Gotham Gazette

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Comptroller Site Offers Initial Window Into Cloudy World of City Subcontracting

stringer audit presser

Comptroller Stringer at a recent press conference (photo: @scottmstringer)

In February, Comptroller Scott Stringer declared that his office's online City-spending tracking tool, Checkbook NYC, would start providing information about subcontracts handed out by prime vendors working with the City. The push to publicly display what is billions of dollars of often secretive, murky procurement indicates a big step toward what could be a major leap forward in transparency. In Fiscal Year 2014 the City doled out $21.2 billion to subcontractors. "New York City has set a new standard for transparency by being the first government to make subcontractor payment data readily publicly available," Stringer told Gotham Gazette in a statement.

To make the initiative truly transformative, though, the City must ensure that its contractors report their subcontracting, something not required by law.

While the first subcontractor data went live on Checkbook NYC two months ago, the initiative was initially announced in March 2013 by former Comptroller John Liu and then-Mayor Michael Bloomberg. Without legislation requiring it, the two agreed it would become protocol.

"Fully disclosing contracts was a major step forward," Liu said of launching Checkbook NYC in a recent phone interview. "Subcontracting and lack of transparency remains a huge problem. A great deal of mismanagement and impropriety with Citytime happened at the subcontracting level," he said, citing the CityTime scandal where a contractor siphoned millions of dollars from the City while delaying an automated payroll technology project.

Structured similarly to the Federal Funding Accountability and Transparency Act of 2006, which requires online disclosure of subcontractors by Federal contractors, the new rules established in 2013 state that prime vendors who win contracts with the City are expected to upload details about subcontracting to the City's Payee Information Portal. Those names and payments are then made available on Checkbook NYC, which provides regular updates on the City's contracts and spending.

Good government watchdogs have praised the initiative. "It is great to see some subcontractor data up on Checkbook, and we hope to see more as the City works to ensure that prime contractors are aware of their responsibility to report information on their subcontractors," said Rachael Fauss, director of public policy at good government organization Citizens Union.

Exposing the largess of subcontracts in a clear, transparent way fosters greater opportunity for government accountability and can protect against corruption, as Liu alluded to.

"This was a huge data integration task," said John Kaehny, executive director of Reinvent Albany, another good government group, and co-chair of the NYC Transparency Working Group. "They had to do a lot of plumbing work to get it to here. We're very impressed."

Despite this unprecedented move toward greater fiscal transparency, there are limitations to the system. Collection of the data began in November 2013 but it is self-reported by the prime contractors and there has been no indication that the City is pushing to enforce compliance. As of the end of March, Checkbook NYC shows $9.2 billion in City contracts for the ongoing fiscal year (2015), but only $33.1 million in subcontracts reported.

For fiscal year 2014, Checkbook NYC reports $207.6 million paid to subcontractors, with a total contract spending of $21.2 billion. That is a mere 0.97 percent. The comptroller acknowledges that subcontracting reporting is minimal at this point. "This new initiative opens up a world of opportunities for transparency and good governance, but the information is only as good as the data that is shared. To truly succeed, there must be a city-wide effort to incentivize vendors to enter subcontractor information on our City's systems," Stringer said.

Citizens Union's Fauss has already called for action by the City Council to ensure compliance. Testifying at a multi-committee hearing in February on the 911 system contract and the Department of Investigation's report on the Emergency Communications Transformation Program, Fauss recommended that the Council conduct oversight hearings on fully implementing the rules for reporting subcontracting data. "A citywide, coordinated effort to bring all prime contractors into compliance could go a long way toward further improving transparency of outsourced projects," she told Gotham Gazette.

Liu agrees that whether through law or regulation, prime vendors should be required to disclose the data. The initial agreement stated that, "In the event a prime vendor fails to carry out their responsibility, the City has the right to withhold payment until all requirements have been met." But Liu is uncertain how much of that agreement survived the transition through administrations, both in the comptroller's office and the mayor's office.

"Maybe what we're seeing are the bureaucratic limits between what a memorandum of understanding from a former mayor and former comptroller can produce," said Reinvent Albany's Kaehny. "Maybe what we need right now is a city law to ensure compliance with reporting, otherwise it will never achieve its potential."

Kaehny believes this fiscal transparency tool is powerful in understanding the City's procurement system, ensuring fairness, and fighting "pay-to-play" culture and conflicts of interests. But without sufficient data, it is useless to journalists, advocates, academics, and others.

Even just getting this ball rolling is no small feat: New York is the first city in the U.S. to provide subcontracting data, according to Stringer's office and advocates. The state-level equivalent fiscal transparency website, Openbook New York, does not provide subcontracting information, although it might in the future. "New Yorkers have a right to know how their taxpayer dollars are being spent," emailed Nikki Jones, deputy press secretary for New York State Comptroller Tom DiNapoli, whose office runs Openbook. "We are continuously looking for ways to increase government transparency by expanding the amount of available financial data on," she added.

But the consensus seems to be that the City Council, mayor, and comptroller need to work together to push for full compliance. "I think it's great that subcontracting information is now available on the website," said James Parrott, deputy director and chief economist, Fiscal Policy Institute. "But it seems unworkable if [disclosure] is not required. If it's just voluntary and there's no penalty, as soon as any issue related to subcontracting comes up, even those who do provide the data will stop providing it." He praised the comptroller's comments drawing attention to the fact that it is not yet universal.

A law mandating strict reporting requirements would certainly boost this transparency initiative. Could the Council or Mayor's Office of Contract Services (MOCS) help ensure compliance? Council Member Helen Rosenthal, chair of the Council's contracts committee, declined to comment, saying the comptroller is best versed on the issue; and numerous attempts to contact MOCS went unanswered.

A recent audit report released by the comptroller's office criticized the mismanagement of funds under the "Build It Back" (BIB) housing recovery program for Hurricane Sandy victims, largely representative of Bloomberg administration performance. A Pennsylvania-based contractor, Public Financial Management, was meant to handle BIB applications through three subcontractors. A look at Checkbook NYC shows that these subcontractors, and the payments made to them, have not been reported, though Public Financial Management has been paid more than $17 million, of which $4.4 million went to subcontractors.

by Samar Khurshid, Gotham Gazette

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