Minnesota has failed for three years to meet federal requirements for a program designed to steer millions of dollars in state transportation projects to minority- and women-owned businesses.

The program has been so plagued by mismanagement and weak oversight that some firms were awarded multimillion dollar contracts for which they might not have otherwise qualified.

In one case, nearly $1.6 million for buying materials on the Union Depot project in St. Paul was funneled through a minority- or women-owned firm to a non-minority-owned contractor. In another case on the same project, nearly $2 million was improperly credited to a non-minority-owned firm.

The findings and others, included in an internal audit of the Disadvantaged Business Enterprise (DBE) program, have led to a shake-up in the Minnesota Department of Transportation’s Office of Civil Rights and may result in additional investigations.

“This is absolutely a wake-up call,” said state Sen. Scott Dibble, DFL-Minneapolis, chairman of the Transportation and Public Safety Committee. Given the gravity of the issues raised by MnDOT’s internal audit, Dibble said he may ask the Legislative Auditor’s Office to conduct its own independent review.

Transportation department officials said they are moving quickly to address the shortcomings cited in the audit of the DBE program.

“This is a high priority for Commissioner [Charles] Zelle and the agency. We need to ensure that all contractors have an opportunity to work on MnDOT projects,” MnDOT spokesman Kevin Gutknecht said in an e-mail. “MnDOT fully supports diversity and believes that a diverse workforce, internally and externally on MnDOT projects provides a stronger and better outcome and better projects.”

The 30-year-old DBE program has long been plagued with fraud and oversight problems at both the federal and state levels. In 2010 and 2011 alone, U.S. Department of Transportation fraud investigations led to $88 million in recoveries, restitutions and fines, along with 10 federal indictments and eight criminal convictions.

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