February 14, 2019
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As the Joint Legislative Audit Committee requested, the California State Auditor presents to you this audit report regarding California’s Disabled Veteran Business Enterprise (DVBE) program.
The Department of General Services (General Services) and the California Department of Veterans Affairs (CalVet) are responsible for overseeing the DVBE program, which requires that state governmental entities that award contracts for goods or services (awarding departments) strive to spend at least 3 percent of the cumulative value of all their contracts on DVBE firms (3 percent goal). This report finds that the State lacks accurate data to gauge DVBE program success and that General Services and CalVet have failed to maximize DVBE participation and to accurately measure the program’s success.
One indicator that the DVBE program could be improved is that only a small percentage of currently certified DVBE firms actually benefit from the program. Of the 1,671 firms registered in the DVBE program in fiscal year 2017–18, only 133 (or 8 percent) received contracts as prime contractors directly from state agencies. Moreover, 89 percent of the total amount the State awarded directly to DVBE firms that year went to only 30 of those 133 firms.
We reviewed six awarding departments to understand how they identify and contract with DVBE firms, and they explained that they often struggle to find a DVBE firm that can provide the services or products they need. The awarding departments claim that there are not enough qualified certified DVBE firms. Nevertheless, CalVet and General Services have not considered awarding departments’ needs in their outreach efforts to encourage more businesses owned by disabled veterans to participate in the DVBE program, nor have they measured the success of those outreach efforts. CalVet also lacks the necessary resources to fully meet its statutory responsibility to assist departments that struggle to meet the 3 percent goal, and we believe that General Services is better equipped to fulfill this responsibility.
Finally, none of six awarding departments we reviewed could fully support the amounts that they told General Services they had spent on contracts with DVBE firms in fiscal year 2017–18. As a result, General Services may have overstated awarding departments’ successes in meeting the 3 percent goal, further highlighting the State’s need for reliable data by which to measure this program’s success.
ELAINE M. HOWLE, CPA
California State Auditor