Homeless services provided by the city of Los Angeles and the Los Angeles Homeless Services Authority are disjointed and lack adequate data systems and financial controls to monitor contracts for compliance and performance, leaving the system vulnerable to waste, an audit ordered by a federal judge has concluded.
The audit by the global consulting firm Alvarez & Marsal found that the city was unable to track exactly how much it spent on homeless programs and did not rigorously reconcile spending with services provided, making it impossible to judge how well the services worked or whether they were even provided.
Contracts written by LAHSA were vague, allowing wide variations in the services provided and their cost, it said.
Those findings echoed a November report by the Los Angeles County Auditor-Controller that found 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.
The audit, posted on the website of U.S. District Judge David O. Carter on Thursday arose from a 2020 lawsuit filed by the L.A. Alliance for Human Rights, a group representing business owners, residents and property owners, which alleged that the city and county were failing in their duty to provide shelter and services for people living on the streets.
Both the city and county reached settlements providing for thousands of new shelter beds and additional mental health and substance use treatment.
But under continuing monitoring of that settlement, Carter repeatedly said that he wanted more transparency for homelessness spending and insisted that the city also fund an outside audit.
An attorney for the plaintiffs, Elizabeth Mitchell, said the audit validates the core allegations in the lawsuit, reinforcing the urgent need for systemic reform.
“These finding are not just troubling — they are deadly,” Mitchell said. “The failure of financial integrity, programmatic oversight, and total dysfunction of the system has resulted in devastation on the streets, impacting both housed and unhoused.
“Billions have been squandered on ineffective bureaucracy while lives are lost daily. This is not just mismanagement; it is a moral failure.”
Alvarez & Marsal, which said it could conduct the audit for$2.8 million to $4.2 million, was selected from among three bidders.
The city originally agreed in April to pay for the audit but limited its contribution to $2.2 million. That amount has since been increased as the scope expanded.
The audit was initially set to include not just shelters the city committed to create under the settlement, but Mayor Karen Bass’ Inside Safe program, the city’s controversial anti-camping law and the street cleanups by the Sanitation Bureau’s CARE+ teams. The audit was later expanded to include LAPD homeless-related activities and county services to city shelters, while enforcement of the anti-camping law was dropped.
In follow-up hearings, representatives of Alvarez & Marsal reported to Carter that it was having difficulty obtaining records necessary for its work from the city, the county and the Los Angeles Homeless Services Authority.
In October, Diane Rafferty, an Alvarez & Marsal managing director, described “heart-breaking” experiences in field visits to shelters and street encampments.
“Every day that goes by there’s people on the street that are not receiving the services that the city is paying for,” Rafferty said in court.
She described one shelter resident with a traumatic brain injury who frequently missed the meal cutoff time and “was prostituting themselves on the street to get food.”
One shelter budgeted for four case managers had only two on site for 130 clients.
After street visits, she said, she was concerned about her team having post traumatic stress disorder.
“The emotion that came out seeing what they were seeing and how these people are living, with all the money going to the service providers was heart-breaking.”
