City Auditor: Homelessness Contracts Awarded “Properly,” but Delays, High Turnover, and Inappropriate Metrics Remain Issues

The city auditor issued a report last week on the city’s Homelessness Strategy and Investment division, which concluded that while HSI is awarding contracts to homeless service providers “properly, HSD is not executing contracts in a timely manner.” Because the city is awarding budgeted contracts late, providers are being forced to use their own funds to cover services during these delays.

“We reviewed a sample of 29 contracts and found that all of them were signed late,” the report says. “Ten contracts were executed over 50 calendar days late and three were six months late. This resulted in some service providers not being able to invoice the City for program expenses[.] …We reviewed a sample of 29 contracts and found that all of them were signed late. Ten contracts were executed over 50 calendar days late and three were six months late. This resulted in some service providers not being able to invoice the City for program expenses and needing to use other funding sources to keep programs in operation.”

(The Law Enforcement Assisted Diversion program, which is considered a homelessness program despite the fact that it focuses on criminal recidivism and quality of life outcomes, not housing, finally received city approval for its 2020 contract in late March).

A big reason for the delays, according to the auditor’s report, is that most contracts start on January 1, which gives the city’s grants and contracts administrators only a few weeks after the budget is adopted in November to execute these contracts. Another issue is that turnover among the grants and contracts specialists who are in charge of monitoring contract compliance is extremely high—30 percent in the first half of 2019, according to the audit—and new hires are being trained by their coworkers instead of through any formal training program. In his response to the audit report, acting HSD director Jason Johnson, who has announced he will leave in June, said HSD has hired temporary workers to help grants and contracts specialists who are “working beyond their capacity.” These are among the workers who are being trained on the job by their peers.

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As I reported last year, the Human Services Department dismantled its formal contracts compliance unit and directed contract specialists in each division to have “a high level of individual accountability” to catch errors in contracts. HSD set up the unit in 2014 after a scathing state audit found that the HSD lacked “adequate controls” to monitor how contracts were being written as well as how human service providers were spending grant money.

The city auditor did not report on specific errors that had escaped contract reviewers’ attention, but did note that many large contracts were being reviewed through “desk reviews” that do not involve on-site visits, meetings with program staff, or reviews of client files.

The auditor also highlighted an issue homeless advocates have been pointing out since before the city implemented “performance-based contracting,” which allows the city to withhold funding from providers if they fail to meet certain milestones: Requiring homeless service providers to produce a high number of “exits to permanent housing” in order to get full funding is unrealistic in a city that is not building enough of this type of housing to serve the need, and ignores other types of success stories that do not involve, say, a person leaving emergency shelter and moving directly into permanent housing.

For example, the city’s performance metrics penalize programs that move clients into “foster care, nursing homes, hospitals, domestic violence shelters, and transitional housing and transitional living programs for youth” by counting those as “negative” rather than positive exits from the programs. In its response to this criticism, included in the audit, HSD said that it chose exits to permanent housing as a performance metric “because the goal of the homeless response system is to end an individual’s experience of homelessness and HSD is committed to ensuring investments work towards this goal”—a response that ignores the fact that the city’s homeless population far outnumbers the number of units that are available to house it.

Additionally, the audit found that the fact that the city has no way of tracking how many shelter beds are available in real time “creates inefficiencies for overworked shelter staff” who are forced to call around to other shelters when clients show up at shelters that are full. And it concluded that the current system for tracking client’s “vulnerability,” which puts some people on track for housing while leaving others in limbo indefinitely, exacerbates the existing racial inequities in the homeless service system, particularly for undocumented people.

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