Purpose

To determine whether the New York State Thruway Authority is monitoring its contractors to ensure they are actively working to reach participation goals for minority- and women-owned business enterprise (MWBE) and disadvantaged business enterprise (DBE) programs, is accurately reporting MWBE and DBE participation in its contracts, and has controls in place to detect or prevent MWBE and DBE fraud. The audit covers the period January 2013 through December 2014.

Background

The New York State Thruway Authority (Authority) is responsible for overseeing the 570-mile highway system and 524-mile canal system in the State. For contracts involving State money, the Authority must comply with New York State Executive Law (Law), set MWBE goals, monitor its contractors, and report to the Department of Economic Development (DED) how much was paid to all contractors and how much was paid to MWBEs, so that its MWBE utilization rate can be calculated. For contracts involving federal money, including the current New NY Bridge project (the Tappan Zee Bridge replacement), the Authority must comply with federal regulations that require it to set DBE goals, monitor its contractors, and report to the New York State Department of Transportation (NYSDOT) how much was paid to all contractors and how much was paid to DBEs so that its DBE utilization rate can be calculated. From January 2013 through December 2014, the Authority reported to DED a total of $137.1 million in MWBE payments out of $324 million in eligible contract expenses, for an overall MWBE utilization rate of 42 percent. The Authority also reported to NYSDOT a total of $73.5 million in DBE payments out of $1.2 billion in eligible contract expenses, for a federal DBE utilization rate of 6 percent.

Key Findings

• The Authority has not accurately reported its MWBE utilization to DED, primarily because it has adopted practices that significantly skew its figures and result in over-reporting. For example, the Authority consistently reports only a portion of its eligible contract expenses to DED, thereby overstating its MWBE utilization rate. Further, the Authority did not make adjustments for payments to MWBE prime contractors who, in turn, paid other MWBE contractors as subcontractors, resulting in a double-counting of payments.
• We estimate that the actual MWBE utilization rate that the Authority achieved over the twoyear period was, at best, about 18 percent, excluding its work on the New NY Bridge project, which is not subject to MWBE requirements. If eligible payments from that project were to be included, the utilization rate would further decline to below 9 percent.
• For fiscal years 2011-12 through 2014-15, the Authority set its overall annual MWBE goals at 20 percent, without explaining, as required by DED regulations, why it was not able to attain the Statewide goal of 28.92 percent specified in the Law. For fiscal year 2015-16, the Authority increased its overall annual MWBE goal to 30 percent, though it still has not explained how it plans to change its practices to meet these higher goals.
• The Authority did set its federal DBE goal for the New NY Bridge in line with the regional goal set by NYSDOT and has accurately reported its DBE utilization to NYSDOT.
• The Authority needs to better develop and implement strategies for detecting and preventing MWBE fraud on its contracts. The Authority has established some procedures that increase the likelihood of uncovering DBE fraud in the New NY Bridge project. However, it has yet to implement any controls for other projects, even though it recently increased its expectations
  for MWBE participation substantially across many areas, which would tend to increase the risk of such fraud on other contracts.

Key Recommendations

• Develop annual Authority MWBE goals based on factors such as history and potential contract opportunities.
• Work with DED to correct errors in past MWBE utilization reporting.
• Ensure that all MWBE utilization and all associated eligible contract expenses are reported to DED.
• Develop and implement strategies for detecting and preventing MWBE fraud schemes in Authority contracts.

Authority Response

In responding to our draft report, Authority officials detailed at length their efforts to encourage MWBE participation. However, their response generally avoided the core issue of inaccurate and often inflated MWBE utilization reporting. Further, the Authority’s response did not meaningfully address the report’s recommendations.

Other Related Audits/Reports of Interest

Dormitory Authority of the State of New York: Contract Participation of Minority- and Women- Owned Business Enterprises (2014-S-7)

Department of Corrections and Community Supervision: Selected M/WBE Purchases by Various Facilities (2013-S-30)