    [Senate Hearing 118-242]
    [From the U.S. Government Publishing Office]

                                                              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

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                   __________

                       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

                               C O N T E N T S

                                     ------
    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
      Committee Inspector General, U.S. Department of Justice........     4
    Hon. Hannibal ``Mike'' Ware, Inspector General, U.S. Small
      Business Administration........................................     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. Government 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

        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, presiding.
        Present: Senators Hassan [presiding], Ossoff, Romney, and
    Scott.
        Also present: Senator Ernst.

                 OPENING STATEMENT OF SENATOR HASSAN\1\

        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 distinguished panel of witnesses on how Congress
    and the Federal Government can strengthen efforts to prevent
    waste, fraud, and abuse of emergency spending.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Senator Hassan appears in the
    Appendix on page 29.
    ---------------------------------------------------------------------------
        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)
    designed 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 pandemic, 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 assistance.
        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 disease'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
    obviously unprecedented though in its size and scope. Because
    of that, Congress also put in place mechanisms for strong
    oversight. Toward that end, Congress provided funding for the
    Government Accountability Office (GAO) and inspectors general
    (IG) across the government to oversee COVID-19 spending.
    Congress also established the Special Inspector General for
    Pandemic Recovery (SIGPR), as well as the Pandemic Response
    Accountability Committee (PRAC) to better coordinate oversight
    and promote transparency among COVID-19 relief programs.
        These oversight entities have uncovered hundreds of
    billions of dollars in scams, fraud, and improper payments
    involving pandemic relief programs, and are working with law
    enforcement officials 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 Congress 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 accountable for stealing taxpayer dollars, and how we
    can prevent fraud in the future. With that, I will now
    recognize Ranking Member 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 telling 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 becomes 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 Congress 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 general 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
    Assistance loan programs. But General Ware and his team have
    estimated the true number closer to $200 billion. What the true
    number 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. Considering 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
    Committee (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
    Subcommittee 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 minutes 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 General 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
    Commissioner on the US Sentencing Commission, worked as an
    attorney in private practice, and spent several years as an
    Assistant United States Attorney (AUSA). Welcome Inspector
    General Horowitz, you are now recognized for your opening
    statement.

