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iAUDIT! - If you haven’t heard, court-appointed auditors from Alvarez & Marsal (A&M) released their assessment of the City of LA’s homeless programs on March 6, and to be honest its worse than I imagined. Although written in the dry language of an audit, the assessment’s findings reveal a homelessness intervention system in almost complete disarray. LAHSA’s contract payment system is so dysfunctional, it chronically pays its vendors late and pays them based on whatever bills they choose to submit. As an audit from LA County reported in December, many contracts are signed weeks or months after LAHSA starts paying them. The shelter system is so disjointed, clients may be counted twice or more simply because they move from one facility to another. The City reinforces this lack of accountability by paying LAHSA regardless of how insufficient the performance documentation may be. Waste is structural, since most contracts pay for processes instead of results. Based on this assessment, and put in context with other reports and audits, only a fundamental restructuring of Los Angele’s homeless interventions will bring accountability and actual results to the system.
Local leaders were quick to react to A&M’s report, making comments long on hypocrisy and mighty short on accountability. In a stunning attempt to condemn the system they created, various officials claimed they’ve been the real voices for reform all along. It seems like they have a collective case of selective amnesia.
For example, Mayor Bass issued a statement saying A&M’s report “Validated her efforts to “change what’s festered for decades.”
“The broken system the audit identifies is what I’ve been fighting against since I took office,” she said. “We still have work to do, but changes we’ve made helped turn around years of increases in homelessness to a decrease by 10% — the first one in years. The City, the County and LAHSA are working together to change and improve the system, and we are committed to continuing to do that.”
Apparently she forgot that just three months ago, she released a glowing self-assessment of her office’s homelessness efforts, with no comments about a system so broken it can’t even count the number of people it serves. She also claimed a decrease in unsheltered homelessness using numbers produced by a system that, according to A&M, has no idea how many people it served. Also, as has been her habit lately, the Mayor misspoke. The supposed 10 percent decrease was in unsheltered homelessness, not homelessness overall. The alleged 2024 decrease in homelessness was so small, it was within the PIT count’s margin of error.
In another statement, Mayor Bass was still hesitant to criticize LAHSA, “Mayor Bass has been critical about defunding LAHSA before. “New urgency has been at the core of our work to bring people off the street, not the creation of new bureaucracy,” Bass said in a statement. “We can’t afford to just create new paperwork or slow momentum to reduce encampments and connect people with housing and mental health treatment”. This is either naïve or intransigent, depending on how one looks at it. In any case, her blind loyalty to LAHSA is one of the reasons $2.3 billion has been spent on failed programs.
The same LA Times article that quoted Mayor Bass also reported Supervisor Horvath’s comments, “No more waste through duplicated resources,” Horvath said in a statement. “No more contracts for services that don’t deliver. We need accountability and results right now.”
Yet she was the chair of LAHSA’s Board of Commsioners until December 2024 and had ample opportunity to demand change. Her comment about questionable contracts is laughable considering she was among the Commission members who rubber stamped $4 million in contracts written to a nonprofit where the husband of LASHA CEO Dr. Va Lecia Adams Kellum is a senior manager. (Coincidentally, LAist reported “Among the payments that have had no performance reports to LAHSA were $1.7 million last year to Adams Kellum’s husband’s employer, under a $2.1 million contract Adams Kellum signed in a breach of ethics rules, according to a records request response to LAist. Another with no performance reports was a $60,000 LAHSA consulting contract for Adams Kellum to advise the mayor in the six weeks leading up to becoming LAHSA’s CEO, according to a records response to LAist”. So LAHSA paid $60,000 for Adams Kellum to advise Mayor Bass on homelessness, and then Adams Kellum became LAHSA’s CEO. One must wonder what she told Bass about LAHSA).
Councilmember Raman, who somehow became chair of the City’s Homelessness Committee this year, tried to jump on the “I told you so” bandwagon as well. She issued a statement, “saying the audit reinforced the need for a motion she introduced last month proposing a new city division to centralize oversight of the city’s homelessness spending.
“This work must happen now: this is about more than just metrics — this is about saving people’s lives by bringing them indoors into safety,” she said. This is ironic coming from a Councilmember who knows only too well a LAHSA-managed shelter in her own district is run so poorly, people prefer life on the streets.
For its part, LAHSA’s leaders dared not be quoted directly, instead sending the Times a generic statement, “acknowledging the “siloed and fragmented nature of our region’s homeless response for driving poor data quality and integration, lack of contractual clarity, and disjointed services as major impediments to success and oversight.”
It said it had come to the same conclusion in 2021 and has since “advocated for creating a regional body to mandate collaboration between the City, County, and LAHSA, just as proposed in the court’s audit.”
