Purpose

To determine whether the New York City Department of Homeless Services (DHS) has adequate controls over the contracted homeless shelter contract procurement and rate-setting processes, and whether current contracted shelter rates are reasonable. Our audit covered the period from July 1, 2013 through May 30, 2017.

Background

Governed by a “right to shelter” mandate, New York City (City) provides temporary emergency shelter to every eligible person who requests services. DHS is responsible for providing transitional housing and services for eligible homeless families and individuals in the City and for fiscal oversight of the homeless shelters.

DHS procures shelter spaces from private providers through competitive sealed proposals, open-ended Requests for Proposals (RFPs), and negotiated acquisitions. DHS is responsible for establishing the contract rates awarded to shelter providers. DHS uses a number of tools to guide its rate setting, including an annual Budget Construct spreadsheet that tracks contract rates and rate guides listing recommended rates based on shelter type and RFP-established amounts. To administer other aspects of its homeless shelter fiscal responsibilities, DHS uses its Client Assistance and Rehousing Enterprise System (CARES), an electronic case management system, as well as three citywide computer systems: the City’s Automated Procurement Tracking System (APT), the Financial Management System (FMS), and the HHS (Health and Human Services) Accelerator for contract management. For City fiscal year 2016, DHS housed a daily average of 58,000 individuals at 748 shelter locations, with a budget of greater than $1.3 billion. As of March 2016, there were 126 private providers with 351 registered contracts providing homeless shelters for single adults and families.

In August 2016, following a comprehensive 90-Day Review of DHS Operations ordered by the Mayor, DHS and the New York City Human Resources Administration (HRA) began integrating into a single management structure, under which both agencies report to the Commissioner of the Department of Social Services (DSS). The goal of the review was to ensure New York City’s homeless services are delivered as efficiently as possible. Under this plan, homelessness prevention and homeless rehousing operations will transition from DHS to HRA while shelter system management will remain with DHS. The City’s 90-Day Review reforms also included a commitment to rationalizing shelter provider rates. We recognize that this audit was conducted while DHS was in the midst of implementing the structural and organizational changes that resulted from this operational review. As part of this reorganization, DSS officials advised us that they are reforming processes, work flows, policies, and procedures at every level of the agency and that its implementation is still ongoing.

Key Findings

• Several opportunities for improvement of controls over the shelter contract procurement and rate-setting process exist for DHS.
  • DHS does not have written policies and standard operating procedures (SOPs) for key aspects of the shelter contract procurement and rate-setting process, including standard rate guidelines for negotiating provider budgets.
  • Documentation for the entire DHS contract award process is not readily available nor maintained, as required by New York City Procurement Policy Board (PPB) regulations, DHS’s default SOP.
• We could not determine whether the shelter rates are reasonable. Regardless of the guidance used (DHS Rate Guides, RFP Rate Guide, and similar shelter groupings), we found the rates are generally inconsistent among similar shelters, often exceeding the prescribed ranges.
• The various computer data systems utilized by DHS are not integrated with each other, and therefore the important data cannot be easily shared and combined to facilitate further analysis.

Key Recommendations

• Create, maintain, and implement DHS-specific SOPs for the shelter contract procurement and rate-setting process, as well as standard rate guidelines for negotiating provider budgets to ensure continuity in processes as DHS transitions through its integration into DSS.
• Ensure that contract negotiations, evaluations, and evidence of reasonableness are adequately documented in contract registration packets to comply with stated DHS contract and ratesetting practices, New York Codes, Rules and Regulations (Title 18, Part 900), and PPB rules.
• Improve controls over the rate-setting process so that rates are within DHS’s outlined ranges. If contracts are awarded with rates that exceed those ranges, maintain adequate documentation for justification.
• Collaborate with related City agencies to integrate data systems so that DHS has the ability to perform data analytics on shelter data, and ensure that the integration has built-in controls to safeguard the data.

Other Related Audits/Reports of Interest

Office of Temporary and Disability Assistance: Oversight of Homeless Shelters (2015-S-23)
Homeless Shelters and Homelessness in New York State – An Overview, Exclusive of New York City (2016-D-3)