Driscoll Foods Shortchanged City by $9.39 Million for Emergency Food Distribution Services During Pandemic, NYC Comptroller Audit Finds

 

Comptroller calls on DSS to recoup remaining $7 million in overpayment from food vendor with $161.7 million in contracts with City agencies

New York City Comptroller Brad Lander released an audit that found that Driscoll Foods overbilled New York City for $9.39 million on a $90 million pandemic contract for food services and delivery.  

Driscoll (also known as Metropolitan Foods Inc.) spent approximately $3.9 million less on food items than the contracted amount. Rather than spending the surplus to assist more food insecure New Yorkers, Driscoll billed the City $2 million more for its own profit, spent $3.4 million on additional staffing costs, and overbilled $1.5 million on food warehousing and storage—totaling $9.39 million.  While the Department of Social Services (DSS) disallowed $2.35 million of the $9.39 million that Driscoll overcharged, the vendor still received approximately $7 million in overpayments. 

“This funding was for New Yorkers who urgently needed food to survive during the pandemic—not for Driscoll to pad their profits,” said Comptroller Brad Lander. “DSS must immediately recoup the $7 million they overpaid Driscoll, if they are going to continue to do business with New York City.” 

During COVID-19, DSS created the Pandemic Food Reserve Emergency Distribution Program (P-FRED) to distribute fresh produce, food supplies, and meals to food insecure New Yorkers. As part of this program, in July 2020, DSS entered into an emergency contract with Driscoll to acquire and distribute shelf-stable foods and fresh produce to approximately 400 Emergency Feeding Programs (EFPs), food pantries, and community kitchens across the five boroughs. In turn, the EFPs could distribute food and meals to residents in need. The Driscoll contract ran from July 2020 to June 2022 and had a maximum budget of $90,975,987.  

The Comptroller’s audit found that: 

• DSS did not oversee that claims for payment were for the appropriate budgeted categories and therefore did not ensure that the money budgeted for food was actually spent on food;  
• Driscoll did not maintain appropriate inventory records to track the acquisition and distribution of the $61 million spent on food prior to March 1, 2022;  
• DSS did not ensure that they evaluated claims and paid for program expenses that were reasonable and necessary nor did DSS require Driscoll to supply supporting documentation that demonstrated the vendor’s claimed expenses were appropriately allocated, actually incurred, and correctly calculated;  
• DSS did not confirm that Driscoll’s sub-vendor was approved before issuing payments for related services as required by § 4-13 of the Procurement Policy Board Rules. 

The Comptroller’s audit found that DSS failed to properly administer P-FRED and monitor the $90 million contract and calls on the City to recoup the $7 million that it overpaid Driscoll. DSS agreed to implement seven of the Comptroller’s eight recommendations, one of which is to recoup the $7 million in overpayments to Driscoll. 

Still, Driscoll collected $141 million from five City agencies in FY 2023 and maintains four active contracts with the NYC Department of Education and the Administration for Children’s Services (through the Department of Citywide Administration) totaling $161.7 million 

Comptroller Lander continued, “Driscoll holds millions of dollars in contracts for school lunches and to feed children in foster care. If they want to keep the City’s business, they need to pay back what they overcharged during the pandemic. Going forward, the City must better monitor its contracts with Driscoll and other food vendors.” 

Read the audit here, and view the Comptroller’s Audit Recommendations Tracker here.