HUBZone Program: SBA's Control Weaknesses Exposed the Government to Fraud and Abuse
Published: 2008-07-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Historically Underutilized Business Zone (HUBZone) program is intended to provide federal contracting opportunities to qualified small business firms in order to stimulate development in economically distressed areas. As manager of the HUBZone program, the Small Business Administration (SBA) is responsible for certifying whether firms meet HUBZone program requirements. To participate in the HUBZone program, small business firms must certify that their principal office (i.e., the location where the greatest number of employees work) is located in a HUBZone and that at least 35 percent of the firm's employees live in HUBZones. Given the Committee's concern over fraud and abuse in the HUBZone program, GAO was asked to (1) proactively test whether SBA's controls over the HUBZone application process were operating effectively to limit program certification to eligible firms and (2) identify examples of selected firms that participate in the HUBZone program even though they do not meet eligibility requirements. To perform its proactive testing, GAO created four bogus businesses with fictitious owners and employees and applied for HUBZone certification. GAO also selected 17 HUBZone firms based on certain criteria, such as receipt of HUBZone contracts, and investigated whether they met key program eligibility requirements.
section_title: What GAO Found
paragraphs: GAO identified substantial vulnerabilities in SBA's application and monitoring process, clearly demonstrating that the HUBZone program is vulnerable to fraud and abuse. Considering the findings of a related report and testimony issued today, GAO's work shows that these vulnerabilities exist because SBA does not have an effective fraud-prevention program in place. Using fictitious employee information and fabricated documentation, GAO easily obtained HUBZone certification for four bogus firms. For example, to support one HUBZone application, GAO claimed that its principal office was the same address as a Starbucks coffee store that happened to be located in a HUBZone. If SBA had performed a simple Internet search on the address, it would have been alerted to this fact. Further, two of GAO's applications used leased mailboxes from retail postal services centers. A post office box clearly does not meet SBA's principal office requirement. We were also able to identify 10 firms from the Washington, D.C., metro area that were participating in the HUBZone program even though they clearly did not meet eligibility requirements. Since 2006, federal agencies have obligated a total of more than $105 million to these 10 firms for performance as the prime contractor on federal contracts. Of the 10 firms, 6 did not meet both principal office and employee residency requirements while 4 met the principal office requirements but significantly failed the employee residency requirement. For example, one firm that failed both principal office and employee residency requirements had initially qualified for the HUBZone program using the address of a small room above a dentist's office. GAO's site visit to this room found only a computer and filing cabinet. No employees were present, and the building owner told GAO investigators that nobody had worked there "for some time." During its investigation, GAO also found that some HUBZone firms used virtual office suites to fulfill SBA's principal office requirement. GAO investigated two of these virtual office suites and identified examples of firms that could not possibly meet principal office requirements given the nature of their leases. For example, one firm continued to certify it was a HUBZone firm even though its lease only provided mail forwarding services at the virtual office suite.

section_title: Letter
paragraphs: Thank you for the opportunity to discuss our investigation of the  Historically Underutilized Business Zone (HUBZone) program. Created in  1997 and managed by the Small Business Administration (SBA), the  HUBZone program is intended to provide federal contracting  opportunities to qualified small business firms in order to stimulate  development in the economically distressed areas in which the firms are  located. These areas, which are designated based on certain economic and  census data, are known as HUBZones. To ensure HUBZone areas receive  the economic benefit from the program, SBA is responsible for  determining whether firms meet HUBZone program requirements and then  later monitoring whether the firms maintain their eligibility. To participate  in the HUBZone program, small business firms generally must satisfy three  main requirements: (1) the firm must be owned and controlled by one or  more U.S. citizens; (2) at least 35 percent of its full-time employees must  live in a HUBZone; and (3) the principal office (i.e., the location where the  greatest number of qualifying employees perform work) must be located in  a HUBZone.
Small business firms in the HUBZone program are eligible to bid on  federal prime contracts and subcontracts available exclusively to program  participants, in addition to benefiting from other contracting preferences.  According to procurement data from the Federal Procurement Data  System–Next Generation (FPDS-NG), in fiscal year 2007 federal agencies  reported about $8 billion in obligations on prime contracts with HUBZone  firms. In awarding prime contracts and subcontracts, both federal  contracting officials and prime contractor officials rely on SBA’s controls  to provide assurance that only eligible firms participate in the program.
