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More than $70 trillion in federal dollars are managed by registered asset-management firms in the United States, but less than 1 percent of those dollars are handled by minority- or women-owed (MWO) firms, according to a new report released Wednesday by the U.S. Government Accountability Office.

The report (pdf), exclusively provided to The Root, reviewed federal retirement plans; an endowment; and an insurance program overseen by eight federal entities, of which the latter had $388 billion in externally managed assets in 2015. In its report, the GAO made its assessment of MWO-firm access to all of them.

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Federal employees pay into federal plans from their salaries during their careers, and asset managers invest funds so that they build equity. Some of these entities include the Army and Air Force Exchange Service, the Federal Reserve System and the National Railway Retirement Investment Trust. Representatives from the GAO interviewed decision-makers from these entities to determine how well they were working to create opportunities for minority- and women-owned asset-management firms.

Verdict: not good at all.

In some instances, none of the plans used MWO firms. Others used vey few. At BlackRock, a publicly traded asset-management firm that oversees three federal plans, just 1.6 percent of its managers are African American, while 81.5 percent are white; 13.5 percent are Asian.

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One of the reasons minority- or women-owned businesses don’t get as much of the asset-management pie is that, unless an entity specifically asks for a minority- or women-owned firm, consultants tasked with job searches will not even consider them, according to the report. Another issue is that there is a bias against using MWO firms because it is assumed that they will not perform as well as white ones, even though there is no data backing up that assumption, the report found. The GAO cited industry studies that reveal there is no difference between the performance of an MWO and a non-MWO firm.

The lack of opportunities that minority-owned firms get to handle federally managed dollars should concern Congress and Americans in general, said Sen. Cory Booker (D-N.J.).

“Federal employees are paying into this, and federal employees reflect the wonderful diversity of our nation,” he said. “So when you have high-quality, strong-performing [asset] managers who don’t give [MWO firms] a shot to manage some of these funds, it flies in the face of our values as a nation of equal opportunities and inclusion.”

When Booker arrived in Washington in 2013, tackling asset-management diversity in contracting was one of the first issues he took on. A year later, he and Rep. Gregory Meeks (D-N.Y.) and Rep. Maxine Waters (D-Calif.) held a summit with pension-fund administrators to find out why there were so few MWO firms getting a shot to manage federal assets.

One issue is that the process of how to apply for contracts is not very clear or made readily available to prospective minority-owned firms. Firm size is another challenge. Institutional investors often require firms to have a minimum of threshold assets under management—usually $1 billion, at the very least; liability insurance; as well as lengthy track records that smaller firms usually do not have.

But the dearth of ethnic and gender diversity is not the only issue with having federal assets managed by a select few firms. A major concern for Meeks is the potential for a security breach of a firm managing a lion’s share of assets.

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“If you have a cyber breach of that firm, it would impact all of the federal employees,” Meeks said. “But if you broke it down so that you had many small firms, it would not have an effect over the broad scope of everyone, and it better diversifies what those risks may be.”

As bleak as the report’s findings were, there were some recommendations for improvement. Federal investment entities could create minority-centered competitions that are marketed to firms that historically have been excluded from federal bidding. Adjusting high thresholds for assets under management, liability insurance and years of management experience would ensure that smaller firms were eligible to apply.

The report emphasized that the leadership of pension funds and various government plans has to prioritize diversity, and the consultants hired to search for asset managers have to diversify their Rolodexes beyond their typical recruiting pools. Meeks stressed that adjusting these thresholds isn’t the same as lowering standards. To the contrary, it is about access to the bidding process that is proportionate to a firm, regardless of size.

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When asked what he and his colleagues would do to ensure that MWO firms get federal asset-management jobs in the future, Booker said that he would continue challenging fund administrators to accept the GAO’s recommendations on diversifying the firms that are handing their assets.

“If they have such little amounts of diversity or do not have a [diversity] program, that’s unacceptable,” Booker said. “The more we can shine a light on the problem and demonstrate there are constructive things they could be doing, the more quickly we’re going to see changes being made.”