Homeless Services Agency Accused of Mismanagement

Five years after the city's Department of Homeless Services pledged to clean up its act, it is facing renewed allegations of improper accounting practices.

Comptroller William Thompson issued a scathing criticism of the department yesterday, saying it dodged oversight by funneling hundreds of millions of dollars into a private bank account. The department used the money, Mr. Thompson said, to make inappropriate payments to homeless shelters and social service providers.

The findings are especially disturbing because Homeless Services officials promised to reduce such practices following similar allegations in 2003, the comptroller wrote in a letter to the department that was released to the press. The department responded yesterday afternoon, saying it is fulfilling its pledge while also managing a surge in demand for shelters.

Mr. Thompson, a likely candidate for mayor in 2009, said the department used an off-the-books account to pay service providers on a month-to-month basis without drawing up long-term contracts that would require city oversight. He pointed in particular to payments to the Highland Park Community Development Corporation in Brooklyn, which in March was accused of corruption in an article in the New York Post.

"In violation of the City Charter, DHS has chosen a path that results in a total lack of transparency in accountability," Mr. Thompson wrote.

A key allegation is the expansion of noncontract payments, which were limited in 2003 to renting shelter space, to cover additional social services.

The commissioner of the Department of Homeless Services, Robert Hess, said the department has cut its noncontract business in half while dealing with an increase in demand for shelter.

"We are converting to contracts as quickly and fully as we can — and doing it in a way that doesn't undermine our assurance of shelter for every family who needs it," Mr. Hess said in a statement yesterday.

A senior policy analyst for the Coalition for the Homeless, Patrick Markee, said in a statement that the city's noncontract strategy amounts to accounting tricks and "expensive Band-Aid solutions."

Highland Park is the only company identified as receiving noncontract payments, a representative in the comptroller's office said. But based on the size of the account in question — it holds more than $160 million — the Department of Homeless Services is believed to be doing business improperly with other providers, the representative, who spoke on the condition of anonymity, said. A representative from Highland Park could not be reached for comment.

Mr. Thompson told The New York Sun that, although he had not yet read the department's response to his allegations, he would be happier if noncontract services had decreased.