and
effectively. We also noted the vital role played by inspectors gen-
eral in ensuring the public’s trust in our government.
Chief among those concerns was the level of fraud reported by
the Small Business Administration (SBA). It concluded there was
some $36 billion of waste, fraud, and abuse in the Pandemic Assist-
ance loan programs. But General Ware and his team have esti-
mated the true number closer to $200 billion. What the true num-
ber is, we won’t know precisely, but it is an alarming figure in and
of itself.
I am also concerned about the pending expiration. The Treasury
Department’s Special Inspector General for Pandemic Recovery,
currently scheduled to sunset at the end of March 2025. Consid-
ering this timeline also coincides with the maturing of loans at the
Treasury Department’s Main Street Lending Program (MSLP). It
would be wise to have these authorities expire at that time.
The COVID pandemic was, of course, a unique crisis. It upended
much in our country. But I believe we have much to learn for how
we can do a better job in the future when there are tragedies of
that nature. That is the purpose I believe of, at least for me in our
hearing today. I look forward to hearing you with regards to your
testimony from what you have learned, but also your advice on
what you think we can do in the future to be better guardians of
the people’s money.
I know that it is not your job to tell Congress how to do our job
better. That is not why you are inspectors general, but nonetheless
you have been around long enough to say, ‘‘Why did these guys not
do this? They should have done that instead.’’ We want to learn
from that, that experience. With that Madam Chair, I am happy
to turn back to our testimony.
Senator HASSAN. Thank you Ranking Member Romney. It is the
practice of the Homeland Security and Government Affairs Com-
mittee (HSGAC) to swear in witnesses. If you will all please stand
and raise your right hand.
Do you swear that the testimony you give before this Sub-
committee will be the truth, the whole truth, and nothing but the
truth, so help you, God?
Mr. HOROWITZ. I do.
Mr. WARE. I do.
Mr. MILLER. I do.
Ms. SHEA. I do.
Thank you very much. Please be seated. We will now proceed to
each witness. I will introduce you and then you will go for 5 min-
utes of testimony in turn.
We will start with our first witness, who is Michael Horowitz,
who serves as Inspector General for the Department of Justice
(DOJ) and the Chair of the Pandemic Response Accountability
Committee. Mr. Horowitz was confirmed to be the Inspector Gen-
eral of DOJ in 2012 and was tapped to lead the PRAC in 2020.
Prior to becoming an IG, he served a 6-year term as the Commis-
sioner on the US Sentencing Commission, worked as an attorney
in private practice, and spent several years as an Assistant United
4
States Attorney (AUSA). Welcome Inspector General Horowitz, you
are now recognized for your opening statement.
TESTIMONY OF HON. MICHAEL E. HOROWITZ,1 CHAIR, PAN-
DEMIC RESPONSE ACCOUNTABILITY COMMITTEE, INSPEC-
TOR GENERAL, U.S. DEPARTMENT OF JUSTICE
Mr. HOROWITZ. Thank you, Chair Hassan, Ranking Member
Romney, Members of the Subcommittee. Thank you for inviting me
to testify at this very important hearing and for the Committee’s
continued support of the IG community and independent oversight.
The Pandemic Response Accountability Committee partners with
IGs to oversee more than $5 trillion in Federal pandemic relief
emergency spending. Over the past 31⁄2 years, the PRAC and its
partner IGs have, among other things, promoted transparency by
developing a state-of-the-art website, pandemicoversight.gov, that
allows the public to see how its money has been spent, and pro-
vides links to over 1000 audits and reviews by Federal IGs, the
GAO, and our State and local oversight partners.
We have also established close working relationships and shared
information with our State and local oversight partners at a level
not previously seen in Federal oversight efforts. We have also used
advanced data analytics to improve program integrity, prevent and
detect fraud, and hold accountable those who have defrauded pub-
lic programs. The PRAC has issued two lessons learned reports to
date, detailing how to improve program integrity and prevent
fraud—I am looking forward to talking about those during today’s
hearing—and we have heard repeatedly from individuals in our
work about the important role pandemic programs have played in
helping individuals, businesses, and communities respond to the
pandemic.
However, we have also reported on the serious failures that oc-
curred in implementing many of these programs, including at the
outset of the pandemic, failing to use even the most basic fraud
prevention controls. These failures resulted in hundreds of billions
of dollars in taxpayer funds going to fraudsters, instead of the
small businesses, unemployed, and other individuals and entities
for whom that money was intended. It also resulted in historic lev-
els of identity fraud, leaving scores of identity theft victims.
How do we prevent fraud in the future? In addition to imple-
menting basic program controls, agencies must collect and make
public complete data on how money is being spent. There are far
too many data gaps currently, which we will talk about I am sure
today. Additionally, existing data sources and data analytics must
be used to improve program integrity, and prevent fraud before
funds are sent out.
Unfortunately, when the pandemic hit in March, 2020 and the
PRAC was created, we did not have a data analytics tool because
in 2015 when the Recovery and Accountability Transparency Board
sunset, the IG community’s highly successful Analytics Pro Plat-
form also sunset, despite controller General Gene Dodaro’s plea to
Congress and the administration at the time.
1 The prepared statement of Mr. Horowitz appears in the Appendix on page 31.
5
Six years later in 2021, Congress had to appropriate $40 million
for the PRAC to build a new analytics center, the Pandemic Ana-
lytics Center of Excellence (PACE), and give us the funding, which
it did, to operate it through our sunset in September, 2025. Con-
gress also importantly provided us with special hiring authority
that enabled us to attract remarkably talented data scientists, that
was critical to our efforts. The PACE has been instrumental in ad-
vancing our efforts to improve program integrity.
Earlier this year, we used the PACE to analyze over 33 million
PPP and Economic Injury Disaster Loan (EIDL) applications to
identify questionable social security numbers (SSNs). We then had
the Social Security Administration (SSA) tell us, pursuant to legal
authorities Congress gave us in the CARES Act, whether the
names, dates of birth, and social security numbers used in those
PPP and EIDL applications match the information in the Social Se-
curity administration’s database.
As we publicly reported at the time, we determined that over
69,000 questionable SSNs had been used to obtain $5.4 billion in
PPP and EIDL funds, and that another 175,000 questionable social
security numbers had been used in applications that were ulti-
mately not paid. We identified another $38 million in funds that
were sent to applicants using social security numbers of deceased
individuals, all of that through our effort to match data using the
PACE.
Had the PACE been available to us at the outset of the pan-
demic, we could have worked with SBA and the Small Business
Administration’s Office of Inspector General (SBAOIG) to flag these
suspicious applications before the money went out. By the way, the
$5.4 billion is over 300 times the annual cost for the operation of
the PACE, which is $16 million. The PACE is also providing inves-
tigative support to more than 600 pandemic related investigations
that are currently ongoing, with an estimated fraud loss of about
$1.8 billion.
The PACE’s ability to prevent and detect improper payments and
reduce the instance of fraud cannot be overstated. That is why it
is critical for Congress to pass legislation, allowing IGs to use it to
oversee all Federal spending and to make it permanent. The exten-
sion would not create a super IG that duplicates the audit, inves-
tigative, and oversight efforts of IGs. Rather, it would simply en-
sure that IGs continue to have access to this critical fraud preven-
tion tool.
Thank you for your time, for holding the hearing, and I look for-
ward to answering your questions.
Senator HASSAN. Thank you very much. Our next witness is
Mike Ware, who serves as the Inspector General of the Small Busi-
ness Administration. During the COVID–19 pandemic, SBA played
an important role in distributing emergency grants and loans to
small businesses during the pandemic. The SBA Office of Inspector
General led by Mr. Ware was tasked with ensuring that those
funds were used to help small businesses continue to operate in the
face of a historic economic downturn.
The Senate confirmed Mr. Ware to be the Inspector General of
SBA in 2018. In total, he has 30 years of experience in the Inspec-
tor General community, including as Deputy Assistant Inspector
6
General for Management at the Department of the Interior (DOI),
and before assuming his current role as deputy and later Acting In-
spector General of SBA. Welcome Inspector General Ware. You are
now recognized for your opening statement.
TESTIMONY OF HON. HANNIBAL ‘‘MIKE’’ WARE,1 INSPECTOR
GENERAL, U.S. SMALL BUSINESS ADMINISTRATION
Mr. WARE. Thank you, Chair Hassan, Ranking Member Romney,
Senator Ernst, and distinguished Members of the Subcommittee.
Thank you for the privilege of testifying before you today and for
your continued support of the Small Business Administration’s Of-
fice of Inspector General.
