County audit finds lax accounting at L.A. homeless authority

An audit of the Los Angeles Homeless Services Authority has found that lax accounting procedures resulted in the failure to reclaim millions of dollars in cash advances to contractors and to pay other contractors on time, even when funds were available.

LAHSA, a city-county joint powers agency, failed to establish formal agreements on how and when advances should be repaid, did not always maintain records for capital advances and could not provide an accurate list of all contracts and their execution dates, county Auditor-Controller Oscar Valdez wrote in the 57-page audit released Tuesday night.

The audit found that LAHSA had recovered only $2.5 million of $50.8 million in Measure H funds advanced in the 2017-18 fiscal year and, as of July, had $8 million still outstanding from advances from county, city and state programs made from 2016 through 2023.

In a sample of contracts, the auditors found that LAHSA understated the amounts awarded to two recipients by $505,591 and lacked supporting documentation for approximately $5 million advanced to five recipients.

Reacting to the audit, Los Angeles County Supervisor Lindsey Horvath issued a statement Wednesday calling for a new county department to consolidate homelessness contracting within the county.

“The audit findings underscore the urgent need for greater accountability in our homeless services system,” the statement said. “LAHSA plays an important role, but the current structure is not meeting the scale of this crisis.”

A spokeswoman said Horvath will introduce a motion to create the new department for consideration at the supervisors’ November 26 meeting.

LAHSA officials pushed back on several of the findings. In a preemptive response, LAHSA Chief Executive Va Lecia Adams Kellum told reporters last week that most of the findings related to activities of prior administrations and that she had already identified many of the accounting issues since her appointment in March 2023. She said she was working to fix them.

Adams Kellum said she welcomed the audit to see if the agency is “on the right track for system improvement that we’ve already put in place, and to further let us know what’s missing.”

She said she was pleased to learn that the areas of concern were things she was well aware of as the former head of the service provider St. Joseph Center and that she had come to LAHSA to fix.

“Much of these audits are covering time periods before I joined LAHSA, so it’s important that I get that baseline, that I see what those key areas of pain points are, and if we’re on the right track for system improvement that we’ve already put in place, and to further let us know what’s missing,” she said.

The agency said that many of the problems occurred during a period of rapid growth in the context of the COVID pandemic when it was under intense pressure to establish services to save lives.

In particular, the agency said it was following its operational agreement with the county which did not require it to recoup the $50.8 million.

LAHSA asked the auditor-controller to drop several of the 16 findings and reduce others from high to a lower priority.

The auditor left its report intact but included LAHSA’s comments. “Given the significant public funds advanced to and still outstanding with subrecipients, it is critical LAHSA implement our recommendations to ensure public funds are properly accounted for and safeguarded,” the auditor-controller said.

The county audit, ordered by the Board of Supervisors in February, is separate from an audit of L.A. city homelessness programs being conducted under the auspices of federal court in the L.A. Alliance for Human Rights lawsuit against the city and county.

But it parallels issues that the court-appointed auditors have raised.

In an October hearing, Diane Rafferty of the auditing firm Alvarez & Marsal told the court that preliminary field work uncovered “inconsistencies in services offered due to a lack of clear standards.”

For example, she said, “for the service providers, there’s no consistent definition of what is storage, what is a shower, what is a hot meal ... and it winds up being the service provider defining those for the people that they’re serving.”