Control of LA’s federal homeless money is about to change. Here’s what happens next

The nonprofits that run the Los Angeles region's federally funded homeless shelters, outreach teams and housing services will soon be overseen by a different government agency, under a deal a federal judge says he plans to approve next week.

If approved, the shift will mark the biggest change in the control of federal homeless dollars in L.A. in decades.

The proposed settlement would shift federal grants and duties from the troubled L.A. Homeless Services Authority (LAHSA) to the county government in stages, starting next month. LAHSA’s management of federal dollars for homeless services would end in June. The deal between LAHSA and the Trump administration keeps the region's request for roughly $240 million in new annual federal funding on track and adds tighter checks on how that money is spent.

U.S. District Judge David O. Carter said at a Friday hearing he would likely sign it Monday, ending LAHSA's lawsuit over the Trump administration’s June suspension of the agency.

“This has been an absolute past dereliction of duty by the federal government” and local governments, Carter said, referring to what he called decades of failure to properly oversee homelessness dollars.

“I choose now to turn this back to the proper governing bodies,” Carter said. "But please, this can never happen again."

Citing past audits and reports, Carter said “HUD’s been on notice since 2007” of LAHSA’s oversight failures and “abandoned” its own oversight role.

“I termed it a partnership in failure,” he added. “Local government turned an absolute blind eye to the distribution of these funds and transparency and accountability for these funds.”

“And what is so sad and disappointing is, these funds were meant to serve the absolute most vulnerable in our society,” the judge added.

U.S. District Judge David O. Carter, left, shown in West L.A. on Wednesday, Aug. 21, 2024.

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Los Angeles Times

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LAHSA has faced major problems in recent years. Last year, an LAist investigation found the signature of LAHSA’s then-CEO, Va Lecia Adams Kellum, finalized a $2.1 million contract with the nonprofit where her husband was working in senior leadership, despite previously telling LAist she was “completely recused.”

LAist also found the agency kept awarding millions in contract renewals to another nonprofit even after LAHSA’s own compliance team labeled it “high-risk” for, among other things, billing for services while reporting no enrolled participants. That group’s leader, Alex Soofer, recently pleaded guilty to diverting $2 million. Another nonprofit operator contracted with LAHSA, Michael Young, was arrested and charged by federal prosecutors with misappropriating millions of tax dollars, including allegedly siphoning $1 million into a high-end nightclub.

Additionally, a 2024 L.A. County audit found LAHSA had mismanaged hundreds of millions in contracts for homeless services, often paying service providers late and failing to track whether services were provided.

Under the deal, Carter would receive quarterly reports on progress and could intervene if one of the parties asks him to resolve a dispute.

When control would shift

The deal, on its own, does not change which nonprofits provide shelter, outreach and housing. It instead changes which government agency pays them and ensures they’re serving people as required.

Here’s what the timeline will be if Carter follows through on approving the deal:

• Within two weeks of this year's federal awards: Most new grants awarded to LAHSA will instead be managed by the county, not LAHSA.
• Starting Dec. 1: Grants for programs that begin on or after that date move to the county before they start.
• January 2027: LAHSA, which has overseen the homeless counts since 2005, runs the annual homeless count one last time. The county runs it after that.
• By March 1, 2027: The county is approved to take over as the agency that applies for federal homelessness money for the whole region going forward, instead of LAHSA.
• By April 1, 2027: The county takes over management from LAHSA of many federal grants for programs already underway that continue past June 2027.
• By June 30, 2027: LAHSA finishes administering federal grants that end by this date.
• By Dec. 31, 2027: The county takes over the region’s federally required database, known as HMIS, that tracks which homeless services each person receives. The county also takes over another system, known as CES, that matches people with taxpayer-funded housing. With that, LAHSA's last remaining federal roles end.
• January 2028: The county conducts the annual homeless count, taking over that role from LAHSA.

What the deal would mean for services

The federal government’s attorneys said the goal is to have stronger oversight over homelessness spending, after many years of documented failures by LAHSA. Attorneys who struck the proposed settlement said in court Friday that the timeline was structured to ensure a smooth transition that doesn’t disrupt homeless services.

The HMIS database and matching system, which caseworkers use to track clients and place them in homes, will switch over last to avoid disrupting services, said Shayla Myers, the lead attorney for the L.A. Continuum of Care, the body that coordinates federal homelessness funding and joined LAHSA in the lawsuit.

For taxpayers, the deal adds safeguards on spending Carter has demanded for years. LAHSA must send invoices and spending records to the U.S. Department of Housing and Urban Development (HUD) before drawing grant money, and submit receipts afterward. A HUD contractor, Guidehouse, will review its books, and the county must follow the same rules for older grants it inherits. The parties will report to Carter every three months, until LAHSA no longer has any federal roles overseen by HUD.

Bill Essayli is the first assistant United States attorney for the Central District of California.

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First Assistant U.S. Attorney Bill Essayli, whose office represents HUD, told LAist after the hearing that the county is probably the best equipped to take over, and scrutiny will be crucial.

“Do I have amazing confidence in the county? No,” he said, noting that LAHSA is a joint city-county agency.

“But we're going to verify that they are going to be good stewards of the tax money.” With LAHSA gone, he added, “The buck's going to stop at the county.”

Under the proposed deal, LAHSA agrees to cooperate fully with HUD's investigations. A LAHSA attorney told the judge on Friday the agency is cooperating fully with criminal investigations, adding that it was critical that HUD agreed not to reinstate LAHSA’s suspension, so that it can continue to manage federal dollars until they’re handed off.

Judge wanted more 'teeth' for the court

Carter spent much of the hearing asking attorneys for the parties what power he would have to enforce the deal after signing. The proposed settlement lets him settle disputes and receive reports, but he said that left him looking over shoulders without the authority to actually enforce it.

“I have no jurisdiction. I have no teeth,” he said.

He read aloud from 2024 hearings in a related lawsuit, known as L.A. Alliance, where he warned that bills without supporting documents should not be paid. Essayli said that the proposed settlement would be binding “and we'll vigorously enforce it.”

Myers said the deal gives the court oversight to ensure that the problems federal authorities flagged “don’t exist.”

Carter asked to have the ability to hire an expert, at about $150 an hour paid by HUD, to help him understand the quarterly reports on implementing the deal that transfers federal roles from LAHSA to the county. Essayli agreed.

How the case got here

HUD suspended LAHSA from federal funds on June 11, citing alleged failures in the agency’s financial management and conflict-of-interest safeguards. The move put roughly $240 million in expected federal homelessness funding for the region in limbo and held up federal funding HUD had already awarded.

LAHSA, which is overseen by the city and county’s elected officials, sued.

In August, Carter blocked the suspension, writing that LAHSA and HUD had been in “a joint partnership in failure,” and ordering a competition for LAHSA's federal roles. He deferred the selection to the continuum of care — the body designated by federal law to make that choice.

In October, the continuum chose the county for all four, over objections from L.A. Mayor Karen Bass and several City Council members who wanted the city to share control. The city then reached a tentative side deal giving it access to data on unhoused residents and a role placing people in city-funded housing.

What happens next

Carter said he expects to sign the proposed settlement on Monday.

Myers said the deal lets the region “build a peaceful transition of power.”