I am proud of the dedication of the men and women of my office
who work hard every day to detect, deter, and combat fraud in
SBAs programs for the benefit of the American people, particularly
their work in providing oversight of SBAs more than $1.2 trillion
in pandemic assistance programs. Since 2020, SBAOIG has been
leading the charge to uncover pandemic fraud and hold fraudsters
accountable, providing an exponential return on investment.
Our work has resulted in more than $13 billion in dollar accom-
plishments, including investigative recoveries, fines, and forfeit-
ures, representing a nearly 200 full return on investment (ROI) to
the taxpayer. Additionally, our work has resulted in another more
than $8 billion in EIDL funds returned to SBA by financial institu-
tions, $20 billion in EIDL funds returned by borrowers, and over
$1 billion in United States Secret Service (USSS) bulk seizures.
Our investigations involving SBAs pandemic programs have re-
sulted in almost 1,200 indictments, 940 arrests and 630 convictions
as of October 31st of this year. We have issued 37 pandemic related
reports, with 95 recommended corrective actions to strengthen in-
ternal controls and promote integrity, efficiency, and effectiveness
within SBAs programs.
Our recommendations for corrective action to the agency have re-
sulted in SBA tightening their internal control systems, and our
work continues to focus on ensuring only eligible recipients re-
ceived funds, facilitating the return of funds received by ineligible
recipients, and bringing those who willfully exploited the programs
to justice.
We have leveraged data analytics to prioritize our investigative
efforts in conjunction with our law enforcement partners. To date,
hotline complaints have exceeded more than 270,000 from which
our office has identified more than 104,000 actionable leads. This
represents more than 100 years of investigative case work with our
available resources.
Now, this was possible through data analytics that leveraged ma-
chine learning as well as our partnership with the PRAC. The un-
precedented level of fraud in SBAs pandemic programs led us to
publish our fraud landscape report in June of this year. In our com-
prehensive review of potential fraud in SBAs pandemic assistance
loan programs, we estimate that SBA disbursed more than $200
billion in potentially fraudulent COVID–19 EIDLs and PPP loans,
representing approximately 17 percent of disbursed funds.
1 The prepared statement of Mr. Ware appears in the Appendix on page 45.
7
Specifically, more than 4 million loans totaling 136 billion
COVID–19 EIDLs, and $64 billion in PPP funds. Now, the growth
of SBAs programs coupled with an estimated 200 billion in poten-
tial pandemic related fraud, has significantly expanded SBAOIG’s
oversight responsibilities. Our oversight capacity is very much de-
pendent upon the availability of sufficient budgetary resources.
Support of the President’s proposed Fiscal Year (FY) 2024 budget
of 63.3 million is vital, since it would allow our office to maintain
its current staffing levels, while also allowing for much needed in-
crease in our investigative resources. Absent the proposed budget
for fiscal year 2024, we will be unable to capitalize on the laws that
extended the statute of limitations for fraud in the PPP and EIDL
programs to 10 years, as well as provide effective oversight of SBAs
flagship programs that present significant management and per-
formance challenges.
Quite simply, more resources to my office means more investiga-
tive capacity and more wrongdoers brought to justice. We have the
authority, the proven track record, the expertise, and an engaged
workforce that is singularly focused on this mission. We will con-
tinue leading the fight against fraud along with our law enforce-
ment partners. We will leverage data analytics, agile methodology,
and our expertise in SBAs programs, to course correct and bring
those who abused the programs to justice.
Rest assured, with these additional resources, taxpayers will con-
tinue to receive significant return on investment as well as benefit
from a more efficient and effective SBA. Thank you for the oppor-
tunity to speak to you today. I am happy to answer any questions
you may have of me.
Senator HASSAN. Thank you very much, Mr. Ware. Our next wit-
ness is Brian Miller, who serves as the Special Inspector General
for Pandemic Recovery. Before being confirmed to be the Inspector
General in 2020, Mr. Miller held positions as Inspector General of
the General Services Administration (GSA), Senior Associate White
House Counsel, and as an Assistant United States Attorney. Wel-
come Inspector General Miller. You are now recognized for your
opening statement.
TESTIMONY OF HON. BRIAN D. MILLER,1 SPECIAL INSPECTOR
GENERAL FOR PANDEMIC RECOVERY, U.S. DEPARTMENT OF
THE TREASURY
Mr. MILLER. Good afternoon Chair Hassan, Ranking Member
Romney, and Members of the Subcommittee, I am Brian Miller,
Special Inspector General for Pandemic Recovery. Thank you for
the opportunity to appear here today. We appreciate it. We appre-
ciate your support for our office.
As I explained in my submitted written testimony, it is essential
for Congress to promptly extend SIGPR beyond the current sunset
date of March, 2025. SIGPR is investigating cases nationwide with
potential fraud totaling over $565 million. So far, SIGPR has
opened a total of 64 complex fraud investigations, with 130 poten-
tial defendants. SIGPR’s investigations have resulted in multiple
arrests, indictments, guilty pleas, in addition to millions in court
1 The prepared statement of Mr. Miller appears in the Appendix on page 59.
8
ordered restitution, forfeiture, seizure orders, and a large civil set-
tlement.
We have made 22 recommendations for suspension and debar-
ment to the Treasury debarring official. In addition, approximately
$21 million in multiple Main Street Loan Program funds have been
returned and repaid by borrowers because we contacted them noti-
fying them that we were looking into their loan and they imme-
diately repaid.
What is particularly notable about SIGPR is that we have devel-
oped these cases by our own initiative. It is our own proactive work
in developing these cases. 89 percent of our investigations were
started by our office. SIGPR has also completed several audits re-
lated to Treasury’s direct loans to air carriers and businesses crit-
ical to national security, and is in the process of auditing the Main
Street Lending Program and the effects the program’s loan losses
are having on Treasury’s investment in the program.
Borrowers who received direct loans or Main Street Lending Pro-
gram loans, were not required to make payments whatsoever in the
beginning. That is, no principal, no interest, for the first year of the
loan. Even before principal became due in year three, SIGPR ob-
served an alarming rate of defaults by borrowers who failed to
make interest payments. Interest payments became due in year
two. Even the interest payments people were defaulting on.
As a result, SIGPR is concerned that the default rate will grow
exponentially in years three through five of the MSLP program, as
repayment of principle becomes due. The MSLP program loss fig-
ure reported by the Federal Reserve has steadily increased and
even this morning, they reported $310 million in loan losses. We
believe that this trend of increasing defaults will not only continue,
but is likely to accelerate as MSLP loans reach their 5-year matu-
rity date when borrowers must repay 70 percent of the loan prin-
cipal. These balloon payments will undoubtedly lead to significant
numbers of borrower defaults, just as my office sunsets.
Not all the defaults will necessarily indicate fraud, but a default
is a red flag that merits further investigation. SIGPRs recent re-
view of information about MSLP loans that are either in default or
considered impaired resulted in the opening of criminal investiga-
tions. Thus, in mid-2025, we are going to enter a period in which
an even larger number of frauds may be revealed. But by the terms
of our authorizing statute, SIGPR is scheduled a sunset in March,
2025. At the time when SIGPR is needed most. We will not be able
to undertake the thorough and effective investigations that will be
warranted at that time.
For this reason, I ask Congress to move quickly to authorize ex-
tending SIGPRs operations to September 30, 2030. SIGPR is the
only agency that focuses specifically on potential fraud that has
been committed by Treasury’s direct loan programs and the Main
Street Lending Program, and it should be permitted to continue
doing that. For these reasons, I urge this Subcommittee and Con-
gress in general to move quickly as possible to extend SIGPRs op-
erations. I welcome any questions, and thank you for the oppor-
tunity to be here.
Senator HASSAN. Thank you very much. Last, testifying on behalf
of the Government Accountability Office, is Rebecca Shea. Congress
9
authorized GAO to conduct sweeping oversight and analysis of pan-
demic relief programs. To date, GAO has authored more than 200
reports on the pandemic, and made nearly 400 recommendations to
improve service delivery and prevent waste, fraud, and abuse of
pandemic relief funds.
Ms. Shea is a director of the GAO’s forensic audits and investiga-
tive service team, which conducts audits to identify waste, fraud,
abuse, and mismanagement of taxpayer dollars across numerous
Federal programs, including those created to provide relief during
the pandemic.
Ms. Shea has more than 20 years of audit experience, and she
and her team frequently employ advanced data analytics to help
agencies predict and prevent fraud. Welcome, Ms. Shea. You are
now recognized for your opening statement.
