City Agency Audit Reports
Audit Report on the Department of Homeless Services’ Controls Over Billing and Payments Made to Aguila, Inc.
Audit Number: FK10-130A
Release Date: November 04, 2011
AUDIT REPORT IN BRIEF
The New York City Department of Homeless Services (DHS) is responsible for providing temporary emergency shelter and social services to eligible homeless families. These services are primarily delivered by approximately 150 for-profit and non-profit providers. Aguila Incorporated (Aguila) is a non-profit provider that serves homeless families at 16 different facilities in the Bronx and Manhattan. Under Chapter 24-A, §612 (5) of the New York City Charter, DHS is required to establish performance criteria, goals, and objectives for providers and monitor and evaluate provider performance. In Fiscal Year 2010, DHS paid Aguila approximately $27.3 million for services it provided directly ($26.3 million) and indirectly as a sub-contractor ($1 million). Aguila provided services under both formal written contracts and unwritten or handshake agreements with DHS.
Audit Findings and Conclusions
DHS did not adequately monitor Aguila’s fiscal and operational performance. Specifically, DHS did not ensure that Aguila monthly invoices were accurate and supported by client sign-in logs and attendance records. Consequently, for June 2010, we found that DHS paid Aguila for 4,494 unsupported care days costing $470,897. Further, DHS did not adequately review Aguila contracted facility expenditures and did not conduct any reviews of Aguila non-contracted facility expenditures. Therefore, payment rates were not reasonable. Our review of Aguila financial records for two of 16 facilities with expenditures totaling $15.3 million, found a total of $913,949 in expenditures were for improper purposes, and a total of $9.1 million was insufficiently supported. As a result, DHS should recoup $1.4 million for unsupported care day payments ($470,897) and funds used to make improper expenditures ($913,949). DHS should also immediately investigate expenditures totaling $9.1 million that were insufficiently supported and recoup funds accordingly.
Furthermore, our review found that DHS did not adequately review agreements and other expense supporting documentation to ensure that $19.5 million in rent and security service payments were appropriate. In addition, DHS paid Aguila $10.3 million to provide shelter and social services at six facilities without entering formal written contracts in violation of the City’s Procurement Policy Board (PPB) rules and failed to ensure that rates paid Aguila for these six facilities were reasonable and appropriate.
Additionally, DHS did not effectively monitor Aguila’s operational performance to ensure that Aguila housed clients in safe and sanitary conditions and transitioned its clients to permanent housing in a timely manner.
To address these issues, we make 19 recommendations, including that DHS should:
- Investigate unsupported client-lodging days identified in this report and recoup payments as appropriate.
- Recoup $913,949 from Aguila related to improper expenditures.
- Investigate insufficiently supported expenditures totaling $9.1 million and recoup funds accordingly.
- Review and approve Aguila sub-contracts for the performance of its obligations.
- Enter into written contracts with Aguila for directly operated facilities that at minimum specify or restrict how funds may be expended, delineate services to be provided, establish minimum performance standards, and detail remedies or termination clauses for failure to meet standards.
- Establish non-contracted facility per diem rates based upon audited line-item operating budgets.
- Routinely check whether facilities have open violations and ensure that providers rectify open violations in a timely manner.
- Require Aguila to develop improvement plans for facilities that do not meet housing placement targets.
DHS and Aguila Responses
DHS generally disagreed with the report’s findings and recommendations. Nevertheless, DHS stated that it would strengthen its monitoring of Aguila’s fiscal and programmatic performance. However, DHS will not review non-contracted facility expenditures.
Aguila generally disagreed with the audit findings regarding unsupported care days, improper and unsupported payments, and placement of clients into permanent housing. Specifically, Aguila asserted that it provided us records to support questioned care days and expenses, and that it was only partially responsible for client placement. However, Aguila did not provide us such supporting documentation.