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Statement

of

The Honorable Nydia M. Velázquez

Ranking Member, Committee on Small Business

The Inspector General’s View of the SBA

June 5, 2013

The Small Business Administration provides a wide-range of services to hundreds of thousands of entrepreneurs each year.  From loans, to contracts, to training – these programs are critical to both startups seeking to build a future and to existing companies trying to forge ahead.  Making sure that these initiatives function as Congress intended them to – while also ensuring that they are free from fraud and abuse – is absolutely critical.  This important job falls to the Inspector General.

In this capacity, the IG functions as both an evaluator and as an investigator.  They assess performance across the agency’s operations, providing valuable insights into what is working and what is not.  As a result, SBA management can take steps to improve its programs and services. 

Similarly, the IG also acts to investigate serious problems arising from poorly-written policies or improper personnel actions, including potentially criminal behavior.  As a result of the IG’s efforts, programmatic flaws are remedied, while would-be fraudsters are put on notice that they will be caught.  Taken together, the IG’s role is vital to the SBA’s ability to achieve its mission.

Through its work, the IG recovered and saved the agency $90 million last year.  This included issuing 22 reports and the indictment of 59 individuals – all of which were convicted.   These actions show that the IG has a full plate before it– which is great news if you are employed there, but far more troubling if you are a taxpayer.

To this point, the Office of the IG is growing, while the SBA itself is shrinking.  This raises serious questions about whether the agency is able to effectively implement its programs – and I hope to gain a better understanding of this from the IG’s testimony today. 

The agency’s lending programs play a significant role in allowing entrepreneurs to secure capital at affordable rates.  However, the SBA now makes the largest loans it ever has in its history, while also expanding its use of delegated authorizations to lenders.  Such moves are questionable policy goals for an agency that is supposed to serve small businesses – and at the same time safeguard taxpayer dollars.  They also raise problematic administration issues.  For instance, larger loans may increase the likelihood that criminals try to obtain financing through the SBA fraudulently.  Delegated authority – without sufficient oversight – raises similar questions: namely, who is watching the piggy bank?  Ensuring that these policy changes are not Trojan horses is a paramount concern to this committee.

On a similar note, SBA’s procurement programs also play an important role in helping speed our economic recovery.  When small and disadvantaged firms are awarded federal contracts, the additional revenue allows them to add staff, creating jobs.  

Unfortunately, as we have seen time and again, front companies and large corporations too often find ways to masquerade as small businesses, depriving legitimate entrepreneurs of promising work.  The GAO has identified numerous instances where firms failed to meet the appropriate standards and won procurement work.  It is my hope that together we can identify ways to close these gaps and ensure this type of behavior is curtailed.  

While the SBA’s lending and contracting programs are but only two areas of the agency, the IG’s efforts are critical across the entire agency.  Ensuring that all of SBA’s initiatives are well run and free of fraud and abuse is essential not only to the small businesses they serve directly, but also to the taxpayer who is responsible for footing the final bill.

By identifying how the SBA can improve its functions, the Inspector General is instrumental in the agency achieving its mandate of assisting small businesses.  Without a robust, effective and well managed IG, it is doubtful that the Small Business Administration could perform its mission of fostering entrepreneurship, which is critical to our economy.   I therefore look forward to hearing the witness’ testimony and thank her for being here today.

I yield back the balance of my time.      

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