TESTIMONY OF MS. REBECCA SHEA DIRECTOR,1 FORENSIC
AUDITS AND INVESTIGATIVE SERVICE, U.S. GOVERNMENT
ACCOUNTABILITY OFFICE
Ms. SHEA. Thank you, and good afternoon. Chairwoman Hassan,
Member Romney, and Members of the Subcommittee, thank you for
inviting me to discuss insights into fraud prevention, based on
cases of COVID–19 fraud and the recommendations and resources
GAO has developed to address fraud and payment integrity risks.
Congress and the Administration have provided trillions in
COVID–19 relief funds to help the Nation respond to and recover
from the pandemic. Many of these funds went to the right recipi-
ents in the right amounts, providing needed assistance to unem-
ployed workers, small businesses, and many others. These pro-
grams were critical for assuring public health and economic sta-
bility.
Along with the good these programs offered, comes the fact that
fraud is inevitable where there is opportunity for gain, and with
the trillions of dollars in program benefits, along with certain risk
factors present in many of these relief programs, there is an un-
precedented opportunity for fraudsters to gain.
For example, many of the COVID–19 relief programs had known
risk factors for fraud, such as those that were new, expanded, or
significantly changed, that made a large volume of payments and
quick disbursements that involve payment or eligibility decisions
made outside of the agency, such as by grantees or States; or
lacked information or data systems to confirm eligibility, along
with a reliance on self-certification.
Although we will never know the full extent of fraud associated
with these programs, estimates for the two largest, SBA and De-
partment of Labor (DOL) programs, indicate hundreds of billions
lost to fraud. Given its inevitability, finding fraud when it does
occur, is a good thing, and preventing it from occurring in the first
place is the goal, to avoid costly pay and chase.
Looking at fraud schemes from pandemic programs to identify
where things went wrong, can provide insights into better controls,
analytic readiness, and policy design choices for normal operations,
as well as emergency situations. For example, misrepresentation is
1 The prepared statement of Ms. Shea appears in the Appendix on page 67.
10
the hallmark of fraud, and many cases saw falsified eligibility and
identity information.
This is the basis for two insights from GAO’s written statement.
Self-certification alone is not sufficient as a fraud control, and
agencies should assume identity information is compromised and
apply upfront verification controls.
Data analytics are a key way agencies can move beyond insuffi-
cient controls like self-certification, but the cases reflect challenges
in doing so. This is the basis for another two insights, that agencies
need to address interoperability issues to support data analytics,
and use free resources for fraud prevention and detection like
Treasury’s Do Not Pay system for flagging ineligible recipients, as
well as data available across their own programs.
All of the cases and challenges associated with preventing
COVID–19 fraud—reinforce the importance of strategic fraud risk
management, the basis for two other insights. These include agen-
cies consider emerging and complex fraud schemes affecting similar
programs when developing their fraud risk assessments, and en-
suring payment integrity checks and fraud controls are part of pro-
gram design, with an emphasis on assuring data access and use.
Congress and agencies can learn from and act on these insights
as well as from the numerous recommendations and resources GAO
has provided for fraud risk management. For example, GAO has
suggested actions Congress can take, including increasing oversight
by reinstating requirements for agencies to report on their progress
with fraud prevention, making permanent a data analytics function
in the oversight community, and making permanent Treasury’s ac-
cess to Social Security’s full death data to help prevent payments
to deceased individuals.
Requirements have been in place for many years for agencies to
manage fraud risk and the importance of prevention is the corner-
stone of GAO’s Fraud Risk Framework that we issued in 2015.
Using that framework as a guide, we have made 173 recommenda-
tions to over 40 program offices for improving fraud prevention and
detection. 95 of those remain open. Implementing these rec-
ommendations would help ensure programs safeguard taxpayer
dollars.
In addition, GAO has developed resources like our web-based
Antifraud Resource, and the recent Framework for Managing Im-
proper Payments, in Emergency Assistance Programs which pro-
vide a roadmap for fraud prevention and payment integrity. We
have also started examining the challenges agencies face in strate-
gically managing fraud risk, and possible incentives to do this bet-
ter. We will be exploring this in greater depth in the coming year.
With insights from past fraud schemes, taking actions GAO has
recommended to agencies and Congress leveraging available re-
sources to prevent fraud, and by considering possible incentives for
fraud prevention, the Federal Government as a whole will be better
able and positioned to prevent fraud in any environment. I thank
you for this opportunity and I look forward to answering your ques-
tions.
Senator HASSAN. Thank you very much, Ms. Shea. We are now
going to start with a round of questions for each senator. I am
going to begin and then we will alternate off and some other sen-
11
ators may be in and welcome Senator Ernst, who is not generally
a Member of this Subcommittee, but who asked to participate and
we are very glad to have her here.
I am going to start with a question to Inspector General Ware.
As I mentioned in my opening statement, Congress moved quickly
in the early days of the pandemic to provide critical relief for
healthcare facilities, businesses, schools, and families. However,
while Congress intentionally strengthened oversight over COVID
spending, criminal fraudsters, were able to take advantage of
COVID relief programs and steal billions of taxpayer dollars.
With the benefit of hindsight, what could Congress do differently
in the future to strengthen oversight and accountability with re-
gard to emergency spending, even when we need to act quickly?
Mr. WARE. Thank you. It is interesting in that with the benefit
of hindsight, often everybody at this table says that we are in the
hindsight business. But I tried from the very beginning to get way
out of the hindsight business. I am going to get there, but to put
what we thought should be done at the onset of the programs,
which we did with the first two lesson learned reports that went
out before the first loan went out, and we kind of detailed at that
point what we thought should be done on the onset.
It is the same thing that IG Horowitz and myself and many oth-
ers in the community have been discussing. It is one of the things
I know that he probably will speak about is leaving a legacy docu-
ment that defines just that. Many of us are already working on
that very document at this moment.
But relative to hindsight, I believe one of the things that has to
be a critical part of our thought process, is internal controls as a
primary ingredient when baking, if you will, the Bills and the Acts.
In this case, the controls that would have normally been in place,
let us say for the flagship programs—and I know this was not de-
signed to be that, right—were gutted and removed from the onset.
Many of the control mechanisms that would have been in place
to catch things on the onset simply were not there. That is why
about, 14, 30 days later, I was sounding the alarm saying, we have
a problem. We have to improve the control environment. But that
is one of the primary things. One other is also ensuring that we
have the ability to share data across government agencies. I under-
stand the Privacy Act concerns, I get that. But it could be for key
reasons at key times. In my opinion, I feel that this would have
been a key time. It would have allowed us to set up controls in the
beginning, and not end up in the pay and chase model that we are
in currently. It would allow us to more quickly catch wrong doers
as well, if we were able to share that information.
Senator HASSAN. I appreciate that. Then of course, one of the key
issues here is making sure that as we exercise internal controls, we
have the resources to do it quickly and effectively in this kind of
setting.
Ms. Shea, a question for you. As Inspectors General and GAO
have pursued their important oversight work, they have made hun-
dreds of recommendations to Federal agencies and to Congress to
improve program operations and avoid additional fraud. Earlier
this year, GAO issued a report that included several recommenda-
tions to Congress for preventing improper payments and other
12
forms of waste, fraud, and abuse of taxpayer dollars, specifically by
mandating stricter anti-fraud controls within agencies.
How would congressional action on these recommendations help
improve program delivery and prevent fraud in future emergency
spending efforts?
Ms. SHEA. Yes. Thank you. So the Comptroller General in our
previous testimony talked about 10 matters for Congress. I will
mention two here that could help address these payment integrity
issues. The first is partly what IG Ware was talking about the pre-
paredness issue. One of the matters that we have recommended is
helping agencies get better prepared by Congress reinstating re-
porting requirements for agencies in their annual financial reports
to report on their progress with fraud risk management.
That requirement sunset in 2020, right as we were entering the
pandemic, and agencies had not made significant progress on that.
Had they been better prepared, had they established dedicated en-
tities for fraud risk management, had they assessed their fraud
risk, had they identified data sets and got them in place and ad-
dressed some of those interoperability issues prior to the emer-
gency situation, they would have been better able to pivot when
they had to plus up those programs.
Reinstating that reporting requirement, we think would help
with that. That provides needed transparency for oversight for the
IG and the GAO community, but also for Congress. I also think
that having that reporting requirement each year they have to re-
port it, kind of, nudges the behavior that you are looking for. That
would be one significant thing.
