A report from the Department of Investigation released Thursday found widespread corruption among nonprofit homeless shelter providers, citing “hundreds of governance and compliance concerns” that include salaries inflated by taxpayer dollars, the hiring of family members and failures to follow procurement regulations.
The sweeping 100-page report, examining the past three years of provider operations, found nepotism, overinflated executive salaries, conflicts of interest and failure to comply with competitive bidding rules over its three-year-long review of over 50 major nonprofit providers.
The report comes amid a series of federal and state investigations of city contracts and the possibility of influence peddling and kikcbacks among Adams administration officials.
“When it comes to protecting the vast taxpayer resources that City-funded nonprofits receive, prevention is key,” DOI Commissioner Jocelyn E. Strauber 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.”
One example cited in the report was Black Veterans for Social Justice, a provider that receives taxpayer funding and had allegedly employed its CEO’s children since at least 2007. But the company lied in a questionnaire to DOI, claiming the organization did not employ any immediate family members of senior employees or board members, according to the report.
The organization is now working under a monitorship agreement.
Another provider, South Bronx Overall Economic Development Corporation, improperly employed at least five relatives of senior employees — including the child and niece of the nonprofit’s Executive Director and the children and cousin of its Chief Administrative Officer, the report says.
Neither nonprofit immediately responded to a request for comment.
In another example of corruption, the report said shelter provider SEBCO Development purchased security services from a for-profit security company owned by the nonprofit — allowing higher-ups at the nonprofit to line their pockets with hundreds of thousands of dollars in salary payments from the mostly-taxpayer-funded security company.
SEBCO did not respond to a request for comment.
DHS-funded shelters host around 86,000 people every night, racking up $4 billion in spending in fiscal year 2024 — up from $2.7 billion annually in fiscal year 2022, according to the report. This is largely due to the influx of asylum seekers coming to New York.
The report did not include city-funded emergency migrant contracts.
City comptroller and mayoral candidate Brad Lander slammed Mayor Adams for not putting in place oversight and safeguards earlier.
“DOI’s latest 100-page investigation underlines the Adams Administration’s failure to implement any of the anti-corruption recommendations from DOI’s 2021 report,” Lander 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.”
Spokespeople for the Department of Social Services did not immediately respond to a request for comment, but said in a statement issued to Crain’s that the report was not reflective of DSS’s current procedures.
“We take every instance of non-compliance very seriously, which is why DSS has completely stopped doing business with a number of providers highlighted in the report, enhanced invoice review policies and practices, and reinforced our robust audit and accountability mechanisms,” spokesperson Neha Sharma told the outlet.