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California State Auditor Logo COMMITMENT • INTEGRITY • LEADERSHIP

Disabled Veteran Business Enterprise Program
The Departments of General Services and Veterans Affairs Have Failed to Maximize Participation and to Accurately Measure Program Success

Report Number: 2018-114


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California State Transportation Agency

January 25, 2019

Elaine M. Howle, California State Auditor
California State Auditor’s Office
621 Capitol Mall, Suite 1200
Sacramento, CA 95814

Dear Ms. Howle:

Attached please find responses from the Department of Transportation (Caltrans) and the Department of Motor Vehicles (DMV) to your draft audit report regarding the Disabled Veteran Business Enterprise Program (#2018-114) issued January 18, 2019. Thank you for allowing both departments and the California State Transportation Agency (CalSTA) the opportunity to respond. As the draft report was redacted to show only those portions relevant to Caltrans and DMV, respectively, their responses are limited to those portions corresponding to them individually.

As noted in each of their responses, Caltrans and DMV concur with the recommendation directed at each of them in the report and already have established timelines to implement corrective action. We appreciate your identification of opportunities for improvement in the departments.

If you need additional information regarding the departments’ responses, please do not hesitate to contact Michael Tritz, CalSTA Deputy Secretary for Audits and Performance Improvement, at (916) 324-7517.

Sincerely,

BRIAN C. ANNIS
Secretary

Attachments

cc: Laurie Berman, Director, Department of Transportation
William Davidson, Acting Director, Department of Motor Vehicles




California Department of Transportation

January 23, 2019

Mr. Brian C. Annis
Secretary
California State Transportation Agency
915 Capitol Mall, Suite 350B
Sacramento, CA 95814

Dear Secretary Annis:

Thank you for the opportunity to review and comment on a redacted copy of the California State Auditors’ (CSA) draft report entitled, “Disabled Veteran Business Enterprise Program…” (Report 2018-114). As portions of the draft report were redacted, the California Department of Transportation (Caltrans) limits its comments to the portions relevant only to Caltrans.

At the request of the Joint Legislative Audit Committee the CSA conducted an audit of the Disabled Veteran Business Enterprise ( DVBE) program, including following up on issues identified in CSA’s February 2014 report. Specifically, the Joint Legislative Audit Committee asked CSA, among other things, whether DVBE contracts go to a small number of DVBE certified contractors.

The CSA auditors concluded that Caltrans had fully addressed the recommendations from the 2014 report.

In the draft report the CSA auditors found that Caltrans overstated DVBE participation amounts in Caltrans’ data system for 1 of 5 contracts reviewed. The CSA auditors concluded that Caltrans could not fully support the DVBE participation data reported for fiscal year 2017-18. Caltrans had overstated some DVBE participation amounts and, as a result, DVBE participation levels could be significantly inflated and could lead users of this information to draw incorrect conclusions about Caltrans’ success in meeting the 3 percent goal for DVBE participation.

They also stated that Caltrans DVBE activity reports were not fully supported because the data system used to produce the activity report is incomplete. Caltrans told the CSA auditors that the data system is unable to quantify the amount of subcontracting for roughly $290 million in contracting activity which could result in underreporting DVBE participation.

Recommendation:

To ensure that DVBE participation data are reported accurately and consistently, Caltrans should implement or strengthen a review process to ensure that DVBE participation amounts entered into its data system are accurate. This review process should include verification, on a sample basis, of the amounts awarded to, and the certification status of, the DVBE contractor or subcontractor for high-value contracts that includes DVBE participation.

Caltrans Response:

By March 1, 2019, Division of Procurement and Contracts (DPAC) will add procedures to ensure that peer reviewers and managers more stringently review and verify data entered into the Contracts Administrative Tracking System (CATS). DPAC will also perform quarterly random samplings of high-dollar contracts to confirm DVBE certifications and verify that data was entered correctly in CATS. The quarterly samplings will be done in conjunction with the 810 Quarterly Report. The process will be similar to a compliance review, including a checklist and findings to be corrected.

Please note that DPAC is in the process of replacing CATS with a system (CATSII) more capable of capturing, tracking and reporting accurate data. We expect CATSII to be up and running within the next two years.

