Audit Report on The Monitoring of The Department of Housing Preservation and Development of Subcontracts Covered By Local Law 129

Local Law 129 established the City’s Minority- and Women-owned Business Enterprise (M/WBE) Program. This law, enacted in 2005, 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. Local Law 129 was intended to address the disparities revealed by the study. It 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.

The agencies overseeing City prime contracts that have M/WBE goals (set by the agency) are required to monitor the compliance of the prime contractors with their utilization plans. The New York City Department of Housing Preservation and Development (HPD) is the largest municipal developer of affordable housing in the nation. According to the Mayor’s Procurement Indicators report, HPD awarded a total of 18 contracts (valued at $238,686,154) for which HPD set M/WBE subcontractor participation goals during Fiscal Years 2007 through 2009.

The audit determined whether HPD is complying with Local Law 129 with regard to monitoring the use of M/WBEs by vendors that were awarded contracts in which M/WBE subcontractor participation goals have been established.

Audit Findings and Conclusions

HPD is not in compliance with key provisions of Local Law 129 with regard to its monitoring of the use of M/WBEs by vendors that were awarded contracts that have M/WBE subcontractor participation goals. HPD does not maintain a list of the contracts subject to the local law subcontracting requirements and is therefore unable to adequately track these contracts to determine whether the established subcontracting goals have been met by the prime contractors.

In addition, HPD does not monitor the use of M/WBEs by the prime contractors that were awarded contracts having M/WBE participation goals. HPD does not review the prime contractors’ records to verify payments made to subcontractors and also does not perform job-site inspections or contact the M/WBE subcontractors to verify their use. In addition, HPD does not ensure that certain key documents required by the law (e.g., list of subcontractors) are being submitted by the prime contractors. These noncompliance issues and deficiencies can be attributed to HPD management’s failure to establish and institute detailed procedures to ensure compliance with the law.

We also found that the City’s Financial Management System (FMS) data upon which the Mayor’s Office of Contract Services (MOCS) bases its public reporting and the use of M/WBEs by the City reflects anticipated amounts rather than actual amounts. Furthermore, the subcontracting data entered in FMS by HPD is not always accurate. The actual values of the subcontracts awarded to M/WBEs in contracts with established M/WBE goals are not publicly reported. In addition, HPD does not maintain accurate records of actual subcontractor utilization (including M/WBE subcontractors). As a result, an accurate measurement of HPD’s M/WBE subcontractor use is not known.

Audit Recommendations

Based on our findings, we make six recommendations, including that HPD should:

• Maintain a list of contracts subject to the Local Law 129 subcontracting requirements.

• Monitor the use of M/WBEs by prime contractors and verify payments made to them by, at a minimum, performing job-site inspections, contacting M/WBEs identified in the plan to confirm their participation, and auditing the contractors’ books and records.

• Ensure that key documents required by the law are submitted by the prime contractors, including a list of the subcontractors (both M/WBE and non-M/WBE).

• Establish controls to ensure that the information it enters in FMS pertaining to M/WBE subcontracting is accurate.