When applying for HUBZone status, firms are required to verify that the  information they submit to SBA is true and correct. If SBA approves an  application and grants a firm HUBZone certification, that firm is then  required to notify SBA of any material changes affecting the firm’s  eligibility, such as changes in principal office location or number of  employees residing in a HUBZone. Further, to compete for government  contracts, HUBZone firms must verify in the government’s Online  Representations and Certifications Application (ORCA) that they are a  HUBZone firm and that there have been “no material changes in  ownership and control, principal office, or HUBZone employee percentage  since it was certified by the SBA.” There are criminal penalties for  knowingly making false statements or misrepresentations in connection  with the HUBZone program, including failure to correct “continuing  representations” that are no longer true.
Although the HUBZone program can have positive economic outcomes for  small business firms and economically distressed communities, in January  2003 the SBA Office of Inspector General (OIG) reported that SBA’s  internal controls were inadequate to ensure that only eligible firms were  allowed to participate in the HUBZone program. Given your concern over  program fraud and abuse, you requested that we perform an investigation  to (1) proactively test whether SBA’s controls over the HUBZone  application process were operating effectively to limit program  certification to eligible firms and (2) identify examples of selected firms  that participate in the HUBZone program even though they do not meet  eligibility requirements.
To proactively test whether SBA’s controls over the HUBZone application  process were operating effectively, we set up four bogus firms and  submitted applications to SBA. Our applications contained fictitious  employee information and bogus principal office addresses. We used  publicly available guidance provided by SBA in preparing our applications.
When necessary, we fabricated documents to support our applications  using commercially available hardware and software.
To identify examples of firms that participate in the HUBZone program  even though they do not meet eligibility requirements, we first obtained  and analyzed a list of HUBZone firms from the SBA’s Certification  Tracking System as of January 2008. We then obtained federal  procurement data from FPDS-NG for fiscal years 2006 and 2007. We  analyzed these data to identify HUBZone firms with a principal office  located in the Washington, D.C., metropolitan area for which federal  agencies reported obligations on HUBZone prime contracts totaling more  than $450,000 between fiscal years 2006 and 2007. Based on this process,  we selected 16 firms for further investigation. We selected an additional  firm for investigation based on a referral to GAO’s FraudNet hotline. For  the 17 selected firms, we then used investigative methods, such as  interviewing firm managers and reviewing firm payroll documents, to  gather information about the firms and to determine whether they met  HUBZone requirements. We also reviewed information about each firm in  ORCA. While performing our proactive testing and investigative work, we  found other HUBZone firms using virtual office suites to fulfill SBA’s  principal office requirement. We investigated two of these virtual office  suites to identify additional examples of firms that participate in the  HUBZone program even though they do not meet eligibility requirements.
Our work was not designed to identify all fraudulent activity in the  HUBZone program or estimate its full extent. In addition, our work was  not designed to determine whether the selected firms we investigated  committed fraud when applying for HUBZone status or receiving a  HUBZone contract award. We conducted our investigation from January  2008 through June 2008 in accordance with quality standards for  investigations as set forth by the President’s Council on Integrity and  Efficiency. Additional details on our scope and methodology are included  in appendix I.
subsections: section_title: Ineffective Program Eligibility Controls Enabled GAO to Obtain HUBZone Certification for Bogus Firms
paragraphs: Our proactive testing found ineffective HUBZone program eligibility  controls, exposing the federal government to fraud and abuse. In a related  report and testimony released concurrently with this testimony, we  reported that SBA generally did not verify the data entered by firms in its  online application system. We found that SBA was therefore vulnerable to  certifying firms based on fraudulent application information. Our use of  bogus firms, fictitious employees, and fabricated explanations and  documents to obtain HUBZone certification demonstrated the ease with  which HUBZone certification could be obtained by providing fraudulent  information to SBA’s online application system. In all four instances, we  successfully obtained HUBZone certification from SBA for the bogus firms  represented by our applications. See figure 1 for an example of one of the  acceptance letters we received.