Caltrans appreciates the opportunity to provide a response to the relevant portions of the draft audit report. If you have any questions or require further information, please contact David Prizmich, Chief, Division of Procurement and Contracts, at (916) 227- 6100, or William E. Lewis, Assistant Director, Independent Office of Audits and Investigations, at (916) 323-7122.

Sincerely,

LAURIE BERMAN
Director

c: David Prizmich, Chief, Division of Procurement and Contracts, California Department of Transportation
William E. Lewis, Assistant Director, Independent Office of Audits and Investigations, California Department of Transportation




California Department of Motor Vehicles

January 25, 2019

Brian C. Annis, Secretary
California State Transportation Agency
915 Capitol Mall, Suite 350-B
Sacramento, CA 95814

Dear Secretary Annis:

The Department of Motor Vehicles (DMV) is providing a response to the recommendation contained in the California State Auditor (CSA) draft audit report “Disabled Veteran Business Enterprise Program” (Report 2018-114) issued on January 18, 2019.

At the request of the Legislature and approved by the Joint Legislative Audit Committee (JLAC), the CSA conducted a follow-up audit of Department of General Services and Veterans Affairs pertaining to the issues identified in a February 2014 audit related to the Disabled Veteran Business Enterprise(DVBE) Program. JLAC directed CSA to select two additional departments to identify current conditions related to the DVBE Program. CSA selected DMV as one of the two additional departments.

Below are the CSA Recommendation and DMV response (in bold):

Recommendation

To ensure the DVBE participation data are reported accurately and consistently, DMV should implement or strengthen a review process to ensure DVBE participation amounts entered into the department’s data systems or FI$Cal are accurate. This review process should include verification, on a sample basis, of the amounts awarded to, and the certification status of, the DVBE contractor or subcontractor for high-value contracts that include DVBE participation.

Response:

DMV concurs with the recommendation. The DMV takes the DVBE program very seriously and continues to be committed to exceeding the three-percent goal for state governmental agencies . Additional training was conducted to ensure staff are following proper procedures. Further, beginning February 2019, DMV is implementing a quarterly process to check Small Business/Disabled Veteran Business Enterprise amounts awarded and certification status for high - value contracts exceeding $100,000. In the interim, to assure program management that the error found during the audit is not a widespread problem, DMV’s Internal Audits Office randomly sampled 20 contracts of varying amounts awarded and found the DVBE calculations were correct on all 20 contracts.

Planned completion date: February 2019

We appreciate the opportunity to provide a response to the CSA recommendation. If you have questions or concerns, please contact Aida Singh, Acting Chief of Audits (916) 657-6480 or by email sent to Aida.Singh@dmv.ca.gov.

Sincerely,

WILLIAM DAVIDSON
Acting Director




California Department of Veterans Affairs

January 25, 2019

Elaine M. Howle
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, California 95814

Dear Ms. Howle:

Thank you for the opportunity to respond to your audit of the Disabled Veteran Business Enterprise program.

1

The mission of the California Department of Veterans Affairs (CalVet) is to serve and honor all California veterans by connecting them and their families with their earned benefits through education, advocacy and direct services. CalVet takes great pride in this mission and works tirelessly to ensure that our California veterans are aware of and connected with these benefits. CalVet employs many different methods to conduct outreach to veterans, both directly at events or through one-on-one contact, and indirectly through a well-developed community of stakeholders. In all of these outreach efforts, CalVet includes information regarding the state’s DVBE program.

CalVet’s outreach staff, Local Interagency Network Coordinators (LINCs), regularly interact with veterans and their families to provide information about their earned benefits. The Department’s California Transition Assistance Program (CalTAP) staff also present at transition events at all major military installations in the state (approximately 23), with the specific purpose of introducing service members to their community network of care and informing them of their state benefits. CalVet staff throughout the Department also take part in numerous community collaboratives, resource fairs, employment workshops, stand-downs, and veteran orientation workshops on college campuses. Staff also work with veterans to provide direct referrals for services either in-person, over the phone, or via email, for requests such as: claims assistance, housing, healthcare, employment, education, financial assistance, and requests for military records. In the next month, CalVet will distribute the 8th Edition of the California Veteran Resource Book. Annually, CalVet distributes more than 150,000 copies of the book to veterans and veteran stakeholders statewide. The Resource Book provides a detailed description of all of the earned benefits for which California veterans may be eligible and explains how to apply for those benefits.

