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NEWS from the Office of the New York State Comptroller
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DiNapoli: Dormitory Authority Overstated MWBE Contract Participation

July 8, 2015

The state Dormitory Authority (DASNY) for the past four years overstated the amount of business it did with minority- and women-owned business contractors (MWBE) and could not show how it determined the authority’s overall MWBE participation goals or industry-specific goals, according to a report released today by State Comptroller Thomas P. DiNapoli.

“Ensuring MWBE opportunities with the state isn’t about being politically correct, it’s smart business. It’s about creating a more diverse, vibrant, and ultimately, more successful New York,” DiNapoli said. “My auditors found DASNY officials have not properly set annual participation goals for minority- and women-owned businesses and need to improve the accuracy of reporting program results.”

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

The law sets the state’s MWBE participation target at 28.92 percent. DASNY set an annual goal in each of the four fiscal years 2011-12 through 2014-15, ranging from 20 percent to 26 percent. While authorities may submit MWBE plans with participation goals that are less than the statewide goal; they must also include explanations as to why. DASNY did not do so.

DASNY officials told DiNapoli’s auditors that the goal of 28.92 percent participation was not achievable, due to certain unique circumstances faced by the authority. However, they provided no formal analysis to support that claim and could not demonstrate how they determined the authority’s overall MWBE participation goals.

According to DASNY:

  • For the fiscal year ended March 31, 2012, it paid MWBEs $200.3 million out of $864.9 million in total contract payments, for a MWBE participation rate of 23.2 percent. 
  • For the fiscal year ended March 31, 2013, it paid MWBEs $181.8 million out of $839.3 million in total contract payments, for a participation rate of 21.7 percent; and
  • For the nine months ended Dec. 31, 2013, it paid $166.2 million to MWBEs out of $591.4 million, for a participation rate of 28.1 percent.

DiNapoli’s auditors, however, determined that DASNY overstated these numbers. Auditors found that a sample of payments to prime contractors totaling $37.8 million was overstated by $9.2 million (24 percent), and a sample of payments to subcontractors totaling $25.9 million was overstated by $4 million (15 percent).

The law allows payments from MWBE prime contractors to MWBE subcontractors to be counted towards MWBE participation goals. However, in preparing reports to DED, DASNY did not make adjustments for such payments. 

For example, one prime contractor was paid $3,877,310. Out of that, sub-contractors were paid $1,103,868. DASNY, however, reported a total of $4,981,178 being paid to MWBEs.

DASNY also reported MWBE participation for two payments made to non-MWBE prime contractors. The payments of $1.5 million were sent to the prime contractor’s address, with a notation that they were “in care of” the MWBE vendor. However, there was no evidence that the MWBE vendor actually had any role in the procurements.

DiNapoli’s recommendations to DASNY include:

  • Develop and implement formal processes to properly establish annual MWBE participation goals.
  • Develop ways to assure data entered into the authority’s automated MWBE participation reporting system is correct; and
  • Develop processes to correct data-entry errors, including providing revised amounts and participation rates to DED and other stakeholders.

DASNY officials generally disagreed with the auditors’ observations and conclusions. However, officials also indicated the report provided useful observations about data management and they will formalize the authority’s process to establish annual MWBE participation goals.

See the report Contract Participation of Minority- and Women-Owned Business Enterprises, or go to: http://osc.state.ny.us/audits/allaudits/093015/14s7.pdf