The state’s housing division failed to properly manage and oversee its emergency shelter program while it experienced record-high demand in recent years, according to analysts in State Auditor Diana DiZoglio’s office.
Beginning in December 2022, the state’s Emergency Assistance shelter network began to see skyrocketing numbers of families seeking housing. To keep up with the demand, the Executive Office of Housing and Livable Communities (ELHOC) — and its precursor under former Gov. Charlie Baker, the Executive Office of Housing and Economic Development — placed hundreds of families temporarily in hotels and motels around the state.
However, according to the 74-page audit report released earlier this week, state officials signed “unlawful” emergency contracts with some service providers and failed to adequately oversee and document their agreements with others.
The report did not include an overall amount of money that was wasted due to the lack of contract and program oversight.
Below are four main takeaways from the auditor’s report:
1. Emergency contracts did not follow the proper process as required by law
Two of the many contracts EOHLC issued to keep up with the shelter demand did not follow the procurement process required for state agencies. Though EOHLC argued that it was justified in signing these contracts because of the emergency situation, the State Auditor’s Office disagreed.
Typically, state agencies are required to solicit bids from prospective contractors to keep contracts fair and reasonably priced. However, if the delays from this process would cause unnecessary harm, they are able to sign short-term agreements while the proper process is followed.
The auditors wrote in their report that EOHLC should have been able to foresee the incoming stress on the system and prepared accordingly before emergency measures became necessary.
“This would have allowed for competition among vendors with improved pricing, terms and fairness,” the report says. “Emergency contracting is designed to ‘buy time’ to conduct a fair, legitimate procurement process under normal procurement rules. This did not occur.”
In addition, the auditors wrote, the emergency contracts lasted for too long, and should have gone for “weeks, not several months.”
One of the contracts at issue was with East Boston-based Spinelli Ravioli Manufacturing Co. for food delivery to hotels and motels being used as shelters that did not have culinary facilities.
The other contract that the SAO deemed improper was with Mercedes Car Company, now known as Pilgrim Transit, which offered transportation to shelter residents for necessary travel to destinations such as medical appointments.
The housing agency vehemently disagreed with these findings, with Secretary Ed Augustus writing in an official response letter that the analysis was “fundamentally wrong and unfounded.”
EOHLC signed two other emergency contracts in 2023, with Ascentria Community Services and the United Way of Massachusetts Bay; though the report mentioned these two contracts, it did not list any issues with them.
2. State overpaid for services, but it’s not clear by how much
One of the main concerns of the report was that EOHLC’s procedures may have led to unnecessary costs, due to both a failure to search for cheaper options and simple administrative errors and oversight.
For the food contract with Spinelli, the auditors wrote that the catering company had initially offered a payment option that would have been a flat fee for the services they would provide, but that EOHLC had not inquired further about what this flat fee would be.
The agency also could have considered contracting with multiple food providers around the state to decrease delivery costs, rather than having all meals come from the East Boston facility, they wrote.
Auditor analysts also took issue with the costs of the deal with Mercedes Car Company, comparing the trip fees to standard taxi rates listed on the Boston Police Department website.
A taxi rider would pay $2.60 for the first one-seventh of a mile, then 40 cents per mile afterward. In contrast, trips with the car company had a base fee of $140 for the first person and $40 for each additional person, and $498 for the first person in a wheelchair van.
“The transportation service fees … are considerably higher than the typical rates observed in the taxicab or ride-sharing industry. In fact, they align more closely with the pricing structures of executive car services,” the report says.
In one instance, the state was billed $140 for a trip that lasted 223 feet within a single parking lot.
They also noted that EOHLC could have worked with the MBTA or regional transit authorities to provide transportation at a lower cost.
However, the report determined that it was impossible to know how much money the agency could have saved if it had not signed the emergency contracts, because EOHLC did not take the time to find out.
In addition, the audit revealed that the state was overcharged for 9.6% of food deliveries from Spinelli, for a total overcharge of $4,136 (This was offset, however, by additional deliveries where the state was undercharged, for a net overcharge of $2,306). The overcharges were due to inadequate oversight of invoices the agency received, the auditors wrote.
EOHLC disagreed with these findings, saying that the report left out relevant context. In particular, for the transportation contract, the agency said it needed very specialized services, but also encouraged shelter residents to use public transportation when and where possible.
The transportation service needed to be available on demand with short notice, able to travel to locations not near public transit, and able to accommodate people with disabilities and families with small children requiring booster seats.
Augustus noted that when EOHLC did solicit bids for competitive transportation contracts, they received no “satisfactory” proposals.
“The lack of satisfactory bids received in response to our competitive procurement speaks volumes to the extremely unique and challenging nature of this service,” he wrote.
As for the overcharges, he argued that with a nearly $10 million contract, the $2,306 in net overcharges was just 0.02% of the total.
3. Documentation of procurement decisions was lacking
Nearly all of the report’s findings dealt, directly or indirectly, with a lack of documentation for decisions EOHLC made when administering the emergency assistance program.
For the emergency contracts, the agency did not sufficiently document how it made the decisions to hire those companies, the report said.
EOHLC also did not have documentation of subcontractors that worked with some of their contracted service providers, and for some charges for various services that the auditors questioned, the agency could not provide documentation to verify them.
“Without proper records, EOHLC cannot verify whether services were provided according to contractual terms, nor can it ensure that payments were appropriate and aligned with the agreed-upon budgets,” the report says. “It increases the risk of improper use of public funds and a lack of accountability for the services provided.”
EOHLC acknowledged that it could have done more to keep up its documentation, and Augustus wrote that the agency was already “committed” to updating its policies to do so in the future.
4. Some issues in the report have already improved
EOHLC wrote in its official response to the report that it had already updated its invoice review process to increase oversight of payments to vendors, one of several changes the agency has made since the audit period.
It has also clarified some of its policies on how funding is used and restructured its shelter diversion program to have unique contracts for a “more streamlined process.”
Beyond internal policies, however, Augustus said the state has made a number of changes to the shelter program, introducing a maximum number of families that can be served, new eligibility requirements and a cap on the length of time a family can stay in a shelter.
This has resulted in fewer families staying in shelters and lower costs. Gov. Maura Healey announced the day before the audit report was released that all hotel and motel shelters would be closed by summer.
As a result of these and other changes implemented by Healey, for the first time since July 2023, the number of families in shelters has fallen back below 5,000, Augustus wrote.
“These all represent significant progress toward establishing a Right to Shelter system for families where stays are rare, brief, and non-recurring, and costs are financially sustainable to the Commonwealth,” he added.
DiZoglio’s office will review EOHLC’s progress in six months, according to the typical audit process, according to the report.
