Auditors probing LA’s homelessness spending describe poor accounting and inconsistent care

Los Angeles is directing millions to tackle homelessness but not all of it appears to be well-spent or properly accounted for, according to auditors charged with looking at how the city is putting those public funds to use.

Auditors with the firm Alvarez & Marsal said during a court hearing Wednesday that contracts with service providers were not written in a way by the joint city-county Los Angeles Homeless Services Authority to measure outcomes or to set standards for what counts as a hot meal or storage, for example.

That, auditors said, has resulted in inconsistent and poor care which they described witnessing during 18 “spot checks’ on providers.

Auditors, who are expected to complete a report this year, also described seeing broken showers and people still going hungry despite the massive public investment in reducing homelessness.

Auditor Diane Rafferty recounted how a woman with a traumatic brain injury prostitutes herself so she could afford food.

"It's heartbreaking, your honor,” she told U.S. District Judge David O. Carter. “It is heartbreaking.”

Kevin Call, who is part of the Skid Row community, was at the hearing and said afterward he agreed with the auditors’ assessments.

“In the city of Los Angeles, people are suffering on Skid Row,” Call said. “Even with all the money that’s supposed to be available and all that – somebody’s got to be held accountable for that.”

Lack of accountability

The audit comes out of a 2022 settlement with LA Alliance for Human Rights, a group of business owners and residents that had two years earlier sued over how homelessness is managed in the city and county.

The city settled first with the LA Alliance, agreeing to create nearly 13,000 new shelter and housing beds. L.A. County, in its 2023 settlement, said it would provide 3,000 new beds for the treatment of mental health and substance abuse.

The LA Alliance had wanted the city to pay millions in sanctions, saying it was not meeting the terms of its agreement. Carter decided on an audit instead.

Alvarez & Marsal, which was chosen earlier this year to do the audit, reported at the hearing that spending by providers is often unsubstantiated or inaccurate. They found in one instance, a service provider with apparently two case managers at one site had incurred expenses for 10.

Asked about potential fraud in the system by one of the monitors overseeing the settlement, retired judge Jay C. Gandhi, Rafferty offered a “political answer.” State and federal funds must be carefully tracked, she said.

“Otherwise, other people, much more powerful than us, could come in and audit that at a different level than we provide,” Rafferty said.

Carter said going forward, invoices with providers should provide more transparency by explaining what work was performed. He also said too many invoices from providers are missing dates and other substantiating information.

“We could speculate that this was set up by providers to get paid, and it was provider-oriented,” Carter said.

Shared responsibility

City Controller Kenneth Mejia, who presented an update on his office’s dashboard on the city’s homelessness spending, and city council members, including council president Marqueece Harris-Dawson, were also at the hearing.

Harris-Dawson asked the auditors if they knew of any other places that had a city-county entity like the Los Angeles Homeless Services Authority.

Rafferty said that L.A. appeared unique, and that just as LAHSA needs to hold service providers accountable, the city had to hold LAHSA accountable.

Later in the hearing, county Supervisor Chair Lindsey Horvath said she brought a different perspective about LAHSA.

Horvath noted that the LAHSA board is made up of 10 members, half chosen by the county, half chosen by the city.

“I don't see LAHSA as an outside entity,” Horvath said. “I appreciate that we want to hold LAHSA accountable. That’s us.”

What’s next

Carter scheduled several other hearings this month related to the settlements with the LA Alliance, including one on Oct. 16 in which L.A. Mayor Karen Bass is expected to attend. At that time, controller Mejia is expected to give another update on his homeless spending dashboard.

Carter, proclaiming a love of pie charts, said it was critical to get the data up so the public can see it, and elected officials can use it to make decisions. LAHSA announced Wednesday that it too is updating online dashboards "to track the work being done to address homelessness."