Minority/Women Business Enterprise Program Under Fire After Audit

A recent audit of Denver’s program, the Minority/Women Business Enterprise (M/WBE) has shown that it has not been meeting its goals. You can take a look at the complete audit here. The program is operated by the Division of Small Business Opportunity, part of the Office of Economic Development, and it is designed to help get minority and women owned businesses a share of the large number of city and county construction jobs and related work like landscaping, trucking and engineering.

In order to be certified for the M/WBE, at least 51% of the business must be owned by women and minorities. However, the audit brought to light concerns that businesses that should not be eligible to participate in the program are finding ways to game the system and are nevertheless getting certified and receiving work.

The audit found that of the 720 businesses that are certified and part of the M/WBE, only about 70% of them have actually received work from the city, and only 31% are getting repeat work from the city. Additionally, over the course of the program’s 8 year life, only 9 firms have graduated from the program, meaning they are now too large or are making too much money to continue being eligible. In short, Dennis Gallagher, the Denver City & County Auditor, called the program “broken.” The audit found an array of other issues with the program including not only ineffective or inaccurate reporting by the Division, but also a lack of required reporting. For example, the ordinance creating the program requires issuance of quarterly reports, which are not being produced currently. The audit was not all bad news though, as it did find that some certified sub-contractors were not being counted toward the program’s goals.

The Division defended itself in saying that the program has no control over whether the city awards contracts to a participating business or not. Further, the Division is planning to consider the audit’s recommendations to try and improve the program, but this is not the first time the program has been under fire.  In 2011, the program was audited criticized. That audit generated 16 recommendations of which only 6 were later implemented. So we will have to wait and see if the program will adopt more recommendations to try and improve itself this time around.

If you have questions about applying to become a minority/women-owned business, contact the Law Office of E.C. Lewis, P.C., home of your Denver Business Lawyer, Elizabeth Lewis, 720-258-6647 or email her at Elizabeth.Lewis@eclewis.com.