       TESTIMONY OF HON. MICHAEL E. HOROWITZ,\1\ CHAIR, PANDEMIC
      RESPONSE ACCOUNTABILITY COMMITTEE, INSPECTOR 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.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Horowitz appears in the Appendix
    on page 31.
    ---------------------------------------------------------------------------
        The Pandemic Response Accountability Committee partners
    with IGs to oversee more than $5 trillion in Federal pandemic
    relief emergency spending. Over the past 3\1/2\ 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 provides 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 public 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
    occurred 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 levels of identity fraud, leaving
    scores of identity theft victims.
        How do we prevent fraud in the future? In addition to
    implementing 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
    Platform also sunset, despite controller General Gene Dodaro's
    plea to Congress and the administration at the time.
        Six years later in 2021, Congress had to appropriate $40
    million for the PRAC to build a new analytics center, the
    Pandemic Analytics Center of Excellence (PACE), and give us the
    funding, which it did, to operate it through our sunset in
    September, 2025. Congress 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 advancing 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 Security 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 ultimately 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
    pandemic, 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 investigative 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 extension would not create a super IG that
    duplicates the audit, investigative, and oversight efforts of
    IGs. Rather, it would simply ensure that IGs continue to have
    access to this critical fraud prevention tool.
        Thank you for your time, for holding the hearing, and I
    look forward 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
    Business 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
    Inspector General community, including as Deputy Assistant
    Inspector General for Management at the Department of the
    Interior (DOI), and before assuming his current role as deputy
    and later Acting Inspector 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 Office of Inspector General.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Ware appears in the Appendix on
    page 45.
    ---------------------------------------------------------------------------
        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
    accomplishments, including investigative recoveries, fines, and
    forfeitures, 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 institutions, $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
    resulted 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 internal controls and promote integrity,
    efficiency, and effectiveness within SBAs programs.
        Our recommendations for corrective action to the agency
    have resulted in SBA tightening their internal control systems,
    and our work continues to focus on ensuring only eligible
    recipients received 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 machine learning as well as our partnership with the
    PRAC. The unprecedented level of fraud in SBAs pandemic
    programs led us to publish our fraud landscape report in June
    of this year. In our comprehensive 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.
        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 potential pandemic related fraud, has significantly expanded
    SBAOIG's oversight responsibilities. Our oversight capacity is
    very much dependent 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 increase 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
    performance challenges.
        Quite simply, more resources to my office means more
    investigative 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 continue leading the fight against fraud along
    with our law enforcement 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 continue to receive significant return on investment as
    well as benefit from a more efficient and effective SBA. Thank
    you for the opportunity 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
    witness 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. Welcome 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
    appreciate your support for our office.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Miller appears in the Appendix on
    page 59.
    ---------------------------------------------------------------------------
        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 potential defendants. SIGPR's
    investigations have resulted in multiple arrests, indictments,
    guilty pleas, in addition to millions in court ordered
    restitution, forfeiture, seizure orders, and a large civil
    settlement.
        We have made 22 recommendations for suspension and
    debarment 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 notifying them that we were looking into their
    loan and they immediately repaid.
        What is particularly notable about SIGPR is that we have
    developed 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 related to Treasury's direct loans to
    air carriers and businesses critical 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
    Program 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 observed 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 figure 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 maturity date when
    borrowers must repay 70 percent of the loan principal. 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 review of information about MSLP loans that are either
    in default or considered impaired resulted in the opening of
    criminal investigations. 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 extending 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 Congress in general to move quickly as
    possible to extend SIGPRs operations. I welcome any questions,
    and thank you for the opportunity to be here.
        Senator Hassan. Thank you very much. Last, testifying on
    behalf of the Government Accountability Office, is Rebecca
    Shea. Congress authorized GAO to conduct sweeping oversight and
    analysis of pandemic 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
    investigative 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.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Ms. Shea appears in the Appendix on
    page 67.
    ---------------------------------------------------------------------------
        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
    recipients in the right amounts, providing needed assistance to
    unemployed workers, small businesses, and many others. These
    programs were critical for assuring public health and economic
    stability.
        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 unprecedented 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 Department 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 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
    insufficient 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 agencies consider emerging and complex fraud schemes
    affecting similar programs when developing their fraud risk
    assessments, and ensuring payment integrity checks and fraud
    controls are part of program 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 access 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
    cornerstone of GAO's Fraud Risk Framework that we issued in
    2015. Using that framework as a guide, we have made 173
    recommendations to over 40 program offices for improving fraud
    prevention and detection. 95 of those remain open. Implementing
    these recommendations 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
    Improper Payments, in Emergency Assistance Programs which
    provide a roadmap for fraud prevention and payment integrity.
    We have also started examining the challenges agencies face in
    strategically managing fraud risk, and possible incentives to
    do this better. 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
    resources 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 questions.
        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
    senators 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 regard 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
    others in the community have been discussing. It is one of the
    things I know that he probably will speak about is leaving a
    legacy document 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 designed 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 understand 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
    hundreds 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
    recommendations to Congress for preventing improper payments
    and other 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 preparedness issue. One of the matters that we have
    recommended is helping agencies get better prepared by Congress
    reinstating reporting 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 entities for fraud risk management, had they assessed
    their fraud risk, had they identified data sets and got them in
    place and addressed some of those interoperability issues prior
    to the emergency 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 report 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
    continue the oversight and analytic capability of the PACE. As
    Chair Horowitz mentioned earlier, that capability existed in
    our experiences with the Recovery Act. When we had that
    capability, there were data Memorandum of Understanding (MOUs),
    there were expertise 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 controls 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 important thing to think about is: there is a
    distinction between getting 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 people who legitimately deserved unemployment and
    other benefits. 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 prevention measures very quickly in this day and age.
    Senator Romney.
        Senator Romney. Thank you. I am going to yield my time to
    Senator 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
    Generals, 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 Government. There is not a lot of trust left in the
    Federal Government. It was not before, but with the pandemic,
    they just see this unbelievable 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 trillion 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 varied
    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 maintenance, basketball hall of fame, art festivals,
    municipal anniversary 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 people'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 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 everything. 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 legislation was put forward and the agencies implemented
    it, the legislation 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 legislates, 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 recommendations, probably thousands at this point, of
    recommendations, 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 businesses, 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
    somewhere else did not go to the people who really needed it or
    the businesses that really needed it.
        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
    Inspector 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
    question 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 agencies. We also know that the lag in implementing
    those requirements 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 entity 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
    Business 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
    Business and Entrepreneurship, it is one of my top priorities
    to ensure that the Federal Government is addressing the more
    than $200 billion in SBA COVID-19 relief that was fraudulently
    paid to scammers. However, the Biden SBA has discounted the
    full extent 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\
    ---------------------------------------------------------------------------
        \1\ The report refernced by Senator Ernst appears in the Appendix
    on page 94.
    ---------------------------------------------------------------------------
        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
    taxpayer 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
    fraudulent 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 soapbox 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 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 discussion 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
    recovery 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 prosecutors. 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 prosecuting
    fraud cases. He is now part of our office.
        I have a number of experienced Federal prosecutors on
    staff, because 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 prosecution 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, Georgia. We had to pull out after the Department of
    Justice says, ``You don't have jurisdiction in that area.'' The
    Federal Bureau of Investigation (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
    specifically, 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 allowing me to join in and thanks to all of our witnesses
    for the great work that you do for our agencies. Thank you.
        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 character, 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 government 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, either 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 insurance 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 programs, 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 foreign entities. Nobody checked foreign Internet Protocol
    (IP) addresses to see if they were foreign IP addresses. We
    have state actors.
        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 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
    significant 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
    investment opportunities from Nigeria. [Laughter.]
        I think I know now.
        Mr. Horowitz. To give you a sense also of the opportunistic
    nature of this. For the UI program, we have identified a bunch
    of social 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 decentralized.
        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 addresses identified and associated with unworthy
    individuals obtaining CARES Act funds.
        It is hard to quantify, but we are seeing money going to IP
    addresses overseas. In some of our other programs, Main Street
    Lending, 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
    importance 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. We see this in the record, like the
    government is just giving away money.
        Senator Romney. I want to underscore the outrage and
    frustration 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 attempted 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 government all the time. I
    wonder why we are singularly ineffective in being able to
    control this to the extent that basically every corporation 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 opportunities 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 organized 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 pandemic, 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
    handing 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.

