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NYS Comptroller

THOMAS P. DiNAPOLI

Taxpayers' Guide to State and Local Audits

Metropolitan Transportation Authority: Contract Participation of Minority- and Women-Owned Business Enterprises


Issued: September 10, 2015
Link to full audit report 2014-S-6
Link to 90-day response

Purpose
To determine if the Metropolitan Transportation Authority established annual participation goals for minority- and women-owned business enterprises; met these goals; and accurately reported its results to the Department of Economic Development.

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. Specifically, pursuant to the Law and regulations set forth by the Department of Economic Development (DED), State agencies and public authorities must establish annual goals for such participation, make a “good faith” effort to achieve their goals, and report quarterly on their level of participation to DED. The Metropolitan Transportation Authority (MTA) reported to DED total contract expenditures of $1.1 billion for State fiscal year 2011-12, $1.2 billion for fiscal year 2012-13, and $1.2 billion for fiscal year 2013-14. MTA reported MWBE utilization of $158.6 million (14.4 percent), $260.7 million (21.7 percent), and $283.4 million (23.6 percent) for the same periods, respectively. MTA’s Department of Diversity and Civil Rights (DDCR) is responsible for administering the MWBE program and the Disadvantaged Business Enterprise (DBE) program, a similar program for federally funded contracts.

In 2011, OSC issued a report (2010-S-9) on MWBE reporting by the MTA and found that the Authority had not shown its goals were reasonable; consistently fell short of reaching its goals; did not accurately report the results of its efforts; and, in fact, overstated the extent of MWBE participation in its procurements. In that report, OSC made six recommendations to improve MTA’s compliance with the Law. In their September 23, 2010 response, MTA officials agreed with our recommendations and stated that they had taken “the necessary steps toward addressing those programmatic weaknesses and implemented corrective measures to ensure improvements within our program.”

In April 2015, the MTA Office of the Inspector General (MTA OIG) released a report on compliance monitoring in the DBE program based on a review of a sample of federally funded contracts. That audit followed up on previous reviews that linked instances of fraudulent activity and violations with weaknesses in compliance monitoring. The MTA OIG found that DDCR oversight fell short of its own monitoring requirements and, by failing to fulfill two key tasks – payment verification and on-site investigations – made the MTA more vulnerable to fraud.

This audit covers State-funded (and not federally funded) contract payments. 

Key Findings

Despite MTA’s agreement with the recommendations in OSC’s 2011 report and their assurances that corrective action would be taken, many of the conditions identified in our initial audit still exist. In particular, weaknesses in controls over MWBE reporting continue and have resulted in inaccurately reported MWBE utilization numbers as well as an increased risk of fraud. The unreliability of MWBE utilization data results in a questionable baseline for managing a critical program and assessing the Agency’s performance. Until management takes decisive steps to address these weaknesses, neither the public nor MTA management can depend on this data as a reliable source of information. Key findings include:

  • DDCR uses self-reported information from prime contractors to support the MWBE subcontractor utilization numbers that it reports to DED. However, DDCR often could not support amounts reported to DED as MWBE participation. We reviewed 128 payments totaling $42.7 million and found there was no documentation to support MWBE participation for 30 payments, totaling $13.9 million. In addition, for 37 payments (totaling about $21.5 million), the documentation DDCR had did not match the payments it reported to DED. Specifically, 11 payments were underreported by a total $5.9 million, and 26 were over-reported by a total $14.2 million. All told, over 50 percent of the sampled payments were either unsupported or inaccurately reported.
  • To determine if reported payments were in fact received by MWBEs, we sent confirmation letters to 102 MTA prime and subcontractors for 274 payments. We received responses to 53 of the 102 letters, covering 142 payments totaling $38.7 million. Of those 142 payments, only 66 (46.5 percent), totaling $13.9 million, matched the amounts reported by DDCR. In one response to a reported payment of $2.8 million, the subcontractor stated that its share of the total $2.8 million transaction was only $140,244, representing a 5 percent commission. The remaining $2.66 million was paid to the company that provided the goods. That company is not an MWBE. In another instance regarding two reported payments totaling $147,654, the respondents stated they have not received any payments for the sampled contract from the MTA since 2007.

Key Recommendation

  • Ensure all reported payments made to MWBEs are documented and support that an MWBE performed the work and was paid for such work.

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: Contract Participation of Minority- and Women-Owned Business Enterprises (2014-S-7)


State Government Accountability Contact Information:
Audit Director: Carmen Maldonado
Phone: (212) 417-5200; Email: StateGovernmentAccountability@osc.state.ny.us
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236