The city’s Human Services Department has quietly dismantled an office that monitors how grants to nonprofit providers are written and spent. According to a June 10, 2019 email from HSD deputy director Audrey Buehring, the office “will be dissolved after March 31, 2020 and will cease full review of contracts for the 2020 Contract Season.”

The office (full name: Leadership and Administration Contracts Unit, or LADCU), was put in charge of contract compliance after a scathing state audit in 2014 concluded that HSD lacked “adequate controls” to monitor how contracts were being written as well as how human service providers were spending grant money. The audit found that the city did not “consistently verify the information it receives” from nonprofit human service providers or keep records adequate to ensure that public dollars were being spent appropriately by providers.

The main problem with HSD’s tracking and compliance system, the audit found, was “the way that the service provider monitoring responsibility is assigned to Department employees,” with the same employees in charge of choosing providers, negotiating contracts, and then “self-monitoring” to make sure the contracts stayed in compliance throughout the year.

After the audit, those duties shifted to the contracts unit, and since then, the unit appears to have lived up to its charge. In the past year alone, LADCU’s four contract reviewers caught dozens of errors in contracts before they went out, including one contract that went through several layers of review before a staffer with the unit caught an error that would have cost the city $2 million, according to an April memo from all six LADCU staffers raising alarms about the change. (The memo was obtained by The C Is for Crank.) LADCU staffers also caught the fact that an HSD staffer had removed mandatory language designed to protect immigrants in multiple contracts, as well as language committing the city to pay “an unlimited sum” for rodent control in several contracts, according to the memo.

The 2014 state audit calling for stricter monitoring of HSD contracts found that in many cases, a single employee was assigned to analyze community needs, pick a provider, negotiate a contract, and ensure that the provider complied with the contract requirements—duties that the auditor called “incompatible.” Under former interim HSD director John Okamoto, the contracts unit began to serve as an extra layer of review by experts whose only job was to ensure that contracts were “accurate, consistent, and compliant” with federal, state, and city requirements, including labor laws passed at the city level.

Once the unit is completely dismantled, starting with next year’s contracting season, their responsibilities will revert to HSD’s various divisions—essentially the same system that led to compliance issues in the first place.

HSD will also create a new “Continuous Quality Improvement” unit to check contracts for compliance after they’ve been signed; but there will no longer be any city staffers exclusively dedicated to ensuring that contracts are compliant with every city, state, and federal requirement before they go out. If errors are caught after the fact, contracts will have to be amended, costing time and money.

According to an internal HSD memo from June, the department decided to shut down the contracts review unit because human-service providers that receive funding through the city “are asking more and more of us, and rightfully so, including better wages for their workers, an annual cost-of-living increase that matches the actual inflation rate in Seattle, fewer barriers in applying for our funding, and simpler contracts. We are years behind schedule in giving this to them because no one ever has the capacity to work on this.” The funding freed up by eliminating contract review jobs, the memo continues, will go toward “reducing operational burdens on providers.”

Ironically, one of the errors the contract review unit reportedly caught last year was a provider that failed to provide the 2 percent wage increase the city required in its 2019 budget. (HSD and the mayor’s office did not respond to repeated requests for confirmation or comment on this question, which I initially asked them about more than a week ago).

The June memo goes on to explain how the city will get by without the additional layer of oversight that was added in response to the state audit just four years ago: “This change will require every person who touches a contract to have a high level of individual accountability in order to make this work. … If each individual holds themselves to a high level of accountability, then we can operate more efficiently without additional resources.”

“Although we will make our best efforts to support the divisions in this transition, at this time there is no added capacity. We also realize that staff doesn’t just write contracts, there are many other duties they perform that these changes will impact.”

Shaun Van Eyk, the union representative for PROTEC17, which represents workers at HSD, says that management initially told him, “‘We’ve gotten everybody in compliance and in alignment, and we don’t need that group anymore and they’ve served their purpose.'”  But, he adds, staffers themselves have expressed “concern about the individual divisions not having the appropriate staffing levels to be able to do that extra layer of work.”

“They’re trying to build this ship as it’s floating out to sea,” Van Eyk says.

Meg Olberding, a spokeswoman for HSD, told The C Is for Crank that moving contract review “back into HSD’s Divisions” would ensure that contracts move through the process more quickly, without being “reviewed by at last three or four staff before execution,” to “eliminate the bottleneck that can sometimes occur as contracts move from Divisions to a central contracts unit and back to Divisions for final execution.

“Moving all the contracting functions back into HSD’s Divisions allows for essential organizational improvements that 1) further empower Divisions to manage staffing resources; and 2) allow the divisions to mitigate risks to agencies (whom they work with more closely) and our contract execution process,” Olberding said.

But the move may not be as simple as Olberding makes it out to be. The work of monitoring contracts and ensuring compliance will reportedly devolve to a number of different staffers at various levels of the department, including contract specialists who write—but don’t review—contracts as well as others who have not been trained in contract compliance.

Additionally, a review of HSD’s weekly internal contract reports reveals that contracts get executed late for a number of reasons unrelated to the extra layer of review imposed after the audit, and that there are many potential bottlenecks both before and after the contracts enter LADCU that have nothing to do with the division.

The changes will impact every division within HSD, from Aging and Disability to Youth and Family Services. (The Homelessness Strategy and Investments Division, which is responsible for HSD’s homeless service contracts, is being largely disbanded as part of the move to a regional homelessness agency, but will retain some contracts for permanent supportive housing and other services).

In the April interoffice memo, the six contracts unit staffers raised concerns about what it will mean for city staffers to have the responsibility of writing, executing, and reviewing their own contracts. Noting that former acting HSD director Okamoto specifically called attention to the need for “separation of job functions” in his memo responding to the state auditor’s report, the memo says, “No one with both the expertise in compliance and the authority to hold [the staffers writing the contracts] accountability will see the contracts before they are signed.”

The staffers say the change could have the greatest negative impact on small providers serving the most vulnerable people—the ones HSD claims will be best served by eliminating layers of contract review. “HSD leadership has knowingly consented to receive an unknown number and severity of audit findings after LADCU is disbanded, but the agencies contracts with have not,” the memo says. “Smaller grassroots agencies without a legal team or compliance team will be at the greatest risk of receiving audit findings, which will seriously impact their ability to obtain funding in the future.”