Overview
SDO did not confirm SDP indirect spending information on 16 out of the 60 SDP partners in our sample.
SDO’s “Supplier Diversity Program (SDP) Indirect Spend Validation” policy outlines the following steps SDO needs to take to confirm SDP partner spending:
V. Internal Tracking
As you receive the email confirmations back from the Partners, populate the columns within the [Vendor Report Management portal] excel document with the validated information. . . .
Responded: [Yes/No]
- Reported Amount: Already populated the spending amount
- Confirmed Amount: Add the dollar amount in the Confirmed Amount once validated by SDP Partner via email
- Difference [percentage]: Percentage auto calculates
- Results: Select Accurate/Underreported/Overreported. Note: if the results are within a 10% margin, then the validation is considered accurate
- Compliance Officer: the person responsible for tracking validation information. . . .
VII. No Response
If the SDO [SDP] Partner does not respond to the first email request, then follow up with the Second Notification Reminder email message.
VIII. Bounce Backs
Collect all bounce-backs and undeliverable emails into one document and send the spreadsheet to the SDO Systems and Data Analytics Unit for further review.
Because SDO did not confirm information on how much statewide contractors expended on SDP indirect spending, SDO is limited in its ability to provide oversight of and confirmation that statewide contractors meet their contractual SDP indirect spending.
We recommend that SDO collaborate with the Operational Services Division (OSD) to obtain accurate spending information as reported by statewide contractors and more details on contractual agreements in order to effectively monitor whether statewide contractors meet SDP indirect spending agreements. In addition, SDO should take additional measures to improve the amount of SDP indirect spending reported by SDP partners by reaching out multiple times for better information confirmation.
Auditee’s Response
The SDO agrees with the recommendation for further collaboration with the Operational Services Division (OSD). The two agencies have been working together since the Audit Period to encourage greater reporting of indirect spending. In addition, SDO and OSD have executed an Interdepartmental Service Agreement (ISA) to document our respective responsibilities for the purpose of increasing diverse and small business representation on and validation of diverse business spending on statewide contracts. It is of note that it is crucial for SDP partners to respond to requests for verification, and while the SDO Compliance Unit reaches out multiple times, not all partners respond.
However, since the Audit Period, the SDO’s Compliance Unit has increased the number of SDP reported line items confirmed significantly. In [fiscal year] 2023 for example, the SDO Compliance staff verified 1,459 line items, up from only 269 in [fiscal year] 2022. This resulted in verification of over $307 million in SDP spend. The SDO will continue these efforts.
Auditor’s Reply
We commend SDO on its increased efforts to get more SDP partners to confirm indirect spending, and we will follow up on this issue in approximately six months as part of our post-audit review.
| Date published: | December 23, 2024 |
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