The Small Business Administration is failing to prevent ineligible firms from receiving government contracts through its 8(a) minority business program, according to the Government Accountability Office.

The GAO recently conducted two reviews of the SBA's 8(a) program, which enables participating firms to receive contracting preferences from federal agencies. In one review, GAO looked at a random sample of 123 8(a) firms and found the SBA had failed to complete annual eligibility reviews on more than half of them.

In the other review, GAO investigated 14 firms that weren't eligible for the 8(a) program but received $325 million in set-aside and sole-source contracts through the program. The SBA either failed to detect false statements and misrepresentations - such as the race of the owner or the owner's net worth - or the agency failed to take action on them, GAO found.

GAO investigators also created four bogus companies and applied for certification as 8(a) firms. The SBA certified one of these firms.

The victims of the SBA's failure to keep ineligible firms out of the 8(a) program are small businesses that actually are owned by people who are economically and socially disadvantaged, GAO said. Members of minority groups are presumed to be socially disadvantaged; business owners also must have a net worth of less than $250,000 to qualify for the 8(a) program. To remain eligible, the owner's net worth must remain below $750,000.

About 9,500 firms are certified for the 8(a) program, and about half of these have at least one active federal contract. The federal government awarded $15.2 billion in 8(a) contracts in fiscal 2008.

The SBA agreed with most of GAO's recommendations on improving its oversight of 8(a) firm eligibility, and said it already is working on some of them, such as improving staff training and establishing a central repository for complaints about fraudulent firms. Pending new rules for the 8(a) program also will strengthen it, the SBA said.

Earlier GAO investigations found fraud in the SBA's Hubzone program, which provides contracting preferences for small businesses located in low-income areas, and in a contracting program for service-disabled veterans.

For more information, see www.gao.gov

Agency seeks advisers for minority biz programs

The Department of Commerce is looking for business leaders to advise it on how to help minority-owned firms access capital, participate in emerging industries and join the supply chains of major corporations.

"We want the best leaders to come up with strategies to positively influence minority-owned businesses around the nation," said Secretary of Commerce Gary Locke. "Expanding the minority business community will help economic growth over the long term."

Locke will appoint the 25-member National Advisory Council on Minority Business Enterprise. Nominations will be accepted through May 10.

The recruitment notice is posted at www.mbda.gov

Corporate political ads: Bill would set new rules

Democrats unveiled legislation aimed at blunting the effect of a Supreme Court decision that overthrew restrictions on independent corporate expenditures during political campaigns.

The court ruled it was a violation of the First Amendment to prohibit corporations or unions from buying ads that expressly advocate the election or defeat of political candidates. It also threw out a ban on corporate-funded issue ads that mention a candidate in the weeks just prior to an election.

Congress could, however, regulate political speech by corporations through disclaimer and disclosure requirements, the court ruled.

That's the approach taken in the new DISCLOSE Act, which would ban foreign-owned corporations, federal contractors and businesses that received government bailouts from buying political ads. Other corporations would face new disclaimer and disclosure requirements. The heads of any organizations sponsoring a political television commercial - a CEO in the case of a corporation - would have to appear on screen and say he or she stands by this message. In cases where the ad is purchased by an umbrella group, the ad would have to disclose the top five donors.

The bill also would require corporations and advocacy groups that spend money on elections to report their political expenditures and list donations of more than $1,000 to their campaign accounts.

If a political candidate is attacked by a corporate-funded ad, he or she would have the right to purchase an ad at the lowest possible rate in the media markets where the attack ad aired.

Democrats said the legislation is needed to prevent corporations and other special interests from controlling politics, but U.S. Chamber of Commerce President and CEO Tom Donohue said the bill is "nothing more than a brazen attempt to tilt the playing field in favor of the incumbent party in this fall's elections, silence constitutionally protected speech and abridge First Amendment rights."

President Barack Obama, however, praised the legislation, saying it would enable Americans to "follow the money and see clearly which special interests are funding campaign activity and trying to buy representation in our government."

For more information on DISCLOSE, the Democracy Is Strengthened by Casting Light On Spending in Elections Act see http://schumer.senate.gov

Lobbyist spending on pace to break last year's record

More than $900 million was spent on lobbying the federal government in the first quarter, according to the Center for Responsive Politics.

If lobbying spending continues at this pace for the rest of the year, it would break last year's record of $3.5 billion.

Business associations led by the U.S. Chamber of Commerce spent $139 million on lobbying, followed by health care interests at $138 million, and the energy and natural resources sector at $128 million, according to the center. The finance, insurance and real estate sector spent $123 million, an amount that likely will increase this quarter as financial reform legislation is considered in the Senate.

For more information, see www.opensecrets.org

Compiled by Kent Hoover, khoover@bizjournals.com