Nepotism. Self-dealing. Executive salaries in the high six figures.
These are some of the allegations leveled in a new report on New York City’s multibillion-dollar shelter system released by city investigators on Thursday.
The review, which began in 2021, found a range of potential improprieties at 51 nonprofits that receive taxpayer funds to provide shelter and services for clients of the city Department of Homeless Services, which manages the biggest municipal shelter system in the United States. On an average night, over 87,000 people stay at the more than 500 New York City shelters funded by the department.
The city’s Department of Investigation found multiple instances of apparent conflicts of interest, potential nepotism and failure to comply with competitive bidding requirements on the part of shelter providers, according to the nearly 100-page report.
“City-funded nonprofit service providers pose unique compliance and governance risks, and comprehensive city oversight is the best way to stop corruption, fraud, and waste before it starts,” Department of Investigation Commissioner Jocelyn Strauber said in a statement. “Today’s report provides ample evidence of the risks specific to nonprofits and shortcomings in city oversight and makes 32 recommendations to strengthen controls around this essential network.”
In some cases, insiders were paid outside of their normal compensation through personal business interests involving the shelter where they worked, such as security companies that staffed those shelters — and were owned by the nonprofits they served. In other cases, shelter providers told investigators they did not employ any immediate relatives of senior employees or board members, which would violate their city contracts — but the investigators later found that adult children of shelter executives had been employed by the nonprofits for years.
Multiple nonprofit executives received more than $500,000 annually, and in some cases more than $700,000 annually, in compensation from the shelter providers and related organizations. Investigators emphasized these salaries were funded largely or in part by taxpayer dollars and said the city lacks sufficient rules to guard against excessive compensation.
Many of the groups have annual revenues in the tens or even hundreds of millions of dollars. More than 90 nonprofit contractors now provide shelter services for the city, up from at least 70 just a few years ago, according to the report. New York City has a decades-old legal right to shelter that generally requires that a bed be provided to anyone who needs one — though this right was curtailed for migrants earlier this year.
The report comes as the city faces a stubborn housing and homelessness crisis exacerbated by the migrant influx since the spring of 2022. The homeless services department’s budget for shelters rose to $4 billion in fiscal year 2024, up from $2.7 billion two years earlier, according to the report. Migrant shelters run by NYC Health and Hospitals — called humanitarian relief centers — were not covered by the review and are being separately monitored by city investigators and a major accounting firm.
A spokesperson for the city’s Department of Social Services, which oversees the shelters, said it has “completely stopped doing business with a number of providers highlighted in the report,” and taken other steps to strengthen accountability for the nonprofit contractors.
“To be clear, this report does not reflect our current contracting and oversight processes given that the review began years ago prior to the current administration, but we look forward to continuing on these improvements to better serve New Yorkers,” the agency said in a statement.
In responses to a draft version of the report that were included in Thursday’s release, city officials agreed with many of the recommendations and said they would develop a written plan to address the findings within 90 days. The social services department referred suspected problems to city investigators over the course of the probe and promptly tackled cases predating Mayor Eric Adams’ administration, according to the spokesperson.
Investigators said the review was partly sparked by a New York Times story about the former CEO of shelter provider Bronx Parent Housing Network, who in 2022 pleaded guilty to a federal bribery and kickback scheme involving the organization and received a 27-month prison sentence. Representatives of the nonprofit, which is now known as Housing Solutions of New York, did not immediately respond to requests for comment. The organization was placed under a city monitorship from April 2021 to April 2024, according to the report.
Several other nonprofits named in the report either did not respond to inquiries or pointed to their responses in the report. Some organizations defended how much their executives received in compensation as reasonable, while others said they followed appropriate disclosures in hiring contractors the investigators ultimately flagged for potential conflicts of interest.
The Department of Investigation said “aspects” of its review of shelter providers are ongoing.
