SBA Orders More Than 4,300 Small Businesses to Produce Financial Records in Fraud Clampdown

Businesses that fail to comply with these requirements by Jan. 5 risk losing their eligibility to participate in the 8(a) program.

Administrator of the Small Business Administration, Kelly Loeffler, speaks during a press conference in Washington on Oct. 27, 2025. Madalina Kilroy/The Epoch Times

The Small Business Administration (SBA) ordered all 8(a) Business Development Program participants to produce financial records amid concerns the initiative is riddled with fraud and abuse, the agency said in a statement released on Dec. 5.

The 8(a) program seeks to help small business owners, considered socially and economically disadvantaged, to develop and grow operations through training, workshops, and guidance. Program participants gain access to contracting opportunities in the federal marketplace.

As part of a “comprehensive effort to protect taxpayers and legitimate small businesses by rooting out fraud, waste, and abuse,” more than 4,300 8(a) participants are now mandated to produce financial documents for the past three years, according to the statement.

Documents included in the audit are bank statements, financial statements, general ledgers, payroll registers, contracting and subcontracting agreements, and employment records.

“There is mounting evidence that the 8(a) Program designed for ‘socially and economically disadvantaged’ businesses went from being a targeted program to a pass-through vehicle for rampant abuse and fraud—especially during the Biden Administration, which aggressively prioritized [diversity, equity, and inclusion] over merit in federal contracting,” SBA Administrator Kelly Loeffler said.

Pass-through refers to a type of business in which the entity isn’t taxed; instead, the individual owners are taxed.

Small businesses that fail to comply with these requirements by Jan. 5 risk losing their eligibility to participate in the 8(a) program. They could also face further investigations and remedial actions.

“As our previously-announced government-wide audit continues, we’re committed to thoroughly reviewing every federal contract, contracting officer, and contractor—while working alongside federal law enforcement and other agencies to deliver accountability for taxpayers,” Loeffler said.

The SBA launched a full-scale audit of the 8(a) program after the Department of Justice (DOJ) uncovered a multiyear-long fraud and bribery scheme involving a former federal contracting officer and 8(a) contractors.

In a June 12 statement, the DOJ announced that a government contracting officer for the U.S. Agency for International Development (USAID) and three owners and presidents of companies had pled guilty for their roles in a “decade-long bribery scheme involving at least 14 prime contracts worth over $550 million in U.S. taxpayer dollars.”

Out of the three companies involved in the scheme, two were certified small businesses under the 8(a) program.

According to a June 27 SBA statement, one of the contractors secured an additional $800 million in federal contracts despite being officially flagged by USAID as lacking “honesty or integrity.”

In an Oct. 21 post on X, journalist James O’Keefe, owner of the O’Keefe Media Group, shared a video he claimed exposes a federal contracting scam related to the 8(a) program. He said a business that committed the scam used its “minority-owned status as a front” to obtain government contracts while outsourcing 80 percent of the work.

In an Oct. 22 post on X, Loeffler announced that SBA officially suspended the business exposed by O’Keefe. Both the company and its three owners were suspended from conducting any new business with the federal government.

“[They] will not be permitted to bid for federal contracts, subcontracts, or set-asides, and will not be able to receive any federal assistance,” the SBA administrator said.

According to the SBA statement, the latest initiative will begin with high-dollar, limited-competition contracts that date back over a period of 15 years. It will be done in collaboration with various federal agencies that award contracts to 8(a) participants.

“Findings will be referred to the SBA Office of Inspector General and DOJ for enforcement, and the SBA will pursue all available actions to recover misused funds. Anyone with information about fraud, waste, mismanagement, or misconduct may report it to the SBA [Office of Inspector General],” the statement reads.

On Nov. 6, the Department of the Treasury announced a department-wide audit of contracts awarded under “preference-based” contracting, totaling about $9 billion in contract value.

“The audit will examine potential misuse of the Small Business Administration’s 8(a) Business Development Program, and other initiatives that provide federal contracting preferences to certain eligible businesses,” it said.