Searing audit finds city of LA has failed to properly track billions in homelessness spending

L.A. city officials have made it impossible to accurately track homelessness spending, in large part by outsourcing to an agency that has failed to collect accurate data on its vendors and hold them accountable, according to findings from an independent audit commissioned by a federal judge.

The problems heighten the risk of tax dollars being misspent, auditors found after reviewing $2.4 billion in city funding.

The draft audit report, released Thursday by U.S. District Judge David O. Carter, comes as Los Angeles City Council members weigh an overhaul of homelessness spending.

Many of the problems auditors identified were at the Los Angeles Homeless Services Authority, known as LAHSA. It’s the government agency, overseen by the city and county, that for decades L.A. mayors and council members have outsourced management of much of the city’s homelessness dollars for sheltering, feeding and serving people.

The report paints a blistering picture of a lack of accountability for taxpayer dollars in recent years.

Auditors said the document trail provided by the agency was so poor that it made tracking the spending nearly impossible. The agency “failed to verify whether the services invoiced were provided,” auditors also found.

The report states that insufficient “financial accountability led to an inability to trace substantial funds allocated to the City Programs.”

"The lack of uniform data standards and realtime oversight increased the risk of resource misallocation and limited the ability to assess the true impact of homelessness assistance services."

There was "a high level of noncompliance" among the small number of service provider contracts that were reviewed, auditors added. And a lack of oversight, they wrote, has "made it challenging" to determine how program funds were used and "whether they achieved the intended outcomes."

In one example, auditors said LAHSA leaders failed to provide them documentation to verify the existence of about 2,300 housing sites the agency was responsible for. Seventy percent of the contracts for those sites did not disclose any expenses over the prior year, the auditors added.

County Supervisor Lindsey Horvath responded to the audit by calling LAHSA’s problems “a nightmare,” and announced that she will schedule a vote by county supervisors to pull county funding from the agency and instead have the county manage it directly.

“We cannot accept this dysfunction any longer,” Horvath said.

Elizabeth Mitchell, an attorney for the L.A. Alliance for Human Rights, said the findings are "not just troubling — they are deadly.” The group’s high-profile lawsuit was the venue by which Carter initiated the audit.

“The failure of financial integrity, programmatic oversight, and total dysfunction of the system has resulted in devastation on the streets, impacting both housed and unhoused,” she said.

“This is not just mismanagement; it is a moral failure.”

The city is projected to send about $306 million in taxpayer dollars this fiscal year to LAHSA.

There has been no comment so far by LAHSA Chief Executive Va Lecia Adams Kellum, who has been leading LAHSA for the past two years. She was in charge for the last 15 months of the timeframe reviewed by auditors, which covered mid-2020 to mid-2024.

A spokesperson for LAHSA provided a statement about the audit, attributing problems to the “siloed and fragmented nature of our region’s homeless response.”

The statement did not address the findings about failures by the agency to monitor vendors and tax dollars. LAist has asked for comment on those details and has not yet received an answer.

In a statement, L.A. Mayor Karen Bass acknowledged the audit had identified a broken system.

“This audit validates our work to change what’s festered for decades,” she said, adding that there is still work to do. “The city, the county and LAHSA are working together to change and improve the system and we are committed to continuing to do that.”

Among the payments that have had no performance reports to LAHSA were $1.7 million last year to Adams Kellum’s husband’s employer, under a $2.1 million contract Adams Kellum signed in a breach of ethics rules, according to a records request response to LAist. Another with no performance reports was a $60,000 LAHSA consulting contract for Adams Kellum to advise the mayor in the six weeks leading up to becoming LAHSA’s CEO, according to a records response to LAist.

The new audit was conducted by the consulting firm Alvarez and Marsal, under Carter’s supervision.

Reaction to the audit from elected officials

While much of the management of homelessness spending has been outsourced to LAHSA, ultimate responsibility for the city’s tax dollars rests with elected officials: Bass and the City Council.

Councilmember Monica Rodriguez said the report confirmed what she’s been raising alarm bells about for years.

“We could never get clear answers about the tax dollars being invested in homelessness,” Rodriguez told LAist in an interview.

“I  hope this is a wake up call for my colleagues” on the City Council to shift the funding out of LAHSA, she added. After a scathing county audit in November, Rodriguez introduced a motion to explore pulling city funding from LAHSA and instead have the city oversee it directly.

In a statement, Councilmember Nithya Raman said the audit findings “reinforce the need for real oversight and performance management of our city’s homelessness response.”

That need, she said, is why she introduced a motion last week to create a centralized team at the city tasked with collecting data on homelessness spending.

In an interview last week, she said she’s been pushing for more data to be made available about what’s happening with homelessness dollars.

“ No one within the city is actually charged with tracking, how well are these programs working? Are our service providers doing what they're supposed to be doing? And how best can we spend our dollars?” she said.

Paying vendors through LAHSA, Raman added, has meant that at “the city, we don't have information that we need in order to make sure these dollars are being spent well, and that people on the streets are getting the help that they need.”

Councilmember Bob Blumenfield said the audit documents “the same frustrations that I have had with the complexity and opaqueness into how the city funds homeless services."

“The fragmentation of the system makes it difficult for the City to follow the money and the lack of direct control over the homeless contracts and data exacerbates the problem,” he added.

Councilmember Ysabel Jurado, who represents Skid Row, said in a statement on Friday that she was deeply concerned with the audit’s findings. 

“It’s long overdue that we implement uniform data standards and real-time oversight to ensure accountability,” she said. “Every dollar spent on homelessness services needs to be accounted for and contribute to real, measurable improvements in the lives of our unhoused neighbors.”

Bass has voiced concerns on exiting LAHSA

Bass has been critical of plans to pull funding from LAHSA, saying the city’s work should focus on serving unhoused people, not creating new bureaucracies.

Rodriguez’ motion to yank the funding was in limbo for three months, until Wednesday when the City Council’s housing and homelessness committee voted to further explore an exit from LAHSA by directing city staff to prepare an analysis. It now goes to the full City Council.

At the county level, the Board of Supervisors voted, 4-0, in November to explore redirecting its funding of LAHSA and instead have it managed directly by the county. Supervisors recently received a report from county staff on what it would look like to take control from LAHSA of the county’s funding. A vote on next steps could take place in the coming weeks.

The backstory on the audit

Carter, the federal judge, initiated the audit after learning that L.A’s independently-elected city controller is blocked from auditing the mayor’s signature homelessness program Inside Safe.

Carter called the situation “ridiculous” at a hearing in January, adding that the audit overseen by the court may be the only independent review of city homelessness spending in decades.

The audit has been blocked by the city attorney’s office. Officials there say their understanding of the city charter is that it doesn’t allow the controller to audit the performance of a mayoral program unless the mayor consents. That position has been disputed by the controller and the chair of the charter committee that wrote the charter language.

The city charter says that the controller’s powers include conducting “performance audits of all departments and may conduct performance audits of City programs.”

Carter plans to hold a public court hearing on March 27 about the newly released audit, and has asked Bass, Council President Marqueece Harris-Dawson, City Controller Kenneth Mejia, county Board of Supervisors Chair Kathryn Barger and the auditors to attend.

Also at that hearing, Carter will consider a request by L.A. Alliance for consequences against the city for allegedly failing to add the shelter beds it committed to in a 2022 settlement deal.

City officials say the city can’t afford to add much more shelter because it’s financially broke, amid rising lawsuit payouts and police department increases. Carter, for his part, has suggested that more people could be served if existing homelessness funds are spent more efficiently.