Inspector General Uncovers SBA Encouraged Fraud for Over 20 Years

PETALUMA, Calif., May 6, 2015 /PRNewswire-USNewswire/ -- As early as 1995 the Small Business Administration (SBA) Inspector General uncovered rampant fraud in federal small business contracting programs. The American Small Business League (ASBL) reviewed 20 years of investigations that found the SBA clearly knew about rampant fraud, but adopted policies that encouraged fraud and protected fraudulent firms to inflate small business contracting data.

The investigation found the SBA Press Office responded to the damming Inspector General reports by claiming the fraud was the result of miscoding, computer glitches, anomalies and simple human error. They even released press releases claiming the fraud was a "myth."

The Inspector General suggested in Report 5-14, "If SBA had put as much effort into verifying whether the company currently met the award's size standard as it put into trying to find ways to earn credit towards its small business goals, then perhaps the contract action would have been awarded to a company that was legitimately small at the time of award."

A 1995 SBA Inspector General investigation found evidence of a "particular fraudulent practice" where large businesses continued to illegally misrepresent themselves as small to hijack federal small business contracts. The Inspector General recommended the SBA to publish a list of all the fraudulent firms and circulate the list to all federal agencies to prevent the fraudulent firms from continuing to receive small business contracts.

The SBA refused to adopt the Inspector General's recommendations.  As a result, the fraudulent firms continued to receive billions of dollars in federal small business contracts. The investigations revealed the SBA has continued to knowingly include contracts to fraudulent firms in their annual small business contracting data for over 20 years.

In 2005, the SBA Inspector General released Report 5-15 that stated, "One of the most important challenges facing the Small Business Administration (SBA) and the entire Federal Government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards."

Report 5-14 uncovered 66 percent of the high dollar procurements the SBA itself had reported as going to small businesses actually went to large businesses. One of those firms was Dutch corporate giant Buhrmann NV with over 26,000 employees around the world.

Report 5-16 uncovered the SBA knew large businesses were committing felony federal contracting fraud by making "false certifications" and "improper smal lbusiness self-certifications."

A series of federal investigations have all found fraud and abuse in federal small business contracting programs. In 2009, the Government Accountability Office essentially accused the SBA of encouraging fraud. NBC, CBS, ABC, CNN, CNBC, Fox News and RTTV have all reported on the abuses.

For 20 years the SBA has refused to adopt policies to halt the fraud, but recently finalized the "safe harbor from fraud penalties" policy that helps protect fraudulent firms that are caught hijacking federal small business contracts.

CONTACT: Steve Godfrey, [email protected], 707-789-9575

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SOURCE American Small Business League