Objective

To determine whether the New York City Department of Homeless Services (DHS) is effectively monitoring its contract with Church Avenue Merchants Block Association, Inc. (CAMBA) to ensure reported costs are allowable, supported, and program-related. The audit covered the period from July 2020 through June 2023.

About the Program

DHS, an administrative unit of the New York City Department of Social Services (DSS), is the agency responsible for providing transitional housing and services for eligible homeless families and individuals in New York City and for providing fiscal oversight of the homeless shelters. In July 2011, DHS contracted with CAMBA, a City-based not-for-profit organization, to provide temporary housing, case management, housing referrals, placement services, and on-site medical and mental health services for homeless women, including those with mental illness and co-morbid substance abuse disorders, at its 200-bed Magnolia House Women’s Shelter (Magnolia) for the period from July 2011 through June 2020. The original contract for $67.4 million was renewed, amended, and increased during the period from July 1, 2020 through June 30, 2021 to $84.5 million, including $4.9 million to cover COVID-19-related expenses. In July 2021, DHS entered into a new $49 million contract with CAMBA for the period from July 1, 2021 through June 30, 2026 for Magnolia.

During the 3 fiscal years ended June 30, 2023, CAMBA claimed $27.9 million in reimbursable expenses for the contracts. DHS is responsible for monitoring its contracts with CAMBA to ensure reported costs are allowable, supported, and program-related. To qualify for reimbursement, CAMBA’s invoices/expenses must comply with DHS’ Human Service Providers Fiscal Manual (Fiscal Manual), the City of New York Health and Human Services Cost Policies and Procedures Manual (Cost Manual), and the Magnolia contracts.

Key Findings

For the 3 fiscal years ended June 30, 2023, we identified $4,501,692—accounting for approximately 16.1% of all CAMBA’s reported costs—that did not comply with the requirements in the Fiscal Manual, Cost Manual, and Magnolia contracts. This includes:

• $2,126,980 in compensation costs (salaries and related fringe benefits) that were not supported by Magnolia staff sign-in/sign-out logs, were overallocated to the Magnolia contracts, or were not related to the Magnolia program.
• $1,835,545 in contracted services costs and other expenses that were unsupported, overallocated to the Magnolia program, or non-reimbursable.
• $539,167 in indirect costs related to the non-allowable charges identified in the report.

These findings, along with other irregularities, point to a significant deficiency in DHS’ monitoring and oversight of its contracts with CAMBA. For instance, DHS approved CAMBA’s security contracts without evidence that they were competitively bid, as required. DHS also did not complete the required expenditure reviews or ensure that year-end closeouts were completed timely—a process control that would improve the quality of DHS’ reviews and facilitate recovery of overpayments.

Key Recommendations

• Review and recover, as appropriate, $4,501,692 in reported expenses that were not in compliance with the Fiscal Manual, Cost Manual, and Magnolia contracts.
• Review the eligibility of claimed expenses in accordance with the Fiscal Manual, Cost Manual, and providers’ contracts, ensuring that providers such as CAMBA:
  • Retain the requisite documentation to support claimed expenses,
  • Maintain the required inventories, and
  • Complete year-end closeouts on time.