A searing report from the Government Accountability Office has charged the Small Business Administration with poor controls and oversight that resulted in a number of companies receiving undeserved funds from a program designed to boost small businesses in underserved communities.

According to the GAO, the SBA failed to verify required paperwork or perform audits for its 12-year-old Historically Underutilized Business Zone, or HUBZone, program, which was established to help small businesses in distressed areas.

To participate in the SBA program, businesses must attest that their office is in a designated HubZone and that a minimum of 35 percent of its employees live in the area.

Those HUBZone firms are mandated to spend at least 50 percent of a contract’s personnel costs on its own employees.

The GAO said that some HubZone recipients admitted diverting the lucrative work contracts to larger companies that would be ineligible under SBA guidelines.

Rep. Nydia Velazquez, D-N.Y. who chairs the House Small Business Committee, said the HubZone program “needs to be shut down.”

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