Audit Report on the Samaritan Daytop Village Inc.’s Compliance with Its Contracts with the Department of Homeless Services
This audit is of Samaritan Daytop Village Inc. (Samaritan), a nonprofit corporation that provides shelter and services to homeless individuals and families pursuant to contracts with the New York City Department of Homeless Services (DHS). DHS is the City agency responsible for providing temporary emergency shelter and social services to eligible homeless adults and families. In the audit, we examined whether payments to Samaritan and the payment rates were reasonable, appropriate, and adequately supported, and whether Samaritan complied with certain provisions of its contracts with DHS. The audit also examined whether DHS adequately monitored Samaritan to ensure that all payments were made in compliance with the terms of the contracts.
DHS contracts with approximately 77 for-profit and nonprofit corporations to provide homeless services, of which Samaritan is one. Pursuant to contracts with DHS, Samaritan is responsible for delivering services to homeless families and individual adults at multiple facilities throughout New York City. For our scope period of Fiscal Year 2015 (July 1, 2014, through June 30, 2015), DHS paid Samaritan approximately $51.8 million for services it provided in connection with seven contracts that required Samaritan to operate four Single Adult Shelters and three Family Shelters.
Audit Findings and Conclusions
The audit found that Samaritan generally complied with the fiscal requirements of its DHS contracts. Specifically, Samaritan’s payment rate calculations were reasonable and its expenditures appeared appropriate, in line with the budget, and adequately supported.
However, our audit found weak controls over certain aspects of DHS’ fiscal operations that could reduce the effectiveness of DHS’ oversight of Samaritan and other providers as well. Specifically, we found that DHS provided excessive cash advances to Samaritan beyond the amounts dictated by DHS’ internal guidelines and that DHS failed to fully recoup these excess cash advances. According to the Fiscal Manual prepared by DHS and provided to Human Services Providers (the Fiscal Manual), requested advances “will be given at the beginning of the contract term and each of the city’s fiscal years (7/1 to 6/30).” In addition, the Fiscal Manual states that “the maximum amount of the advance should be two (2) months or 2/12th of the annual contract amount.” Notwithstanding these instructions, DHS paid advances to Samaritan that exceeded the maximum amount allowed pursuant to the Fiscal Manual by $1.5 million and, as of November 15, 2016, DHS had failed to recoup $346,337 of that excess amount.
Our audit also found weaknesses in Samaritan’s controls over the maintenance of its In/Out Log sheets at the Family Shelter facilities, which are required to support its calculation of the number of “care days” it provided and for which it billed DHS. Specifically, Samaritan was not able to provide In/Out Log sheets for 43 of 532 client cases, which represented 545 “care days” provided to homeless families for which Samaritan billed DHS.
Finally, we found that although DHS did not perform expenditure reviews of Samaritan’s contracts for Fiscal Year 2015, Samaritan’s expenses appeared appropriate. However, we note that expenditure reviews are nonetheless necessary to enable DHS to effectively monitor the fiscal performance of Samaritan and other providers and to ensure that DHS obtains reasonable assurance that expenditures are appropriate and consistent with the terms of the applicable contracts. Such reviews are particularly important because DHS does not require Samaritan to submit supporting documentation with its monthly invoices. As a result, DHS has limited assurance that the expenses being billed are valid absent a DHS fiscal review is performed as described in the Fiscal Manual.
Audit Recommendations
The report made the following five recommendations, four to DHS and one to Samaritan.
- DHS should recoup the outstanding advance of $346,337 from Samaritan.
- DHS should follow its Fiscal Manual when making advances and recoupments to better ensure that all advances paid are recouped by end of the annual closeout.
- DHS should ensure that advance payments made to providers do not exceed the allowed maximum advance amounts as stated in their Fiscal Manual.
- DHS should amend the Fiscal Manual or develop internal procedures that determine a frequency with which to conduct expenditure reviews.
- Samaritan should maintain and safeguard In/Out Log sheets to ensure that “care day” billing invoices are properly supported.
Agency Responses
In the response submitted by the New York City Human Resources Administration (HRA) on behalf of DHS, DHS agreed with three of four recommendations and stated that it is taking actions to tighten up its vendor management process, currently revising its Fiscal Manual to more closely align with established internal policies and procedures, and developing a more formal process for its expenditure reviews.[1] However, DHS disagreed with the recommendation that it should follow its Fiscal Manual when making advances and recoupments to better ensure that all advances paid are recouped by closeout.
In its response, Samaritan stated that it has “implemented a system to ensure better maintenance and safeguarding of the program in/out log sheets.”
[1] In April 2016, following a comprehensive review of the City’s homelessness policies, Mayor de Blasio appointed Commissioner Banks to lead DHS, in addition to HRA, as head of a joint management structure under the Department of Social Services (DSS).