A Compilation Of Audits Of The Minority And Women-Owned Business Enterprises Program

Audit Report In Brief

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Enacted in 2005, Local Law 129 (LL129) established the City’s Minority- and Women-owned Business Enterprise (M/WBE) Program.  This law responded to a study commissioned by the New York City Council, which found that there was a significant disparity in contracting opportunities afforded to certain M/WBE groups in the City’s procurement of goods and services.   To address the disparities revealed by the study, LL129 details certification, contract participation goals, technical assistance, and administrative procedures to promote the utilization of M/WBE firms for contract and subcontract opportunities valued at less than $1 million.  Subcontractor participation goals are set for certain groups in two industry classifications: Black Americans, Hispanic Americans, and Caucasian females for professional services and Black Americans, Asian Americans, and Hispanic Americans for construction services.

Findings and Conclusions

Audits of the M/WBE program by the City Comptroller’s Office found a common theme in the administration of the program:  The lack of compliance with key provisions of LL 129 concerning agency monitoring of M/WBE participation goals of vendors to ensure that subcontractor utilization goals are achieved.  The City Comptroller’s Office has completed four audits of the M/WBE program.  The objective of the initial audit was to determine whether Department of Small Business Services (DSBS) complied with the key provisions of Local Law 129 and §6-129 of the Administrative Code.  This included the monitoring by DSBS of City agencies’ M/WBE utilization and whether DSBS determined if agencies met their subcontractor utilization goals.  The other three audits were each of individual City agencies [the Department of Design and Construction (DDC), the Department of Housing Preservation and Development (HPD) and the Department of Parks and Recreation (Parks)] and their monitoring of subcontractor utilization goals covered under the M/WBE program.

Our central finding as to the lack of adequate and effective monitoring of compliance by both DSBS and the agencies we audited is troubling, given that the M/WBE program is still in its infancy.  A program of this importance, just recently launched, should be rigorously monitored from its inception to ensure it is being properly and effectively implemented as intended by LL 129, the City Charter and the City’s Administrative Code.  The failure to properly monitor implementation of the program jeopardizes the ultimate goal of the M/WBE program:  To increase M/WBE participation in the City’s procurement process in a manner consistent with local and State procurement law.  As concerning is the statistics reported by the Mayor’s Office of Contracts (MOCS) of the program.  We found them to be an unreliable means by which to effectively measure the success of the program as defined by LL 129.

Recommendations

As previously mentioned and clearly documented in all the audits conducted by the Comptroller’s Office, the lack of effective monitoring of the program at the agency and oversight level must be improved.  In that regard, DSBS in consultation with MOCS should formulate and institute uniform procedures in the effective monitoring of the program that are consistent with the provisions contained in LL 129 that each agency must follow.  This would include:

• Ensuring audits of prime contractors’ books and records are performed to verify the use of and payments made to subcontractor M/WBE firms by prime contractors;

• Collecting and reporting data on actual payments made to M/WBE subcontractors by prime contractors instead of planned goals;

• Ensuring agencies initiate enforcement actions against those prime contractors that do not comply with the M/WBE provision of their contracts;

• Requiring agencies to ensure that prime contractors submit complete and accurate subcontractor lists in a timely manner;

• Requiring agencies to conduct job-site inspections, and contact M/WBE subcontractors to confirm their participation in the project;

• Establishing controls to ensure that the information recorded in FMS pertaining to M/WBE anticipated subcontract amounts is accurate.