Federal agencies overstated their success last year in contracting with small businesses that face socio-economic disadvantages, according to a watchdog report released Wednesday.

The Small Business Administration’s inspector general’s office said it identified $400 million worth of contracts that agencies gave to ineligible firms but still counted toward their targets.

The findings are significant because 2013 was the first year that the Obama administration claimed to have met the federal government’s small-business contracting goals. The flawed numbers led to inaccurate reports to Congress and the American people, according to the report.

Under current law, the federal government strives to award 23 percent of its contracts to small businesses, with 3 percent intended for firms located in economically struggling areas known as Historically Underutilized Business Zones and 5 percent for companies that face economic and social disadvantages.

Auditors found that contracting officers incorrectly claimed $208 million worth of contracts for HUB Zone firms and $219 million for companies facing economic and social disadvantages.

Some contracts went to firms that were not participating in the SBA programs that their awards were tied to, according to the report. Auditors also found that agencies changed some awards to sole-source contracts to help meet their goals.

The report called for SBA to take steps to ensure that its database for identifying eligible firms contains accurate and up-to-date information. The agency agreed with the recommendations.

Rep. Sam Graves (R-Mo.) has proposed legislation that would increase the government-wide goal for small-business contracting from 23 percent to 25 percent of all awards, but the watchdog report raises questions about whether the administration can reach the existing target.