Federal aid to minority businesses has been hindered by unfocused leadership and a misuse of resources, according to a study commissioned by the Department of Commerce.
The government's programs "while clearly valuable in many respects, have reinforced the traditional minority business enterprise's focus on marginal retail (and) service business with limited prospects for growth," the report released this week said.
The government's efforts were weakened further by its "lack of focused leadership," "lack of consensus on major goals and objectives," inadequate use of resources and unrealistic business expectations.
The report also cites political infighting between the Small Business Administration and the Department of Commerce over who will administer what programs.
The report's criticism are "justifiable. It seems to make some valid criticisms," said Jeff Mayer, acting deputy assistant secretary of commerce or domestic economic policy coordination. The infighting, Mayer acknowledged, is "a reflection of competing constituency interests" which is no different from any other part of government or business.
In 1976 the Office of Management and Budget tried to resolve the infighting question, the report states, "but in the end appeared to confuse it even more with its recommendations on how responsibilities should be divided." In the end there was no overall responsibility for minority business enterprise development, but merely specific responsibility for specific programs. If a client's problem did not neatly fit into a specific program, it was not clear which agency should be approached. This confusion continues," the report said.
The report cited a lack of coordination among the SBA and Commerce and OMB resulting in actions being "made in a vacuum" and duplication of efforts.
"According to General Accounting Office and OMB reports, the duplication of effort problem is compounded by poor execution of the programs, limited funding and inadequate staff support," the report said. "Considering that the specific minority business enterprise assistance budgets of both SBA and DOC (Commerce) combined are only $117,298,500 this is something that the government and the minority business community can ill afford."
The biggest weakness, however, in federal programs for minority businesses, is unrealistic expectations, the report said. The federal government has "disregarded the realities of the free enterprise system," particularly in regarding what abilities are necessary to start and manage a successful business, the speed at which changes can occur in the business sector for minorities and the fact that private sector will not help minority businesses as much as the government thinks it will.
". . . to avoid further waste of taxpayers' dollars, the federal government must rethink its leadership position or change its strategy," the report concluded.
The report recommended that the federal government focus more on developing middle and large-sized minority businesses instead of its previous emphasis on "moon and pop" establishments.
Mayer said the Commerce Department is already developing proposals to implement such a recommendation under the authority of an assistant secretary of commerce.