Audit: Sloppy Contracting at Dept. of Homeless Services

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Comptroller dubbed the the “Department of Hand-Shake deals” in an audit released March 25.

The agency that has been using properties throughout the city—including a hostel at 237 W. 107th St.—for emergency homeless clients rarely signs contracts with service providers or the buildings’ landlords, the audit found. Payments to these organizations and landlords are based on “cooked” or “inflated” invoices, according to Liu.

“There’s no opportunity to measure the performance of these agencies. There’s no way to monitor their compliance to what they’ve agreed to,” Liu said. “This is not the way that city agencies should be run.”

Comptroller John Liu (at podium) said the Department of Homeless Services needs to do a better job of creating contracts with service providers.

The audit dealt with how the department places clients in beds in “emergency” circumstances, much like the situation on West 107th Street. In that case, the department had been housing women at the hostel without a formal agreement, but was going to sign a contract for a full 135-bed shelter. The department ultimately backed out when questions were raised about the building’s condition and the landlord’s history of tenant harassment.

The audit, initiated by Liu’s predecessor William Thompson, showed that the department paid $152.7 million during the course of a year to 107 service providers without a contract. In one instance, a provider who was charging the department for duplicate lists of clients was getting between $800 and $4,800 per month per family, Liu said.

Liu stopped short of characterizing the agreements as illegal, but said that “hand-shake deals” are unheard of nowadays.

In a statement following Liu’s press conference, Department Commissioner Robert Hess said that the “emergency” declarations that involve verbal agreements are the “fastest procurement mechanism available at this point.” Hess also argued that the department requested, without success, that Thompson, the former comptroller, hash out other ways to have a timely procurement process.

“While those appeals were fruitless, we look forward to working with Comptroller Liu to find a better legal way to expedite shelter procurements and not leave the most vulnerable men, women and children out in the cold because of bureaucratic red tape,” Hess said in a statement.

The audit suggests that the department start signing formal contracts with all providers of shelter and social services; set up performance standards; and conduct spot checks and interviews with clients and building staff.

While the department agreed that it should start trying to establish contracts for its facilities when possible, it rebuffed the auditors’ opinion that per diem arrangements are subject to the city’s procurement guidelines. Contracts for these types of payments, the department said, are therefore not required.

The department also pointed out that these referrals frequently take place on a shorter timetable than the city’s procurement process allows.

“DHS must also refer families to emergency shelter space as needed, prior to completion of the procurement processes for additional facilities—processes that take, on average, seven to nine months from start to finish,” the agency responded in the audit.

Still, auditors highlighted that the
department had allowed non-contracted providers to continue providing services for up to 22 years, ample time to go through the contracting process.

This assessment is the latest in a series of audits that have repeatedly showed the department relying on verbal agreements with service providers and landlords.

Mark Hersh, owner of the West 107th Street hostel currently serving as emergency housing for homeless women, seems to have entered into this type of loose agreement with the department before. During a 2002 meeting, Community Board 7 quizzed then-Deputy Commissioner Maryann Schretzman about paying Hersh for empty rooms in his buildings.

“We have verbal agreements. We do not have contracts, so we cannot negotiate [prices] very much,” Schretzman said of the arrangement, according to board minutes.

Liu said he will collaborate with the Council, Public Advocate Bill de Blasio and homeless advocacy groups to ensure the city fixes this issue internally.

“It’s been going on year after year after year. It’s unacceptable,” Liu said. “Instead of turning a deaf ear to problems, let’s get them to follow recommendations.”

Mary Brosnahan, executive director of the Coalition for the Homeless, asked Mayor Michael Bloomberg and Linda Gibbs, a former department commissioner and current deputy mayor, to follow through with promises to end this approach to contracting.

“It’s business as usual with the Bloomberg administration,” Brosnahan said at a press conference. “We have got to get out of the business of paying slumlords to put homeless families in these squalid conditions.” 

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