Earlier this year, the Small Business Administration announced that the

federal government had reached its goal of awarding at least 23 percent of its

total contracts to small businesses—the highest percentage in nearly eight

years.

This was a big deal for the federal

government—as Washington is always happy to tout its support for small firms.

Related: Small Business Contracts Flow to

Mega Corporations

But a scathing new report

from the SBA's inspector general casts doubts on the government's commitment to

small businesses—and claims that the agency's numbers were significantly

inflated—by as much as $2 billion.

The IG reviewed federal contracts

intended for companies eligible for the HubZone program, which benefits

companies in low-income communities, as well as the 8(a) program, which

benefits minority-owned firms.

Auditors concluded that inaccurate

reporting practices and lax oversight resulted in some $428 million intended

for disenfranchised groups going to ineligible firms. They added that another

$1.5 billion went to business that used to be eligible for the programs—but are

no longer qualified.

"In addition to overstating the small

business "goal" dollars, this may have also prevented other eligible firms from

being awarded these contract actions," the report says.

Related: The 10 Hottest Spots to Start a

Small Business

The auditors said information for the

HubZone and 8(a) programs wasn't consistently transmitted to the System for

Award Management, "As a result the affected small businesses—especially HubZone

firms—are not getting the visibility" in the system, which "may impact federal

agencies in meeting their procurement goals."

The auditors only reviewed contracts

worth more than $3 million, so it's likely that even more money was awarded to

ineligible companies.

The IG recommended that SBA create a

streamlined process to more accurately award contracts. Agency officials agreed

with the recommendations.

This isn't the first time federal

grants for small businesses have gotten in the wrong hands. Earlier this year, an investigation by

the American Small Business League revealed that only 16 of 100 companies

receiving small business grants were actually small firms. The rest of the

money was going to behemoth corporations like Apple, Bank of America and

General Electric.

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