                  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
    protect taxpayer dollars, and for holding this hearing on these
    extraordinary 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 Subcommittee on Investigations (PSI) last Congress,
    led multiple bipartisan 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
    incarcerated 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 office's recent work has found serious
    deficiencies at other facilities like Federal Correctional
    Institution (FCI) Tallahassee, an unannounced inspection that
    you led, which found moldy, rotten, pest infested food, serious
    maintenance issues, putting health and safety at risk.
        Senators Braun, Durbin, and I introduced the Bipartisan
    Federal Prison Oversight Act earlier this year, which provides
    for unannounced investigations by the Office of a DOJ Inspector
    General. Can you explain please, why those unannounced prison
    investigations 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
    inspections. 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-women'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 important bipartisan report in that regard. We
    went to Waseca to see 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 Camera Bill passed--and all sorts of problems
    in an institution that was relatively low risk about whom we
    had gotten fewer complaints. 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 educators 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 mentioned, 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
    containers 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 Subcommittee 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. According 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
    community 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 Delinquency 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. 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 juvenile detention or correctional facilities. Is
    your office currently undertaking any work to oversee the
    implementation of that legislation 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 hearing. 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
    something 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, allows 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 community and the ability to prosecute fraud?
        Mr. Horowitz. Thank you for the question. I think it is
    very important 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 overseas, 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.
        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 agencies 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 Administration. 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 problem 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 essentially 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 identifying 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
    agencies? 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
    program, 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 volumes of loans. That is what they
    did. Now still, we would have appreciated seeing the type of
    controlled infrastructure that I recommended before the first
    loan went out, but that was not done as speed was the only
    thing considered.
        Senator Hassan. Thank you. Ms. Shea, State and local
    governments 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 identifying attempted fraud.
        For example, early implementation of identity verification
    technology in Arizona, is credited with preventing more than
    $75 billion in unemployment insurance fraud. What prevented
    more States from implementing similar measures? How can
    Congress encourage 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 fraudulent 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 multiple 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 Integrity 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 technology.
        Two more questions, one to Inspector General Horowitz, and
    then I will ask a wrap up question to the whole panel. Mr.
    Horowitz efforts to prevent fraud and recover stolen taxpayer
    dollars are made more difficult when these crimes are
    perpetrated by foreign 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 online 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 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
    Operations Center at the PRAC. We have an analyst sitting
    there, and so we are working with those folks who understand
    what's happening 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
    Government's response to future crises. If you feel like you
    have already 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 dollar. Prevention is absolutely critical. We
    need to ensure that agencies are taking the steps to assess
    their fraud risk, that they have figured out what their risk
    tolerance is going to be for normal operations 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
    recommendation 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-glamorous 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 approach things differently, they have due
    diligence. They will do due diligence on assets. You all know,
    you are business and professional 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 decisions 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 Federal 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 interest, 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 organizations 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 leadership, 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 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 sometimes 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
    sessions 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 critical, 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. Senator 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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