DRAFT Executive Summary Finance Department Response This audit report identified a number of issues with which we concur, where the City can make improvements to better manage and monitor MWBE contractors and subcontractors to meet the City?s MWBE goals. However, the audit only looked at MWBE activity during the period from July 1, 2013 to June 30,2015 (FY 2013-14 and FY 2014-15), which is now two to four years old and overlapped two different administrations. Further, since the audit was designed as a narrowly focused compliance audit, it does not provide the context of a comprehensive performance audit. For that reason, the audit does not report that the City substantially exceeded the annual aggregate MWBE goals for public works for that time period. The City?s primary public policy objective for is to ensure that MWBE companies obtain an equitable share of the City?s business. Many of the issUes stated throughout the audit are of the City having to work with outdated MWBE goals based upon ordinances from 1992 through 1994. Clearly there have been many changes to the Rochester marketplace over the last twenty? -five years. The state recognizes the changing marketplace by periodically updating its MWBE goals, policies and procedures. The City should Consider updating its goals, policies and corresponding administrative procedures. The audit findings fall into six categories. Our response and proposed action steps are summarized below. 1. Failure to Meet MWBE Ethnic Sub Category Goals Department Comments . Ordinance 89-17 has been used as the basis for the City?s Public Works MWBE goals since the expiration of Ordinance 92?326 and associated ordinances. TheCity has continued to use the specific ethnic goals for city funded projects set by the 1992 and related ordinances even though the types and numbers of MWBE companies have significantly changed over time. . For example, the total number of companies in the City?s first MWBE Directory in 1992 was 51. The 2016 Directory listed 396 companies. The greatest change has been in the number of WBE companies. The 1992 Directory did not list any WBE companies. In 2016, there were 260 and 136 . In addition to the changing dynamics of companies entering the marketplace, the 1992 ordinance set minority sub-group goals by ethnic categories that can no longer be supported by available data. Since 2015, New York State has stopped providing ethnicity data for certified minorities. Therefore, the City has to shift aWay from ethnicity based minority sub-group goals. The state goals now break MWBE goals into simply and categories, which is the recommended approach for the City. . During and since the time period of the audit, the City has followed administrative procedures for City MWBE goals consistent with the procedures set by those ordinances, while making adjustments to reflect current market conditions and available information about MWBE contractors. State and Federal MWDBE goals apply when DRAFT FINANCE EXECUTIVE SUMMARY TO MWBE AUDIT Page 1 of 4 funded by those sources. State and Federal goals can be enforced under state and federal rules. . PSA goals and procedures are set by Ordinance 2012-318. Specific PSA ethnic goals for are those set by the 1992 era ordinances. funded by State or Federal grants are subject to the MWDBE goals set by the funding agency. Proposed Action The City?s MWBE policy goals for public works and should be updated to reflect current market and data considerations. Our recommendation is to have the City mirror the state?s MWBE goals and administrative procedures 2. MWBE and Prime Contractor Compliance Issues Department Comments . The department concurs that examples of the types of issues identified in the audit such as a ?pass-through?, un-allowed purchase of materials, use of non-minority third-tier subcontractors and inability to verify valid claimed expenses and other supporting documentation deficiencies have occurred and may occur because the City currently does not have a full 100% compliance process. A . The MWBE Officer found out about the public works subcontractor issues as part of the contract review-process, and removed one subcontractor from the approved contractor?s list for multiple violations. The department believes that these issues are rare, and, when found, the MWBE Officer addresses the issue. Because the audit is not comprehensive it does not provide the contextual data to show what percentage of total contracts and MWBE contractors actually have these problems. Proposed Action The City could develop a 100% compliance review process, which would require additional resources. A cost effective alternative would be to require the prime and subcontractors to submit a certification with each application for payment showing what the MWBE subcontractor was paid for. This process would mirror the State D.O.T. payment tracking process and could be absorbed by existing staff. 