Another thing that we have recommended Congress do, is to con-
tinue the oversight and analytic capability of the PACE. As Chair
Horowitz mentioned earlier, that capability existed in our experi-
ences with the Recovery Act. When we had that capability, there
were data Memorandum of Understanding (MOUs), there were ex-
pertise in place, and all of that sunset right before the pandemic
and all of that expertise was lost. This expertise exists now. They
were able to accomplish 95 MOUs, data sharing MOUs, all of that
would be lost.
There’s a significant upfront investment that was made in the
PACE. We think it is cost effective to continue that. The capability
exists there, with Council of the Inspectors General on Integrity
and Efficiency (CIGIE) to be able to carry forward those MOUs and
those data analytic capabilities.
Senator HASSAN. Thank you. I think one of the concerns people
express is that sometimes the concern is implementing stricter con-
trols prevent or slow down relief from reaching those in need. Can
you explain why that may not be the case?
Ms. SHEA. Yes. I won’t say it isn’t the case. There is always a
friction there when you think about eligibility and identity
verification versus getting things out quickly. But I think the im-
portant thing to think about is: there is a distinction between get-
ting any payment out the door and getting reasonably accurate
payments out the door. You do want a little bit of friction there.
I think also it is important to think about how because of the
scope and scale of identity theft, there were a large number of peo-
ple who legitimately deserved unemployment and other benefits.
13
When they went to try and claim those benefits, the benefits had
already been claimed by fraudsters. When you think about that
friction, it is actually in the benefit of the taxpayers to have a little
bit of friction there so that they can make sure that they access
their needed benefits, that they are rightly deserved.
Senator HASSAN. I will follow up a little bit more, but there is
obviously technology that can help us do some of those fraud pre-
vention measures very quickly in this day and age. Senator Rom-
ney.
Senator ROMNEY. Thank you. I am going to yield my time to Sen-
ator Scott.
OPENING STATEMENT OF SENATOR SCOTT
Senator SCOTT. Thank you, Senator Romney. First of all, I want
to thank you for what you do. I have been up here 5 years, and
I think the Inspector Generals, the Independent Inspector Gen-
erals, the GAO, the control and currency, they actually give us
pretty good information to be able to do our oversight job. I want
to thank you for that.
In my State, people are sort of sick and tired of the Federal Gov-
ernment. There is not a lot of trust left in the Federal Government.
It was not before, but with the pandemic, they just see this unbe-
lievable waste. I have talked to people that say, ‘‘We got money
when we are not supposed to get, and they told us, ’Eh, just keep
it.’’’
This stuff’s crazy. From the day we looked at the CARES Act, I
opposed the State and local bailouts because I did not believe the
revenues were going to go down that much. I had been a Governor,
and I knew where my tax base was going to be, and it was not
going away. But it happened. I think the State and local bailouts
total about $500 billion. $500 billion. I think the total revenue
under the State budgets, the collection by the States is about a tril-
lion dollars.
That is a lot of darn money. But here is some of the headlines.
‘‘Biden administration to fund crack pipe distribution to advance
‘‘racial equity’’. Out of State and local bailout money. That is one.
‘‘Vaccine bonuses aid to businesses and a golf course.’’ I thought the
money was supposed to go over COVID and to save people’s lives.
‘‘Cities and States put $350 billion stimulus windfall to widely var-
ied use.’’ ‘‘Flash with COVID–19 aid schools steer funding to
sports.’’ That’s interesting. ‘‘Connecticut City used COVID relief
funds to hire a marching band.’’ Probably we all like marching
bands but does not seem smart.
I have a list. I have a mile long of different things. Examples,
luxury hotels, golf courses, boathouse construction, aquarium main-
tenance, basketball hall of fame, art festivals, municipal anniver-
sary celebrations, weeded eaters, weed eaters, auto repairs, horse
feed, sea urchin hatcheries, walkways at zoos, fire hydrants and
trash cans and swag bags. State and local bailout for to save peo-
ple’s lives.
Now, here I try to think about how my voters think about this.
I think we have been in a rush, we went to a fast food place, and
we ordered a meal through the darn line. We rushed out, we got
our food, and we got on the highway, and we found out those darn
14
French fries were not there. Sort of way I think a lot of people
think of the Federal Government now.
They say, ‘‘I am willing to pay my taxes, but I am not getting
what I paid for.’’ Then I also thought about we have all bought
houses, right? Remember how we always hire those darn inspectors
that cost us money? We think we are going to know what we got.
Then afterwards we find that the pool does not work. It was, ‘‘Oh,
they did not check that.’’ Oh gosh, there is a leak in the roof.
You guys bust your butts. You do. I like all your reports and ev-
erything. So put yourself in my position. I got the people in my
State saying, why do we spend the money like this? You guys are
trying to do your job. Why does this not work? First off, have you
guys had the experience with the fast food place? Probably have,
right? Houses? We all have.
I just talked to a friend of mine that said she had no idea, they
did not even check her pool, and she just bought a house. But what
would your response be to people in Florida? Any of you. Because
this fraud is just rampant.
Mr. HOROWITZ. Yes. Look, I think this is something we have seen
over and over again. Particularly, the problem here was, as the leg-
islation was put forward and the agencies implemented it, the leg-
islation did not require, for example, certain checks and controls.
The legislation could have been tightened up to do that. Then the
agency’s view was going back to the chair’s question all about
speed. It was, we just need to get the money out. The country is
shut down. This is particularly in March and April of 2020. We just
need to get the money out. You IGs, you law enforcement folks, go
figure it out later where the fraudsters are, we are just going to
get the money out.
That resulted in tens, hundreds of billions of dollars in fraud.
Two overlaying concepts I will say is, I think Congress as it legis-
lates, needs to think about with a program like the Coronavirus
Relief Fund (CRF), the first $150 billion, which was in the CARES
Act for State and local entities, and then the State and local fiscal
recovery fund, which was the $350 billion in the ARP bill, both of
those had very little parameters as to what they could be used for.
They were lawfully used for certain things that people would ask
the questions, ‘‘Those do not seem tied into the pandemic?’’
Congress can legislate better, and agencies certainly can do a
much better job. We have written all of us here, hundreds of rec-
ommendations, probably thousands at this point, of recommenda-
tions, on how the Executive Branch and agencies can do a better
job in implementing these programs. I have talked about this over
and over again, the problem with sending this money out, is the
hundreds of billions of dollars that did not go to the small busi-
nesses, that did not go to the unemployed from the unemployment
insurance (UI) programs, that did not go to various folks that State
and locals perhaps we think should have funded. They did not get
the money.
This was not an unlimited sum of money. It was a large sum of
money, but it was not unlimited. Every dollar that went some-
where else did not go to the people who really needed it or the
businesses that really needed it.
15
Senator SCOTT. Did you guys even have the power to, to look at
the State and local bailout money?
Mr. HOROWITZ. Yes, we did.
Senator SCOTT. You did?
Mr. HOROWITZ. We have. We have worked with the Treasury In-
spector General. They have created, for example, with our analytics
platform, a risk scoring model taking 27 variables and helping
them have that information, so they could assess the risk in both
the CRF and the State and Local Fiscal Recovery Funds (SLFRF)
program, the two State and local programs.
They have identified in the latest numbers, 2.24 billion in ques-
tion costs from their work and relying in part on our data.
Senator SCOTT. Ms. Shea, go ahead.
Ms. SHEA. Thank you. We know that requirements for strategic
fraud risk management have been in place since 2016 for the agen-
cies. We also know that the lag in implementing those require-
ments in normal operations led to some of the large gaps in what
we saw in the pandemic. We wanted to get behind that, right?
What is going on? Why are the these lags continuing?
In a recent survey that we did of the 24 Chief Financial Officers
Act (CFO) ACT Agencies, we asked them about the challenges and
what might incentivize them to take these actions that we want.
Behavioral economics we think is the way to go. Try to figure out
what is going on. What is preventing them, what are the barriers,
and what can nudge them in the direction that we want.
Now, the challenges are not going to be super surprising. It has
access to data, and resources, and analytic capabilities, and tools
and techniques. Which we think that a centralized government en-
tity like Treasury’s Office of Payment Integrity can address some
of those issues.
On the incentive side, there are a number of things that the CFO
ACT Agencies mentioned. Like, congressionally directed funding for
payment integrity, ability to demonstrate return on investment
from fraud risk management activities, a couple of other things.
One of the things that we are going to be doing in the new year
in GAO is delving into some of these incentives and these barriers
to taking a strategic approach to fraud risk management.
Senator HASSAN. Thank you. Senator Ernst, I will yield to you.
