By Doug Caldwell
Central Valley Business Times
March 3, 2011
• Top Dem on small biz committee says SBA may be wasting money
• ‘Fraud by borrowers, loan agents, lenders, and other participants in SBA business loan programs’
The U.S. Small Business Administration is shoveling scare money into pet projects that are unauthorized, says Rep. Nydia Velazquez, D-N.Y., the top Democrat on the House Committee on Small Business.
“I am troubled by the agency's continued use of scarce budget authority to fund unauthorized pilot programs,” she says. “These programs were launched without the public hearings and legislative record that accompanies statutorily authorized programs. Therefore, it is impossible to understand why these programs were created and whether or not they are a good investment for the taxpayer.”
Ms. Velazquez cited seven such programs:
• The Small Loan Advantage program
• The Community Advantage program
• The Impact Investing fund
• The Early Stage Innovation fund,
• Regional Clusters
• The Distance Learning Portal, and,
• The Emerging Leaders program.
“The cost of the last three alone makes up nearly 10 percent of the SBA's non-credit programs budget submission,” she says. “In addition, several of these programs are clearly duplicative of other agency offerings. The reality is that these are lean times – everyone has to tighten their belt. And this includes the SBA.”
Calling them “pet projects,” she says the SBA should instead be focusing on addressing the priorities raised by its own Inspector General.
One of those is the awarding of federal small business contracts to companies that should not be eligible.
"In 2009, $97 billion in prime contacts were awarded through these programs. However, IG audits, as well as GAO [Government Accountability Office] investigations, have identified numerous instances where firms that do not meet these program's eligibility criteria, but were improperly given contracts anyway,” she says.
She also says the SBA’s major loan program is riddled with problems.
Citing the Inspector General, she says the SBA “faces a heightened risk of loss” due to expedited loan processing initiatives and its “considerable reliance” on outside financial institutions.
The majority of loans made under the SBA’s 7(a) program are made with little or no review by SBA prior to loan approval because the agency has delegated most of the credit decisions to lenders, Ms. Velazquez says. “Numerous IG criminal investigations have identified fraud by borrowers, loan agents, lenders, and other participants in SBA business loan programs.”