Housing Stability audit finds shelter security and expense issues

Housing Stability audit finds shelter security and expense issues

Published on November 21, 2024

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DENVER - Weaknesses in the Department of Housing Stability's shelter management processes are leading to risks involving security, spending, and contract requirements, according to a new audit this month from Denver Auditor Timothy M. O'Brien, CPA.

"Housing Stability's poor organization is negatively affecting operations at Denver's shelters," Auditor O'Brien said. "These issues need to be addressed because vulnerable populations are at risk."

Housing Stability is responsible for overseeing many types of homeless shelters. The department funds and monitors the providers that operate shelters. Our audit did not look at emergency shelters temporarily serving the influx of migrants arriving in Denver since December 2022.

We found Housing Stability has ineffective systems for monitoring shelter provider performance. Areas of oversight concern center on department organization, finances, and accountability. Housing Stability also failed to ensure safety measures at one shelter, track overall shelter-related expenses, and enforce invoice contracting requirements.

The city contracted with the Salvation Army to operate a shelter at a former DoubleTree hotel and provided them with a security budget of $807,000. Several months later, the Salvation Army had not yet hired a contractor to manage a security presence at the property. In March 2024, two guests were shot and killed. Weeks later, a third guest was shot but survived. The city took over security at the property following the first shooting.

Housing Stability's failure to enforce contract terms had effects beyond security. Contract terms include financial oversight of expense reimbursements. Yet, Housing Stability was unable to provide documentation identifying overall shelter-related spending between January 2022 and March 2024. The inability to measure expenses means the department cannot effectively monitor or enforce accountability for shelter spending. Based on available data, we estimated Housing Stability spent nearly $150 million on shelter expenses during this period but the department does not specifically track this information.

Housing Stability failed to hold providers accountable for their use of city funds. The department received 55% of reviewed invoices past deadline. One shelter requested duplicate reimbursements and Housing Stability issued them. If shelter staff disregard contract terms, they may disregard other important financial controls.

"If Housing Stability doesn't know the scale of its expenses, it can't accurately determine whether these programs need more funding or not," Auditor O'Brien said.

We found Housing Stability was not requiring shelters to provide meaningful documentation for reimbursements. A January 2024 department cost-reimbursement policy reduced the amount of supporting documentation shelter providers must submit with city-funded contract invoices. Providers were no longer required to submit documents such as receipts or credit card statements.

However, this policy does not comply with the city's Fiscal Accountability Rules. We recommended Housing Stability update its submission guidelines and invoicing procedures to comply with fiscal rules. We also recommended it end its new cost-reimbursement policy, but the department disagreed.

"Fiscal Accountability Rules are there to protect public resources," Auditor O'Brien said. "Issuing reimbursements without evidence of expenses puts the city at risk of fraud, waste, and abuse. But Housing Stability has given no credible reason why it is disregarding these rules."

Separately, we found issues around lax protection of sensitive information and insufficient nondiscrimination policies.

We found sensitive confidential data was left unprotected in a shared drive that staff in other city agencies could access. Housing Stability stored documents such as birth certificate orders containing contact information and family information of shelter guests. Not protecting confidential information by restricting drive access creates a data security risk.

We also found nondiscrimination policies for shelter guests were missing in some cases. Some shelters we reviewed lacked sufficient documentation of their efforts to prevent discrimination against guests. Most grievance policies applied only to employees and not to the people being served.

In one case, the Salvation Army's employee handbook conflicts with the contract with the city. The handbook says the Salvation Army will follow nondiscrimination law unless it goes against their religious practice. Every contract with a shelter provided includes language prohibiting discrimination against shelter employees and guests based on their identification with a protected class.

"To say that we are going to follow the law, except for when its different from our religious practices is unacceptable," Auditor O'Brien said. "An agency's handbook does not supersede the terms of an agreed-upon contract."

Housing Stability agreed with all but one of our recommendations, including improvements to policies and procedures related to nondiscrimination and grievance processes, expense tracking, and security plans.

AUDITOR TIMOTHY O'BRIEN, CPA
Denver Auditor

Denver Auditor´s Office

201 W. Colfax Ave. #705 Denver, CO 80202
Email: [email protected]
Call: 720-913-5000
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