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

Management Audit

EXECUTIVE SUMMARY

The objective of this audit was to determine whether the Department of Small Business Services (DSBS) implemented the recommendations made in a prior audit report, Audit Report on the Administration of the Emerging Business Enterprise Program by the Department of Small Business Services (Audit # MD13-077A), issued in June 2013.

DSBS’s mission is to assist businesses in New York City to form, conduct business, and grow.  As part of its mission, DSBS runs the Emerging Business Enterprise (EBE) program, which was enacted by the City Council through Local Law (LL) 12 of 2006 and amended in 2013 by LL1¹.   The EBE program is designed to promote opportunities for businesses owned by persons who are both socially and economically disadvantaged².   The EBE program is one of three business certification programs promoted by the External Affairs unit in DSBS’s Division of Economic and Financial Opportunity (DEFO).  The other two programs are the Minority and Women-owned Business Enterprise (M/WBE) program and the Locally Based Enterprise (LBE) program³.    The External Affairs unit conducts outreach and recruitment activities for all three programs.  Currently, there are only three certified EBE businesses and no EBE contracts were awarded in Fiscal Year 2015.

The prior audit found that of six key provisions contained in LL12, DSBS substantially complied with only one: the preparation and updating of an EBE directory.  For three other provisions—the establishment and operation of a program for the identification, recruitment, certification, and participation of EBEs; annual reporting of the City’s EBE efforts to the Mayor and City Council; and collection of 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—the periodic review of City agencies’ compliance with EBE participation requirements and performance of EBE-related audits—DSBS was unable to comply due to minimal vendor participation in the program.

Audit Findings and Conclusion

This audit found that DSBS has made improvements in its administration of the EBE program since the previous audit.  Of the five recommendations made in the previous audit, we found that DSBS has fully implemented two and partially implemented three.  However, based on our follow-up review, we found that some improvements are still needed.  DSBS needs to maintain better documentation with regard to its outreach efforts.  In addition, there was inadequate evidence that DSBS formally obtained feedback and identified strategies to increase the number of certified EBEs.  In light of the very small number of certified EBEs, these two deficiencies are of particular concern.

Audit Recommendations

To address the weaknesses that still exist, we make the following three recommendations:

• DSBS should ensure that agendas for all hosted events are prepared and maintained in the events folder.
• DSBS should formally solicit feedback from EBE applicants and document the results of that feedback.
• DSBS should compile the results of the feedback from EBE applicants to identify the root causes for the seemingly low interest in EBE certification in order to identify strategies to increase EBE certification and discuss possible recommendations for modifications to the law with the Mayor’s Office.  This information should be included in the required reports submitted to the Mayor’s Office and City Council.

Agency Response

In its response, DSBS generally agreed with the audit’s findings and recommendations.

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