Over the past several years, CalVet has also established a robust network of regional partnerships with county, city, community, and non-profit entities through its annual Leadership Summit. The Department will hold its 4th summit in spring 2019.

2

CalVet does not oppose the findings in the audit, noting that the State Auditor recognizes that CalVet is not sufficiently resourced to fully meet its statutory responsibilities. While this recommendation proposes to shift responsibilities to the Department of General Services (DGS), I feel it is critical that CalVet maintain a strong advocacy role in this program, should any change occur. Veterans seeking business opportunities in California may also need assistance connecting to their other state and federal benefits, many of which may directly impact their success in creating and growing their business. CalVet possesses the necessary cultural competency to connect veterans with their benefits, access communities of care through its robust stakeholder network, and respond to requests for assistance directly.

The Department acknowledges that the focus of this audit is directed at 2 full-time employees who were provided to the Department through an Interagency Agreement (agreement) with DGS. The responsibilities and job duties of these staff members were also prescribed through the agreement. CalVet and DGS have since terminated the agreement and CalVet is now utilizing those positions to support other program needs. More so, CalVet can now direct the duties of these staff members and prioritize efforts that CalVet believes more efficiently and effectively address the Department’s statutory requirements in the Military and Veterans Code. CalVet’s Deputy Secretary for Minority and Underrepresented Veterans serves as the state’s DVBE Advocate and is training staff and developing an outreach strategy that conforms to the Department’s statutory requirements for the program.

CalVet appreciates the efforts of the California State Auditor and its role as an oversight entity. It is our hope that your recommendations will improve the DVBE program and enhance the lives of veterans and their family members in California.

Sincerely,

VITO IMBASCIANI MD
Secretary




Comments

CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM CALVET

To provide clarity and perspective, we are commenting on CalVet’s response to the audit. The numbers below correspond to the numbers we have placed in the margin of CalVet’s response.

1

Although CalVet states that it employs many different methods to conduct outreach to veterans and includes information regarding the DVBE program, we found that it has not assessed the effectiveness of these outreach efforts as state law requires. As we describe in the report, we found the reports that CalVet developed regarding its outreach activities did not provide any meaningful analysis regarding the quality, efficiency, and effectiveness of such activities. Because of these shortcomings, we recommend in the report that, among other things, CalVet assess the effectiveness of its past outreach efforts in increasing the number of DVBE firms that become certified. It should then develop an outreach plan that includes outreach activities the assessment found to be effective in the past.

2

CalVet states that it wants to maintain a strong advocacy role in the DVBE program, implying that its efforts in the past have been sufficient. However, as we state in the report, CalVet has not fulfilled its responsibility to assist underachieving departments in meeting the 3 percent goal. Thus, we stand by our recommendation in the report to the Legislature that it transfer the responsibility for monitoring and assisting underachieving departments from CalVet to General Services. Nevertheless, if the Legislature were to choose to implement this recommendation, the resulting changes to state law would not preclude CalVet from taking an active role in the DVBE program. In fact, our recommendations in the report are intended to ensure that CalVet takes a more active and effective role in the program.




California Department of Corrections and Rehabilitation

January 25, 2019

Ms. Elaine M. Howle, State Auditor
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814

Dear Ms. Howle:

The California Department of Corrections and Rehabilitation (CDCR) submits this letter in response to the California State Auditor’s (CSA) Disabled Veteran Business Enterprise (DVBE) Program report.

CDCR takes seriously its responsibility to meet DVBE program requirements. Since CSA’s previous DVBE audit in 2014, CDCR has immensely improved its compliance with DVBE program requirements and is committed to continuously evaluating and improving compliance. Additionally, CDCR recently received multiple State Agency Recognition Awards for outstanding small business and DVBE advocacy and for contracting success with small businesses and DVBEs.

To address CSA’s recommendation, CDCR has convened a workgroup to ensure it accurately and consistently reports DVBE participation data. CDCR will implement measures to improve the accuracy of contract information captured in and reported by its system of record.

CDCR welcomes the insights provided by the auditors and would like to thank CSA for their work on this report. CDCR will address the specific recommendation in a corrective action plan within the timelines outlined in the report. If you have further questions, please contact me at (916) 323-6001.