OPENING STATEMENT OF SENATOR ERNST
Senator ERNST. Thank you very much, Madam Chair. Thanks to
all of our witnesses for being here today as well. I do not typically
sit on this Subcommittee, so I do want to thank Chair Hassan and
Ranking Member Romney for allowing me to join you today.
To our witnesses, thank you all very much for your efforts to
hold these Federal agencies accountable, including the Small Busi-
ness Administration, and to protect our American taxpayers. All
the work you do really does deserve recognition. Thank you.
As a Ranking Member of the Senate Committee on Small Busi-
ness and Entrepreneurship, it is one of my top priorities to ensure
that the Federal Government is addressing the more than $200 bil-
lion in SBA COVID–19 relief that was fraudulently paid to
scammers. However, the Biden SBA has discounted the full extent
16
of fraud, and instead tried to cast doubt on the legitimacy of fraud
estimates made by expert investigators.
This new status quo at SBA is unacceptable. This flagrant fraud
within government programs, especially when it goes unpunished,
hurts taxpayers and harms small businesses the most. Today I ask
for unanimous consent (UC) to include in the record my Small
Business and Entrepreneurship Committee report titled Small
Business COVID–19 Fraud: Three Years Later, State of Play.1
Senator HASSAN. Without objection.
Senator ERNST. Thank you, Madam Chair. The report details
SBAs refusal at every turn to fully go after fraud and recover tax-
payer dollars. I recommend Congress acts immediately to increase
investigators’ capacity to recover taxpayer funds quickly, ensure
loans are paid back, and strengthen Federal Government controls
when dispersing funding in the future.
I would like to move into my questions, and I am going to start
with Mr. Ware. Thank you so much. I appreciate your work. Your
tireless efforts to hold the SBA accountable are commendable.
Biden’s SBA is in violation of Federal law by prematurely ending
active collection activities on more than $63 billion delinquent,
EIDL and PPP loans with balances of up to $100,000.
Federal law prohibits agencies from ending collections on fraudu-
lent false or misrepresented claims. When your office recommended
for the SBA to not end active collections on fraudulent, false, or
misrepresentative claims, the SBA did not fully agree. How many
instances of fraudulent, false, or misrepresented loans are you
aware of that the SBA has ended collections on?
Mr. WARE. Thank you for the question. It is a significant
amount. The exact amount I could get back to you with in terms
of in details. We definitely have it, and we share your concern and
they know that we share the concern relative to ending collections
on those amounts.
Senator ERNST. Thank you. Further, your office reported that
SBA did not conduct sufficient analysis to support its decision to
end the collections. My Strengthening Taxpayer Recoveries Act
would follow your recommendations and require the SBA to simply
refer loans over to the Treasury Department, so it can decide the
kind of collections that are necessary for the loan. Can you tell us
why it is so important that the SBA refer those delinquent loans
over to Treasury?
Mr. WARE. Yes. First off, they have a requirement to. That is the
most important.
Senator ERNST. Is it the law?
Mr. WARE. It is the law, yes. But second, I think that it sets a
poor precedent that—I promise I will not get too much on my soap-
box on this—but it sets a bad precedent in that it tells folks that
you do not always have to pay the government back. I think that
that is central to some of the issues we saw with Senator Scott’s
concerns that he brought up.
The type of controls that you would have in place for a regular
loan, does not have to be in place for the government because it
is the government. It is the same thing here. Less than a 100,000
1 The report refernced by Senator Ernst appears in the Appendix on page 94.
17
you know, I might be willing to pay it back, but if I do not, what
is the penalty?
Senator ERNST. That is the truth of the matter, and that is why
we are going after this. Again, I appreciate your work. I am going
to move to Inspector General Miller. Thank you very much, sir. I
am sure during this hearing, there has been an extensive discus-
sion around the unfair DOJ opinion, which hampered your ability
to fully investigate all CARES Act programs.
As a Ranking Member of the Senate Small Business Committee,
I would like to see SIGPR fully in the fight on small business
fraud. We need to take your already existing skilled investigators
with the SBA IG to tackle the more than $200 billion worth of
small business fraud. My bill would extend the SIGPR, and make
clear we need as many folks across our government to help claw
back funds.
How would restoring the SIGPRs authorities contribute to recov-
ery efforts for the unprecedented scale of fraud within the SBAs
pandemic programs?
Mr. MILLER. I think we could contribute a lot. We stand ready,
able, and willing to assist General Ware in the fight against fraud
in those programs. We have a number of very experienced prosecu-
tors. Senator Scott mentioned CRF. That was originally one of my
initiatives when I became SIGPR, and I recruited very experienced
prosecutors. For example, the chief of the fraud section at the U.S.
Attorney’s Office in the Eastern District of Virginia had been chief
of the fraud section for a decade. He has 35 years’ experience pros-
ecuting fraud cases. He is now part of our office.
I have a number of experienced Federal prosecutors on staff, be-
cause I think I am old fashioned enough. I am a former Federal
prosecutor too. I am old fashioned enough to think the answer is
criminal prosecution. That will deter others from taking advantage
of these programs. We have had a lot of success with criminal pros-
ecution and getting indictments.
Even in the CRF, we had a number of open cases, some accepted
at U.S. Attorneys’ offices. We had one involving Stonecrest, Geor-
gia. We had to pull out after the Department of Justice says, ‘‘You
don’t have jurisdiction in that area.’’ The Federal Bureau of Inves-
tigation (FBI) took over the case. The mayor of Stonecrest, Georgia
pleaded guilty.
I think we could contribute a lot in a lot of areas. But specifi-
cally, we are happy doing the Main Street Lending Program and
the direct loans from Treasury, and I think we are doing a great
job. I would be happy to—under the leadership of General Ware,
I am subordinate to him—assisting with PPP cases. We do PPP
cases through the PRAC task force, and General Horowitz has
highlighted one of the cases we did recently down in Texas. I think
it is the largest PPP case that the task force is doing. That is in
his written testimony. We led that investigation as well.
We are happy, we are able, and willing, and eager to jump in and
do these cases. That is what excites the people in my office and me.
Senator ERNST. I appreciate it. I appreciate the time as well to
our Chair and our Ranking Member. Thank you very much for al-
lowing me to join in and thanks to all of our witnesses for the great
work that you do for our agencies. Thank you.
18
Senator HASSAN. Thank you, Senator Ernst. I will just note that
one of the issues that this all raises is, how do we make sure SBA
has the resources to both pursue collections and do the essential
work to serve small businesses all around the country? I think that
that is something that our appropriators are looking at so that the
cost benefit analysis that SBA needs to do when it decides not to
collect some cases, is not as pressing for them. I appreciate your
line of questioning. Senator Romney.
Senator ROMNEY. Thank you. General Ware with his comment
about repaying government loans and being honest with funds that
one receives of the government reminded me of a movie. I do not
think I would have ever imagined the circumstance I would be
bringing up a movie named Nacho Libre. But in that humorous
comedy there was an occasion when someone was stealing the
chips that were going to be going to the orphanage. The main char-
acter, Jack Black said, ‘‘These are the Lord’s chips, so you cannot
steal the Lord’s chips.’’ He said it with a most interesting accent,
which I will not try and imitate.
Senator ERNST. Did you actually watch that movie?
Senator ROMNEY. Of course, I watched that movie more than
once. [Laughter.]
Somehow, I understand the sense that taking money from a
church is stealing from God, and the Book of Malachi talks about
the punishments for that. But I also think stealing from the gov-
ernment falls not far behind, in that we are stealing the resources
of people who have worked and have put aside what they have
earned to help our government. For people to steal from that, ei-
ther by not paying back a loan or by being dishonest in their use
of the funds, is something I find quite extraordinary.
We have a responsibility to try and minimize that. I am going
to ask about who it is that is doing it? From your experience, is
it small time individuals that like, ‘‘Oh, look, I can make $25,000.
I can make $50,000.’’ Is it organized criminals that have a system
for doing this? Is it foreign entities organized or disorganized?
Who? I presume it is going to be different for different programs,
different for SBA than it might have been for unemployment insur-
ance and so forth.
But based on your experience, who are the folks doing this today
in these programs? It may be different than other government pro-
grams, but for those associated with the COVID relief programs,
who is doing it? Mr. Horowitz.
Mr. HOROWITZ. Yes, thank you, Senator. It is sort of all of the
above. Yes, and the problem is, it was so easy for some of these
programs that it was almost an invitation to come in. We have for-
eign entities. Nobody checked foreign Internet Protocol (IP) ad-
dresses to see if they were foreign IP addresses. We have state ac-
tors.
