Audit Report on the Department of Homeless Services’ Oversight of Contractors Hired to Assist Individuals and Families Displaced by Hurricane Sandy

Audit Report on the Department of Homeless Services’ Oversight of Contractors Hired to Assist Individuals and Families Displaced by Hurricane Sandy

July 16, 2014

AUDIT REPORT IN BRIEF

This audit was conducted to determine whether the Department of Homeless Services (DHS) established and maintained adequate internal controls to enable it to oversee and monitor the contractors hired on an emergency basis following Hurricane Sandy so that the agency could ensure that the contracted services were provided and that the contractors complied with applicable laws and regulations.  DHS is responsible for providing short-term, emergency shelter for individuals and families who have no other housing options available and for assisting those residing in shelters to transition into permanent housing. 

On October 29, 2012, Hurricane Sandy displaced thousands of individuals and families throughout New York City when their homes were destroyed or left uninhabitable after the storm.  DHS entered into 20 emergency contracts, totaling $19.9 million, with various human service organizations to provide shelter and other services on an emergency basis.  The City obtained disaster-relief grants and sought reimbursement from the Federal Emergency Management Agency (FEMA) for expenses incurred in the aftermath of Hurricane Sandy.  To receive FEMA reimbursement, City agencies must comply with federal reimbursement requirements and must have adequate internal controls in place to ensure that those requirements are met.

Audit Findings and Conclusions

This audit disclosed weaknesses in DHS’s oversight and controls over its emergency contracts.  DHS did not have formal procedures for the oversight and monitoring of emergency contracts nor did it have sufficient evidence of its oversight and monitoring activities for the contracts that were the subject of the audit.  In addition, DHS personnel did not adequately review or check invoices and supporting documentation for accuracy prior to payment.  Finally, emergency contract managers did not perform satisfaction assessments of shelter clients as required by the City’s Procurement Policy Board Rules Chapter 4, §4-01(e).

Audit Recommendations

To address these weaknesses, the audit makes the following six recommendations:

• DHS should ensure that it has clearly defined policies and operating procedures in place to address the oversight and monitoring of emergency contracts.  These policies and operating procedures should establish at least a minimum acceptable set of requirements that are aligned with and incorporate the minimum requirements established by the PPB Rules, Comptroller’s Directives, FEMA requirements and other applicable regulatory requirements.
• DHS should include the emergency contract monitoring procedures described above in its contingency planning documents and ensure that all necessary parties are aware of them.
• DHS should establish standardized minimum requirements for emergency contract managers to document and log their monitoring activities.  These records should be maintained in an organized manner to allow for easy access and retrieval.
• DHS should ensure that those persons assigned the responsibility of certifying vendor invoices have taken the necessary steps to verify that goods and services have been provided as stated on the invoices.
• If it is not feasible for contract managers to perform this verification on a monthly basis before authorizing payments to vendors, DHS should: (1) modify the certification statement signed by contract managers to reflect this circumstance,  and (2) develop an alternate procedure whereby such a verification is conducted periodically (e.g., quarterly).
• DHS should ensure that it requires contract managers to periodically interview or survey clients or their families to assess their satisfaction with services provided by the vendors of emergency contracts.

Agency Response

DHS officials agreed with five of the six audit recommendations but did not respond to Recommendation 4, which addressed DHS’s lack of assurance that persons assigned the responsibility of certifying vendor invoices take the necessary steps to verify the accuracy of those invoices and the goods and services provided.