About 300 firms receiving federal aid under a special government program to help minorities and the disadvantaged may be expelled from the program because they acted as fronts for white contractors or had other problems.
The action was taken by A. Vernon Weaver, administrator of the Small Buiness Administration, following an audit by the SBA'S Inspector General which noted that one of five firms that received millions of dollars in SBA aid was a front.
Results of the audit were published in The Washington Post last week.
The 300 firms have been told to straighten up or they will be eliminated from the program within 30 days. If terminated, the firms have the right to appeal but may still receive SBA aid during the appeals process, which could take many months, Weaver said.
A firm is presumed innocent until proven guilty, Weaver said, even though that means the accused firm may still receive lucrative government contracts.
In addition to acting as fronts, the audit revealed that some firms in the program had no chance of succeeding, while others were still receiving aid and didn't need it. The audit also showed that the owners of some firms were already earning up to $1 million a year.
In addition, the audit said that some SBA contracts were going to high ranking federal employes including a member of the SBA Regional Advisory Committee, persons convicted of bribery and tax evasion, and some who withdrew funds from their businesses for personal reasons "to the possible detriment of the" firm, the report said.
The highest concentration of fronts in the country, the report added, was in the region including the District, Maryland, Virginia, West Virginia and Pennsylvania.
The audit was conducted on SBA'S entire portfoilio of 8 (a) contractors as of April 30, 1978. The purpose of the program is to set aside government contracts for and to aid firms owned or controlled by socially and economically disadvantaged persons to give them experience and headway in the business world.
Of 1,505 firms in the SBA'S portfolio at the time the audit began, 526 shouldn't have been in the program for various reasons. At a formal press conference yesterday on the report, Weaver said that of those 526 firms, 300 have been given written warnings.
Another 10 dropped out of the program after the audit, 10 others were recommended for completion of the program and 30 were recommended for action by the Justice Department and other investigatory agencies, Weaver said.
In addition, the problems of 110 firms were not sufficient to warrant further action, Weaver said, and 96 others are still being reviewed. Thirty of the firms had problems in more than one area, Weaver said.
Weaver would not reveal the names of any of the problem firms because he said they were covered by the Privacy Act.