Audit Report on Department of Homeless Services Controls Over Payments to Hotel and Scatter Site Housing Operators

Audit Report In Brief

This audit determined whether the Department of Homeless Services (Department) maintained adequate controls over funds transferred from the City general fund to a Department bank account for payments to operators who provided conditional housing to families; complied with the City Charter and Procurement Policy Board (PPB) rules when using hotels and scatter site housing facilities; and ensured that conditional housing facilities were maintained in a safe and sanitary condition.

Our evaluation of Department controls over payments to operators of conditional housing facilities found that the City funds were properly accounted for in the Department bank account and that these funds were used to pay operators for providing housing to homeless families. However, the Department did not comply with the City Charter and PPB rules when entering into informal agreements with operators of conditional housing facilities. The Department paid $96 million to these operators during Fiscal Year 2002.

We visited 20 units in six hotels and 56 apartments in 17 apartment buildings in which homeless families reside. The hotels as well as 10 of the apartment buildings inspected generally were in satisfactory condition. However, the remaining seven apartment buildings, all operated by Gin Realty, had conditions that may pose a threat to the health and safety of the occupants placed there by the Department. Specifically, 30 of 41 apartments we visited in these seven buildings had unsafe and unsanitary conditions, which included roach infestation, peeling paint, leaking faucets, water damage and mold on ceilings and walls, missing or broken tiles, and holes in walls and ceilings.

Audit Recommendations

To address these issues, we recommend that the Department should:

• Procure the services of hotel operators and apartment owners in accordance with the provisions of the City Charter and PPB rules by:
• entering into formal contracts with the operators,
• ensuring that contracts contain measurable performance standards and penalties for poor performance, and
• registering the contracts with the Comptroller’s Office.

Adhere to its plan to conduct more frequent inspections and to reduce the number of units operated by low performing landlords.