Inspector General says 96 percent of audited transactions should not have been approved
An Inspector General audit of the Minority Business Development Agency’s flagship program found that 96 percent of the reviewed transactions should not have been approved, revealing a stunning lack of oversight at the now-defunct agency and raising questions about what will happen if Democrats revive the program.
The November 2025 audit, which has not been previously reported, reviewed $16 billion in transactions approved by the MBDA business center program, a network of federally funded consultancies, public and private, aimed at supporting minority-owned businesses, which had to be at least 51 percent minority-owned to qualify for services. The audit found that $15.4 billion of the $16 billion in transactions reviewed were “duplicate transactions, transactions with missing or inadequate documentation, and transactions that MBDA should not have approved based on the underlying activity.” In one case, a business obtained a $33 million contract through the program without providing any paperwork.
“I cannot recall seeing anything at this level of improper or inappropriate payments,” said Judge Glock, the director of research at the Manhattan Institute, who studies waste and fraud in government programs. “Over 90 percent is fairly wild for a major program.”
President Donald Trump issued an executive order in March 2025 attempting to eliminate the agency, though a federal court stepped in to block that move. In response, the administration fired all remaining employees at the agency in October 2025. The Trump administration’s actions followed the ruling of a federal judge in March 2024 that the operating theory of the agency—that certain racial and ethnic groups are presumptively disadvantaged—was unconstitutional and that the agency could not use race or ethnicity to dole out money.
The 2025 audit, which began under the Biden administration, looked at just 10 of the 40 business centers funded by the agency before it was gutted by the Trump administration in 2025. And it only chose centers with a history of bookkeeping problems, meaning the audit’s findings can’t be extrapolated to the program as a whole.
But the numbers still reveal a remarkable lack of oversight at the congressionally established agency, which cannot be eliminated by executive fiat and could always be refunded by a future Democratic president. The audit found that the agency “relies on assertions of Business Center clients, not review of supporting documentation, to evaluate reported jobs created or retained.” Such practices made it impossible to “ensure that Business Centers comply with award terms and conditions” or that “program goals are being met.”
The report even found that MBDA officials failed to follow the agency’s standard operating manual “because they were unaware” that it existed. Nor did they take “any action” in response to previous audits, “making the extent to which MBDA monitored and followed up on issues … unclear.”
“The fact that several business centers submitted incomplete audits or audits that showed no effort to correct errors is pretty surprising,” said Glock. “If groups are not managing funds in a manner commensurate with their contract, the awarding agency would usually step in and shut them down. But MBDA didn’t do that despite these failed audits.”
At least some of that mismanagement was likely due to fraud, Glock added. Minority contracting is notorious for front schemes and pass-through scams, he said, and the practice has been linked to political corruption and higher infrastructure costs.
Though the report does not establish that any fraud occurred, it suggests there were functionally no safeguards in place to prevent it.
The lack of oversight is not a new problem for the agency, which was created by executive order during the Nixon administration in 1969 and only codified into law under the Biden administration. The report notes that an Inspector General audit from 2017 had found “similar” issues with record-keeping and self-attestation, and that “many of the issues remain[ed]” almost a decade later. As a result, lawmakers were largely in the dark about the business center program, which is required to submit performance reports to Congress alongside its annual budget requests.
“Approving transactions that should not be approved artificially inflates the performance metrics for Business Centers, potentially allowing them to avoid consequences for failing to meet performance goals,” the report reads. “MBDA’s overstated Business Center performance metrics make MBDA programs appear more successful than they actually are, misleading stakeholders.”
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