Some Philadelphia homeless shelters have gone months or years without being paid by the city

It was the Monday after Thanksgiving when officials at Gloria’s Place, a West Philadelphia homeless shelter that’s operated for five decades, learned their contract with the city wouldn’t be renewed due to a lack of funding, and the seven families in its care would need to find shelter somewhere else.

That came after Gloria’s Place had for ten months housed dozens of children and adults referred to them by the city — but were not paid the more than $400,000 the city owed them.

Officials at Hope PHL, which operates Gloria’s Place, said the effects of the delays in payment and the abrupt contract cancellation are devastating. The nonprofit is no longer able to bill the city for its services, but two families remain there in the middle of winter with nowhere else to go.

“Those contracts keep real families, youth, and young children housed and safe,” said spokesperson Trish Downey. “Our families at Gloria’s Place are feeling the unfair and life-altering repercussions of these decisions.”

And Gloria’s Place is not alone.

Leaders from a half-dozen nonprofits that have held contracts with the city’s Office of Homeless Services told The Inquirer that, since at least 2020, they have experienced severe delays in payment, in some cases stretching for months or years. Those gaps can jeopardize the availability of already scarce resources for the city’s most vulnerable populations like emergency shelter and housing assistance, according to executives at the nonprofits.

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The situation presents a challenge for new Mayor Cherelle L. Parker, who was inaugurated earlier this month and inherits an office now facing questions about its fiscal responsibility.

Last month, top officials in former Mayor Jim Kenney’s administration said they became aware in the fall that the Office of Homeless Services had spent nearly $15 million more than it was budgeted over the last four years. Those officials, who said they had seen no evidence of corruption or self-enrichment, referred their findings to the city’s inspector general, who is investigating the matter.

While it is common for providers that hold contracts with government agencies to experience remittance delays, some nonprofit leaders in Philadelphia say payments from the Office of Homeless Services are more inconsistent than other agencies and have worsened since 2020.

The office admits that a number of nonprofits weren’t paid in a timely manner. Spokesperson Sherylle Linton Jones said the cost of services completed through the pandemic exceeded the funding allocated to the office, so it “paid prior year costs with funding in the then-current fiscal year.”

She said the office expects to complete all payments for fiscal year 2023 by the end of February.

“All these issues involving OHS developed during the Kenney administration,” Linton Jones said. “However, the Parker administration ... is committed to seeing them resolved in a transparent manner, so that vital services to people experiencing homelessness in Philadelphia are delivered efficiently, fairly and equitably.”

The lagging dollars can have cascading effects on nonprofits’ finances. One organization has had to tap a line of credit to cover shortfalls because the city took too long to pay. Another is in the process of transferring its contracts to a different city agency that pays faster than the Office of Homeless Services.

Jeremy Montgomery, president and CEO of Philly House, the city’s largest and longest-running shelter, said his organization hasn’t been paid by the Office of Homeless Services since 2020 and is owed more than $600,000. Linton Jones said the delay is “unrelated to invoicing issues.”

Montgomery said Philly House continues to partner with the city and shelter people referred to them because they’re “fortunate” to not rely entirely on public funds — and they want to meet their mission of housing people most in need.

“We don’t want our history to be jeopardized,” he said.

Through the pandemic, the Office of Homeless Services budget significantly ballooned, rising from about $80 million in the 2020 fiscal year to nearly $130 million today. The city also saw an unprecedented amount of federal assistance, some of which was allocated to homelessness prevention and treatment.

Since 2020, the Office of Homeless Services spent $9.6 million more that it was allocated, then overspent its budget in the current 2024 fiscal year by another $5.1 million.

The overruns occurred during the tenure of former executive director Elizabeth Hersh, who led the office since 2016 and resigned in October. Officials said her departure was unrelated to the budget overruns.

Hersh’s former chief of staff, David Holloman, is leading the office on an interim basis until Parker names a replacement. In November, Holloman asked City Council for a budget infusion to cover the nearly $15 million shortfall. But Council members denied the request and only approved an additional $9.6 million — just enough to cover overruns from previous years.

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Linton Jones said the office is cutting administrative expenses, freezing hiring for some roles, reducing contracts “with consistent underspending,” and putting off some new programs to resolve the current year’s $5.1 million shortfall.

Gloria’s Place officials said they were surprised to be told on Nov. 27 that the shelter would lose its city funding — the same week officials from the Office of Homeless Services testified to Council about their budget hole.

But it had still not been paid for housing families through 2023. Downey said that until mid-December, four of Hope PHL’s five contracts with the Office of Homeless Services were not uploaded into the office’s invoicing portal, so they couldn’t bill the city for the services they performed for most of the year.

Linton Jones said “there was never dedicated funding to support the ongoing operation of Gloria’s Place.” She said the “emergency nature of the services” and staffing issues at the Office of Homeless Services led to the delay in contract finalization.

As of last month, Hope PHL was able to invoice the city for the $422,000 it was owed. But without a contract with the Office of Homeless Services, Gloria’s Place is set to close.

Downey said the organization is seeking funding from private sources to help place the two remaining families in housing elsewhere.

“We will not ask families to leave our shelter without having alternative accommodation identified,” she said.

Nonprofits that contract with the Office of Homeless Services have not been affected by payment delays in the same way, and funding loss tends to have a more significant impact on groups with smaller budgets that rely most heavily on city dollars.

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David Chiles, executive director of the Lutheran Settlement House in Fishtown, said it’s fairly common for nonprofits to experience delays in being paid by the city. His organization, he said, has enough funding from other sources to cover shortfalls.

“The reality of government funding that’s reimbursement based, for smaller organizations, that’s really tricky,” he said. “You have to have a lot of cash reserves so you can put that money out and you know it will take a little while for it to come back to you.”

Chiles said the Office of Homeless Services has been a strong partner and that overspending could be a result of underfunding. He said the Parker administration and City Council should consider bolstering the city’s funding for homelessness treatment and prevention — not cut it due to overspending.

“I hope they recognize the critical role that Lutheran Settlement House and nonprofits like us play in caring for some of the most vulnerable people and individuals and families in Philadelphia,” he said, “and that we need their support.”

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Other potential fixes could be bureaucratic in nature. Parker has said her administration is exploring ways to streamline the contracting process across the government, and she has charged agencies with developing a strategy to improve service delivery, including paying providers it contracts.

Even amid the budget shortfall, some snags in payment delays could be relatively minor.

For example, Montgomery said Philly House learned late last year that a 2021 payment was held up due to a $250 lien for failure to pay an annual commercial trash collection fee — but Philly House doesn’t pay that fee because it uses a third-party trash collector.

“It doesn’t matter who the contractor is with the city, that’s a common woe,” he said. “The city systems are not fully efficient and productive.”