A federal program that was designed to help small companies owned by women is not working and instead benefiting other businesses.
In a new report from the Government Accountability Office, auditors revealed that the Small Business Administration’s Women in Small Businesses program, which began in 2012, is failing to certify that only eligible businesses are receiving the funds.
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Small businesses that are at least 51 percent controlled by women are eligible to receive federal contracts through the program. Owners are supposed to prove they meet the standards by providing the Small Business Association with financial statements and other documents.
Since it began, the government has doled out $52.6 billion in contract obligations through the program. However, the SBA does not appear to be verifying all of the recipients.
In fact, the auditors said that about 40 percent of the businesses that received the funds in 2012 and 2013 were not actually eligible for the program. It is not clear how much money those contracts accounted for.
The GAO says the problem is that companies either submit their own certifications for the program or they enlist a third-party certifier and the SBA does not usually oversee those that have been submitted by third party certifiers.
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“Without ongoing monitoring and oversight of the activities and performance of third-party certifiers, the Small Business Administration cannot reasonably assure that certifiers fulfill the requirements of the agreement…. As a result of inadequate monitoring and controls, potentially ineligible businesses may continue to incorrectly certify themselves as WOSBs, increasing the risk that they may receive contracts for which they are not eligible,” the report said.
SBA officials told auditors that one reason for the large number of ineligible recipients of the contracts could have been because businesses didn’t understand the guidelines.
This is not the first time the SBA has struggled with overseeing its programs. In fact, auditors said the problems they found in their review of the Women in Small Business Program “were similar to those found in examinations of its other socioeconomic programs,” the auditors said.
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Earlier this year, the SBA’s inspector general released a scathing report that revealed federal contracts intended for low-income communities as well as minority-owned firms, were actually going to other companies that didn’t meet the programs’ requirements.
In total, the IG said the SBA’s inaccurate reporting practices and lax oversight resulted in some $428 million intended for disenfranchised groups going to ineligible firms. Another $1.5 billion went to businesses that used to be eligible for the programs—but no longer qualify.
In both instances, the auditors recommended that the SBA update their processes to more accurately award and track contracts. The agency has agreed with the recommendations.
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