SBA's HUBZone fails gov't. investigation

waltky · 07-19-2008, 02:01 AM

Your tax dollars at work...

Contract Mess: Bogus Firms Qualify for Federal Program
July 18, 2008 - Government Investigators Qualified Using Fake Firms, Phony Addresses

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Government investigators were able to qualify for a federal program with access to billions of dollars of government contracts designed to give preference to firms that are headquartered in disadvantaged communities by setting up bogus firms with phony addresses. The HUBZone program, under the direction of the Small Business Administration, doles out $8 billion dollars in government contracts a year and is incredibly easy to game, according to a new Government Accountability Office report.

"It's absolutely shameful," said House Committee on Small Business Chairwoman Nydia M. Velázquez (D-NY) who chaired a hearing on the issue yesterday. "It's tougher to get a library card than it is to get into the HUBZone program. All you need is a bit of White-out," said Velazquez, referring to a quick change of address that would allow for a company based in a wealthy area to qualify for federal contracts meant for companies located in poorer communities.

GAO's lead investigators told the Congressional panel they had found countless instances of abuse by non-qualifying firms. Investigators said they found the SBA is doing almost nothing to verify the information of applicants. Investigators also said they had extensive evidence of individuals who misrepresent the locations of their companies, knowing the agency will not question them about their applications.

The GAO review delves into ten randomly-selected firms in the Washington DC metropolitan area. Many of these companies had set up "virtual offices" or rented mailboxes in poor communities with the sole purpose of gaining a mailing address within HUBZone boundaries. All ten failed GAO's site inspections, and have been referred to the Inspector General for corrective action.

More ABC News: Contract Mess: Bogus Firms Qualify for Federal Program

waltky · 07-28-2008, 04:53 AM

Well, gee - we didn't know...

SBA Works to Correct Fraud, Abuse in HUBZone Program
Monday, July 28, 2008 - The U.S. Small Business Administration (SBA) was “truly shocked” by allegations before a House committee last week that the Historically Underutilzed Business Zone (HUBZone) program was susceptible to fraud and abuse, and the SBA has taken steps to correct problems in the program, an SBA administrator said.

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“The HUBZone program was developed to help economically distressed areas, and we want to make sure that the money is in fact going to those HUBZone firms that are eligible,” Fay Ott, associate administrator for Government Contracting and Business Development at the SBA, told CNSNews.com on Friday. A GAO investigation of the HUBZone program, conducted from January to June 2008, found that 10 of the 17 HUBZone-certified programs they surveyed fell short of eligibility requirements.

The government watchdog uncovered that many of the companies involved listed addresses in HUBZones but employed no workers at those sites, operating instead from principal corporate headquarters in prosperous Washington, D.C., suburbs. All of the programs surveyed were in the Washington, D.C. area. As part of its investigation, the GAO also told Congress it was able to obtain HUBZone certification for four fictional companies.

The HUBZone program, created in 1997 under the Small Business Reauthorization Act, encourages federal contracting opportunities for small business firms in economically distressed areas. To qualify for HUBZone certification, the firms must be owned and controlled by at least one U.S. citizen, must employ 35 percent of its full-time employees from a designated HUBZone area and must have a principal office located in a HUBZone. Ott said the SBA was surprised by the results of the GAO’s survey.

More CNSNews.com - SBA Works to Correct Fraud, Abuse in HUBZone Program

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