Although SBA requested documentation to support one of our  applications, the agency failed to recognize the information we provided in  all four applications represented bogus firms that actually failed to meet  HUBZone requirements. For instance, the principal office addresses we  used included a virtual office suite from which we leased part-time access  to office space and mail delivery services for $250 a month, two different  retail postal service centers from which we leased mailboxes for less than  $24 a month, and a Starbucks coffee store. An Internet search on any of  the addresses we provided would have raised “red flags” and should have  led to further investigation by SBA, such as a site visit, to determine  whether the principal office address met program eligibility requirements.  Because HUBZone certification provides an opening to billions of dollars  in federal contracts, approval of ineligible firms for participation in the  program exposes the federal government to contracting fraud and abuse,  and moreover, can result in the exclusion of legitimate HUBZone firms  from obtaining government contracts. We provide specific details  regarding each application below.
Fictitious Application One: Our investigators submitted this fictitious  application and received HUBZone certification 3 weeks later. To support  the application, we leased, at a cost of $250 a month, virtual office services  from an office suite located in a HUBZone and gave this address as our  principal office location. Specifically, the terms of the lease allowed us to  schedule use of an office space up to 16 hours per month and to have mail  delivered to the suite. Our HUBZone application also indicated that our  bogus firm employed two individuals with one of the employees residing  in a HUBZone. Two business days after submitting the application, an SBA  official emailed us requesting a copy of the lease for our principal office  location and proof of residency for our employee. We created the  documentation using publicly available hardware and software and faxed  copies to SBA to comply with the request. SBA then requested additional  supporting documentation related to utilities and cancelled checks. After  we fabricated this documentation and provided it to SBA, no further  documentation was requested before SBA certified our bogus firm.
Fictitious Application Two: Four weeks after our investigators  submitted this fictitious application, SBA certified the bogus firm to  participate in the HUBZone program. For this bogus firm, our “principal  office” was a mailbox located in a HUBZone that our investigators leased  from a retail postal service provider for less than $24 a month. The  application noted that our bogus firm had nine employees, four of which  lived in a HUBZone area. SBA requested a clarification regarding a  discrepancy in the application information, but no further contact was  made before we received our HUBZone certification.
Fictitious Application Three: Our investigators completed this fictitious  application and received HUBZone certification 2 weeks later. For the  principal office address, our investigators used a Starbucks coffee store  located in a HUBZone. In addition, our investigators indicated that our  bogus firm employed two individuals with one of the employees residing  in a HUBZone area. SBA did not request any supporting documentation or  explanations for this bogus firm prior to granting HUBZone certification.
Fictitious Application Four: Within 5 weeks of submitting this fictitious  application, SBA certified our bogus firm. As with fictitious application  two, our investigators used the address for a mailbox leased from a retail  postal service provider located in a HUBZone for the principal office. Our  monthly rental cost for the “principal office” was less than $10 per month.  Our application indicated that two of the three employees that worked for  the bogus firm lived in a HUBZone. SBA requested a clarification regarding  a small discrepancy in the application information, but no further contact  was made before receiving the HUBZone certification.
section_title: Selected HUBZone Firms Do Not Meet Program Eligibility Requirements
paragraphs: We were also able to identify 10 firms from the Washington, D.C., metro  area that were participating in the HUBZone program even though they  clearly did not meet eligibility requirements. Since 2006, federal agencies  have obligated a total of more than $105 million to these firms for  performance as the prime contractor on federal contracts. Of the 10 firms,  6 did not meet both the principal office and employee residency  requirements while 4 met the principal office requirement but significantly  failed the employee residency requirement. We also found other HUBZone  firms that use virtual office suites to fulfill SBA’s principal office  requirement. We investigated two of these virtual office suites and  identified examples of firms that could not possibly meet principal office  requirements given the nature of their leases.
According to HUBZone regulations, persons or firms are subject to  criminal penalties for knowingly making false statements or  misrepresentations in connection with the HUBZone program including  failure to correct “continuing representations” that are no longer true.  During the application process, applicants are not only reminded of the  program requirements, but are required to agree to the statement that  anyone failing to correct “continuing representations” shall be subject to  fines, imprisonment, and penalties. Further, the Federal Acquisition  Regulation (FAR) requires all prospective contractors to update ORCA— the government’s Online Representations and Certifications Application— which includes certifying whether the firm is currently a HUBZone firm  and that there have been “no material changes in ownership and control,  principal office, or HUBZone employee percentage since it was certified  by the SBA.” However, we found that all 10 of these case-study firms  continued to represent themselves to SBA, ORCA, GAO, and the general  public as eligible to participate in the HUBZone program. Because the 10  case study examples clearly are not eligible, we consider each firm’s  continued representation indicative of fraud. We referred the 10 firms to  SBA OIG for further investigation.
