PHILADELPHIA (KYW Newsradio) — A city inspector general’s report on Philadelphia’s Office of Homeless Services has found that overspending in the department was driven not by criminality or corruption but by a determination to deliver life-saving services through the COVID-19 pandemic.
“This case is largely about the former executive director of OHS, Liz Hersh, and the department’s emphasis on saving lives above almost all considerations during her tenure,” Inspector General Alex DeSantis said Monday, during a City Hall event, where the report was released to City Council and reporters at the same time.
Mayor Cherelle Parker said she is committed to punishing anyone found to have engaged in illegal actions, but she also felt it was important to vindicate those who’ve been cleared after an investigation.
“I thought it was important to stand up for the men and women who are giving it 1,001% every day,” she said. “No one deserves to do their jobs under a shadow of doubt about their own individual honesty, integrity or character.”
OHS overspent its budget by $15 million over four years, beginning in 2020, when its budget was cut at the same time the pandemic was putting new demands on the system. There was also an encampment on the Benjamin Franklin Parkway that summer that was resolved by promising new housing opportunities, including immediate shelter for more than 200 people. In 2022, Texas began sending asylum seekers to Philadelphia in buses, putting more pressure on OHS services.
City departments routinely overspend, and money is moved around within the $6.2 billion budget to cover the deficits during a mid-year budget transfer. But when OHS went before City Council last fall, seeking to make up the gap, member Katherine Gilmore Richardson objected, saying she suspected irregularities in the office. Council agreed to cover less than $10 million of the deficit. Richardson referred the matter to the inspector general.
Richardson further suggested there’d been misconduct during hearings on the 2025 budget, last week, at which she demanded that 13 OHS officials individually testify that they did not personally benefit, or receive or accept money, from OHS or federal, state or city government. Some of the officials seemed amused by the question, others were clearly offended.
DeSantis stressed that his report was preliminary but said he found no evidence of corruption.
“To discuss this case in the context of corruption at this stage would be entirely premature, irresponsible of us, and somewhat misleading,” he said. “It’s time for us to begin discussing this matter in an honest way that frames the right issues fairly and clearly. This case highlights the risk that’s associated when our government officials prioritize outcomes over all other things. We, as a city, cannot afford to discard process.”
The 15-page draft report outlines the measures OHS took to continue to deliver services as the deficits mounted, including juggling payments to contractors, delaying payment on some invoices for long periods of time, retroactively amending contracts to pay past due amounts in new contracts and mingling grant funds with operating funds to cover costs.
“They did not adjust their spending practices. They took no action to cut services. They took no action to adjust their programs,” DeSantis said. “Instead, they decided to push through, because, under the leadership of Liz Hersh, their mission, saving lives, was too important.”
Hersh said the report was fair.
“It reinforces what I’ve been saying,” she told KYW Newsradio in a phone interview. “The team at OHS is extraordinary. They should be honored and recognized for the work they do, and the fact that their work has been called into question is unconscionable.”
As for her own role in the overspending, she admits that saving lives took precedence over staying within her budget.
“During the pandemic, they were the most vulnerable people, when we had a stay-at-home order, and they had no home to stay in, that was the imperative,” she said. “We were responding to an emergency, just like police and fire respond to an emergency.”
She’s also proud of the results, regardless of the financial confusion it created.
“We bucked the national trend. We reduced the number of people experiencing homelessness through the pandemic when other cities’ numbers skyrocketed. We never closed our doors. Outreach, intake, shelters all stayed open. Our providers worked selflessly through the pandemic and the administrative systems we had available to us fell short of what we needed to manage everything that had to be done,” she said.
Richardson seemed discomfited by the IG’s report. As other Council members watched DeSantis’s presentation, she kept her eyes down, apparently taking notes. She refused to comment afterward.
Parker praised Richardson for calling attention to the situation, saying there clearly had been a problem and the investigation resulted in recommendations that should keep that level of overspending from occurring at OHS again.
The recommendations include:
— Strengthening the budget verification process when finalizing contracts
— Imposing strictures on carrying over deficits.
— Collecting and tracking more data from the city’s Payment Verification Unit.
— Evaluating the scope of the exemption for nonprofit contractors in the city’s contracting process.
— Restricting the mixing of grant funds and operating funds for a single contract.