WASHINGTON - Companies collected tens of millions of dollars in government contracts by claiming to have main offices in poor neighborhoods that were actually empty duplexes, part-time offices, and other ineligible locations, congressional investigators charge.
Billions more remain at risk because the Small Business Administration doesn't usually check paperwork, rarely conducts audits, and is slow to kick out firms that are no longer eligible for the $8 billion in contract set-asides for small businesses, the Government Accountability Office said.
GAO reports obtained by the Associated Press examined SBA's Historically Underutilized Business Zone program, created in 1997 to help small firms in distressed areas. To be eligible, companies fill out applications attesting that their principal office is in a designated HUBZone and that at least 35 percent of the firm's full-time employees live in that area.
The GAO review of 125 applications submitted in September 2007 found that the SBA asked for supporting evidence of a firm's eligibility claims only one-third of the time; the agency conducted a site visit only once to verify whether an office actually existed.
In all, SBA conducted audits on 5 percent of the total 13,000 HUBZone firms from 2004 to 2007; when it did conduct an audit, more than half of the firms on average were deemed ineligible.
In the Washington, D.C., area, the GAO found 10 out of 17 certified HUBZone firms that it investigated failed to maintain minimum employee requirements or falsely claimed principal locations in places such as a dentist's office. Those firms, providing services from engineering to information technology, were awarded $105 million in preferential contracts in 2006-2007 from the Pentagon, Veterans Affairs, and Health and Human Services - based at least in part on their HUBZone status.
Also improperly certified were four bogus firms set up by the GAO claiming fake principal locations in HUBZone areas that were actually a
"You have to wonder about the Bush administration and its commitment to disadvantaged communities, when all it takes for wealthy individuals to access billions of dollars in federal contracts is a $10 P.O. Box and a bottle of Wite-Out," said Representative Nydia M. VelDazquez, Democrat of New York, who chairs the House Committee on Small Business and requested the reports.