subsections: section_title: Case Studies of HUBZone Firms That Do Not Meet Program Eligibility Requirements
paragraphs: We determined that 10 case study examples from the Washington, D.C.,  metropolitan area failed to meet the program’s requirements. Specifically,  we found that 6 out of the 10 failed both HUBZone requirements to  operate a principal office in a HUBZone and to ensure that 35 percent or  more of employees resided in a HUBZone. Our review of payroll records  also found that the remaining four firms failed to meet the 35 percent  HUBZone employee residency requirement by at least 15 percent. In  addition, all 10 of the case study examples continued to represent  themselves to SBA, ORCA, GAO, and the general public as HUBZone  program–eligible. One HUBZone firm self-certified in ORCA that it met  HUBZone requirements in March 2008 despite the fact that we had spoken  with its owner about 3 weeks before about her firm’s noncompliance with  both the principal office and HUBZone residency requirements. Table 1  highlights the 10 case-study firms we investigated.
Case 1: Our investigation clearly showed that this firm represented itself  as HUBZone-eligible even though it did not meet HUBZone requirements  at the time of our investigation. This firm, which provided business  management, engineering, information technology, logistics, and technical  support services, self-certified in July 2007 in ORCA that it was a HUBZone  firm and that there had been “no material changes in ownership and  control, principal office, or HUBZone employee percentage since it was  certified by the SBA.” We also interviewed the president in March 2008 and  she claimed that her firm met the HUBZone requirements. However, the  firm failed the principal office requirement. Our site visits to the address  identified by the firm as its principal office found that it was a small room  that had been rented on the upper floor of a dentist’s office where no more  than two people could work comfortably. No employees were present, and  the only business equipment in the rented room was a computer and filing  cabinet. The building owner stated that the president of the firm used to  conduct some business from the office, but that nobody had worked there  “for some time.” Moreover, the president indicated that instead of paying  rent at the HUBZone location, she provided accounting services to the  owner at a no-cost exchange for use of the space. See figure 2 for a picture  of the building the firm claimed as its principal office (arrow indicates  where the office is located).
Further investigation revealed that the firm listed its real principal office  (called the firm’s “headquarters” on its Web site) at an address in McLean,  Virginia. In addition to not being a HUBZone, McLean, Virginia, is in one of  the wealthiest jurisdictions in the United States. Our site visit to this  second location revealed that the majority of the firm’s officers in addition  to about half of the qualifying employees worked there and indicated this  location was the firm’s actual principal office. When we interviewed the  president, she claimed that the McLean, Virginia, office was maintained  “only for appearance.” See figure 3 for a picture of the McLean, Virginia,  building where the firm rented office space.
Based on our review of payroll documents we received directly from the  firm, we also determined the firm failed the 35 percent HUBZone  residency requirement. The payroll documents indicated that only 15 of  the firm’s 72 employees (21 percent) lived in a HUBZone as of December  2007. We also found that in January 2007 during SBA’s HUBZone  recertification process the president self-certified that 38 percent of the  firm’s employees lived in a HUBZone. However, the payroll documents  received directly from firm showed only 24 percent of the firm’s  employees lived in a HUBZone at that time.
In 2006 the Department of the Army, National Guard Bureau, awarded a  HUBZone set-aside contract with a $40 million ceiling to this firm based on  its HUBZone status. Although only $3.9 million have been obligated to date  on the contract, because the firm remains HUBZone-certified, it can  continue to receive payments up to the $40 million ceiling based on its  HUBZone status until 2011. We referred this firm to SBA OIG for further  investigation.
Case 2: Our investigation determined that this firm, a general contractor  specializing in roofing and sheet metal, continued to represent itself as  HUBZone-eligible even though it did not meet HUBZone requirements.
While he self-certified to the firm’s HUBZone status in ORCA in September  2007, the vice president admitted during our interview in April 2008 that  the firm did not meet HUBZone requirements. Nonetheless, after our  interview, the firm continued actively to represent that it was a HUBZone  firm—including a message in large letters on its Web site and business  cards declaring that the firm was “HUBZone certified.” The firm’s vice- president self-certified during the SBA’s HUBZone certification process in  March 2007 that, as shown in figure 4, the firm’s principal office was one- half of a residential duplex in Landover, Maryland.
