Overview
EOHLC did not ensure that payments to shelter providers were made according to the terms and conditions specified in their contracts. A review of payment records made to shelter providers during the audit period totaled $700,020,207, and subsequently after the audit period EOHLC spent an additional $282,906,682. We identified several instances of noncompliance with the contractual terms.
Specifically, during our review of a sample of 60 invoices to examine high-risk areas across a total population of 863, for the period from July 1, 2023, through December 31, 2023, we identified the following discrepancies:
- Meeting Room Charge: One invoice included a charge of $250 for the use of a meeting room, billed for 16 uses. The use of the conference room and the rate were neither specified nor negotiated in the contract. EOHLC should not be paying for services that are not included in the contract.
- Room Charges: One invoice included a charge for 89 rooms, but the contract only specified payment for 86 rooms at a nightly rate of $139 per room. This discrepancy led to an overcharge of $6,255 for 3 additional rooms, which were not included in the contract, for this 15-day billing period. EOHLC has a fiduciary duty to pay for only those services for which it contracted.
- Strategic Rehousing Initiative (SRI) Gift Cards: An invoice we reviewed included a charge of $9,009.95 for American Express gift cards connected to the SRI program. However, the contract’s scope of services, outlined in Attachment A of the contract, does not indicate that SRI funds can be used for gift cards. Additionally, EOHLC’s SRI policy does not clarify whether gift cards are an allowable expense. Gift cards such as these can be abused because gift cards typically do not have restrictions on the types of purchases that could be made. Without such limitations, these gift cards could be used for the purchase of nonessential items such as alcohol, tobacco, or gambling. The Department of Transitional Assistance establishes controls over the types of products that are for purchase with EBT cards. Controls should also exist over the types of purchases that can be made with the EOHLC-supplied gift cards. The same invoices showed that EOHLC paid for charges related to rent, furniture, appliances, and rental security deposits but did not specify what these gift cards were used for or intended to be used for, nor did EOHLC stipulate any controls over their assignment and use.
- Diversion Program Discrepancy: One invoice included a charge for the Diversion Program at a total cost of $19,450 for 97 families served (this works out to an average cost per family of $200.52). The average costs between the two billable rates, according to the terms of the contract, however, were $1,580 per family. EOHLC could not provide any documentation to verify the accuracy of the $19,450 or that 97 families were actually served.
Noncompliance with contractual payment terms constitutes a serious risk of financial mismanagement, which not only compromises accountability but also can erode the trust that is essential between EOHLC and shelter providers. Moreover, inaccuracies in payment processing can have negative impacts for shelter providers, leading to substantial financial strain. Such adverse financial conditions may impair EOHLC’s ability to deliver vital services, ultimately jeopardizing the welfare of the people and communities it serves.
Additionally, EOHLC has a fiduciary duty to ensure the accuracy and integrity of invoices for contracted services. Regardless of whether this occurred during an emergency or not, EOHLC at all times must perform reviews so that it is only paying for services that were actually performed and that comply with the requirements of contracts.
Authoritative Guidance
Subsection I of Section III of Attachment A of the Executive Office of Housing and Livable Communities Division of Housing Stabilization Emergency Assistance (EA) Family Shelter contract states:
By the 10th of each billing month, the Contractor shall submit a standardized invoice form to the appropriate Contract Manager for the previous month.
The invoice must have the applicable supporting documentation attached (identified below):
- A Monthly Accommodation Form must be signed by the Contractor’s Executive Director or their designee to attest to EOHLC that the monthly form accurately reflects the daily number of units available, and the daily number of units occupied.
- A Personnel Summary Report.
- Costs summary of SRI funding expenses -A form to be provided by EOHLC for submission.
Reasons for Noncompliance
EOHLC responded to the discrepancies identified; however, it failed to supply any supplementary documentation that would adequately justify these inconsistencies.
Recommendations
- EOHLC should implement stronger monitoring procedures to verify that all payments to shelter providers align with the negotiated terms in their contracts. EOHLC may have required services not anticipated or included in its contracts with the different types of shelter providers. However, EOHLC should amend the contracts or draft new contracts to cover these services in order to provide full transparency in government.
- EOHLC should ensure that all charges are pre-approved, contractually authorized, and properly documented before processing payments. EOHLC should ensure that it complies with contract terms and payment approval procedures to avoid similar issues in the future.
- EOHLC should limit the use of gift cards, and in instances where it does allow them, EOHLC should implement stronger control mechanisms like those required for other public benefit programs within the Department of Transitional Assistance to prevent potential abuse or misspending of taxpayer-funded benefits.
