-Comptroller finds agency uses off-the-books account to pay service providers despite holding news conference to announce
 formal contract process-

-“Such behavior should not be tolerated” – Thompson says -

View DHS Letter

New York City Comptroller William C. Thompson, Jr. today harshly criticized the City’s Department of Homeless Services (DHS) for using an off-the-books account to pay service providers – even though City Hall committed to a more accountable and transparent payment process.

In a tersely worded letter to Deputy Mayor Linda Gibbs – the former commissioner of the Department of Homeless Services -, Thompson lambasted DHS for promising one thing and then ignoring its own words.

“That DHS would continue to expand its use of off-the-books payments to shelter providers in light of our agreement is of grave concern,” Thompson said in the letter. “For DHS to have expanded this payment mechanism beyond per-diem housing to include social services is inexcusable.”

You can read Thompson’s letter, the audit, and the news release to announce the reforms in 2003 at www.comptroller.nyc.gov.

In October 2003, Comptroller Thompson issued an audit of DHS examining controls over payments to hotel and scatter site units, which operate without contracts. The audit found that an increasing number of facilities were being brought online outside the City's official procurement process.

In response to the findings, Mayor Bloomberg and then-DHS Commissioner Mayor Gibbs invited Thompson to a news conference that month to unveil a joint initiative to obtain more homeless facilities through a formal contracting process, including registration by the Comptroller’s office.

At the time, Gibbs said that “decreasing the number of facilities without contracts are both critical to increasing accountability and bringing greater order to a system often defined by crisis. We will continue reducing the scatter site program until it is gone, while moving the system away from per diem payments toward contracts.”

And Bloomberg had noted that “Good government means transparent management and accountability, and bringing more facilities into a formal contracting process will be better from every perspective.”

However, Thompson’s new analysis shows the City has not been true to its word.

“It appears that DHS has expanded beyond making payments for per-diem housing without contracts to include payments for social services as well,” Thompson said. Additionally, DHS continues to pay providers using a separate bank account other than the City’s customary treasury account.

“The use of an account such as this distorts the City’s records and substantially reduces transparency and accountability,” Thompson said, noting (see chart below) how the account has grown from $52,051,660 in 2001 to $161,132,332 in 2008.

                             Fiscal Year                                                  Amount

Thompson pointed to a clear example of how DHS has used this private account to fund a contract that it improperly entered into with the Highland Park Community Development Corporation in Brooklyn. In January 2007, DHS entered into a month-to-month agreement with Highland to provide employment training, counseling services and housing for homeless families.

DHS further indicated that this decision was made because of an increase in homeless families that could not be met with existing resources.

The month-to-month contract, however, was not submitted to the Comptroller’s Office for registration. Thompson noted that additionally there is no record of any DHS payments to Highland from the City’s General Fund.

“Accordingly, it is apparent that DHS has paid Highland for purely contractual work out of a separate DHS bank account in total disregard for citywide accounting, contracting and procurement requirements,” the Comptroller said. “Given DHS’ attitude with respect to its use of this separate bank account, it is highly likely that it is using it to pay for other service contracts as well.”

“In absolute disregard of our agreement, and in violation of the City Charter, DHS has chosen a path with respect to Highland that has resulted in a total lack of transparency and accountability. Such behavior, no matter the reason, should not be tolerated by your administration.”

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