Senate Bill Aims to Stop HUBZone Fraud Four senators are proposing tighter controls over the scandal-plagued HUBZone program, but the bill offers only vague solutions to the well-documented problems of waste, fraud and abuse. The HUBZone Improvement Act, S. 3020, directs SBA to implement policies for ensuring that only qualified companies are participating in the program. How to do that is left up to the SBA administrator. The bill says the policies should include “the appropriate use of technology to control costs and maximize, among other benefits, uniformity, completeness, simplicity, and efficiency.” But the bill would provide no funds to beef up SBA oversight. The legislation says a company may be declared ineligible if it does not meet the requirement that 35% of its employees live in a HUBZone at the time it submits a bid on a contract or is awarded a contract. The bill’s sponsors are Senate Small Business Committee chair Mary Landrieu, D-LA; the committee’s ranking Republican, Olympia Snowe of Maine; Sen. Kit Bond, R-MO, who sponsored legislation creating the HUBZone program in 1997; and Sen. Jeff Merkley, D-OR. In 2008 and 2009 GAO investigators found widespread incidents of fraud in HUBZone contracting and a lack of oversight by SBA. The director of GAO’s investigation, Gregory Kutz, said some company executives freely admitted the violations. “I don’t think they think they’ll ever get caught, and if they get caught, as we’ve seen, there’s no serious punishment,” he testified before the House Small Business Committee last year. (SAA, 4/3/09) GAO said many HUBZone companies did not maintain their headquarters in a HUBZone or did not employ 35% HUBZone residents, as required by the program’s rules. In 2008 GAO registered four nonexistent companies as HUBZone firms with no questions asked. The investigators found that SBA rarely visited HUBZone companies to verify their eligibility and did not move promptly to decertify companies that were found to be ineligible. SBA Administrator Karen Mills later said the agency had moved to correct those deficiencies. (SAA, 8/7/09) The senators said their legislation follows GAO’s recommendations for tightening controls over the program. “While the SBA has taken several critical steps to reduce fraud within this critical program, the GAO reports underscore that further improvements are necessary if the agency is to eliminate mismanagement and abuse,” Sen. Snowe said in a statement. “The purpose of this legislation is to ensure that only eligible firms participate in the HUBZone program by providing the SBA a clear roadmap to improve the management, oversight and evaluation of the program.” The bill would also require that the official map of HUBZones be kept accurate and up-to-date and that SBA assess the effectiveness of the program in creating jobs in poor neighborhoods. SBA has acknowledged that it has never studied whether the program was achieving its primary purpose of economic development.