Following up on a report last July detailing fraud and abuse in the Small Business Administration’s Historically Underutilized Business Zone program, GAO has found that fraud and abuse in the HUBZone program extends beyond the Washington, D.C., area.
It identified 19 firms in Texas, Alabama, and California participating in the HUBZone program that clearly do not meet program requirements, such as principal office location, one of which listed "Suite 19," in its address, which turned out to be a residence in a trailer park.
In fiscal 2006 and 2007, federal agencies obligated nearly $30 million to those 19 firms for performance as the prime contractor on HUBZone contracts and a total of $187 million on all federal contracts, according to GAO-09-440.
It said that although the agency has initiated steps in strengthening its internal controls following the July report and testimony, SBA still has a long way to go to incorporate a fraud prevention system with front-end controls at the application stage, fraud detection and monitoring of firms already in the program, and the aggressive pursuit and prosecution of individuals committing fraud.