Auditee’s Response
EOHLC properly managed its shelter providers and adhered to the terms of its contract, but is committed to continue improving its monitoring and invoice review processes. EOHLC agrees on the importance of using clearer contract terms and is committed to continuing to improve our contract terms and amendment practices and our monitoring and invoice review processes. But as to the specific issues identified in the report, EOHLC properly managed its shelter providers and adhered to the terms of its contracts, including:
- Meeting Room Charge
It is standard practice for hotels to charge hotel guests for the use of meeting rooms, conference rooms, or event space. EOHLC occasionally required such spaces to accommodate events such as parenting classes, legal service clinics, vaccination clinics, and other supportive services typically provided to families in the EA Family Shelter Program. As EOHLC informed the SAO, before a meeting room could be charged to EOHLC, provider staff had to make a request to EOHLC and EOHLC had to affirmatively agree in advance to pay for use of the meeting room. EOHLC agreed to pay for the use of a hotel meeting room in the one instance identified by SAO because the room was needed in order to meet with families to provide supportive services.
- Room Charges
The room charges identified in the report as improper were in fact used to shelter eligible homeless families enrolled in the EA Family Shelter Program. Some families required two hotel rooms to accommodate the size and composition of their family, as was the case in the instance identified by SAO.
It is important to note that the contract was amended in the next fiscal year to 96 rooms. EOHLC agrees with the SAO report that, in this situation, we could have executed a contract amendment more quickly. EOHLC is committed to ensuring that contracts reflect that all charges are contractually authorized and properly documented as part of our invoice review process as noted above.
- Strategic Rehousing Initiative (SRI) Gift Cards
There is no evidence to suggest that gift cards were misused. SRI funds are intentionally flexible in order to aid families exiting shelter. Providers are required to retain records and relevant documentation of expenses for their records, and to verify that expenses are allowable prior to submitting invoices to EOHLC. In the invoice mentioned in the draft audit report, EOHLC verified that the provider kept detailed information on each gift card disbursement.
Nonetheless, gift card usage is rare and EOHLC agrees gift cards should not be the primary mechanism utilized. Since the audit period, EOHLC issued an “Administrative Plan on the Uses of Strategic Rehousing Initiative (SRI) Funding,” as well as several memoranda further clarifying the use of SRI funding. The SRI Administrative Plan includes definitions, allowable uses, SRI approval and invoicing processes, among other information. EOHLC also developed an invoice template specific to SRI, which collects specific information on gift cards. EOHLC agrees to further review the practices of our providers to strengthen control mechanisms and verify use of the gift cards.
- Diversion Program
EOHLC maintains that the SAO did not have sufficient facts or information regarding diversion services as very few opportunities were presented to EOHLC to thoroughly explain how it works. Under the relevant contract, rates for diversion services could fall within a range that SAO averages to $1,580 per family. The $19,450 invoice at issue shows 8 diversion referrals and 79 calls from the homelessness prevention hotline.
SAO’s alleged “discrepancy” appears to rest on averaging costs across both diversion services and homelessness prevention hotline calls and suggesting that the resulting $200 per family is too low. This calculation does not reflect the reality of costs under this program, under which minimal costs were associated with calls from the prevention hotline and the costs for diversion services varied based on family needs.
Since the audit period, EOHLC separated out diversion services into their own contracts for providers. This allows for a more streamlined process, especially for invoice review. Diversion contracts are now set up as reimbursement contracts, requiring supporting documentation for all costs incurred from the previous month. EOHLC has also released other administrative plans relative to the diversion program to clearly define terms, appropriate use of funds, and standardize the program overall.
Auditor’s Reply
In its response, EOHLC stated that it is standard practice to charge hotel guests for the use of meeting rooms or conference rooms. If this was a need, then EOHLC should have added meeting rooms or conference rooms to the contract. EOHLC stated that it had to agree in advance to pay for the use of this space. However, EOHLC was unable to provide any evidence of this when we requested it.
Regarding the room charges, EOHLC has a financial obligation to pay for only those services included in the contract. We understand that some families may require multiple rooms. In that instance, EOHLC should place these families in locations that can accommodate these families under the terms of the contract. We noted EOHLC’s agreement in our finding when we stated that it should have amended its contract sooner.
EOHLC stated that there was no evidence to suggest that gift cards were misused. We agree; however, the lack of evidence, either way, is the problem we are highlighting. The invoices we received did not include any details for the purchases made with these gift cards; we cannot determine whether these gift cards were used as intended because EOHLC did not receive sufficient evidence to ensure that the funds on these cards were used appropriately. We note that EOHLC says that it is issuing a new initiative to further clarify the use of SRI funding and to explain allowable uses, which is in alignment with our recommendation.
EOHLC stated that our audit report is incorrect for suggesting that there was a discrepancy in an invoice for diversion services. EOHLC was unable to provide evidence to support the statement that the services provided to the families were accurate. EOHLC stated that this invoice showed that diversion services were provided to families, but this is not the case. The invoice only shows that EOHLC was billed for these services. It is not evidence that the services were provided. EOHLC is incorrect in suggesting that we found the average cost of $200 per family to be too low. We were comparing the invoice to the terms of the contract and properly labeled it as a discrepancy.
As part of our post-audit review process, we will follow up on changes EOHLC has stated it has begun implementing regarding these matters.
| Date published: | May 20, 2025 |
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