Senator ROMNEY. They did not even have to put a U.S. address
and so forth now. They could even put in anything and we just
said, ‘‘Oh, OK. Here’s the money.’’
Mr. HOROWITZ. Nobody checked. In fact, to the point of controls
we are trying to look at SBA data to see the IP addresses. They
did not keep the IP addresses because it was not required for them
19
to maintain it. We do not even have a way of going back to try and
figure that out. So that, just for example, a basic issue.
Senator ROMNEY. Mind numbing.
What proportion would you think is foreign entities or is it just
impossible to know at this stage?
Mr. WARE. We issued a report on loans that went to foreign IP
addresses. I cannot recall what the number was, but it was signifi-
cant enough that I led a U.S. delegation earlier this year that went
to Nigeria to discuss partnerships in getting some of our money
back that went to bad actors over there.
Senator ROMNEY. I wondered why I had stopped receiving invest-
ment opportunities from Nigeria. [Laughter.]
I think I know now.
Mr. HOROWITZ. To give you a sense also of the opportunistic na-
ture of this. For the UI program, we have identified a bunch of so-
cial security numbers that were used across various States. We
have one number that was used in more than 40 States because
the States did not speak to one another. That program is so decen-
tralized.
We see this in a large and a small scale. One of the concerns I
think we all have, is we have trained people at some level to say,
go try and defraud a Federal program because it is easy to do it,
and that is a bad message.
Senator ROMNEY. Mr. Miller.
Mr. MILLER. Yes. We participate in the Department of Justice
COVID–19 task force. In that capacity we look at a number of
cases, and our staff member, a prosecutor of course, has told me
in my notes, he says, we have seen volumes of overseas IP address-
es identified and associated with unworthy individuals obtaining
CARES Act funds.
It is hard to quantify, but we are seeing money going to IP ad-
dresses overseas. In some of our other programs, Main Street Lend-
ing, for example, we have seen money going to South America, to
the Middle East, and to China.
Mr. WARE. I found the figure was 5 billion. 5 billion was what
we reported that went to foreign IP addresses.
Senator ROMNEY. 5 billion?
Mr. WARE. $5 billion.
Senator ROMNEY. That is extraordinary. Why is it, do you believe
that people are so willing to defraud the government, to steal from
the government? Are our penalties too small? Should we have far
more punitive measures to go after people who, who steal from our
government?
Mr. WARE. Perhaps. I have two examples of this. One is, in one
of the cases our agents was working, as they started to pull the
text messages and the emails, they were saying, ‘‘They are not
checking anything,’’ is what was routinely being said across the
board. There was a second one that when questioned as to why
would you do this? He said, ‘‘I would do it again.’’ He said, ‘‘It was
worth it. It was highly unlikely that I would be caught doing this.’’
Which brings me back to the beginning in talking about the im-
portance of having a proper control and risk framework in place to
mitigate this. There were folks that committed fraud probably, who
would not normally commit fraud, and they were being told things.
20
We see this in the record, like the government is just giving away
money.
Senator ROMNEY. I want to underscore the outrage and frustra-
tion that you all feel, that I feel, and that the people in our country
feel as this goes on. I just note that if something like this were at-
tempted with a credit card, your visa, or if you are trying to do a
charge account at a store of some kind, this could not happen or
they wouldd be out of business. Yet it happens with our govern-
ment all the time. I wonder why we are singularly ineffective in
being able to control this to the extent that basically every corpora-
tion is able to control, or they would be out of business, or their
Chief Executive Officer (CEO) would be out of a job.
I want to conclude by saying, I concur that we need to continue
the PACE program and to continue to get data and I also believe
we need to get the Social Security data and other data. I recognize
privacy concerns, but when we are losing through fraud, hundreds
of billions of dollars—that is the number that I have heard from
you today, hundreds of billions of dollars—we have to recognize
that is money that could go to Americans in need, it could go to
help Israel and their defense of their land, it could help the
Ukrainians.
The idea that we are using this money for fraud, is just simply
outrageous. I also agree that we should extend the life of SIGPR,
well beyond 3/25 because the timing is not propitious. Thank you,
Madam Chair.
Senator HASSAN. Thank you, Ranking Member Romney. Before I
move to Senator Ossoff, I was noticing that Mr. Horowitz seemed
to want to say something in response, so I just wanted to give you
the opportunity if——
Mr. HOROWITZ. No, that’s fine. I was going to echo what IG Ware
said, which is, I am not sure the penalties are the problem, because
we, for example, recently got a 25-year sentence on a fraudster and
tried to get the news out about that. The problem are the opportu-
nities that were presented, and having basic controls, like you said.
When an individual tries to commit small dollar fraud and get
stopped, they usually do not try again because they understand
there is something there. That does not help, perhaps with orga-
nized crime that are more sophisticated. But we could have stopped
a lot, I think, of the lower dollar frauds, the non-organized crime,
which is probably most of what occurred, because they would not
have had the attitude that IG Ware mentioned, of this is easy. The
government is saying, come in, just take the money. We are not
going to ask any questions.
If you tell people that, sadly, as you said, even in the worst pan-
demic, even when their citizens need the money, they are willing
to come in and take the money.
Senator ROMNEY. Yes. Americans are not stupid. If we are hand-
ing out free money, they will be willing to take some.
Senator HASSAN. Yes. We also have to invest in the capacity for
those controls. Senator Ossoff.
21
OPENING STATEMENT OF SENATOR OSSOFF
Senator OSSOFF. Thank you, Madam Chair, and I want to thank
you and Senator Romney for working together so vigorously to pro-
tect taxpayer dollars, and for holding this hearing on these extraor-
dinary abuses, a level of fraud, but I think is shocking to the whole
Subcommittee.
With the benefit of your attendance, Inspector General Horowitz,
and given the extended conversations that you and I have had on
a range of issues over the last few years, I am going to range a bit
out of the direct focus of this hearing and into some of your other
jurisdiction.
I want to begin with a discussion of the Bureau of Prisons (BOP).
As you all recall Mr. Horowitz, when I chaired the Permanent Sub-
committee on Investigations (PSI) last Congress, led multiple bi-
partisan investigations of the Bureau of Prisons and issues related
to incarceration. We found, for example, that at U.S. Penitentiary
(USP) Atlanta that serious long-term security breaches that put
the community and the whole southeast region at risk were left
unaddressed.
We found pretty extreme cases of abuse and neglect of incarcer-
ated people, including pretrial detainees held at the jail there. We
found detainees and inmates lacking access to clean drinking
water, hygiene products, medical care. A whole range of serious
problems that had gone on for a long time. I noticed that your of-
fice’s recent work has found serious deficiencies at other facilities
like Federal Correctional Institution (FCI) Tallahassee, an unan-
nounced inspection that you led, which found moldy, rotten, pest
infested food, serious maintenance issues, putting health and safe-
ty at risk.
Senators Braun, Durbin, and I introduced the Bipartisan Federal
Prison Oversight Act earlier this year, which provides for unan-
nounced investigations by the Office of a DOJ Inspector General.
Can you explain please, why those unannounced prison investiga-
tions are so important?
Mr. HOROWITZ. Absolutely. Thank you, Senator for the question.
By the way, I am going this Friday to visit USP Atlanta with the
new BOP Director to get a tour of the reopened facility.
Senator OSSOFF. I appreciate that. In the future, you should also
consider an unannounced inspection.
Mr. HOROWITZ. That, now getting to the unannounced inspec-
tions. One of the things Congress did last year in funding us, and
a critical part of the Appropriations Bill, was to give us additional
money to do these unannounced inspections. It is the first time we
have ever done them. What happens is we are showing up at a
prison on a Monday morning at 8 a.m., we are calling the warden
and saying, ‘‘We are coming at noon with our team, and we are
going to spend the week there to inspect your prison.’’
We did the first one at the Federal prison in Waseca, Minnesota
earlier this year. We selected Waseca because it was an all-wom-
en’s institution. We have had, as you know from your leadership
on the Subcommittee, serious issues with sexual assaults against
women in prison. You and Senator Johnson issued a very impor-
tant bipartisan report in that regard. We went to Waseca to see
22
what was going on there, because it had scored as a low risk. It
was our first one. We wanted to see what happened.
We got there. We found holes in the roofs of the buildings, pipes
running across beds that were leaking, and camera issues—which
again, you have helped lead, I know on that effort to get the Cam-
era Bill passed—and all sorts of problems in an institution that
was relatively low risk about whom we had gotten fewer com-
plaints. We let the BOP know about the crumbling facilities. For
example, cascading problems, by the way, was staffing First Step
Act.
