Audit Report on the Administration of the Emerging Business Enterprise Program by the Department of Small Business Services

The mission of the Department of Small Business Services (DSBS) is to make it easier for businesses in New York City to form, do business, and grow. As part of its mission, DSBS runs the Emerging Business Enterprise (EBE) program, which was enacted by the City Council and signed by the Mayor as Local Law 12 of 2006. The program is designed to promote opportunities for businesses owned by persons who are socially¹ and economically² disadvantaged.

This audit determined whether DSBS complied with key provisions of Local Law 12 of 2006 with regards to the EBE program.

Audit Findings and Conclusions

Of the six key provisions audited, DSBS substantially complied with only one—preparing and updating an EBE directory. For three other provisions—establishing and operating a program for the identification, recruitment, certification, and participation of EBEs; annually reporting the City’s EBE efforts to the Mayor and City Council; and collecting the necessary information to determine the availability and utilization of EBEs to revise the citywide participation goals accordingly—DSBS substantially did not comply. For the remaining two provisions—periodically reviewing City agencies’ compliance with EBE participation requirements and performing EBE-related audits—DSBS was unable to comply due to minimal participation in the program by vendors.

Although DSBS has established and is administering the EBE program, it does not appear to be operating as intended. Overall, DSBS provided minimal evidence of its efforts regarding the EBE program, specifically in identifying and recruiting businesses that qualify as EBEs. To date, there are only three certified EBEs with a total of only 22 applications submitted since the beginning of the program in 2007. As a result, DSBS cannot adequately assess the effectiveness of the EBE program and its lack of information is hindering its efforts in increasing the participation of EBEs in the City’s procurement process.

DSBS generally complied with only one of the four aspects (with regard to certification) of the key provision requiring it to establish and operate an EBE program. DSBS developed an EBE certification application which adheres to the requirements of the Local Law and requires the applicants to provide supporting documentation to evidence social and economic disadvantage. Furthermore, DSBS maintains an updated list of certified EBEs in its directory of certified companies posted on its website for use by agencies.

However, there was a lack of evidence that DSBS made any substantial efforts to increase the certification of EBEs. DSBS’s outreach efforts and promotional materials used for the EBE program generally speak primarily of the Minority- and Women-owned Business Enterprise (M/WBE) program, with only minimal mention, if any, of the EBE program. In addition, DSBS has not reported to the Mayor’s Office or to the City Council on its activities and efforts relating to the EBE program.

Audit Recommendations

To address the audit issues, we made five recommendations, including that DSBS should:

• Update its website and brochures to better promote the EBE program, ensuring that the information is readily available and prominently displayed.
• Maintain adequate documentation regarding its outreach efforts in promoting the EBE program.
• Submit the required reports to the Mayor and City Council detailing its efforts to promote the EBE program, the program’s accomplishments, if any, and provide strategies to improve the program resulting from the studies conducted on businesses and/or the feedback obtained from businesses.

Agency Response

DSBS officials generally agreed with four of the audit’s five recommendations, but did not address the recommendation that they adequately document their efforts to promote the EBE program. In addition, DSBS strongly disagreed with the audit’s finding that there was a lack of evidence that the agency effectively promoted the program. After carefully reviewing DSBS’s arguments in its response, we found them to be without merit.