Robbing poor communities

Tuesday, July 22, 2008 | 2:03 a.m.

The federal government offers a variety of inducements to encourage economic activity in poor neighborhoods. This is often necessary because many businesses are not willing to take a chance on helping to revive a deteriorating community without financial help. That is understandable because of the risks involved.

The Historically Underutilized Business Zone initiative started by the Small Business Administration in 1997 should have been a shining example of such programs. Its aim was to help small businesses set up shop in impoverished areas, take root and help those communities thrive by employing nearby residents.

But a Government Accountability Office report issued last week painted a completely different picture. The auditing agency for Congress found that millions of dollars from the program went to companies that merely set up empty duplexes, part-time offices and other ineligible operations in poor neighborhoods without the SBA’s catching on.

This happened because the SBA didn’t perform follow-up audits to ensure the money was being spent properly.

The agency simply gave out funds as though it were handing out free samples of a new product in a shopping mall.

This is not the first time a federal agency handed out funds and then lost track of how the money was spent, and it probably won’t be the last. The SBA now admits it messed up and is undertaking a full review of the program.

Going forward, Congress must ensure that when a federal agency distributes funds it also has the staff available to monitor the use of that money. That scrutiny would make government programs more effective and reduce wasteful or fraudulent spending.

The shame of this episode is that there are honest companies that could have put those millions of dollars to good use in creating jobs in impoverished neighborhoods where they are needed most.