One of the things Congress passed was the First Step Act to give
inmates a chance to rehabilitate, huge wait lists because the edu-
cators were being pulled off educating to do correctional officer
duty, because they were short staffed. They were short-staffed in
healthcare. They were short staffed in facilities management. All of
the things we would not have appreciated until we got on the
ground. That was our first report, and that’s public on our website.
Our second one was at a higher risk prison, FCI Tallahassee, we
went to at the end of May, we issued a report last week. What we
found there was—stunning is a nice word. We got there and on day
two, we went to the kitchen to observe food service. As you men-
tioned, bread with mold on it, rotting vegetables, all being served
to inmates.
We went to the warehouse to look at the food. What appeared to
be rodent droppings. We did not actually see the rodents. We saw
bugs crawling in the boxes of cereal. We saw the damaged con-
tainers in the rotting containers. It was stunning to see that. It
was not a humane place to be. We went to the living facilities.
Again, leaking windows, again, a primarily a female institution.
Feminine hygiene products were being used to stop the leaks into
the facility. We published pictures. By the way, anybody who wants
to see this, there are pictures of this, extraordinary pictures on our
website.
Senator OSSOFF. I want to return to prisons in a moment, but I
first want to raise another DOJ related issue with you. The Sub-
committee I chair now received testimony from the National Center
for Missing and Exploited Children (NCMEC), which found that
from 2018 to 2022 in my home State of Georgia, there were nearly
1,800 reports to NCMEC of children missing from foster care. Ac-
cording to NCMEC’s analysis, they believe that over 400 of those
children were likely victims of sex trafficking.
It is crucial that DOJ have the resources and infrastructure to
work with NCMEC to track and locate missing foster children and
to hold accountable those who traffick them. Can you and I sit
down to discuss a plan of attack on that?
Mr. HOROWITZ. Absolutely. NCMEC has done great work. As
CIGI chair, they have done a lot of work with us and the commu-
nity on helping with missing children.
Senator OSSOFF. I would note for the purposes of that work that
we will do together, that DOJ’s Office of Juvenile Justice and De-
linquency Prevention (OJJDP), which administers Federal grants
to States under the Juvenile Justice and Delinquency Prevention
Act, there are conditions on those grants to receive full funding.
23
State grantees have to comply with certain core requirements. Here
is one of them.
That children who commit what are known as status offenses, or
offenses that would not be criminal if committed by adults, like
running away from a foster care placement, cannot be placed in ju-
venile detention or correctional facilities. Is your office currently
undertaking any work to oversee the implementation of that legis-
lation or other issues related to foster kids?
Mr. HOROWITZ. We are not doing anything currently, and I would
be happy to sit down with you talk about that. We have done work
in the past about the issue you mentioned about detention facilities
and how OJJDP, which is the acronym for the entity in the Justice
Department that manages those grants. We are handling that with
States, and we have found some serious issues with that before.
This is an important issue, and I would be happy to talk with you
further about it.
Senator OSSOFF. I appreciate that. Thank you, Madam Chair for
indulging some questions that strayed from the focus of your hear-
ing. I appreciate it.
Senator HASSAN. Thank you, Senator Ossoff, and thank you for
your focus on really important issues here and to Inspector General
Horowitz, thank you for the continued work you and your team do
in that area.
I have one more round of questions, and then you know, if some-
thing else occurs to Senator Romney, he will have another go at it
and then we will wrap up. But to Inspector General Horowitz, the
Pandemic Response Accountability Committee was established in
part to improve coordination within the oversight community.
One of the key tools that the PRAC developed to aid this kind
of coordination is something that you have been talking about the
Pandemic Analytics Center of Excellence, which, as you noted, al-
lows data from many different agencies to be analyzed side by side
to help investigators spot patterns or anomalies indicative of fraud,
that they might not see if they only had a narrow view of just one
agency’s program.
Many in the oversight law enforcement community have called
for the Congress to make this type of tool permanent. You have
echoed that call today. How could the PACE or other data sharing
improvements contribute to the future work of the oversight com-
munity and the ability to prosecute fraud?
Mr. HOROWITZ. Thank you for the question. I think it is very im-
portant that we all talk about prevention. That is what I want to
focus on as I think about analytics going forward. Because of the
failures that occurred at the outset of the pandemic, we are all
about chasing the money. This was this pay and chase model. The
analytics were being used to try and catch the bad guys.
Anybody who is in this area will tell you that once the money
goes out to fraudsters, good luck finding it. Right? It is going over-
seas, it is going into crypto, it is going into other places. We are
chasing it, and you have heard from IG Miller, IG Ware, the great
work that’s being done to collect, but we are talking hundreds of
billions of dollars of fraud, and we are talking about billions, which
is a big number, but still a very small percentage.
24
It is very important because what has to happen is, we have to
work with Executive Branch agencies, the Office of Management
and Budget (OMB) Leadership, and Congress, to make sure agen-
cies use an analytics platform to prevent fraud before it happens.
This notion that we had two choices, which I have heard over and
over again at the outset of the pandemic, either get the money out
today, or wait weeks and weeks and weeks and weeks to verify.
That was nonsense. There is always an alternative choice, as we
have heard, it is a balance of risks. The work I mentioned, we sent
2.7 million Social Security numbers to Social Security Administra-
tion. In about 2 weeks, we got the information back from them. Is
it a real number? Does the name, date of birth that they put on
their application match what you have in the official records? Is
the person living or dead?
You do not need much more than that to right away figure out
is this a problem? Right? If we had this upfront, which is the prob-
lem with it expiring in 2015, we had to build it anew. By the way,
Congress spent millions—I was on the recovery board—to support
that analytics platform. It went away. The taxpayers got essen-
tially nothing for their money. Six years later, $40 million had to
be invested to run this program for 4 years or so.
It would be, I think, an awful outcome if the taxpayers, again,
in 2 years ended up with nothing to show for that, when it could
save literally billions of dollars, and importantly, Congress should
make it applicable across the board to all Federal spending. There
is no reason it should only be limited to pandemic funding.
Senator HASSAN. Thank you for that. I want to follow up with
Inspector General Ware a little bit on this issue of prevention. We
have discussed today, technology can be a critical tool for identi-
fying and preventing fraud. However, many agencies, including the
SBA, struggled to roll out pandemic relief programs due to their
aging technology infrastructure. How did existing challenges, such
as legacy information technology (IT) impact the overall success of
the pandemic relief programs or exacerbate fraud at critical agen-
cies? Can you speak to how SBA overcame some of its legacy IT
challenges?
Mr. WARE. Sure. We have been reporting the IT challenge as one
of the top management challenges facing SBA for a number of
years. With that being said, they were running the seven A pro-
gram, right, using the technology that they had existing and the
relationships they had in place with the banks. I believe that is
why they were selected to run PPP and EIDL because those things
existed. They existed in a way that they were working. They had
some work to be done, but they were working.
The issue was, when you had 14 years’ worth of lending running
through the door in 14 days, then I think maybe anybody would
have had issues with that. But relative to the IT platform, what
they did to mitigate those issues was they contracted it out to a
private contractor who had a lot of experience in moving large vol-
umes of loans. That is what they did. Now still, we would have ap-
preciated seeing the type of controlled infrastructure that I rec-
ommended before the first loan went out, but that was not done as
speed was the only thing considered.
25
Senator HASSAN. Thank you. Ms. Shea, State and local govern-
ments were important partners in disbursing Federal aid during
the pandemic. They were also overwhelmed by numerous attempts
to defraud pandemic programs. However, States that successfully
implemented tools such as identity verification technology as part
of their application processes, were much more successful in identi-
fying attempted fraud.
For example, early implementation of identity verification tech-
nology in Arizona, is credited with preventing more than $75 bil-
lion in unemployment insurance fraud. What prevented more
States from implementing similar measures? How can Congress en-
courage States to adopt identity verification technology or other
anti-fraud tools?
Ms. SHEA. Yes. States had some of the same issues with legacy
IT that IG Ware just mentioned for SBA and some of the other
agencies. Early on, some of them had the legacy IT systems, so it
did not enable them to address cybersecurity issues, identify fraud-
ulent and stolen identities, to be able to connect with the Integrity
Data Hub, which is the multi-state Department of Labor funded
program that enabled States to see and crosscheck against all of
the other State data, whether or not people are applying for mul-
tiple States, and then also had an identity verification control in
that.
