Comptroller: Contractors misappropriated $6.85 million in Suffolk County homeless funds

Contractors who provide shelter to homeless residents in Suffolk County misappropriated $6.85 million between 2016-18 "by diverting emergency housing funding from its intended use," according to a report from the Office of the Suffolk County Comptroller.

As of Dec. 31, 2023, the county has collected $3.04 million through repayment agreements with several nonprofits or by withholding funding from the Department of Social Services, according to the report, which is the culmination of a series of audits. County officials said they have implemented stricter oversight in contracts with homeless providers to curb future instances of misappropriated funds.

"The findings are more than troubling," Comptroller John M. Kennedy Jr. said Thursday during a news conference at the H. Lee Dennison Building in Hauppauge. "They are absolutely, outright, totally unacceptable."

The $6.85 million represents about 6.37% of the $107.5 million of program revenue received by 14 contractors, according to the report.

"This money should be spent on what it was intended for," County Executive Edward P. Romaine said.

In some instances, contractors "attempted to characterize things as capital improvements that had nothing to do with the operations of the homeless housing entity at all," Kennedy said.

As another example, Kennedy said some contractors increased salary for employees after its budget had been submitted and without departmental approval in violation of its county contract. He said the "common practice" of retroactive approval of salary increase undermines the bidding process by which contractors are selected.

The audits found 12 contractors exceeded salaries as stipulated in their contract by a total of $1.7 million, all of which must be returned to the county.

Kennedy said there’s a difference between "an innocent mistake and an active attempt to conceal and to go ahead and misappropriate. More often than not, that’s what we found."

The comptroller described the overall activity uncovered as "unscrupulous" but said he couldn’t comment on if any offenses rise to a criminal level. He did say that audits are forwarded to the district attorney’s office as standard procedure.

A spokesperson for Ray Tierney, the district attorney, said the office does not confirm or deny the launching of an investigation.

There are currently about 2,400 homeless people in Suffolk County, a "staggering" number that includes about 1,000 children, said John Imhof, commissioner of the Department of Social Services.

Ken Knappe, who leads the department's finance division, said it is using the report "as a guide on how we can strengthen our internal policies."

The largest overpayment went to HELP Suffolk Inc., a Bellport-based nonprofit that operates under the parent organization, HELP USA Inc. The audit found the nonprofit was overpaid $2.05 million.

The largest portion was $1.5 million of per diem payments "that were improperly excluded from program revenue reported" on the homeless shelter provider financial statements, according to the report.

The nonprofit declined to return the funds or enter into a repayment agreement, according to the report. The Department of Social Services then began withholding monthly payments.

Samantha Conlan, senior vice president of development and communications at HELP USA, said in an email the report shows the organization “has addressed the amounts cited in previous reports.”

The comptroller began a "more comprehensive" examination of contractors providing homeless services in 2019 in response to audits examining the fiscal years 2000 through 2015 that found "patterns of abuse," according to the report.

Audits are now done yearly "to timely identify excess county funding and questionable costs," according to the report.

By Joe Werkmeister

joe.werkmeister@newsday.com

Joe Werkmeister covers the towns of Southampton, East Hampton and Shelter Island. He is a graduate of St. Bonaventure University and previously worked as the editor of two North Fork community newspapers.

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