Los Angeles County supervisors voted Tuesday to step up efforts to root out fraud in a program meant to help small businesses, telling staff to finally make improvements that will more than earn the counties’ own auditors recommended for the first time three years ago.

The

program, called the

Preferred Program for Local Small Businesses

,

gives small local businesses an edge in their battle for provincial contracts. The Times reported last week that the initiative had been repeatedly targeted by fraudsters looking for easy access to taxpayer money.

The Office of County Investigations, which had opened 13 investigations into companies certified through the program, estimated that the county had spent at least $40 million on suppliers they believed were sometimes defrauding the government with the help of county employees. Five people were criminally prosecuted.

Following The Times’ reporting, the supervisors unanimously approved a motion on Tuesday that directly addresses this

S

the

Chief Executive Office and the

The Department of Economic Opportunity, which has overseen the program since mid-2022, will join a handful of other county departments in making recommendations on how to improve the program’s oversight, compliance and governance.

Program staff should also plan to conduct a random sample of certified businesses to gauge how many are legitimate small businesses. (The county certifies a business as a small business if it is a local, independent business with 100 or fewer employees.)

Supervisor Hilda Solis, who co-authored the motion with Supervisor Janice Hahn, said she wanted the county to crack down on bid rigging, split purchasing and other common procurement schemes.

Whether it’s internal employees or someone who works with our employees to understand how we can game the system, that’s money taxpayers are missing out on, Solis said in an interview. That, to me, is the starting point.

In 2020, county auditors sounded the alarm about repeated abuses of the programs and made a number of recommendations on how program leaders could deter fraud, including requiring companies to disclose conflicts of interest and penalizing companies that ignored program rules.

The report was submitted to the Internal Services Department and the Ministry of Consumer and Business Affairs, which oversaw the program at the time. Nothing happened.

I don’t think from that point on anyone really picked up on the report to provide a path forward, Solis said.

Regulators now say they want to see some progress. The motion directs the Department of Economic Opportunity to immediately implement the recommendations auditors first made in 2020.

The department does

He must report to the board within a month

are

progress.

“I hope that with these new measures, our departments will be better able to detect fraud and ensure that contracts go to the legitimate small businesses that need and deserve these contracts,” Hahn said in a statement.

Kelly LoBianco, the head of the Department of Economic Opportunity, had previously called the procurement fraud an outrageous violation of the public trust in a statement to The Times.

she

highlighted that the vast majority of contracts went to legitimate small businesses. She said the department is taking steps to safeguard the program, including internal audits and checking for conflicts of interest.

We know that no system is 100% immune from those determined to commit fraud, she said. LA County is committed to ensuring that contracts go to small businesses that have historically been left out of county contracts and compete honorably to earn them, and not to those who cheat or attempt to manipulate the system.