Early in the pandemic, only about three States were enrolled in
that. But as we progressed, we identified some of these issues. By
2022, about 34 to 43 States were signed up with in the Data Integ-
rity hub. One of the key things that I think is important there is,
us continuing to focus on Department of Labor’s progress, trying to
get States signed up for that so they can leverage that capability
of the multi-state data.
We have been reporting on that and checking their progress, and
at this point, all of the States have agreement with Integrity Data
Hub to use those services.
Senator HASSAN. Great. One of the things we can do as we think
about this is try to provide incentives for States to participate in
this kind of data sharing and verification, identify identity tech-
nology.
Two more questions, one to Inspector General Horowitz, and
then I will ask a wrap up question to the whole panel. Mr. Horo-
witz efforts to prevent fraud and recover stolen taxpayer dollars
are made more difficult when these crimes are perpetrated by for-
eign criminal organizations, as we have talked a little bit about.
For example, Federal investigations revealed that Chinese hackers
stole millions of dollars in pandemic relief funds. What actions can
the United States take to go after fraud perpetrated by foreign
criminal organizations?
Mr. HOROWITZ. I think there are a few things. The most obvious
being look for foreign IP addresses when you are doing things on-
line or as these were, look for masking of addresses using Virtual
Private Networks (VPNs). Look for multi dipping. This is one of the
challenges we have seen, and this is one of the reasons why the
PACE has been so successful, because we have gotten the data
from across agencies. We are able to look for that multi dipping in
26
a way that frankly, agencies have not been able to, in part because
of data sharing limitations.
As mentioned, we have 90 plus agreements in place where we
can do this. Those are a couple of the examples. But we are also
part of the International Organized Crime International Oper-
ations Center at the PRAC. We have an analyst sitting there, and
so we are working with those folks who understand what’s hap-
pening globally. I think that is a critical part, and frankly, that is
why agencies struggle sometimes in this space. That is why it is
so critical that we are the ones as IGs who have these tools to be
able to undertake these efforts.
Senator HASSAN. Excellent. Thank you. My wrap up question to
all of you is to ask each of you to provide a lesson learned from
the response to COVID–19 and how it can inform the Federal Gov-
ernment’s response to future crises. If you feel like you have al-
ready said it, feel free to say that too. But why don’t we start with
Ms. Shea, and we will go right down the line there.
Ms. SHEA. Yes. I think this is a lesson relearned not necessarily
learned, and that is when you try to attempt to recover funds lost
through fraud and improper payments, you get pennies on the dol-
lar. Prevention is absolutely critical. We need to ensure that agen-
cies are taking the steps to assess their fraud risk, that they have
figured out what their risk tolerance is going to be for normal oper-
ations and emergencies.
Then if they are going to lower the tolerance, that they have a
robust post-payment recovery plan in place, and that they have
identified the data sources that they need, and they have those
MOUs in place to be able to do those checks. All of those preventive
activities need to be in place so that we are not chasing the funds
after they go out the door.
Senator HASSAN. Thank you very much. Mr. Miller.
Mr. MILLER. We all agree that more controls and checks and
anti-fraud provisions need to be in place to prevent fraud. But I
also have some mundane recommendations. Our first recommenda-
tion was to Treasury, and that was to add audit rights to contracts.
When you give out the money, when you make the loans, you put
a clause in the contract that says the IG has the right to inspect
your records. If you are going to take our money, we have the right
to look at what you are doing with it. That is a simple non-glam-
orous recommendation.
The other recommendation that I would make very quickly is
that when Congress—and I am not a policymaker, so please forgive
me.
Senator HASSAN. No, it is fine.
Mr. MILLER. But when Congress decides to give money out in the
form of loans, I think that it needs to think about how to prepare
the Federal agency to be a lender. The Department of the Treasury
became a lender under the CARES Act. That is unusual. It is not
a commercial lender, but it was making loans.
It needed to build an infrastructure to help them know how to
be a lender, how to be an effective lender. We deal with banks and
lenders all the time. We deal with treasury. Banks and lenders ap-
proach things differently, they have due diligence. They will do due
diligence on assets. You all know, you are business and profes-
27
sional people. But even in the meantime, when there is not a crisis,
if you are thinking of using a Federal agency as a lender, it may
make some sense to buildup an infrastructure and training in that
agency so that when it does lend, it can actually make good deci-
sions about lending, it has a program of review, it knows how to
analyze assets and financial documents.
I understand that they can hire contractors to do some of that,
but I think the agency itself needs to do that. Even when you have
contractors and even in the Main Street Lending Program, it is a
complicated program. You have Treasury funding it, you have Fed-
eral Reserve partially managing it, and you have Federal Reserve
banks involved in it, but you have commercial lenders actually
lending the money.
In the Main Street Lending Program, they will make a loan and
they are on the hook. If the loan goes bad, they are on the hook
for 5 percent. Right? Treasury pays 95 if it goes bad. Of course, you
have to remember that commercial lenders, they also charge inter-
est, they charge transaction fees, they have all sorts of fees to try
and make up that 5 percent. I do not think going to outside organi-
zations is always the answer. When you do, I think they have to
have more skin in the game.
Because you know, if they are making money off these loans,
even when they default, they are not going to be that careful with
it. That is one of my concerns. But we will come out with a lessons
learned, and I do not want monopolize the time.
Senator HASSAN. I appreciate those lessons very much, and I look
forward to the further expansion of that. Mr. Ware
Mr. WARE. I will be real quick here, because I always wanted to
say that I am going to punt to Mike Horowitz. [Laughter.]
I have been waiting on saying that, so I am going to say it today.
But timely data sharing agreements between agencies and the
onset of programs like this, I feel should be baked in to getting
them started up. Because like IG Horowitz mentioned, prevention
is where we need to be on this from the outset.
One other thing on that, I am on record on this. I am generally
opposed to self-certification as a rule. I do not believe that that has
served us well at all. Now I will punt. Mr. Horowitz.
Senator HASSAN. Mr. Horowitz.
Mr. HOROWITZ. I will say ditto to what IG Ware just said. It is
about prevention. We have to think about how to prevent the fraud
on the front end. One of the things we have not had a chance to
mention to my testimony is one of the things we started, which was
brand new in 2021, was what have come to be called gold standard
meetings at some level, which is, we got in the room before money
went out the door, the PRAC, the IG, the agency, the OMB leader-
ship, and the ARP implementation team leadership.
The agency was required to present to all of us what its controls
were, so that we could kick the tires and give our views, and this
was on the understanding, we were not pre-clear anything as IGs.
We were not giving up our independence. It was our ability to say,
we have seen this play before and here are the problems, here are
the challenges, here are the things you need to think about. It has
been very valuable. I think we have done 30 or so of those over the
28
last couple years. It went so well, OMB put out a memorandum
22–04, which puts that in writing as a best practice.
For the infrastructure bill said agencies should follow that model
as well. That’s, again, a way to do the prevention upfront, not a
perfect way, because the controls still have to get implemented,
they have to move forward. But that has been a very valuable, I
think, tool. It also has helped bring together in ways that some-
times did not exist, the IGs and the agencies and put them in the
same room, which was, or at least in the same video screen, which
was critical.
Then the other thing I just want to mention is the importance
of coordination with our State and local partners. We have, I think,
done an extraordinary effort. It is something we thought about
from day one, that with all that money going out the door and all
that money going to local communities, some directly through the
various funds that Senator Scott mentioned, some through other
mechanisms, we had to partner with State auditors, with local
auditors, with State IGs, with local IGs.
We have done that. We have had dozens of listening post ses-
sions with them. We have done fraud alerts for them, so they knew
what to look for. We have partnered in a way that I think is crit-
ical, and we have to keep doing that. The Federal Government does
not have the best reputation, as you all know, as former Governors
of States in partnering with our State counterparts. I think that is
very critical in this space.
Senator HASSAN. I appreciate that very much, and I appreciate
not only the expertise that you all bring to today’s hearing, but the
expertise and leadership you all bring to your entire teams. Sen-
ator Romney said at the outset, he felt bad asking you guys to
spend this much time when you have so much critical work to do.
But I think we are both hopeful that with your input, this time will
be valuable as we go forward and try to make sure that we are
strengthening oversight and accountability and protecting taxpayer
dollars.
Thank you for being here, for the important work you do. I look
forward to continuing to work with all of you and my colleagues to
help prevent waste, fraud, and abuse of taxpayer dollars in relief
programs.
This hearing record will remain open for 15 days until 5 p.m. on
December 1st, for submissions of statements and questions for the
record. The hearing is now adjourned. Thank you. [Whereupon, at
4:17 p.m., the hearing was adjourned.]
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