Financial investigation hangs over Office of Homeless Services

Less than 40 days into her tenure, Mayor Cherelle Parker hired an outside accounting firm to investigate the finances of Philadelphia’s Office of Homeless Services, which overspent its budget by nearly $15 million in recent years.

Other than appointing top-level cabinet members and administrators, it was one of her first acts in office. Parker, in a statement Feb. 7 announcing the decision, described feeling “grave concern” after reviewing preliminary findings from the city’s inspector general.

The budgetary issues came to light late last year, when OHS requested a $14.7 million mid-year transfer to cover shortfalls dating from 2021 through to the current year. City Council ultimately approved just under $10 million to help cover prior year expenses.

In addition, several nonprofits that contract with OHS to provide services for the unhoused reported significant delays in getting paid, the Inquirer reported in January.

The audit is focusing on finances during the administration of Parker’s predecessor, Jim Kenney, and his appointed OHS executive director, Liz Hersh.

Hersh, who resigned in October, told Metro she “makes no apologies” for the way she ran the office, and said homelessness in Philadelphia would be in a worse state if OHS remained under the constraints of its budget.

City-run systems faced serious challenges as a result of the coronavirus pandemic, and Hersh contends that the real focus should be on the significant gains Philadelphia has made in addressing homelessness.

Data from Philadelphia’s point-in-time count, when volunteers survey unhoused individuals throughout the city, indicates that homelessness declined 18% between 2018 and 2023, with the number of people living on the streets (as opposed to in a shelter) dropping by more than a third.

Hersh, now with the national organization Community Solutions Inc., said she has participated in the investigation, which is being conducted by the inspector general’s office and Horsey, Buckner & Heffler LLP.

She noted that other departments have exceeded their allocation in the annual municipal budget, particularly during COVID-19.

But City Council Majority Leader Katherine Gilmore Richardson told Metro that “as someone who has been working on our city’s budget in some capacity for more than 16 years, this is not only uncommon but should sound several alarms.”

Gilmore Richardson began examining OHS’s operations after she said she struggled to get help for a family in need of shelter in late 2022. She said the office’s $14.7 million budget request came as a surprise to lawmakers, as the need for additional funding was not previously discussed.

Council adopted Gilmore Richardson’s resolution in January authorizing the body’s finance committee to investigate OHS.

She also introduced legislation creating an ombudsperson for the office – someone who would be able to act as an advocate, conduct probes and investigate complaints. If Council approves the bill, the measure would go to the voters, as the change requires a ballot question.

Kenney, in the waning months of his administration, appointed Hersh’s chief of staff, David Holloman, as OHS’s interim executive director. Whether Parker will choose him to lead the office permanently, or select her own director, remains unclear.

Under Holloman’s leadership, OHS instituted a corrective action plan in an effort to improve the department’s internal processes and controls, officials said.

The office had been operating on a calendar year system; he changed it to alight with the city’s fiscal year (which runs from July 1 to June 30). Holloman also said he instituted a multi-layer review for contracts.

“I take full responsibility for making sure that we have a process in place that is getting people paid in a timely manner,” he told Metro during an interview in January.

Hersh said she was encouraged to see that Parker’s proposed budget incorporates more money for housing and OHS.

The mayor’s spending plan sets the office’s budget at $88.7 million, up from $80.6 million. However, the increased funding is less than the $91.5 million OHS anticipates spending this fiscal year, according to the administration’s budget documents.

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‘Housing For All’ is a two-year project in which Metro Philadelphia will investigate the city’s affordable housing crisis. It is made possible by The Lenfest Institute for Journalism’s Philadelphia Local News Sustainability Initiative grant.