Audit Report On The Department Of Parks And Recreation’s Monitoring Of Minority And Women-Owned Business Enterprise Utilization On Its Contracts

Executive Summary

The objective of this audit was to determine whether the New York City (City) Department of Parks and Recreation (DPR) adequately monitors its capital project contracts to ensure that contractors are reporting the actual extent of their Minority- and Women-Owned Business Enterprise (M/WBE) utilization.  DPR plans, maintains, and cares for the City’s municipal parks system by ensuring that public parks, playgrounds, recreational centers, and pools located throughout the City are clean and safe for present and future generations.

Through the enactment of Local Law 1 of 2013 (LL1), the City’s M/WBE Program is administered through a partnership of the Department of Small Business Services (DSBS) and the Mayor’s Office of Contract Services (MOCS) working with various City agencies, including DPR, that procure goods and services.  The program was created to address the disparity between the proportion of City contract awards to businesses owned and operated by members of certain ethnic and gender groups and their representation within the New York City regional market by increasing the contracting opportunities for and participation of City-certified M/WBE firms.  Based on the scope of work required by the contract and the availability of certified M/WBEs, agencies determine whether a given procurement contract will be subject to an M/WBE participation goal (i.e., a percentage of the total contract dollars that must be for work to be performed by an M/WBE).  When bidding on a contract with an M/WBE participation goal, a prime contractor must submit a completed Schedule B – M/WBE Utilization Plan (Schedule B), which lays out its intended methods for meeting the contract’s M/WBE participation requirements.

In addition, LL1 requires that City agencies develop and submit an annual M/WBE Utilization Plan to DSBS.  LL1 also requires that agency M/WBE Officers monitor their agencies’ procurement activities to help ensure compliance with their utilization plans and to assess their agencies’ progress toward the participation goals established in those plans.

Audit Findings and Conclusion

This audit found weaknesses in DPR’s M/WBE Program controls that undermine its ability to ensure that contractors are adequately being monitored and that, as a result, they are accurately reporting their M/WBE utilization.  Although we found that DPR has an M/WBE Unit responsible for monitoring compliance with LL1, set the annual agency M/WBE participation goals as required, and performed the M/WBE initiatives described in its Fiscal Year 2016 and 2017 Agency M/WBE Utilization Plans, we also found weaknesses, particularly in DPR’s verification of contactor-provided information that need to be addressed.  Specifically, the audit found that DPR does not conduct formal reviews of the prime contractors’ books and records as the contracts progress to obtain greater assurance that M/WBE subcontractors actually worked on the contracts.  As a result, DPR has insufficient evidence that the M/WBE Unit confirmed the level of participation of the M/WBE subcontractors reported by prime contractors on the sampled contracts.

The review of the seven sampled DPR contracts revealed that a DPR prime contractor paid an M/WBE subcontractor $249,631 for services in a trade for which the subcontractor had no record of prior experience with the agency and for which the subcontractor appeared to have used a few of the prime contractor’s workers.  DPR credited another prime contractor for $25,874 paid to three M/WBE subcontractors although DPR had no supporting documents such as payroll records and sign-in sheets to indicate that the three M/WBEs ever worked on the contract in question.  For another $17,765 (8 percent) of the $234,307 reportedly paid to four M/WBE subcontractors, the cancelled checks were not on file at DPR to show these payments were made.

In addition, our reviews of the payroll reports indicated that 10 workers associated with 1 M/WBE prime contractor and 3 M/WBE subcontractors were paid for services they reportedly performed on a DPR contract on dates for which the corresponding timesheets either did not exist or did not reflect the 10 workers’ presence at the DPR job site.  Furthermore, DPR has yet to provide us with 99 sign-in sheets associated with 50 payroll reports; therefore, we are unable to reasonably ascertain whether the persons named in those payroll reports worked on the days claimed.

Regarding its reporting of the agency’s utilization of M/WBEs, DPR did not perform the required reviews of the City’s Payee Information Portal (PIP) to ensure that its prime contractors were accurately reporting their payments to M/WBE subcontractors and did not verify that contracts subject to M/WBE participation goals were consistently recorded in the designated fields to help ensure the accuracy of City reports regarding the M/WBE participation percentage and dollar amounts awarded to M/WBEs.  The audit also found that DPR has not developed comprehensive procedures governing its administration of the M/WBE Program and does not track or maintain a central list of all contracts and subcontracts covered by LL1.

Audit Recommendations

Based on our findings, we make 10 recommendations, including the following:

• DPR should ensure that prime contractors submit the required supporting documents with their payment requests, such as copies of the sign-in sheets and payroll reports for the prime contractors and subcontractors, and ensure that those documents are maintained in the Construction Division Unit’s contract files.
• DPR should (a) assign specific responsibility to designated staff members to review and compare the sign-in sheets and payroll reports that its prime contractors submit to verify that all reported payments are corroborated by the related sign-in sheets; and (b) ensure that copies of all such documents are maintained in the contract file.
• The M/WBE Unit should ensure the timely request of cancelled checks from prime contractors and that copies of those checks are maintained in the M/WBE subcontractors’ files.
• DPR should establish procedures to confirm that subcontractors approved on a project are the ones performing the work.
• DPR should ensure that all required entries to the City’s Financial Management System’s (FMS’) Contract Goal Header (CTGH) tables are completed and on a timely basis.
• DPR should ensure that periodic reviews are done of FMS to verify that prime contractors are documenting all payments made to subcontractors in PIP.
• DPR should develop its own written policy and procedures that are tailored to DPR’s unique operational structure and contracting activities to foster compliance with LL1, the M/WBE Guidelines, and any other applicable Citywide guidance.

Agency Response

In its response, DPR agreed with the audit’s 10 recommendations, although it believes that 2 (#5 and #9) pertained to procedures already in place.  DPR disagreed with the audit’s findings regarding the performance of formal reviews of prime contractors’ books and records and the need for DPR to maintain a central list of all of its contracts involving M/WBEs.