A new audit finds that a Los Angeles homeless services agency with an $875-million annual budget has routinely paid service providers late, failed to track whether contracts were followed and, in some cases, gave taxpayer funds meant for other purposes to providers who weren’t supposed to receive the money.
The findings released Tuesday night by the L.A. County Auditor-Controller’s office highlight long-standing issues at the Los Angeles Homeless Services Authority (LAHSA) and raise new questions about how the agency is spending large pools of public money.
L.A. County Supervisor Lindsey Horvath, who requested the audit earlier this year, said she now plans to introduce a motion to create a new county department responsible for homelessness response.
"The audit findings make clear the structure we have for service delivery is not working. We need greater accountability and bold action," Horvath said. "The public is frustrated and there is no time to waste in delivering meaningful results.”
It's not yet clear what the proposal would mean for L.A. County's relationship with LAHSA, an agency established in 1993 and jointly overseen by the city and county of L.A. The agency currently administers funding from the county, the city, the state of California and the federal government. This year, the county contributed $348 million to LAHSA's budget.
How LAHSA is responding
LAHSA officials disputed a number of the audit's findings, and maintained that some problems were unique to the COVID-19 pandemic.
"The spending practices captured during the COVID-19 years of this audit should be viewed as an essential investment that contributed to achieving critical public health and service delivery outcomes," wrote Va Lecia Adams Kellum, LAHSA's CEO, in response to the audit.
After LAist's story was published, Adams Kellum sent an internal email to LAHSA staff citing LAist reporting and calling Horvath's proposal "alarming and confusing."
"At this time, I, along with LAHSA leadership, are [sic] working diligently to ascertain clarity on this proposal," Adams Kellum went on to say in the email obtained by LAist and confirmed by LAHSA spokesperson Paul Rubenstein. "In the meantime, please know that we are not treating this situation lightly. Our employees take top priority. The work that you all do matters — you save lives, plain and simple."
Among the 10 issues identified as top priorities, the auditors wrote that LAHSA had misused funds by taking money from one government funder “to pay for services provided under another government funder’s contract/grant.”
“LAHSA must discontinue this practice to ensure financial resources and operations for other programs are not inappropriately (and negatively) impacted,” the audit stated.
What is LAHSA?
Read our explainer to learn more about the L.A. region’s key homeless services agency.
LAHSA has repeatedly found itself in the spotlight over public frustration with rising homelessness in recent years despite billions of dollars in new voter-approved funding.
Adams Kellum, who took over as LAHSA’s CEO in March 2023, told reporters in a news conference last Wednesday ahead of the audit’s release that some of the years covered by the report predate her tenure. She said LAHSA has already worked to address issues, and has rolled out new online dashboards to better track the agency’s performance.
“It is critically important that we are measuring our work and doing everything that we say we're doing,” Adams Kellum said. “We want to be able to show what's working. And in any report card, you also see what's not working — what improvements are needed.”
What else did the audit find?
Billions of dollars in new funding has been spent in recent years to address the region’s homelessness crisis, but the number of people experiencing homelessness across L.A. County has risen 37% since 2017. The latest count showed that about 75,000 people across the county are unhoused on any given night.
The Auditor-Controller’s office undertook an in-depth financial review of LAHSA with the goal of giving taxpayers and elected leaders a closer look at how homelessness funding is being spent to get people off the streets, connected with service programs and placed into shelters and apartments.
Among the audit’s findings:
- LAHSA hasn’t always paid service providers on time, even when funds were available. The auditors found that in a sampling between July 2023 and May 2024, LAHSA paid five out of 13 subcontractors late.
- The agency in some cases paid providers using the wrong funding source. For example, auditors found that one L.A. County subcontractor was paid 14 days before LAHSA received county funding intended to cover that cost. LAHSA confirmed to the auditors that they used another unrelated funding source.
