IG Finds High Dropout Rate Among HUBZone Firms Fewer than one out of five HUBZone companies were found eligible for recertification during SBA’s regular reviews last year, the agency’s inspector general reported. HUBZone firms are required to recertify their eligibility every three years. But in 2005 more than 81% of the companies undergoing recertification either did not respond or were found to be ineligible, according to the IG report. SBA’s HUBZone office did not keep track of the reasons for denying recertification. SBA officials told the IG that in most cases the firms had changed addresses, gone out of business, or did not reply to inquiries. Whatever the reason for the huge number of dropouts, the IG said it raises the possibility that companies were receiving HUBZone set-aside contracts when they were ineligible. In addition to recertifications, SBA also conducted nearly 1,300 examinations of HUBZone firms over the past two years, and more than half those companies were either decertified or recommended for decertification, the IG said. Again, the agency did not track the reasons for those actions. The IG said SBA was slow to follow through on decertifying many of the companies. In contrast to the high dropout rate, the IG found that more than 70% of applicants for the program are accepted. SBA’s associate administrator for HUBZone, Michael McHale, said that is because the online application effectively pre-screens applicants and weeds out many of those that do not qualify before they submit their applications. Three years ago the IG warned that the HUBZone program was vulnerable to fraud because of lack of oversight. (SAA, 3/21/03) SBA has stepped up its oversight since then.