YELLOW SHEET
Office of the State Auditor of Missouri
Claire McCaskill
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YELLOW SHEET Office of the State Auditor of Missouri |
October 27, 2003
Report No. 2003-109
Most state agencies did not meet participation goals of state's minority/women business enterprise program, and some program results are not accurately reflected
In fiscal year 2002, state agencies achieved participation of 9 percent minority business (MBE) and 3 percent women-owned business (WBE) on $1 billion in goods and services and capital improvement expenditures. These percentages fell short of the state's participation goals of 10 percent MBE and 5 percent WBE as set by a 1998 executive order. State officials have not formally assessed the MBE/WBE program or determined the program's effectiveness since its 1998 inception. This audit assessed some parts of the program and focused on the Office of Administration, the program's main administrator. (See page 7)
Minority participation results higher for agencies purchasing through OA
Participation results in 2002 were higher when agencies made expenditures through OA. The 1998 executive order authorized specific actions by OA's Purchasing and Design and Construction (D&C) divisions to meet these goals. (See page 7)
For goods and services purchases: OA reported exceeding the state's MBE goal with 12 percent participation, but fell short of the WBE goal with 3 percent.
For capital improvement contracts: OA reported exceeding state goals with 15 percent MBE and 8 percent WBE.
Some results overstated by OA
OA's reporting of its program results was not entirely accurate. Auditors found OA's D&C personnel overstated MBE/WBE accomplishments on three projects by about $2 million when they reported accomplishments from contract requirements, and not results achieved. On a $5.4 million project, the WBE subcontractor only completed $600,000 of its $1.2 million portion of the project, but program results reflected $1.2 million. Auditors also found D&C personnel counted minority, woman-owned subcontractors as both MBE and WBE. In addition, D&C's results included work completed by non-certified MBE/WBEs. In one case, if the state found the firms ineligible for certification, MBE results would lower by 39 percent and WBE results by 50 percent. (See page 8)
Opportunities are missed for minority participation
Auditors reviewed 86 D&C contracts and found OA did not require MBE/WBE participation on all eligible state contracts. For example, personnel said a $431,000 contract to build a prison did not require participation due to difficulty in finding minority firms near Springfield. Auditors, however, found MBE and WBE subcontractors in the area. In addition, OA has achieved little participation on contracts valued under $100,000 because OA guidance did not require it and promotion for participation on smaller contracts was limited. (See page 10)
Participation waivers granted to contractors were often subjective
Auditors found D&C personnel granted complete or partial participation waivers on 45 percent of the 29 capital improvement contracts subject to participation requirements. D&C guidance states contractors can be waived from participation requirements after demonstrating "good faith" effort to achieve participation. But prime contractors had not adequately supported "good faith" efforts and D&C had not documented spot checks of such efforts. D&C personnel said they are currently working to make the process of determining "good faith" effort more objective. (See page 12)
MBE/WBEs were not routinely notified of contract opportunities
MBE/WBEs were not always made aware of all contract opportunities and OA did not ensure coordination between personnel promoting the program and personnel handling the contracts. (See page 13)
OA did not know if all contractors met participation requirements
OA cannot track participation on contracts because all contractors were not required to provide progress reports showing participation results and amounts paid to MBE/WBE subcontractors. For example, progress reports were not required on design contracts. Construction contractors must submit monthly progress reports, but D&C did not use this information to analyze actual participation accomplishments. In addition, D&C contracts have not provided for monetary penalties for contractors not meeting participation requirements. (See page 14)
OA has not ensured legitimate business relations exist
D&C and Purchasing personnel have not actively monitored contractors to ensure MBE/WBEs actually performed subcontract work and "fronting" has not occurred. D&C personnel made occasional visits to confirm MBE/WBEs were working on construction sites, but these results were not documented. Site administrators were also not required to monitor for "fronting." (See page 15)
Agencies need help in obtaining participation
Some agency officials said they needed more tangible help to achieve higher participation levels. For example, centralized reporting of non-MBE/WBE expenditures could be used to determine future contract opportunities. (See page 16)