Sincerely,

RALPH M. DIAZ
Secretary (A)




California Government Operations Agency

January 25, 2019

Elaine M. Howle, State Auditor
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814

Re: CALIFORNIA STATE AUDITOR’S REPORT NO. 2018-114

Pursuant to the above audit report, enclosed are the Department of General Services' comments pertaining to the results of the audit.

The Government Operations Agency would like to thank the state auditor for its comprehensive review. The results provide us with the opportunity to better serve our clients and protect the public.

Sincerely,

Marybel Batjer, Secretary
Government Operations Agency

Enc

Department of General Services

Date: January 25, 2019

To: Marybel Batjer, Secretary
Government Operations Agency
915 Capitol Mall, Suite 200
Sacramento, CA 95814

From: Daniel C. Kim, Director
Department of General Services

Subject: RESPONSE TO CALIFORNIA STATE AUDITOR’S REPORT NO . 2018-114

Thank you for the opportunity to respond to the California State Auditor’s (state auditor) Report No. 2018-114, Disabled Veteran Business Enterprise Program: The Department of General Services [Has] Failed to Maximize Participation and to Accurately Measure Program Success , which addresses recommendations to the Department of General Services (DGS) resulting from its audit. The following response addresses each of the recommendations.

OVERVIEW OF THE REPORT

DGS has reviewed the findings, conclusions and recommendations presented in Report No. 2018-114, and generally agrees with the state auditor’s recommendations.

DGS welcomes the opportunity to identify ways to strengthen Disabled Veteran Business Enterprises’ (DVBE) opportunities to secure contracts with the State of California. The State is proud of its track record of meeting and/or exceeding the three percent statutory requirement for the past nine years. DGS recognizes that as procurement needs evolve amongst state departments, DGS should continue to adapt its policies and practices to ensure DVBEs continue to have opportunities to compete for state contracts.

DGS is firmly committed to strengthening the Disabled Veteran Business Enterprise (DVBE) program and will strive to implement the recommendations.

RECOMMENDATIONS

A Small Percentage of Firms Have Benefited From the DVBE Program:

RECOMMENDATION # 1:

To increase the number of DVBE firms that awarding departments can contract with when required to use LPAs, General Services should develop and implement a plan to encourage DVBE firms to participate in LPAs.

DGS RESPONSE # 1:

1

DGS agrees with the recommendation. DGS already has a process for regularly encouraging DVBE firms to participate in Leveraged Procurement Agreement (LPA) contracts. Included in that process is the identification of what services or goods can be made available to DVBE firms in large scale contracts, such as those included in the LPA program. DGS will continue to encourage and explore opportunities for DVBE participation in mandatory LPA contracts.

RECOMMENDATION # 2:

To ensure that a greater number of DVBE firms benefit from the DVBE program, General Services should work with awarding departments to understand why only a few DVBE firms receive a large number of contract awards. Based on its findings, General Services should take the necessary steps to remedy this situation.

DGS RESPONSE # 2:

2

DGS generally agrees with the recommendation. DGS is aware that approximately 97% of the awarded contracts to the top 30 DVBE firms referenced in this audit report were reported by departments as procured in a competitive manner in compliance with Public Contract Code 10180 and 10301. In a competitive procurement environment, departments do not have the ability to determine a DVBE who meets the statutory conditions for responsiveness and responsibility is unable to be awarded a contract simply because that DVBE has already received a certain level of contracts with the State. DGS currently performs extensive outreach to DVBE firms on contracting opportunities with the State. DGS also provides continual guidance to state departments on ways to encourage additional DVBE participation on state contracts and will collaborate with departments on ideas for additional ways to enlist DVBE participation. DGS will continue to perform outreach and education for both the DVBE community and state departments.

Additionally, DGS recently launched the eProcurement Business Intelligence Strategies Section (eBISS) SCPRS dashboard. This new dashboard will provide DGS with an in-depth analysis of what goods and services state departments procure, as well as, provide DVBE firms with information on state spend. The dashboard will equip DGS to enhance education to DVBE firms about contract opportunities within the State.

