From the September 2000 issue of Entrepreneur

A red-faced SBA is making amends after an audit showed questionable spending of $6 million earmarked for certifying disadvantaged businesses. But the embarrassment underscores persistent doubts that have dogged the certification program since its inception.

The audit by the SBA's Office of the Inspector General found that $2 million spent on furniture, offices, employees and equipment was never used for the Small Disadvantaged Business (SDB) certification program, which aims to help minority businesses com-pete for federal contracts.

The SBA has treated the audit as a wake-up call, working with auditors to implement financial con-trols. It must also pay back $2.3 million to the federal agencies that fund SDB and return another $1.6 million in unused funds.

But will the irregularities dampen future financial support? James C. Ballentine, associate deputy administrator for government contracting, hopes not. Ballentine's first task when he became involved with the program in 1999 was to whip it into financial shape. Now he must con-vince the funding agencies he's done a good job.

"Most of the mistaken spending happened in 1998," Ballentine says. "We can confidently point to the corrections that have been made since then."

Meanwhile, two years and $22 million into the program, only 3,100 companies out of a targeted 30,000 have been approved.

It's easy to see why, says Lynne Joy Rogers, director of the Los Angeles Urban League's Ron Brown Center. Although certified busi-nesses receive a 10 percent price preference, that doesn't mean they'll get contracts. "The paperwork required becomes another hurdle that keeps businesses from the mainstream of procurement," says Rogers. "Companies don't have time to fill out all these forms for an opportunity they might not get."

Says Ballentine, "This should be one of the tweaks we make-to have more of a contracting program."