Suffolk Comptroller John Kennedy, without fanfare, earlier this month issued a scathing management letter to the county Department of Social Services for a string of missteps in opening a 440-bed homeless shelter in a former Brentwood hotel that have cost the county $3.6 million.
Those missteps, he said, included failing to fingerprint top officials who had criminal records, uncovering details of loans and lawsuits that would have disqualified them, and failing to realize that a vice president was working by phone from Arizona.
The shelter operator, Long Island Women’s Empowerment Network, was ousted in March after a Kennedy audit argued for a more experienced nonprofit, and sent data to the county district attorney for possible prosecution.
While the audit was aimed at the network, the management letter was aimed at the county’s largest single department with a budget of $611 million a year. A management letter is a red fiscal flag, rarely used, when operations run off the rails.
“We firmly believe that had DSS actively and efficiently monitored the agency . . . from the inception . . . irregularities, at a minimum, would have been disclosed on a timely basis; they may in fact have been prevented from occurring at all,” the comptroller said.
More importantly, he said, if DSS had “sufficiently vetted” the initial selection, “it is doubtful the county would have entered into a contract.”
In its bid, for example, the nonprofit showed a deficit of $57,000, but got an 83 percent rating for viability because it was promised a $750,000 loan were it to get the contract. Kennedy found later that the pledge was made by a disbarred attorney who pleaded guilty to falsifying housing loans from the U.S. Department of Housing and Urban Development.
The network also said it had 20 employees, but had a payroll of only $68,300, which the comptroller said should have raised concerns. Kennedy noted that 15 other agencies scored higher than the network, but were not selected.
The comptroller also found an “inherent weakness” in the system that advances money to shelter operators for estimated expenses that are never verified until an audit. The department, he said, must eye those costs upfront.
When the Brentwood shelter opened, social services increased the daily rate to help the network’s cash flow because not all beds were filled. However, the department did not lower the rate for two years, after all beds were filled, costing the county $1.1 million.
In all, Kennedy made a five recommendations to DSS, including tightening requirements for fingerprinting, improving its selection process, increasing monitoring of operators — particularly those with little experience — and making sure all shelter employees work on-site.
DSS Commissioner John O’Neill, widely viewed as an able manager who worked with Kennedy in removing the Long Island Women’s Empowerment Network, agreed with many of the recommendations. O’Neill said he has tightened fingerprinting rules, barred telecommuting and ordered increased on-site meetings with new operators.
However, he sidestepped the issue of selection of shelter operators.
O’Neill said DSS followed current county policies and that despite problems, all network clients, “were properly cared for and received all services that were contracted.” He punted on Kennedy’s call for greater upfront scrutiny of shelter costs, saying Kennedy’s predecessor, Joseph Sawicki, requested that DSS stop such yearly reviews in 2011.
Kennedy, in response, said social services officials provided no “written communication or directive” to back up that assertion.
“We believe it would be more cost effective to prevent unjust payments . . . rather than attempting to recover improper funding . . . once a payment has been made,” he said in the management letter.