Purpose

To determine whether the Dormitory Authority of the State of New York properly established annual contract participation goals for minority- and women-owned business enterprises and accurately reported program results to the Department of Economic Development. The audit covered the period of April 1, 2011 through December 31, 2013.

Background

Article 15-A of the New York State Executive Law (Law) requires State agencies and public authorities to promote the participation of minority- and women-owned business enterprises (MWBEs) in their contracts. State agencies and public authorities are required to establish annual goals for such participation, make a “good faith” effort to achieve their goals, and report quarterly on their level of participation to the Department of Economic Development (DED), a division of the Empire State Development. DED is responsible for the certification of MWBEs. The Dormitory Authority of the State of New York (Authority), a public benefit corporation that finances and constructs buildings for public and not-for-profit entities, is among those entities required to comply with the Law.

Key Findings

• The Law set the State’s MWBE participation target at 28.92 percent, and the Authority set annual goals of 20 percent to 26 percent for the 2011-12 through 2014-15 fiscal years. However, the Authority did not explain why its MWBE participation goals were less than the goal established by the Law, as otherwise required per DED regulation.
• The Authority overstated its MWBE contract participation when reporting to DED. A judgmental sample of payments to prime contractors totaling $37.8 million was overstated by $9.2 million (24 percent), and a judgmental sample of payments to subcontractors totaling $25.9 million was overstated by $4 million (15 percent).
• In preparing reports to DED, the Authority did not make adjustments for payments to MWBE prime contractors who in turn paid other MWBE contractors as subcontractors.
• The Authority did not report payments for non-construction professional services, although it made payments to MWBEs in this industry segment.

Key Recommendations

• Develop and implement formal processes to properly establish annual MWBE participation goals. The formal processes should include, but not be limited to: documenting the methodology, including quantitative analysis, used to establish annual MWBE participation goals.
• Develop and implement formal mechanisms to quality assure data entered into the Authority’s automated MWBE participation reporting system.
• Develop and implement formal processes to correct data-entry errors, including providing revised amounts and participation rates to DED and other stakeholders.
• Report no more than the actual amount paid by the Authority when a MWBE prime contractor makes a related payment to a MWBE subcontractor.
• Contact DED to obtain clarification regarding the reporting of non-construction professional service payments for MWBE program participation purposes. Follow such guidance in preparing quarterly MWBE program reports.

Other Related Audits/Reports of Interest

Metropolitan Transportation Authority: Minority and Women’s Business Enterprise Reporting (2010-S-9)
Dormitory Authority of the State of New York: Mission Statement and Performance Measures (2013-S-13)