LA’s regional homelessness agency hits pause on plans to reform internal audit unit

The Los Angeles area’s top homeless services agency has been under scrutiny in recent years for failing to properly track spending, and some people on its governing board say the agency should be better at auditing itself.

But some leaders of the L.A. Homeless Services Authority recently delayed a vote on a pair of proposals to overhaul its internal audit processes. The proposals were aimed at making sure the audits happen more frequently and in a manner less likely to create conflicts of interest.

Justin Szlasa, a member of LAHSA's governing commission, said he was “deeply disappointed” when those items were removed from last Friday’s meeting agenda.

“Personally, I feel that sends the wrong message, that the effort is not a priority,” Szlasa said in a statement to LAist. “A strong internal audit function is exactly what LAHSA urgently needs now.”

LAHSA spokesperson Paul Rubenstein told LAist that “commission leadership” deferred the votes “to allow more time for thorough review.”

He said the items are expected to be revised and brought back to the commission for a vote. He did not clarify when that would happen.

LAHSA’s problems

The homeless services agency has been plagued by problems in recent years, most of which were uncovered by outside entities.

Last November, an external audit by L.A. County’s auditor-controller 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.

In March, an independent report commissioned by a federal judge found LAHSA had failed to collect accurate data on its nonprofit vendors or to properly account for how they spent taxpayer dollars.

Then in April, L.A. County officials voted to strip about $350 million in funding from the agency and administer the funds itself through a new county homelessness department.

LAHSA has long had a process for auditing itself, but they hadn’t been happening as scheduled in recent years. The internal audit team failed to complete six out of eight audits planned in fiscal years ending in 2023 and 2024, according to the L.A. County auditor-controller.

That’s at least one of the problems the LAHSA Commission purportedly wants to fix.

Agency's response

The commission is a 10-member governing board that makes budget and policy decisions for the regional homeless services agency. Among its members are L.A. Mayor Karen Bass and former L.A. City Controller Wendy Greuel.

Szlasa, who heads a subcommittee focused on the internal auditing process, was appointed to the commission by L.A. County Supervisor Kathryn Barger last November. He says strengthening LAHSA’s ability to audit itself — in part by giving more authority to the internal Audit Committee — would show LAHSA skeptics the agency is moving in the right direction.

“The purpose of the internal audit function isn't a gotcha,” Szlasa said at the committee meeting. “It’s about creating opportunities for improvement. That's really what we're trying to do. And I think that there's a lot of room for improvement.”

LAist reached out to Commission Chair Amber Sheikh, a nonprofit executive appointed to the board by L.A. County Supervisor Janice Hahn, to ask why the internal audit items were removed from the agenda.

Sheikh did not respond.

LAHSA's Rubenstein told LAist the proposals were being delayed and reworked to make them “as strong and effective as possible.”

“We look forward to bringing these improved items back for consideration soon,” Rubenstein said, in a statement. He did not answer questions from LAist about who is reviewing the proposals before they are sent to the full commission.

Rubenstein said the agency has been evaluating its current auditing procedures for “some time” and it supports the idea of making improvements. He said LAHSA CEO Gita O’Neill has made internal audits an area of focus.

“The new interim CEO has made the internal audit process a priority to ensure the organization remains transparent and accountable as it works towards addressing unsheltered homelessness in our region,” he said.

O’Neill did not respond to LAist’s requests for an interview for this story. However, she has said previously that she will work to fix LAHSA’s documented issues managing its contractors.

“Increasing trust in LAHSA hinges on our ongoing commitment to transparency, particularly in LAHSA’s core function of contracting,” O’Neill said in a July statement.

The proposed reforms

Under the proposals, LAHSA’s internal auditors would report to the three-member Audit Committee, rather than to the agency’s upper management — a move that is expected to reduce the potential for conflicts of interest.

The audits currently are done by employees in the agency’s Risk Management Department, which reports to its CEO.

Holly Henderson, LAHSA’s director of risk management, has said that work should be disentangled. She said at a recent meeting that it’s not ideal for her team to report to the same managers they are sometimes meant to evaluate.

“In a best case scenario, they would be two separate functions with two separate individuals overseeing them,” Henderson said.

She added that more independent oversight would give LAHSA’s internal audit team more opportunity to “make sure audits are actually happening.”

The Audit Committee met just once over the past year and hasn’t had a formal charter defining what it does. Szlasa, who heads the Audit Committee, said he’s trying to change that — promising monthly meetings and hoping to harness new power for his committee.

If the proposals move forward, LAHSA’s Audit Committee would have the authority to approve internal auditing plans, budgets and staffing decisions.

“We all deserve progress,” Szlasa said in a statement to LAist. “This Audit Committee will help find ways to make LAHSA and our response to this crisis more effective.”

Szlasa also identified a list of new priorities for LAHSA’s audit team, including reviewing costs associated with LAHSA’s downtown office building and other properties.

LAHSA’s Audit Committee approved the new proposal on Sept. 4, with Szlasa and fellow commissioner Tanisha Saunders voting in favor of it.

Bass, the third member of the subcommittee, was absent.