SBA inspector warns sequestration hurts fraud detection

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Though the office has avoided furloughs, it has imposed a hiring freeze and is not bringing on replacements for staffers who leave.

Legislators on the panel shared her concern. “The indirect cost of that [cut] could be a lot of fraud and abuse that’s now been un-captured,” said Rep. Brad Schneider (D-Ill.).

The SBA inspector general’s office promotes efficiency within the agency and polices fraudsters who take advantage of its loans.

Last year, the office’s actions resulted in over $90 million, as well as 59 convictions and 59 indictments of people who had defrauded the government. To compare, the office’s operating budget last year was about $17.3 million.

“The total office-wide dollar accomplishments therefore represent a more than five-fold return on investment to the office of the inspector general and to the American taxpayers,” Gustafson told the committee.

In the hearing, the inspector general denied that SBA Administrator Karen Mills used a private secondary email account, as other federal officials are reported to have used. 

“I have not found anything like that,” she said.

Gustafson also warned that emergency loans granted in the wake of Hurricane Sandy would be “a big test” for the SBA, due to the large numbers of applications the agency would receive. Loans the agency gives to homeowners and business after natural disasters can be harder to verify, since “very often you’re dealing with people whose records have been washed away,” she said.

Legislators on the committee pushed Gustafson to keep the SBA running effectively.

“Given the current deficit, it is imperative that SBA operate in the most efficient manner possible,” said Rep. Sam Graves (R-Mo.), the panel’s chairman.

Rep. Chris Collins (R-N.Y.) added “I’ve never seen a buffet line that you can’t reorganize and make more efficient. So every process can be, I think, made more efficient.”