We visited this location during normal business hours and found no  employees present. Our investigative work also found that the vice  president owned another firm, which did not participate in the HUBZone  program. A visit to this firm, which was located in Capitol Heights,  Maryland—not in a HUBZone—revealed that both it and the HUBZone  firm operated out of the same location.
Further, payroll documents we received from the HUBZone firm indicated  that it had 34 employees but that only 4 employees (or 12 percent) lived in  a HUBZone as of December 2007. Based on our analysis of FPDS-NG data,  between fiscal years 2006 and 2007 federal agencies obligated about $12.2  million for payment to the firm. Of this, about $4 million in HUBZone  contracts were obligated by the Department of the Air Force. Because this  firm clearly did not meet either principal office or employee HUBZone  requirements at the time of our investigation but continued to represent  itself as HUBZone-certified we referred this firm to SBA OIG for further  investigation.
Case 3: Our investigation demonstrated that this firm continued to  represent itself as HUBZone-eligible while failing to meet HUBZone  requirements. This firm, which specializes in the design and installation of  fire alarm systems, self-certified in May 2007 in ORCA that it was a  HUBZone firm and that there had been “no material changes in ownership  and control, principal office, or HUBZone employee percentage since it  was certified by the SBA.” However, when we interviewed the president in  April 2008, he acknowledged that the firm “technically” did not meet the  principal office requirement. For its HUBZone certification in April 2006,  an address in a HUBZone in Rockville, Maryland, was identified as its  principal office location. We visited this location during normal business  hours and found the address was for an office suite that provided virtual  office services. According to the lease between the HUBZone firm and the  office suite’s management, the firm did not rent office space, but paid $325  a month to use a conference room on a scheduled basis for up to 4 hours  each month. Absent additional services provided by the virtual office suite,  it would be impossible for this firm to meet the principal office  requirement under this lease arrangement. Moreover, the president of the  firm told us that no employees typically worked at the virtual office.  Additional investigative work revealed that the firm’s Web site listed a  second address for the firm in McLean, Virginia, which as noted above is  not in a HUBZone. Our site visit determined this location to be where the  firm’s president and all qualifying employees worked. In addition, the  payroll documents we received from the firm revealed that the percentage  of employees living in a HUBZone during calendar year 2007 ranged from a  low of 6 percent to a high of 15 percent—far below the required 35  percent.
Based on our analysis of FPDS-NG data, between fiscal years 2006 and  2007 federal agencies obligated about $3.3 million for payment to the firm.  Of this, over $460,000 in HUBZone contracts were obligated by the  Department of Veterans Affairs. Further, in addition to admitting the firm  did not meet the principal office requirement, the president was also very  candid about having received subcontracting opportunities from large  prime contracting firms based solely on the firm’s HUBZone certification.
According to the president, the prime contractors listed the HUBZone firm  as part of their “team” to satisfy their HUBZone subcontracting goals.  However, he contended that these teaming arrangements only  occasionally resulted in the prime contractor purchasing equipment from  his firm. Because it continued to represent itself as HUBZone-eligible, we  referred it to SBA OIG for further investigation.
section_title: Some HUBZone Firms Using Virtual Office Services Do Not Meet Program Requirements
paragraphs: Virtual offices are located nationwide and provide a range of services for  individuals and firms, including part-time use of office space or conference  rooms, telephone answering services, and mail forwarding. During our  proactive testing discussed above, we leased virtual office services from  an office suite located in a HUBZone and fraudulently submitted this  address to SBA as our principal office location. The terms of the lease  allowed us to schedule use of an office space for up to 16 hours per  month, but did not provide permanent office space. Even though we never  used the virtual office space we rented, we still obtained HUBZone  certification from SBA. Our subsequent investigation of two virtual office  suites located in HUBZones—one of which we used to obtain our  certification—found that other firms had retained HUBZone certification  using virtual office services. Based on our review of lease agreements, we  found that, absent additional services provided by the virtual office suites,  some of these firms could not possibly meet principal office requirements.  For example:    One HUBZone firm that claimed its principal office was a virtual office  address had a lease agreement providing only mail-forwarding services.  The mail was forwarded to a different address not located in a HUBZone.  Absent additional services provided by the virtual office suite, it would be  impossible for this firm to perform any work at the virtual office location  with only a mail-forwarding agreement.
