The Metropolitan Transportation Authority (MTA) set annual goals for minority- and women-owned business enterprise (MWBE) contracts at around 20 percent, lower than the target set in statute and did not give rationale for the lower target, according to an audit released today by State Comptroller Thomas P. DiNapoli. 

“New York’s MWBE program is vitally important to help level the playing field and give qualified companies a chance to do business with the state,” DiNapoli said. “The MTA needs to do a better job living up to its obligations to give minority and women-owned businesses a fair shake.” 

State law requires state agencies and public authorities to promote the participation of MWBEs in their contracts. The agencies and authorities are supposed to establish annual goals for MWBE participation in their contracts, make a good-faith effort to achieve those goals, and report quarterly on their MWBE participation to the Department of Economic Development (DED). 

In 2011, DiNapoli issued a report on MWBE reporting at 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 overstated the extent of MWBE participation in its procurements. In the report released today, auditors found continued need for improvement.

The MTA reported 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. The authority spent $158.6 million (14.4 percent), $260.7 million (21.7 percent), and $283.4 million (23.6 percent) on MWBE contracts for the same periods, respectively. Auditors also found the authority’s annual goals at times failed to include information from all of its divisions. 

DiNapoli’s auditors reviewed 128 payments to prime contractors totaling $42.7 million and found there was no documentation to support MWBE participation for 30 payments, totaling $13.9 million. MTA procedures require it to obtain verification directly from subcontractors that they have been paid, but the authority was not able to produce any evidence that it undertook such verification for the reported state participation. 

In addition, for 37 payments (totaling about $21.5 million), the documentation did not match the reported payments. Specifically, 11 payments were under reported by $5.9 million, and 26 were over-reported by $14.2 million. In total, more than 50 percent of the sampled payments were either unsupported or inaccurately reported. 

To verify MWBE payments, auditors sent confirmation letters to 102 MTA prime contractors and subcontractors and received responses from 53, which corresponded with 142 payments totaling $38.7 million. Only 66 of the payments, totaling $13.9 million, matched the reported amounts. 

In one response, the subcontractor stated that it received $2.8 million, but kept only $140,244 as commission and forwarded the rest to the manufacturer that provided the goods. This resulted in overstating the reported MWBE amount by $2.66 million. 

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.

In addition, auditors found that the MTA did not follow its own procedures requiring site visits and inspections to ensure that MWBE subcontractors are actually performing the work they were supposed to be doing. Auditors examined the on-site investigation file for nine contracts. Seven of them had a total of 105 subcontractors yet the MTA conducted its investigations when only 11 of these subcontractors were on site. 

For two other contracts, MTA made on-site visits when two subcontractors were present, but there was no record of how many subcontractors were working on these contracts. This raises concerns about whether the authority is ensuring the work committed to MWBEs is being done by those subcontractors, and increases the potential for fraud. 

DiNapoli recommended the MTA:

• Document its reasons for setting an annual goal for MWBE participation that is lower than the 28.92 percent statewide goal, as required by regulation;
• Set appropriate annual goals for MWBE participation in MTA contracts by individual industry, and, if applicable, explain why goals are lower than the industry-specific targets stated in the law;
• Include all constituent agencies in the annual goal plan with proper adjustment for amounts that are not available for the MWBE program;
• Ensure payments are going to MWBEs that have performed work on MTA contracts and amounts reported to DED represent amounts actually paid to certified MWBE contractors/subcontractors; and
• Periodically visit projects to ensure there is sufficient documentation to support reported payments.

MTA officials disputed the audit’s findings, saying they have established appropriate goals and complied with requirements to report efforts to meet those goals. See the report MTA: Contract Participation of Minority- and Women-Owned Business Enterprises, or go to: http://www.osc.state.ny.us/audits/allaudits/093015/14s6.pdf