WASHINGTON — Because of lax oversight, undeserving firms collected millions in federal contracts from an $8-billion government program designated for small businesses in poor neighborhoods, congressional investigators charge.
The Small Business Administration repeatedly failed to verify paperwork and conduct audits to weed out sham firms claiming to have main offices in economically distressed areas, the Government Accountability Office said in a report to be released today, raising questions about an agency seeking to take a greater role in helping firms stave off job losses.
In some cases, the business owners freely admitted diverting the lucrative work to large firms or ineligible businesses.
"When you starve an agency of resources and put in place the wrong people, this is the result: Fraud goes undetected and dishonest companies see skirting the rules as 'business as usual,' " said Rep. Nydia Velazquez (D-N.Y.), who chairs the House Small Business Committee. The committee is holding a hearing today on fraud and waste in SBA programs.
The agency generally agreed with the GAO's recommendations that urged stronger checks, unannounced site visits and stiffer punishment for firms found to be ineligible.