3. Public Works Projects Shortfalls Department Comments . The audit was based on a strict comparison of the sub-group goals as stated in the 1992 ordinance to amounts paid on a contract?by-contract basis. However, the ordinance clearly identified a waiver process for individual projects and set annual aggregate goals, to take into account the fact that there would be individual variations on a project-by- project basis. Achievement of aggregate annual goals is based on the sum of various goals achieved in the individual projects. Because the audit is not comprehensive it DRAFT FINANCE EXECUTIVE SUMMARY TO MWBE AUDIT v.7-20-17 Page 2 of 4 does not report on the fact that annual aggregate goals were met and exceeded during the time period of the audit. . The sub-group goals in the audit sample were not met because the MWBE Officer had to grant sub-group waivers in order to address the lack of availability of sub-groups for individual projects. However, the comprehensive department response provides detailed tables which show that the overall aggregate annual MWBE goals (is. 9.0% for street projects and 17.5% for buildings and general based on project type) were exceeded. . The audit demonstrates the challenges the City has faced in meeting the 1992 ethnic category sub?group goals. The City?s approach has been to permit shifts between ethnic goals to achieve the overall MWBE project goals. Going forward, the City will not able to differentiate between minority Sub-groups since that data is no longer available from the state. . Public Works MWBE goal summary reports are based on the value of MWBE subcontract awards as a percentage of the prime contract award. This is standard practice, since it provides information that can be consistently reported on a timely basis. The audit?s recommendation to report achievement of goals based upon actual expenditures should be done in addition to, not to replace existing reports. The difficulty with tracking achievement of goals only by actual expenditures is that reporting on actual expenditures cannot be done until a project is complete, which for large projects takes several years. Since at any point in time multiple projects are at various stages of completion, it is not possible to tell at that slice of time whether or not annual MWBE goals have been met. Proposed Actions 0 The City?s MWBE policy goals for public works should be updated to reflect current market and data considerations 0 Track accomplishment of goals in two ways: a) based upon initial awards of contracts and MWBE subcontracts (current method); b) based upon actual payment data for each project over time as recommended by OPI 4. PSA Project Issues Department Comments . The audit findings relative to are airesult of the fact that administration of has been decentralized and is the responsibility of individual departments as established by Ordinance 2012-318. Therefore, tracking, monitoring and reporting utilization of and payments to is inconsistent for The MWBE Officer provides advice and information to departments when requested, but is not in a decision making or approval capacity. DRAFT FINANCE EXECUTIVE SUMMARY TO MWBE AUDIT Page 3 of 4 . Although the 1992 and related ordinances specified that MWBE goals were to be met by contractors within the Rochester MSA, as noted above, market conditions have changed over the last twenty-five years to the extent that the City has solicited from outside the MSA for certain types of PSA contracts in order to meet the objective of increasing MWBE participation in city contracts. The state permits any state certified MWBE to be counted towards meeting state goals for state funded projects and PSA contracts. Proposed Actions: 0 The City?s MWBE policy goals for should be updated to reflect current market and data considerations 0 Administrative procedures providing for centralized tracking and reporting should be developed 5. State Contracts Department Comments . Departments did not start to systematically seek assistance from the MWBE Officer for state grant contracts until mid-2014. This was precipitated by state agencies starting to enforce the state MWBE requirements. By that time, a number of the state contracts identified as deficient in the audit were already well under way or completed. The first actions of the MWBE Officer were to request waivers of MWBE requirements from state agencies for completed or nearly completed contracts, which the state approved. . Prior to 2014, departments provided MWBE reporting directly to state agencies. Once state agencies developed a contact with the MWBE Officer, they have required her to approve MWBE plans for the state grants involved, including the initial approved plan and final reporting at the conclusion of the project/grant. Proposed Action: Administrative procedures to ensure the MWBE Officer reviews and approves state and federal grants with MWBE requirements should be developed. 6. MWBE Data Tracking Department Comments . MUNIS is not intended or programed to be used as a central storage repository for MWBE subcontractor information, or to track payments to subcontractors. Proposed Action: Purchase currently available software that is being used by other municipalities to track MWBE subcontractor utilization and payments and related software for ensuring compliance with MWBE and workforce utilization goals. DRAFT FINANCE EXECUTIVE SUMMARY TO MWBE AUDIT Page 4 of 4