Report: New York City shelter system beset by nepotism, excessive salaries

(The Center Square) — New York City's costly emergency shelter system is beset by nepotism, a lack of competitive bidding, and excessive salaries, which are driving up costs for the city's taxpayers, according to a scathing new report.

The report by the city's Department of Investigation said a probe of the shelter system dating back to 2021 uncovered instances of nepotism in city contracts for shelters, a failure to follow competitive bidding rules when procuring goods and services with public money, and poor controls over the use of taxpayer dollars for executive compensation, among other problems.

Investigators found that shelter providers have hired immediate family members of senior executives and board members in violation of their city contracts. In one case, a shelter provider employed several of its CEO's children, the report's authors said.

The report also criticized excessive salaries paid to some nonprofit executives with city money. In one case, the chief executive of a provider called Core received more than $1 million in compensation during one year, the report said. The president and chief executive officer of Acacia Network Housing was paid more than $916,000 in 2021, while the CEO of Camba, another shelter provider, was paid $700,000 over several years.

"However, because shelter providers are not required to consistently report how much of their executives’ total compensation is funded by the city, it often was not clear what percentage of these compensation packages have been publicly-funded and what percentage have been funded by other sources," the report's authors wrote. "This fact only underscores the need for clear rules and transparent reporting in this area."

Department of Investigation Commissioner Jocelyn Strauber said the report "provides ample evidence of the risks specific to nonprofits and shortcomings in city oversight" and highlights the crucial need for reforms to the system.

"When it comes to protecting the vast taxpayer resources that city-funded nonprofits receive, prevention is key," she said in a statement. "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."

New York City has seen more than 183,000 asylum seekers arrive over the past year amid a historic surge of immigration along the U.S.-Mexico border.

Over the past year, the city has spent more than $1 billion on tens of thousands of migrants under its care and expects to spend about $10 billion on migrant costs in coming years.

DOI investigators outlined a series of recommended reforms it said could save taxpayers money. That included centralizing oversight of compliance, fiscal, and governance matters for nonprofit human service providers under contract with the city.

"New York City is currently making an unprecedented financial commitment to address homelessness," the report's authors said. "For that reason, it is more important than ever that it implement stronger risk management and compliance controls around this spending."

A 2021 report by the city agency highlighted similar concerns about fraud and waste in the shelter system under then-Mayor Bill DeBlasio, and made several recommendations that officials say weren't fully implemented.

The report adds to mounting criticism of Mayor Eric Adams, who is fighting federal bribery and fraud corruption charges stemming from a five-count alleging that he accepted undisclosed gifts and illegal campaign contributions from Turkish officials in exchange for helping them build a new consulate in the city.

City Comptroller Brad Lander, a Democrat running for mayor, said the investigation "underlines the Adams administration’s failure to implement any of the anti-corruption recommendations" from the agency's 2021 report.

A report issued by Lander's office in August accused the Adams administration of failing to provide oversight of a $432 million contract to provide services to newly arriving migrants, wasting millions of taxpayer dollars.

“For years, my office has echoed DOI’s urgent drumbeat to fight against lax procurement oversight and safeguards against corruption that City Hall neglects to address," he said in a statement. "If the Mayor continues to fail to implement these common-sense recommendations, further eroding public trust in our local government, then the City Council must take action.”