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The homeless services provided by the City of Los Angeles and the Los Angeles Department of Homeless Services are falling apart, lacking proper data systems and financial management to monitor compliance and performance contracts, and are vulnerable to system vulnerabilities and fraud, a federal judge-ordered audit concludes.
An audit by global consulting firm Alvarez & Marsal found that it was impossible to determine how well the services worked or whether they were offered, as the city couldn’t track exactly how much they spent on their homeless programs and did not strictly adjust their spending with the services offered.
He said the contract written by Lahsa was ambiguous and allowed for a large variation in the services offered and its costs.
These findings reflected a November report by a Los Angeles County Auditor Control who found LAX’s accounting procedures recovered millions of dollars to contractors and paid other contractors on time, even if funds were available.
The audit posted on the website of US District Judge David O. Carter stems from a 2020 lawsuit filed by the LA Alliance, representing business owners, residents and property owners.
Both the city and the county have reached thousands of new shelter beds and settlements offering additional mental health and substance use treatments.
However, under continued surveillance of the settlement, Carter repeatedly said he wanted to increase transparency in homeless spending, and insisted that the city would also fund an external audit.
Elizabeth Mitchell, the plaintiff’s lawyer, said the audit would examine the central claims of the suit and reinforce the urgent need for systematic reform.
“These findings aren’t just annoying, they’re fatal,” Mitchell said. “The failure of the system’s financial integrity, programmatic monitoring and complete dysfunction has resulted in street devastation and impacted both incarcerated and unuseful.
“Billions are wasted on invalid bureaucracy while lives are lost every day. This is not just a mismanagement. It is a moral failure.”
Lahsa issued a statement acknowledging “the quality and integration of poor data as a major obstacle to success and monitoring, the lack of contractual clarity, and the siloed and fragmented nature of local homeless responses to promote disjointed services.”
It said it reached the same conclusion in 2021, and later “advocated for the creation of a regional agency to mandate cooperation between the city, county and Lahasa as proposed in the court audit.”
Many elected officials cried out.
Supervisor Lindsey Horvas said the audit saw it as approval of her proposal to create a new county department that will take over Lahasa’s contractual obligations.
“There’s no more waste from replicated resources,” Horvath said in a statement. “We no longer have contracts for services that we don’t provide. We need accountability and consequences.”
Mayor Karen Bass, the Signature Homeless Program within SAFE, who was criticized for prioritizing locations over places they need to, has also issued a statement characterising it as a testament to efforts to “change what has been “festerized for decades.”
“The broken systems that audits identify are the ones I’ve been fighting for since I took office,” she said. “We still have work to do, but the changes we made have helped us reduce the long-standing increase in homelessness by 10%. Cities, counties and Lahasas are working together to change the system and improve it, and we are committed to continuing.”
Los Angeles Councillor Nisia Raman issued a statement last month that said the audit had reinforced the need for a motion to propose a new urban sector to centralize oversight of the city’s homeless spending.
“This job must happen now. It’s more than just a metric. It’s about saving people’s lives by keeping people safe indoors,” she said.
The audit noted that there are no examples of fraud or proven waste, but highlighted many missing or overlapping controls that opened up the program to abuse.
For example, Lahsa had no standardized methods that were not adjusted based on when shelter beds were available and the number of beds that the funds were occupied. This could have contributed to the “conflicts in the data, potentially unfair distribution of funds.
The lack of specificity in the contract can lead to cascade issues such as inadequately locked storage space. This could discourage non-sheltered people from accepting shelters, and discourage shelters from seeking jobs and exacerbating the anxiety of people who tend to hoard.
The auditor suffered a disruption to Lahasa’s monitoring structure as he used the same team that approved the invoice and cash requests to monitor performance.
“With this arrangement, it is possible that fair judgment has been compromised, particularly if payment approval is inconsistent with the findings that show a defect in the service.”
Overall, the audit found that the direct contract system with the county service providers provides “more efficient coordination and clearer accountability” than the city’s indirect contracts via Rasa.
Alvarez and Marsal were selected from three bidders saying they could conduct an audit of between $2.8 million and $4.2 million.
The city originally agreed to pay for the audit in April, but its contribution was limited to $2.2 million. That amount increased as the scope expanded.
The audit was initially set to include not only the city shelters that it promised to be created under the settlement, but also the city’s internal safe programme, the city’s controversial anti-camping laws, and street cleaning by the Department of Health Care+ team. Lapd homelessness-related activities and county services were then expanded to include city shelters, but camp law enforcement was withdrawn.
At a follow-up hearing, representatives from Alvarez and Marzal reported that Carter had difficulty obtaining the records needed for work from the city, county and Los Angeles homeless services.
In October, Diane Rafferty, managing director of Alvarez & Marzal, described her “heartbreaking” experiences during outdoor visits to shelters and street camps.
“There are people who pass by every day and on the streets who are not receiving the services the city pays for,” Rafferty told the court.
She described one of the shelter residents with traumatic brain damage who frequently missed cut-off times for meals and “prostitution on the streets to get food.”
One shelter budgeted for four case managers, with only two on the site for 130 clients.
After a street visit, she said she was worried that the team had PTSD.
“The emotions that came out looking at what they were seeing and how these people were living were hitting their hearts with all the money sent to their service providers.”
However, the details provided in the 161-page audit sometimes softened the sharp tone of conclusions, recognizing that frontline workers in the challenge faced with difficult clients within a fractured system.
Focusing on the 31% substance use disorder and 24% serious mental illness reported by the most recent number of unsheltered homeless people, service provider morale was found to be strained by “a crisis situation involving aggressive behavior or self-harm.”
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