Homelessness officials recover $13M paid to service providers; judge pushes for more transparency

Officials with Los Angeles’ regional homeless services agency say they’ve recovered about $13 million of $50.8 million paid to service providers beginning in 2018.

That’s up from about $2.5 million that had been recovered at the time of a November audit that found the agency had failed to recover millions paid out to contractors in cash advances.

The update by the Los Angeles Homeless Services Authority, or LAHSA, came during a federal court hearing Tuesday. The agency and other city and county homelessness entities are required to keep the court informed on their progress in creating thousands of new shelter and treatment beds — part a legal settlement over the L.A. city and county’s alleged mishandling of the homelessness crisis.

U.S. District Judge David O. Carter, who is overseeing the process, pressed LAHSA for more details on how and when the funds would be recouped.

“What’s our plan to get the rest of this money back?” Carter said. “I don’t believe you have a payment plan with most of these entities.”

The judge went line by line through a list of 36 homeless service providers who’d received cash advances, praising several nonprofit operators who’d paid large sums back and chastising those that still had large outstanding balances — including People Assisting the Homeless, LA Family Housing Corporation, and The People Concern.

“I think this is just the tip of the iceberg, unfortunately — this $50 million,” Carter said.

In a letter to the judge, LAHSA CEO Va Lecia Adams Kellum explained the cash advances were meant to support startup costs for Measure H, the quarter-cent sales tax for homeless services approved by voters in 2018.

“As such, the advances were always intended to be recouped at the conclusion of Measure H,” Adams Kellum wrote in the letter. "Consistent with this understanding, the County has not sought recoupment of these funds, nor has it instructed LAHSA to specifically recoup these funds.”

LAHSA’s Chief Financial Officer Janine Trejo told the judge that LAHSA’s agreements with most providers gave them through the end of 2027 — when Measure H was originally scheduled to expire— to pay back the money.

Reaction from the judge

Throughout Tuesday’s hearing, Carter lambasted officials for failing to make the service contracts publicly accessible. The judge noted that the L.A. City Controller’s website tracked only about 40 contracts, out of hundreds.

“I don’t know what we’re paying and where it’s going until it goes up on a website,” said Carter. "This is a system, quite frankly, that isn’t functioning.”

City Controller Kenneth Mejia, who recently conducted an audit of interim housing programs, agreed that the lack of accountability and data-sharing was a problem.

“We’re cutting blank checks,” Mejia said.

Carter ordered both the city and county to improve their websites to update the public about progress toward meeting the settlement's goals.

How we got here

The settlement stems from a lawsuit, filed In 2020, by a group of downtown business owners and residents called L.A. Alliance for Human Rights. The group accused the city and county of failing to adequately address the region’s homelessness crisis.

The city of L.A. settled its portion of the lawsuit in 2022, agreeing to create nearly 13,000 new shelter beds and to clear 9,800 homeless encampments by July 2027. L.A County reached a separate settlement in 2023, agreeing to add 3,000 new mental health and drug treatment beds.

Those agreements came after Carter rejected earlier proposals promising far fewer treatment beds. Since then, local officials have been updating the court on their progress — and facing calls for more transparency from the L.A. Alliance and the judge.

Early last year, L.A. Alliance asked the court to fine the city nearly $6.4 million, arguing that Los Angeles was failing to comply with the settlement agreement.

Carter rejected that motion and ordered an independent audit instead. Last April, the court hired consulting firm Alvarez & Marsal to conduct an audit to track how millions of public dollars are being spent to address homelessness and what outcomes those efforts are producing.

Throughout the process, the auditors have complained of delays in obtaining data from the Los Angeles Homeless Services Authority in a timely fashion. In previous hearings, auditors cited inconsistent care and poor accounting.

Multiple audits conducted

The independent audit that Carter ordered is expected to provide the most comprehensive picture of the region’s homelessness programs in years. So far, it has cost more than $3 million,.

Initial results are expected to be published next month.

It is the latest in a string of inquiries into LAHSA's spending and operations over the last several years.

In November, the L.A. County Auditor-Controller released an audit of LAHSA ordered by the county Board of Supervisors. It revealed that more than $50 million in cash advances to service providers had not yet been recouped, and that LAHSA had routinely paid service providers late and monitored those contracts poorly.

In response, the supervisors approved a motion to consider putting homeless services under county control and reducing LAHSA’s role in contracting service providers.

Another audit in December by the L.A. City Auditor-Controller found the city’s shelter beds had an average vacancy rate of 29% and that unused beds cost taxpayers an estimated $218 million.

The audit found contractors were paid the same amount regardless of shelter occupancy rates, more than half of the population who left interim shelters between 2019 and 2023 were unaccounted for or had returned to homelessness. The report also found LAHSA had only enough resources to enroll 30% of shelter residents in housing navigation services.

LAHSA said it's working to address the issues raised in the city audit.

What the city and county reported

L.A. city and county have provided quarterly status reports as they work to meet new housing goals under the legal settlement.

The county reported that it brought more than 1,300 new mental health or substance use disorder beds online — exceeding its agreed-upon milestone of 1,200 new beds by December 2024.

Meanwhile, the city of L.A. reported it had opened more than 4,000 new shelter beds and was in the process of opening another 4,600. The majority of the projects are permanent supportive housing units funded by the city’s voter-approved Proposition HHH bond measure.

The city has not yet revealed plans for identifying and funding the remaining one-third of the shelter beds required by the settlement. City authorities also said L.A. had "resolved" nearly 1,700 tent and vehicle encampments across the city — 17% of its total goal.

L.A. Alliance asked the court to order the city to report more details about encampment clearing operations.

Carter has not yet ruled on that request.