GAO cons SBA with HUBZone applications

Investigators for the Government Accountability
Office fooled the Small Business Administration
by applying for certification for four fake companies
under SBA's Historically Underutilized Business Zone program. SBA approved the applications
in short order.

Fictitious application 1: A virtual office

Investigators leased virtual office services from a
suite located in a HUBZone for $250 a month
and gave that address as the company's principal
location.

The terms of the lease allowed the investigators
to schedule use of the office space for 16
hours a month and have mail delivered there.
Their HUBZone application also said the bogus
firm employed two people, one of whom lived in
a HUBZone.

Two business days after submitting the
application, an SBA official sent an e-mail
message requesting a copy of the lease for the
principal office's location and proof of the
employee's residency.

Investigators created the necessary documentation
by using publicly available hardware and
software and faxed copies to SBA. The agency
requested additional documentation related to
utility payments and canceled checks.

SBA officials requested no further information
and certified the company three weeks later.

Fictitious application 2: A $24 mailbox

This faux company's principal office was a mailbox
in a HUBZone and leased for less than $24 a
month.

The application claimed the firm had nine
employees, four of whom lived in a HUBZone. SBA
requested clarification regarding a discrepancy in
the application information, and officials made no
further contact.

Four weeks after GAO investigators submitted
the fictitious application, SBA certified the fictional
company to participate in the HUBZone
program.

Fictitious application 3: Starbucks coffee shop

For the principal office address, investigators
used a Starbucks coffee shop in a HUBZone. They
also wrote that the firm employed two people,
one of whom lived in the zone.

SBA did not request any supporting documentation
or explanation. Investigators received
HUBZone certification two weeks later.

Fictitious application 4: A $10 mailbox

Investigators used the address of a mailbox located
in a HUBZone for the principal office. They
paid less than $10 a month in rent.

In their application, the investigators said two
of the three employees who worked for the
bogus company lived in a HUBZone. SBA
requested clarification regarding a discrepancy
in the application information and made no further
contact.

The agency certified the invented company
about five weeks later.