- LAHSA does an inadequate job of monitoring contracts to make sure providers are complying with the terms of their funding. The auditors found that about half (51%) of LAHSA’s planned contract reviews did not include methods for monitoring a provider’s compliance with service delivery requirements.
- LAHSA did not establish agreements with service providers to require them to repay nearly $51 million in advances that the agency provided in 2017 using county taxpayer dollars. By July 2024, only $2.5 million of that money had been paid back.
- The auditors discovered an additional $15 million in outstanding cash advances to other providers — some dating back to 2016 — that still haven’t been paid back. Some providers with unpaid advances no longer contract with LAHSA.
LAHSA officials were given a chance in the audit to respond to the findings. They disagreed fully or partially with most of the points above, but agreed that payments to providers were often late. For the findings they agreed with, they laid out timelines for fixing the problems.
Why is this all coming out now?
The audit was initiated by a motion earlier this year from L.A. County Supervisors Horvath and Kathryn Barger.
Barger on Wednesday said she was "deeply disturbed by what this LAHSA audit reveals."
"It’s clear to me that management practices need to dramatically improve at LAHSA," she said in a statement. "I’m also disappointed that LHASA's management team responded by pushing back on some of the audit’s conclusions instead of taking full ownership of its findings and charting a new and improved path forward."
The audit follows a separate analysis by the L.A. City Controller’s Office released on Thursday that found the city of L.A. did not spend at least $513 million in public funds that were budgeted to help with the homeless crisis during fiscal year 2024. The office said a lack of staff and old technology contributed to the spending problems.
Concerns about LAHSA’s performance stretch back years, with some elected leaders suggesting the city should consider withdrawing from the agency. A federal judge overseeing a major homelessness case in L.A. has recently chided LAHSA officials for failing to provide timely data on spending and outcomes for a separate, ongoing audit commissioned by the court.
The judge has ordered officials from LAHSA, the city and the county into court Thursday morning to justify why they’re behind schedule in providing auditors with needed information.
Is any progress being made?
The payment delays identified in the audit have long been familiar to service providers who say they often wait months for reimbursement. Outreach workers who help unhoused people typically earn low wages, often struggling to pay their own rent. Lengthy payment disruptions can put their jobs at risk.
Back in 2018, the Auditor-Controller’s office found that LAHSA was failing to pay service providers on time. By 2021, the office reported that LAHSA had only partially fixed the problem.
Agency leaders said during the news conference last week that LAHSA has paid about 80% of contracts on time over the past two years.
LAHSA leaders added that their staffers are now checking in with providers on a monthly basis and gauging their performance through more frequent “desk audits.”
Janine Trejo, LAHSA’s chief financial officer, said, “We go out and we conduct a monitoring of the service providers, their facilities, their expenses and a sampling of their documents.”
As for the $51 million in advances from 2017, Rachel Johnson — LAHSA’s chief of staff — said that money was meant to buoy service providers through 2027.
“This allowed the providers to really expand rapidly into the work, as was required by the funding,” Johnson said. Agency officials told auditors their agreement with the county did not require the creation of formal repayment agreements with providers for those advances.
What will be different moving forward?
L.A. County voters just approved a big boost in the funding that LAHSA manages. Starting in April, Measure A will increase sales taxes in the county by a quarter-cent for every dollar spent, with most of that money going to homelessness services overseen by LAHSA.
Adams Kellum said Measure A already includes new accountability requirements — such as five-year progress reports — that follow the audit’s recommendations.
“We're in alignment,” she said. “I'm encouraged that these are things we have been working on over the last year and a half.”
However, the audit could increase scrutiny of LAHSA from L.A. County supervisors and city council members who’ve repeatedly said they feel like the agency is a black box. After being told last year that L.A. taxpayer funds could have been spent on motel room shelters that weren’t actually occupied, Councilmember Bob Blumenfield discussed halting city dollars to the agency due to extensive data problems. Blumenfield chairs the council’s budget committee.
Councilmember Monica Rodriguez said at the time, “Get me off this merry-go-round from hell.”
Read the full audit