RECOMMENDATION # 3:

To ensure that awarding departments can effectively identify DVBE firms that provide needed products and services, General Services should work with these departments to continue to narrow the codes available to those commonly used by awarding departments to more precisely identify what the State purchases to streamline search criteria in Cal eProcure. It should also ensure that by October 2019 departments identify their contracting needs and then post these needs prominently on their websites as a resource for DVBE firms. General Services should continue to provide outreach services to DVBE firms on how to create effective keywords and choose appropriate codes. Further, General Services should explore other options for making the Cal eProcure search engine more effective for awarding departments.

DGS RESPONSE # 3:

DGS generally agrees with the recommendation. DGS will continue its work with the Financial Information System for California (FI$Cal) to implement a succinct custom United Nations Standard Products and Services Code (UNSPSC) set, which accurately reflects what the State procures and encourages state departments to identify the codes they regularly use for purchases.

3

The State’s system for procurement is FI$Cal. Requiring departments to post information on their websites is duplicative of and would be administratively redundant to the State’s established system, since departments are already required to post contracting needs in FI$Cal through the online Cal eProcure portal. However, DGS will encourage departments to develop tools for DVBE firms to identify contracting needs specific to each department.

DGS will continue to provide services to DVBE firms on how to select effective keywords and choose appropriate UNSPSC codes when certifying with DGS. Further, DGS will continue to evaluate the effectiveness of the Cal eProcure search engine.

RECOMMENDATIONS

General Services [Has] Not Adequately Overseen the DVBE Program, Hindering Its Success:

RECOMMENDATION # 4:

To ensure that their outreach efforts are effective and result in a greater number of DVBE firms available that can provide the necessary goods and services awarding departments are seeking, [Redacted] General Services should do the following:

  • Assess, at least annually, the effectiveness of [its] [Redacted] past outreach efforts in increasing the number of DVBE firms that become certified.
  • Work with awarding departments to identify the types of goods and services for which they struggle to find a DVBE contractor or subcontractor.
  • Develop an outreach plan to include outreach activities found to be effective in the past based on [its] [Redacted] assessment. This plan should also emphasize outreach to increase the number of DVBE firms that provide the types of goods and services that awarding departments struggle to obtain from DVBE firms.
  • Develop better tracking of the businesses owned by disabled veterans that attend [its] [Redacted] outreach events and review certification data to determine whether these businesses obtained their certifications.
  • Conduct periodic surveys of businesses owned by disabled veterans that attended [its] [Redacted] outreach events but chose not to become DVBE certified to determine the reasons for not applying for the certification. The department [Redacted] should use this information to improve both their outreach and any other areas of the program.

DGS RESPONSE # 4:

4

DGS agrees with the recommendation. DGS will annually assess the effectiveness of outreach efforts through post-event survey responses, strategic partner feedback and outreach team observations. DGS will continue to maintain communication with all departments to help identify what types of goods and services departments struggle with finding DVBE firms to provide. This dialogue with departments happens at the quarterly advocate meetings as well as agency visits with departments who fail to meet their Small Business (SB) and/or DVBE goals. The outreach team is currently working on shifting to even more targeted outreach based on the feedback from departments as well as areas identified through past spend data. DVBE outreach attendees will continue to be tracked via post-event surveys as well as a new survey that has been added to the end of the online certification application. These surveys will assess the goals of DVBE firms in becoming certified or identify reasons they may choose not to become certified.

RECOMMENDATION # 5:

To minimize the occurrence of program abuse and ensure that program abuse cases are handled appropriately and consistently, General Services should do the following:

  • Remind the awarding departments about preventive measures, including notifying all subcontractors listed on a bid if that contract is awarded and providing the name of the prime contractor, the role of the DVBE firm in the contract, the amount of the contract dollars designated for each subcontractor, and contact information that subcontractors can use if they encounter any issues on the project.
  • Develop procedures for awarding departments to help them identify whether a complaint constitutes program abuse, track all complaints, and take appropriate steps when investigating program abuse complaints.

DGS RESPONSE # 5:

DGS agrees with the recommendation. DGS has already begun implementing these recommendations by incorporating them into the ongoing Program Abuse Training and Best Practices documents including, but not limited to, preventative measures that suggests notification of DVBE subcontractor awards.

DGS will include within the ongoing Program Abuse Training and Best Practices documents, examples and case studies, designed to aid awarding departments in identifying whether a complaint constitutes program abuse as well as, how to track complaints effectively and take appropriate steps when investigating these complaints.

