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NEWS from the Office of the New York State Comptroller
Contact: Press Office 518-474-4015

DiNapoli: Oversight of Supportive Housing Falls Short

Audits Find State Office of Mental Health Can Do More to Ensure Taxpayers’ Money Is Properly Spent and Services Are Provided

January 9, 2017

New York State Comptroller Thomas P. DiNapoli today released three audits of supportive housing providers for New Yorkers with mental illness, which found that a lack of monitoring by the state Office of Mental Health (OMH) allowed not-for-profit providers to bill for improper expenses, such as salaries, alcohol and spa services, and for health and safety violations to go uncorrected.

“The Office of Mental Health can do more to monitor and safeguard money that’s earmarked to assist New Yorkers with mental illness,” DiNapoli said. “As the state embarks on an ambitious and necessary expansion of supportive housing, we need to ensure that oversight of the taxpayer dollars that fund vital services for mentally ill New Yorkers are strengthened at the same time.”

OMH’s mission is to promote the mental health and well-being of New Yorkers. Its supportive housing program is a major component of that mission that combines affordable housing with various support services for New Yorkers with serious mental illness, who are able to live independently. The program’s ultimate goal is to ensure clients get permanent housing. In many cases, OMH hires outside contractors to provide and manage the housing and services for its clients.

DiNapoli’s office initiated a series of audits to determine whether the state and mentally ill New Yorkers were getting the services paid for and whether the contracted providers were using taxpayers’ dollars appropriately for justified expenses.

Postgraduate Center for Mental Health

The Postgraduate Center for Mental Health (Postgraduate) provides housing and services for up to 725 clients in apartments in Brooklyn, the Bronx, Queens and Manhattan. DiNapoli’s audit primarily focused on its five-year state contract that ended June 30, 2014, during which OMH paid Postgraduate $40.8 million, including $9.67 million in the contract’s final year.

DiNapoli’s auditors visited 14 clients in their homes and found health and safety issues in some of the apartments, including:

  • Severe bedbug infestation in one apartment;
  • Badly damaged walls and ceilings in four apartments;
  • A bathroom door coming off its hinges in one client’s bathroom;
  • An apartment that smelled so strongly of cat urine that a hospital mobile crisis unit representative had declined to enter it, according to a case manager’s notes; and
  • Two apartments without smoke/carbon monoxide detectors.

A review of Postgraduate case managers’ notes found they weren’t recording some of the problems that DiNapoli’s auditors observed, and that when they did record them, action was not always taken to fix the problems.

Auditors also found Postgraduate charged $697,938 in unsupported or inappropriate expenses to its OMH contracts. Much of this, a total of $457,914, went to a profit-sharing plan, which was not provided for in the OMH contract. Postgraduate officials said its employees were not highly paid so it distributed surplus contract funds to them. Under the contract, unspent surplus funds are supposed to be returned to the state. For 2013-14, Postgraduate distributed $50,000 each to three of its executives and an average of $1,092 to all of its other employees. DiNapoli’s audit also found the not-for-profit had charged $228,957 in profit-sharing costs to its OMH contracts in 2012-2013. 

During its 2013-2014 contract year, Postgraduate’s CEO was paid $847,118, consisting of $396,289 in base salary, $273,000 in bonus pay and $177,829 from a deferred compensation account. Postgraduate charged $222,295 of the CEO’s compensation to OMH contracts, although salaries of not-for-profit CEO’s contracting with the state are generally limited to $199,000 by NYS Executive Order #38.

DiNapoli’s audit determined that OMH had previously identified $1.4 million in overpayments to Postgraduate made from 2011-2012 through 2013-2014 contract years, but did not take action to recover the money until DiNapoli’s auditors questioned OMH officials about the matter.  

Further, according to OMH’s fiscal guidelines, supportive housing providers should set aside a minimum of $500 per client in a contingency fund to assist a client at risk of losing his or her housing.  However, Postgraduate did not formally set aside any funds for contingencies.   

