A new report from the state auditor condemns the Healey administration’s handling of the emergency family shelter system, saying the state’s inability to properly prepare for and assess the migrant crisis resulted in “improper and unlawful” no-bid contracts.
“There was insufficient oversight that allowed for these excessive costs, in the thousands of dollars in some instances, and then a lack of management in ensuring there was documentation to back up the decisions made by the administration,” auditor Diana DiZoglio said in an interview.
The audit, released Tuesday, reviewed financial data from July 2021 to June 2024, a period in which the state placed more than 7,700 families in housing, including shelters, hotels and motels — and turned more than 10,000 away.
The report identified several no-bid contracts related to items such as food and transportation, that resulted in “unnecessarily high costs and inefficiencies.”
The state has leeway to use no-bid contracts during emergency situations, like the one Healey declared in August 2023 in response to a rapid increase in migrants arriving to Massachusetts. But the report found the duration of the no-bid contracts “excessive.”
Emergency contracts “should be executed for several weeks, rather than several months,” DiZoglio said in the interview.
Housing Secretary Ed Augustus, in his written response, said the report “misses the urgent need for reform to the flawed system we inherited, the scale of the crisis that was thrust upon Massachusetts during this time, and the magnitude of the turnaround that has occurred since the Healey-Driscoll Administration took office.”
One contract highlighted in the auditor’s report is with Spinelli Ravioli Manufacturing Co. The East Boston-based company was paid about $9.4 million to prepare and deliver meals to families in 30 hotels and motels used as temporary emergency shelters.
The report finds the state housing office failed to consider a flat rate for delivery fees and did not provide proper oversight of the contract, resulting in overpayments on nearly 10% of deliveries.
Housing officials pushed back on that characterization in a written response to the auditor’s report. They argue that investigators appeared to “misunderstand” the flat-rate delivery offer, and that it’s “speculative” to conclude that a single-rate delivery fee could have resulted in lower costs.
The audit also singled out a no-bid contract with Mercedes Cab Co./Pilgrim Transit of North Truro, an operator “on the tip of Cape Cod.”
In one case, according to the report, the state paid $140 for a taxi ride that went just 223 feet, in a parking lot owned by the cab operator.
The report finds that $2.8 million no-bid contract with the transit company was supposed to end in April of 2024, but was extended twice for an additional $4 million. The audit states these amendments were “inconsistent with law, regulation, and best practices for emergency procurements.”
In its response to the auditor, the housing office said it tried to competitively procure transportation services after signing the emergency contract with Mercedes Cab, but received no “satisfactory bidders.” They also note that the trips flagged as incorrectly invoiced account for just 0.01% of all rides.
Massachusetts “was in the midst of a crisis during the audit period,” housing officials wrote. Since then, they conclude, the administration has built “a stronger, more sustainable shelter program, and increased staffing to appropriately accommodate the system to ensure it runs efficiently and achieves our goal that shelter be rare, brief, and nonrecurring.”
Some providers in the system also defended the use of emergency contracts in response to the audit.
“You can’t have an emergency procurement in shelter, and then have a standard procurement in food and transportation, or you would leave people starving and stranded,” said Heading Home Chief Executive Danielle Ferrier, whose organization operates the Norfolk emergency overflow shelter.
Ferrier disagreed with the report’s allegation that the state failed to foresee the migrant crisis.
“No state agency is going to prepare and start to over-procure,” she said. “They’re always trying to be exact.”
Healey has announced the state will close its remaining motel and hotel shelters this summer, as the state clamped down on the program and the number of families using emergency shelters has dropped dramatically.
The auditor found the state did not ensure payments to shelter providers were made according to terms and conditions specified in their contracts. A review of payments to shelter providers totaled just over $700 million; then after the audit period, the state spent an additional $283 million, the report said, noting “several instances of noncompliance with the contractual terms.”
The auditor made several recommendations, including creating standing crisis management teams and replacing all emergency no-bid contracts with “properly procured contracts” as soon as possible.
The auditor’s office will follow up with state housing officials on these proposed changes in six months as part of the post-audit review process.