DGS will market this training to awarding departments and schedule class dates, times, and frequency to ensure the opportunity is presented to a wide range of state procurement officials.

RECOMMENDATION # 6:

To strengthen the enforcement of DVBE laws, regulations, and guidelines, General Services should track program abuse complaints, including the type of program abuse, how it was reported or discovered, and the dates specific actions are taken on the case. This tracking will enable the awarding departments to identify weaknesses within their processes and provide insight into how to address these issues, improving the DVBE program overall.

DGS RESPONSE # 6:

5

DGS agrees with the recommendation. DGS has already been tracking program abuse cases and has begun implementing these recommendations. Additionally, DGS will include information within the ongoing Program Abuse Training and Best Practices documents on how to track complaints effectively, take appropriate steps when investigating these complaints and reporting complaints to DGS.

RECOMMENDATIONS

The State Lacks Accurate Data to Fully Measure the DVBE Program’s Success:

RECOMMENDATION # 7:

To ensure that DVBE participation data are reported accurately and consistently, [Redacted] General Services [Redacted] should implement or strengthen a review process to ensure that DVBE participation amounts entered into departments’ data systems or FI$Cal are accurate. This review process should include verification, on a sample basis, of the amounts awarded to, and the certification status of, the DVBE contractor or subcontractor for high value contracts that includes DVBE participation.

DGS RESPONSE # 7:

DGS agrees with the recommendation. DGS’ Office of Business and Acquisition Services (OBAS) will develop a desk manual for the OBAS SB/DVBE Advocate responsibilities, which will include policies and procedures to strengthen its process for ensuring DVBE participation data is reported accurately and consistently. The process will include, on a sample basis, verification of amounts awarded to and the certification status of DVBE contractors or subcontractors.

RECOMMENDATION # 8:

Until it begins generating DVBE activity reports using FI$Cal, General Services should issue a policy to require awarding departments to implement or strengthen a secondary review process to ensure that the DVBE activity reports prepared by staff are accurate and supported by departments’ data systems.

DGS RESPONSE # 8:

DGS agrees with the recommendation. The current training on the Consolidated Annual Report (CAR) includes instructions that departments maintain clear and accurate records in their respective procurement files that can be linked to the reported transactions in case of an audit. Since April 2018, DGS has been working with the FI$Cal team to develop and implement the Consolidated Annual Report (CAR) functionality in FI$Cal that will aid in tracking and reporting DVBE participation by providing departments with the ability to query the reported transactions and reconcile with the report at any time.

DGS will incorporate into future CAR training and form instructions that awarding departments do the following:

· Develop, implement or strengthen a secondary review process to ensure that the DVBE activity reports prepared by staff are accurate and supported by documentation.

· Verify on a sample basis, the amount awarded to and the certification status of the DVBE contractor or subcontractor on a contract that includes DVBE participation.

RECOMMENDATION # 9:

To ensure that it can create accurate annual DVBE participation reports, General Services should complete the programming necessary to include DVBE subcontractor information by June 30, 2019.

DGS RESPONSE # 9:

DGS agrees with the recommendation. Since April 2018, DGS has been working with the FI$Cal team to develop and implement the Consolidated Annual Report (CAR) functionality in FI$Cal with a planned migration to production in March 2019. This implementation will provide all awarding departments transacting in FI$Cal the ability to accurately capture directly from their FI$Cal transactions all the DVBE participation achieved either through awarding contracts directly to DVBE prime contractors, or through the use of DVBE subcontractors. Post-migration, DGS will provide training on CAR reporting to departments transacting in FI$Cal, as well as departments that are deferred and/or exempt from migrating to FI$Cal during the fiscal year 2018/19.

CONCLUSION

DGS is firmly committed to honoring veterans through strengthening the DVBE program and increasing DVBE participation in the program, wherever possible, by providing greater access to state procurement opportunities. As part of its continuing efforts to improve those processes, DGS will take appropriate actions to address issues presented in the report.

If you need further information or assistance on this issue, please contact me at (916) 376-5012.

Daniel C. Kim
Director




Comments

CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM GENERAL SERVICES

To provide clarity and perspective, we are commenting on General Services’ response to the audit. The numbers below correspond to the numbers we have placed in the margin of General Services’ response.

