The Small Business Administration has given half of its aid for disadvantaged minority business people to white fronts or others who don't deserve it, Sen. Lawton Chiles (D-Fla.) said yesterday.
Chiles' subcommittee on federal spending practices uncovered numerous SBA abuses three years ago and probed the agency in 1977. That investigation uncovered abuses similar to those reported last week by the SBA Inspector General's office. The inspector general's audit, however, supplied no complete dollar figures for the program's losses.
During a hearing on the SBA's minority program Chiles said that $1.1 billion "was awarded to people that never should have gotten it. That amounts to half the portfolio. We're talking about a program that has given away half of its money to the wrong people."
The hearing was called by Chiles to determine whether SBA had cleaned up the minority 8 (a) set-aside program since hearings were held on it in 1976, 1977 and last year.
The purpose of the 8 (a) program is to set aside government contracts for firms owned or controlled by socially and economically disadvantaged persons to give them experience and headway in the business world.
But much of the aid has gone to the nondisadvantaged through SBA mismanagement and possibly fraud by the front firms.
Inspector General Paul Boucher and William Clement Jr., a high- ranking SBA official, both listed a number of recommendations and corrections made in the program since the abuses were found several years ago.
One area of disagreement between Chiles and Clement, however, was the use of management agreements between nondisadvantaged firms and those eligible to receive minority 8 (a) aid. Chiles said that the agreements would allow nondisadvantaged firms to step in and "milk" profits from the disadvantaged ones they're supposed to help.
But Clement said that those firms providing assistance to the disadvantaged businesses would be screened by the SBA first. William Mauk, SBA deputy administrator, added that the SBA is considering terminating the agreements after 60 days to prevent nondisadvantaged firms from taking over the profits of the eligible ones.
Another problem addressed yesterday was the practice of firms remaining only marginally viable so that they can continue receiving the special minority set-aside contracts and aid rather than graduating from the program and succeeding on their own.
Boucher suggested that the SBA give the firms a specified period of time to reach a particular goal or become independent.
Chiles said that a number of firms also never graduate from federal aid because the areas they are concentrated in are so saturated that few minorities are able to compete with established firms.
Clement said that the SBA is urging more minorities to enter nontraditional areas where there is potential for growth and open markets outside of the federal government.
"We have a program where every incentive is to stay in the program," said Sen. Sam Nunn (D-Ga.).