DiNapoli’s audit recommended that Postgraduate case managers take prompt action to fix apartment conditions that pose health or safety hazards, that OMH only pay for eligible contract expenses and that it recover the nearly $700,000 in payments identified.

DePaul Group, Inc.

DePaul Group Inc. has two affiliates, DePaul Community Services (DCS) and Living Opportunities of DePaul (LOD). The audit examined their operations over 34 months from January 1, 2013 to October 31, 2015. DiNapoli’s audit found the DePaul Group provided appropriate housing and that all but one of the 14 clients auditors visited had adequate housing. In that case, when auditors found a client was living in an unsafe apartment, DePaul Group worked with the landlord to make necessary repairs.

DiNapoli’s audit found that OMH did not adequately monitor the contracted providers’ finances to ensure that claimed expenses were appropriate.

For 2013 and 2014, the affiliates claimed a combined $6.1 million in expenses for providing 433 beds, program services and administration costs. Auditors’ review of a sample of $360,918 in claims found $41,743 (12 percent) in expenses were not allowable and $109,987 (30 percent) were questionable and should be reviewed. Separately, DiNapoli’s audit found the parent group allocated $216,262 in administrative expenses to its affiliates — and were charged to the OMH contract — without adequate support.

Among the spending that should not have been billed to OMH was $12,493 spent at a conference at the Sagamore Resort and Hotel in Lake George that included $4,505 for rooms used by guests of the DePaul Group’s CEO, $1,941 for a suite rented by the CEO (including $1,178 for alcohol served at a dinner he hosted and other incidental charges such as a spa treatment), and $5,000 in conference sponsorship costs.

DiNapoli audit recommended OMH recover $51,450 in costs from DCS and LOD, including $41,743 in disallowed expenses and $9,707 improperly charged to other OMH-funded programs. Another $109,987 in expenses charged to OMH that the audit sampled, such as gift cards, vehicle costs and pension costs, were questionable, and while they may be reasonable and necessary the audit recommended they receive additional review by OMH.

The audit also found several clients paying more than 30 percent of their incomes toward housing costs, which violates the program rules and could make it hard for them to remain in their housing for the long term. Finally, DePaul had not set aside any contingency funds.

Institute for Community Living

The Institute for Community Living (ICL) is one of the largest supportive housing providers in the state, authorized to provide housing for up to 1,420 clients in Brooklyn, the Bronx, Manhattan and Queens. Under its most recently completed contract with OMH, ICL was paid $116.6 million over the five years ended June 30, 2014. It claimed expenses of about $21.5 million for the fiscal year ending June 30, 2014. DiNapoli’s audit sampled 20 client files and determined that ICL was working with clients to develop independent living skills and making monthly and quarterly visits to assess clients’ progress.

The audit also found that ICL charged $138,132 in inappropriate or unsupported expenses and that OMH did not initiate recovery of $561,011 in contract overpayments from the 2010-2011 and 2011-2012 fiscal years until auditors addressed the matter with OMH officials. Finally, as with the other two providers, ICL had not established a contingency fund to assist clients in an emergency.


OMH officials agreed to review many of the questionable and inappropriate expenses and recover funds where appropriate, but disagreed with the auditors’ conclusion that its fiscal oversight of the program was deficient. Officials described oversight by its regional field offices as “rigorous,” despite the fact that staff from OMH’s western New York regional field office never visited one of the DePaul affiliates during the 34-month audit period and only visited the other affiliate once (in 2015).

OMH officials also indicated that contingency funds are suggested (but not required), although such funds are “required,” as prescribed by OMH’s public 2015 Supported Housing Guidelines: Questions & Answers. Auditors recommended that OMH review its various forms of written guidance on contingency funds and resolve any apparent inconsistencies, so that program providers are clear on their responsibilities for those funds. 

The full audits can be found online at

For access to state and local government spending and more than 50,000 state contracts, visit The easy-to-use website was created by DiNapoli to promote openness in government and provide taxpayers with better access to the financial workings of government.