An Audit Report on Selected Business Opportunity Programs at the Department of Transportation
Report Number 16-002
The Department of Transportation (Department) should improve compliance with key statutory requirements for all four of the selected business opportunity programs audited. Business opportunity programs are designed to help businesses owned by groups that have been historically disadvantaged compete for state-funded and federally funded contracts and other purchases.
Auditors identified areas in which the Department should strengthen its processes and compliance with requirements for contract monitoring, program oversight, and reporting for the Disadvantaged Business Enterprise Program and the Small Business Enterprise Program. The Department also should improve its processes related to tracking contracts that are qualified for those two programs and reporting complete and accurate results.
While the Department voluntarily complied with certain elements of the State's Historically Underutilized Business (HUB) Program, it minimally complied overall with the HUB rules that it adopted. While the Department adopted HUB rules, participated in HUB forums, and submitted required reports, it should improve compliance with establishing agency-specific HUB goals, adequately monitoring contractor compliance, and obtaining all required documentation for the HUB Program.
The Department substantially complied, overall, with requirements for the State Use Program. However, it should improve exception reporting for the State Use Program to the Office of the Comptroller of Public Accounts (Comptroller's Office), as required.
Disadvantaged Business Enterprise Program
The Department's Office of Civil Rights is responsible for administering the federal Disadvantaged Business Enterprise Program. The Office of Civil Rights should strengthen its processes for identifying and monitoring contracts that qualify for that program. The Office of Civil Rights should also work with the Department's districts and divisions to better identify those contracts. Auditors identified contracts that qualified for the program but were not included in the program; therefore, those contracts did not have statutorily required language or did not have assigned goals for hiring disadvantaged businesses. In addition, the Department should improve its monitoring of contractor compliance with monthly reporting requirements.
The Department also should improve its processes for reviewing applications to ensure that they are processed in a timely manner. In addition, the Department should ensure that it accurately updates its Disadvantaged Business Enterprise Program Directory, which is a tool that contractors can use to identify certified businesses.
Small Business Enterprise Program
The Department's Office of Civil Rights also is responsible for administering the Department-created Small Business Enterprise Program. During fiscal year 2014, the Office of Civil Rights suspended its monitoring, data collection, and reporting for the Small Business Enterprise Program. According to the Office of Civil Rights, it took that action to implement changes to the program. However, it could not provide any documentation to support how that decision was made or whether appropriate management approved that decision.
The Office of Civil Rights should strengthen its processes for identifying contracts that qualify for the program and work with the Department districts and divisions to better identify those contracts. In addition, the Department should establish an overall goal for the program and require the Office of Civil Rights to report on the program to the Department's executive management. The Department also should strengthen its certification process for the program and accurately update its Small Business Enterprise Program Directory.
The Department voluntarily adopted the State's HUB rules and has incorporated program requirements into its rules in the Texas Administrative Code, strategic plan, and Purchasing Manual. While the Department complied with certain elements of its HUB Program, overall, it minimally complied with the HUB rules that it adopted in fiscal year 2014. For fiscal year 2014, the Department reported that it made $446.4 million in total expenditures through HUB contracts, which is approximately 7.2 percent of the Department's total contract expenditures. Auditors did not independently verify those amounts.
The Department participated in HUB forum sponsorship, submitted quarterly and semi-annual reports to the Comptroller's Office, and included required provisions in contracts. However, the Department should strengthen its processes for identifying and monitoring all applicable HUB contracts. In addition, the Department should work with its districts and divisions to ensure that it obtains all required monthly progress assessment reports. As a result of identified weaknesses in the Department's HUB Program, the HUB numbers the Department reported to the Comptroller's Office for fiscal year 2014 HUB activity were incomplete and inaccurate.
State Use Program
The Department had sufficient controls over purchasing to prevent conflicts of interests and ensure adequate segregation of duties for purchases under the State Use Program. In addition, the Department substantially complied with requirements to give priority to procuring items through the State Use Program. However, the Department should improve exception reporting for purchasing through the State Use Program as required.
Information Technology Controls
The Department should strengthen its access controls over the five key information systems used to store data for the four programs audited.
Auditors communicated other less significant issues related to certification, reporting, and application controls separately in writing to the Department. In addition, to minimize the risks associated with public disclosure, auditors communicated additional details about information technology findings separately to the Department.
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