FTA New York Mass Transit Grants

GAO provided information on whether fraud contributed to the misuse of federal funds on the Holban/Hillside project, focusing on: (1) the prime contractor's Minority Business Enterprise (MBE) program; and (2) two contract change orders approved by the grantee.

GAO found that the prime contractor: (1) made false statements to the New York State Metropolitan Transportation Authority and the grantee regarding the involvement of MBE subcontractors; (2) made false statements concerning MBE substantive functions and the dollar amounts of subcontracts; (3) controlled the largest MBE subcontractor, which did not serve a commercially useful function to the project other than to meet contract regulations; (4) presented schedules that misrepresented MBE participation and overstated dollar amounts; (5) admitted that the overstated dollar amounts were to meet the contract's dollar amount requirements; and (6) affirmed that it used fraudulent MBE because insufficient MBE existed to perform large construction projects. GAO also found that the grantee: (1) ordered two change orders totalling $1,993,000; (2) forced an employee to sign the change orders, violated written change order procedures, and lacked adequate documentation; and (3) removed the prime contractor from the contract due to nonperformance.