The federal Office of Minority Business Enterprise (OMBE) has spent more than $250 million but has produced only "marginal benefits" for minority businesses, says the General Accounting Office.
"OMBE has had only limited success in assisting clients start businesses and was not very successful in helping clients maintaining business," the GAO concludes in a new report on the agency.
Only 15 per cent of the people who sought OMBE aid in starting businesses actually were able to get their enterprises off the ground, and only 21 per cent of the minority businesses seeking help in getting financing actually got it.
And 35 per cent of the firms that were getting OMBE advice went out of business, said the GAO report.
"OMBE's assistance program does not appear to appreciably affect OMBE's objective of closing the gap between the minority population [an] business ownership ratio," said GAO.
Blacks, Hispanics, Asians and Indians account for 17 per cent of the U.S. population, but own only 4 per cent of the businesses and collect only 1 per cent of business groups, many of which now are financed by the office.
OMBE does not give direct financial aid to minority businessmen, instead providing management assistance through contracts with public and private agencies, most of them run by minority group members.
The GAO report criticized both the contractors and OMBE's regulation of them.
"The office (OMBE) does not adequately evaluate the management assistance program's effort nor does it adequately monitor contractors," said the study.
"Generally OMBE's contractors did not provide the amount and frequency of management assistance needed by minority clients" and "are not providing assistance according to Office criteria," GAO charged.
After looking at the books of 24 OMBE contractors, the GAO said "the records did not demonstrate that the contractors provided the assistance they reported to OMBE."
The report said the contractors running local OMBE programs "were not familiar with their clients' in-depth needs, had no plans for providing assistance and did not keep track of clients after initial assistance was provided."
The GAO audit criticizes the minority business agency for spreading its efforts agency for spreading its efforts so thin that few struggling businesses received meaningful aid.
In many cases, the contractors who were paid to help minority businessmen improve their operations were themselves so poorly run that Gao could not measure their effectiveness.
Gao investigators checked out 160 would be minority business owners who went to OMBE financed agencies for help. Only 25 of them - 15 per cent - got enough help to start their own businesses.
After dropping out of the OMBE program, four more of them started businesses, but three of them said they did so with no help from OMBE's local agency.
Looking at 200 firms that were already in business when they went to OMBE contractors for help, GAO verified that 25 had failed and another 44 could not be located, apparently because they too had gone under. The contractors told GAO they didn't know what had happened to the businesses they were supposed to be helping that had disappeared.
Charging that OMBE's "contractors do not seem concerned about their clients' longterms growth and success," GAO blemed the contractors for the failure of many of the minority business efforts.
Only one-third of the firms seeking help from OMBE got to what GAO considered first base - preparation of a detailed business plan.
The GAO found that 84 per cent of the minority group members successfully launching new enterprises had business plans prepared for them, but only 7 per cent of those who failed to get off the ground got such plans.
Federal auditors also faulted OMBE programs for not giving minority businesses more help in getting loans to start or expand their operations.
Only 14 per cent of OMBE's clients who needed loans to start new businesses got them and only 31 per cent of those who wanted loans to expand their business got it.
OMBE contractors prepared loan applications for only half the firms seeking financing, and nearly half the applications prepared were rejected, the audit said, adding that the contractors had to share the blame for the rejection rate.
The GAO audit said the contracotes blamed OMBE for many of the short-comings, claiming the agency demanded they serve large numbers of clients even if that meant providing less thorough service than needed.
OMBE director Randolph Blackwell was out of town for the long Thanksgivings weekend and could not be reached for comment on the audit.
In a letter to GAO released along with the report, Blackwell challenged only one point raised by the auditors. GAO said OMBE ought to evaluate the success of its clients by looking at their profits rather than their gross sales. Blackwell said that was impossible because business owners would not tell how much money they were making.
The November GAO report was the latest in a long series of critical evaluations of the minority business office, which was created in 1969 by President Nixon as part of his "black capitalism" drive.