1

Although General Services indicates that it already has a process for regularly encouraging DVBE firms to participate in LPA contracts, we found that this process is not effective. Specifically, as we state in the report, General Services claims that of the almost 3,500 LPAs available, only 137 of those LPAs list DVBE firms as vendors. Therefore, we stand by our recommendation in the report that General Services develop and implement a plan to encourage DVBE firms to participate in LPAs.

2

General Services overstates the extent of its outreach to DVBE firms on contracting opportunities with the State. As we describe in the report, General Services has known for years that relatively few DVBE firms benefit from the DVBE program. We explain in the report that we expected to find that General Services had conducted some analysis to assess why this is the case; however, it had not done so. Further, in the report we state that General Services has not taken steps to determine what actions are necessary to increase the number of DVBE firms that receive contracts from awarding departments. Until General Services does so and uses this information to inform its outreach efforts, it cannot reliably ensure that the DVBE program provides its intended benefits.

3

General Services misunderstands our recommendation. Our recommendation does not suggest that awarding departments duplicate FI$Cal by posting individual contract solicitations on their websites. Rather, our recommendation is that General Services ensure that all awarding departments comply with its direction to make DVBE firms aware of potential procurement opportunities based on the departments’ anticipated needs. Specifically, as we state in the report, General Services told us that in October 2018 it asked each awarding department’s DVBE advocate to identify the department’s contracting needs for the next six to 12 months and to post this information prominently on the department’s website to inform DVBE firms of opportunities. However, as of early January 2019, General Services knew of only two departments that had followed its direction.

4

Although General Services indicates that it visits departments that fail to meet the DVBE goal, we did not see an outcome from its visits. As we describe in the report, General Services provided us with documentation that it had assessed a couple of departments that did not meet the DVBE goal in fiscal year 2016–17 to identify if there was any assistance it could offer. In each case, General Services concluded that the awarding departments did not need its assistance because they were using best practices or had reasonable processes in place.

5

General Services’ response implies that its tracking of program abuse cases has been sufficient. However, at our opening conference with General Services, it acknowledged that its tracking of program abuse allegations had shortcomings. In addition, as discussed in the report, General Services acknowledged that it has not taken advantage of the potential benefits of tracking these abuse allegations. As we conclude in the report, tracking the main elements of abuse allegations, such as the type of program abuse and how it was reported or discovered, would allow General Services to identify and address trends that otherwise may go unnoticed.




California Department of Public Health

January 24, 2019

Ms. Elaine M. Howle
State Auditor
1621 Capitol Mall, Suite 1200
Sacramento, CA 95814

Dear Ms. Howle,

The California Department of Public Health (CDPH) reviewed the California State Auditor’s draft report titled, “Disabled Veteran Business Enterprise Program.” CDPH appreciates the opportunity to respond to the report.

The report concludes that although the State achieved the goal of expending not less than 3 percent of the cumulative value of all of their contracts on Disabled Veteran Business Enterprise (DBVE) firms during the fiscal years 2014-15 and 2016-17, CDPH could not fully support the DVBE participation data reported for 2017-18.

Below, we address the report finding in more detail followed by our response to the auditor’s specific recommendations.

Finding 1: CDPH could not fully support the DVBE participation data it reported for fiscal year 2017-18. Most significantly, it overstated some DVBE participation amounts. As a result, the department’s claimed DVBE participation levels could be significantly inflated and could lead users of this information to draw incorrect conclusions about the department’s success in meeting the 3 percent goal.

Recommendation to Public Health: To ensure that DVBE participation data are reported accurately and consistently, CDPH should implement or strengthen a secondary review process to ensure that contracts are accurately recorded in their data systems.

Response :

CDPH agrees with the finding presented in the report and will strengthen our secondary review process by updating the trainings required for all staff involved in processing contracts. Currently the data that is entered into CDPH systems is first reviewed by analysts and then reviewed again by managers. These updated trainings for staff and managers will re-emphasize the importance of quality control in accurately recording contract information in our data systems. The training updates will be completed by June 30, 2019.

We appreciate the opportunity to respond to the audit. If you have any questions, please contact Monica Vazquez, Chief, Office of Compliance at (916) 306-2251.

Sincerely,

Karen L. Smith, MD, MPH
Director and State Public Health Officer



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