LAHSA’s statement is jarring in both its hypocrisy and its ignorance. A&M’s report clearly states LAHSA itself is the root cause of most of the homeless system’s problems, yet its leaders claim they’ve been advocating for reform for the past four years. A&M’s assessment covered most of those four years, detailing a massive number of management failures LAHSA claims it’s been trying to fix during the same period.
The statements from these leaders are so stunning in obfuscation, the word hypocritical hardly does them justice. These are the same leaders who have spent years supporting a system that invites fraud, promotes inefficiency, and evades accountability. Despite Supervisor Horvath’s strident talk about a new system, the best idea for reform her appointee to LAHSA’s Board could come up with was to print contracts with potential conflicts of interest on purple paper. Demands to reform LAHSA’s financial systems date back to at least 2018, and yet nothing has been done.
How bad is it? Just a few small samples of the A&M’s audit are shocking:
- The City was paying $281 per night for rooms at an Inside Safe location. If we assume a room is occupied 80% of the year (292 days per year), at $281 per night, it’s costing the city $82,052 per person per year. Even at that ridiculous cost, clients in Inside Safe receive almost no services and often fall back into homelessness.
- LAHSA does nothing to verify the services for which it is billed. All a provider has to do is send in the right forms and it will be paid.
- Once the City’s Housing Department receives a payment request from LAHSA, it rushes to pay it, again, without checking if services have actually been provided.
- The Housing Navigation program is meant to track and support a client from the streets to housing, but LAHSA doesn't know what services clients are receiving, if they are receiving any at all. A&M’s findings are consistent with an advocate coalition survey that found only about a third of people in the Inside Safe program have received help finding housing and 45% have received no social services of any kind.
- Throughout the report, the auditors found no program places more than 20 percent of its clients into permanent housing, and more than twice that number fell back into homelessness.
The LAist headline said it best: “Searing audit finds city of LA has failed to properly track billions in homelessness spending”. In April 2024, the State Auditor said state government had nothing to show after spending $24 billion on homelessness over five years. The A&M report brings that finding home to LA. A&M’s report cites so many opportunities for fraud and abuse, they require a column of their own. But the system is so poorly managed, a provider can merely add hours to a bill, and it will be paid.
You can expect more about the report in future columns, but here a few things to consider in the meantime. There are at least 75,000 unhoused people in LA County. Almost seven of them die on the streets every night. The report shows the billions spent to meet this crisis have produced almost no benefits. We could decry how broken the system is and its cost in real human terms. But perhaps we should turn that argument on its head, and accept the system is operating exactly as it was intended.
At the end of the money pipeline, a group of large corporate nonprofits benefit from the unrestricted and unaccountable flow of money. Most of these organizations are represented by a shadowy agency called the Greater Los Angeles Coalition on Homelessness (GLACH) which functions as their lead advocate. As Christopher LeGras reported in November 2024, GLACH was able to cajole and bully LA’s City Council into increasing its per-bed payments at city-funded shelters, despite phenomenal growth in their revenues. As shown in A&M’s report, nobody knows where the money is going, except that there is evidence some providers claimed reimbursement for more staff than were actually onsite.
What if the system is doing what its leaders intended it to do: funnel as much money as possible as quickly as possible, with as little accountability as possible, to a select group of nonprofits? That would explain many things. It would explain why LAHSA’s Board had no problem approving contracts benefiting Dr. Adams Kellum’s husband’s nonprofit. It would explain why a part-time “Executive Strategist” to LAHSA makes as much as $322,000 a year while being a co-founder of a homelessness nonprofit advocacy group. It would explain why Councilmember Yaroslavsky insisted on placing a shelter in a community fiercely opposed to it, while not mentioning her chief homelessness assistant had been an executive in the nonprofit the Councilmember chose to manage the shelter on a no-bid contract. It would explain why Councilmember Raman granted $42,000 to a nonprofit she created to provide unspecified services at the Riverside Bridge Home. It would explain why these and other leaders supported Measure H, which will pour a new stream of hundreds of millions of dollars into the hands of the same nonprofits. If you wanted to design a system that was intended to benefit a small group of favored organizations, you would design the one described in A&M’s report.
If there is a positive side to the devastation described in the report, it is that the City, County, and LAHSA cannot simply ignore it as they have so many others. The review was ordered by a federal judge, and Judge Carter has already ordered a hearing for March 27 to have local leaders respond in person. Unlike previous audits and reports, elected leaders will not be able to respond with silent contempt, as they have so often in the past. This time, the big question is, will taxpayers and voters be paying attention?
(Tim Campbell is a resident of Westchester who spent a career in the public service and managed a municipal performance audit program. He focuses on outcomes instead of process in his iAUDIT! column for CityWatchLA.)