Five HUBZone firms that claimed their principal office was a virtual office  address leased less than 10 hours of conference room usage per month at  the same time they maintained at least one other office outside of a  HUBZone. Absent additional services provided by the virtual office suite, it  would be impossible for these firms to meet principal office requirements  with only 10 hours of conference room time per month, leading us to  conclude that the majority of work at these companies was performed in  the other office locations.
Five other firms claimed their principal office was a virtual office address  but leased office space for less than 20 hours a month. These firms  simultaneously maintained at least one other office outside of a HUBZone.  Absent additional services provided by the virtual office suite, it would be  impossible for these firms to meet principal office requirements with only  20 hours of rented office time per month, leading us to conclude that the  majority of work at these companies was performed in the other office  locations.
The virtual office arrangements we investigated clearly violate the  requirements of the HUBZone program and, in some cases, exemplify  fraudulent representations.
section_title: Corrective Action Briefing
paragraphs: We briefed SBA officials on the results of our investigation on July 9, 2008.  They were concerned about the vulnerabilities to fraud and abuse we  identified. SBA officials expressed interest in pursuing action, including  suspension or debarment, against our 10 case study firms and any firm  that may falsely represent their eligibility for the HUBZone program. They  were also open to suggestions to improve fraud prevention controls over  the HUBZone application process, such as performing steps to identify  addresses of virtual office suites and mailboxes rented from postal retail  centers.
Madam Chairwoman and Members of the Committee, this concludes my  statement. I would be pleased to answer any questions that you or other  Members of the Committee may have at this time.
section_title: Contacts and Acknowledgments
paragraphs: For further information about this testimony, please contact Gregory D.  Kutz at (202) 512-6722 or kutzg@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this testimony.
section_title: Appendix I: Objective, Scope, and Methodology
paragraphs: To proactively test whether the Small Business Administration’s (SBA)  controls over the Historically Underutilized Business Zone (HUBZone)  application process were operating effectively, we applied for HUBZone  certification using bogus firms, fictitious employees, fabricated  explanations, and counterfeit documents to determine whether SBA would  certify firms based on fraudulent information. We used publicly available  guidance provided by SBA to create four applications. We did the minimal  work required to establish the bogus small business firms represented by  our applications, such as obtaining a Data Universal Numbering System  (DUNS) number from Dun & Bradstreet and registering with the Central  Contractor Registration database. We then applied for HUBZone  certification with our four firms using SBA’s online HUBZone application  system. Importantly, the principal office addresses we provided to SBA,  although technically located in HUBZones, were locations that would  appear suspicious if investigated by SBA. When necessary (e.g., at the  request of SBA application reviewers), we supplemented our applications  with fabricated explanations and counterfeit supporting documentation  created with publicly available computer software and hardware and other  material.
To identify examples of firms that participate in the HUBZone program  even though they do not meet eligibility requirements, we first obtained  and analyzed a listing of HUBZone firms from the SBA’s Certification  Tracking System as of January 2008 and federal procurement data from  the Federal Procurement Data System–Next Generation (FPDS-NG) for  fiscal years 2006 and 2007. We then performed various steps, including  corresponding with SBA officials and testing the data elements used for  our work electronically, to assess the reliability of the data. We concluded  that data were sufficiently reliable for the purposes of our investigation.  To develop our case studies, we limited our investigation to certified  HUBZone firms with a principal office located in the Washington, D.C.,  metropolitan area and for which federal agencies reported obligations on  HUBZone preference contracts—HUBZone sole source, HUBZone set- aside, and HUBZone price preference—totaling more than $450,000 for  fiscal years 2006 and 2007. We selected 16 for further investigation based  on indications that they either failed to operate a principal office in a  HUBZone or ensure that at least 35 percent of employees resided in a  HUBZone, or both. We also investigated one firm referred through GAO’s  FraudNet Hotline.
For the selected 17 firms, we then used investigative methods, such as  interviewing firm managers and reviewing firm payroll documents, to  gather information about the firms and to determine whether the firms  met HUBZone requirements. We also reviewed information about each  firm in the Online Representations and Certifications Application system  (ORCA). During our investigation, we also identified a couple of  addresses for virtual office suites in the Washington, D.C., metropolitan  area where several different HUBZone firms claimed to have their  principal office. We investigated two of these virtual office suites to  determine whether HUBZone firms at these locations met program  eligibility requirements. For the selected virtual office suites, we obtained  and reviewed the lease agreements between the HUBZone firms and the  virtual office suite management and verified any of the HUBZone firms’  other business addresses.
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