As a result of a critical fiscal audit of the agency responsible for managing homeless programs in Los Angeles County, one county supervisor, Lindsey Horvath, is proposing a new county department to better organize the way taxpayer homeless funding is spent — and to only fund partnerships that are effective.
The audit performed by the county’s Auditor-Controller’s Office released on Wednesday, Nov. 20, spells out numerous deficiencies regarding the fiscal practices of the Los Angeles Homeless Services Authority (LAHSA). These include no agreements with partners for repaying cash advances from the county; failing to timely reimburse nonprofits in the field for services even when money was available; inadequate controls over contract reviews or cash payments; and inappropriate use of funds.
On several points, LAHSA’s responses in the report indicated the agency disagreed with the findings or was already working on fixes.
“LAHSA has needed reform for some time. The audit confirms that,” said CEO Va Lecia Adams Kellum in an emailed response released Wednesday. “I came to LAHSA to lead change and fix the problems. Many of the issues outlined in the audit are already known and have been addressed under our new leadership team, or changes are underway.”
LAHSA is a joint powers authority between the county and the city of Los Angeles created in December 1993 to address homelessness. The agency has been under fire for not responding in a timely matter to the urgent homeless crisis exploding on county and city streets, sidewalks, alleyways, parks and freeway underpasses.
Adams Kellum was hired in January 2023 and became the new CEO in March 2023, vowing to fix the problems and add accountability.
At the end of the 2023 fiscal year, the agency received $246 million from the county and $234 million from the city of L.A., the report stated.
L.A. County Third District Supervisor and board chair Horvath said she would like to see changes in how LAHSA and the county manages money from Measure H, a countywide, one-quarter percent sales tax approved by voters in 2017, as well as other county, state and federal funds used to provide shelter, permanent housing and services for the unhoused.
In L.A. County, it is estimated there are 75,312 homeless people, according to a LAHSA count done in early 2024.
“The audit findings underscore the urgent need for greater accountability in our homeless services system. LAHSA plays an important role, but the current structure is not meeting the scale of this crisis,” Horvath said in a statement.
She said she will introduce a motion to be placed before the Board of Supervisors that will “create a new L.A. County (homeless services) department to centralize accountability and expedite the solutions and partnerships we know work.”
Many of the issues in the report have been raised by other authorities, including the Board of Supervisors, which called for the audit on Feb. 27, 2024.
This included nonprofit groups under contract by LAHSA to provide services, referred to as “subrecipients” in the report, who testified to the supervisors in May that LAHSA’s bureaucracy keeps them from getting paid for their work for up to four months, often resulting in cessation of services. The lag time has forced some service companies to use personnel credit cards to buy supplies and meet their own payrolls.
At the meeting, managers of HOPICS (Homeless Outreach Program Integrated Care System) that serves South L.A.; LA Family Housing; The People Concern; People Assisting the Homeless; and Special Service for Groups said the red tape pushed them to stop taking new contracts.
The audit backed up their complaints. In two cases, one subrecipient was paid 53 business days after submitting an invoice for services rendered, while another waited 68 business days. This occurred “even though these payments were Measure H funded and LAHSA should have had cash advances available to pay within 45 days,” cited the report. In another case, it took LAHSA 51 business days to pay for work rendered even after it received reimbursement from L.A. County, the report said.
One claim of $126,168 to the U.S. Department of Housing and Urban Development (HUD) was submitted 144 days after the billing month. The audit called the delay “excessive.”
“The service providers are struggling to pay expenses, while the money is just sitting there,” Veronica Lewis, director of HOPICS, told the Board of Supervisors as reported by this newspaper.
In a response dated Nov. 7, LAHSA said it has begun paying service providers more quickly by using a new advance payment model.
The agency also had problems with keeping track of who was getting the money to perform services. According to the report, LAHSA could not produce an accurate list of all their contracts. LAHSA told the auditor-controller it has 1,273 active contracts as of May 2024, but it provided five different lists with the number of contracts varying from 676 to 1,078.
“In addition, LAHSA was unable to determine the total number of contracts that were executed either timely or retroactively in FY 2023-24” said the audit. The report noted that at times the agency did not follow through on monitoring contracts to see if the job was completed, and reported that one review document was lost.
Under the heading “Inappropriate Use of Funds,” the audit said LAHSA would use funds from one government funder to pay for services that were provided from a different government fund not authorized for that service.
By mismatching funding sources with services rendered, it constituted “weaknesses in internal controls and financial management practices,” the audit said. “LAHSA must discontinue this practice,” it concluded.
The report also cited several instances where records of the sums of working capital were understated. In one case, the award amount for one subrecipient was underreported by $356,967. LAHSA attributed record-keeping errors to staff turnover and system changes, the report stated.
Va Lecia Adams Kellum, CEO of LAHSA, presents the 2024 homeless count numbers on Friday, June 28, 2024. This year’s homeless were down by .27% in Los Angeles County and 2.2% in the city of Los Angeles. (Photo by David Crane, Los Angeles Daily News/SCNG)
Since joining LAHSA 18 months ago, Adams Kellum and her new leadership team have changed the way they do business by instituting new policies and procedures to improve grant management and contract execution, LAHSA said in an emailed response.
In its written response to the audit, LAHSA pointed out that in 2024, the number of unsheltered people experiencing homelessness countywide decreased by 5.1%. And the sheltered population increased by 12.7%. The agency said these statistics “reflect a positive trend since 2023.”
“Together we will ensure LAHSA operates efficiently to effectively address and solve the homelessness crisis,” Adams Kellum said.
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