Part 160: “Some Kind of Action” – A New Homelessness Audit Drops in Los Angeles
Published March 13, 2025.
Photo of the First Street United States Courthouse as seen on the night of January 7 after another LA Alliance lawsuit hearing by Zachary Ellison (GoPro Hero 11 Black).
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By Zachary Ellison and Ruth Roofless, Independent Journalists
The audit was finally in after nearly a year of investigation. The firm Alvarez & Marsal (A&M), engaged under the purview of U.S. District Judge David O. Carter, had a report worth reading. The news coverage was unanimously critical; “major flaws” were found, the Los Angeles Times headlined on the story by veteran journalist Doug Smith, who added that the joint City-County contracting system operated through the Los Angeles Homeless Services Authority (LAHSA) to “monitor contracts for compliance and performance, leaving the system vulnerable to waste and fraud.” The audit, though, wasn’t able to identify any concrete examples for accountability even as it cataloged more than $2.3 billion in spending between LAHSA and the signature Inside Safe program of Mayor Karen Bass among other efforts to address the crisis of the unhoused.
The A&M audit also noted a LAHSA grievance process so ineffectual that out of “2,244 unique requests” for a three-phase process, only 45, approximately 2%, made it from Phase 1 to Phase 2, and out of those, none made it through Phase 3. So not only is the troubled organization quite literally audit-proof, but it’s also grievance-proof. Led by A&M Managing Director for the Public Services Sector Dianne Rafferty, the auditors concluded that “Funding and the City’s budget allocations for homelessness assistance services were not routinely reconciled with actual spending or contractual obligations.” A&M sampled 18 contracts out of a varying number in total from LAHSA, finding “disallowed costs” including “purchases from Amazon, Ralph’s, a bakery, and Best Buy” with no proof or repayment from service providers. There’s no question that at least some money may have been misused, but how much remains in the end a total mystery.
The proverbial gorilla in the room perhaps that the A&M audit didn’t evaluate is executive compensation to top bosses at service providers to LAHSA leadership. This is especially important since rank-and-file homelessness services workers make relatively low wages compared to much of their workforce. With salaries totaling often several hundred thousand annually, many executives have not only been banking it but also, at least in the case of LAHSA CEO Dr. Va Lecia Adams-Kellum, benefiting their family members with contracts. LAHSA recently had to adopt new rules around such disclosures after Adams-Kellum approved contracts related to her husband, an executive at a major contractor. So when A&M finds that “in the absence of accurate and complete data, as well as an integrated data infrastructure, critical understanding of the City Programs’ effectiveness, resource allocation, and long-term outcomes remained constrained,” you have to wonder who was responsible. LA’s politicians and bureaucrats?
The answer, at least in the A&M report, is everyone and no one at the same time. A hearing has been ordered for March 27 at 9:00 am in Courtroom 1 of the First Street Courthouse with Mayor Bass, Council President Marqueece Harris-Dawson, City Controller Kenneth Mejia, and Chairperson of the Board of Supervisors Kathryn Barger set to attend. It’s unclear if Adams-Kellum would attend, and LA County since last November has been actively studying reducing the responsibilities of LAHSA in favor of a new homelessness response agency. Supervisor Lindsey Horvath has indicated following the audit that she would move forward with the measure, calling LAHSA a “nightmare.” For her part, Mayor Bass seemingly has continued to argue that the audit only confirms what she already knew and indicates that change was already underway in the form of Inside Safe, which has a higher cost than prior response programs according to the A&M audit.
The office of City Controller Kenneth Mejia recently announced that they would launch a new audit of CARE and so-called CARE+ operations conducted by LAPD in conjunction with the Department of Sanitation. The latter unit as well as the costs related to the Los Angeles Fire Department in responding to homelessness were not considered as part of the audit. LAPD was a late addition to the A&M audit, and was found perhaps to be even more audit-proof than LAHSA. According to the report, LAPD overtime for securing safe parking areas through the A Bridge Home and Interim Homeless Housing Site program “the annual amount of pay ranged from $78 to $90,477, with an average annual overtime per officer of $4,709.” The report doesn’t indicate who pulled in $90,477 in overtime for staffing these sites. A request for comment on the audit, who the officer was, and if LAPD would investigate whether timecard fraud had occurred was referred by LAPD to the City Controller’s office. LAPD’s Office of Inspector General, which has oversight responsibility for LAPD, similarly referred to the City Controller’s office for follow-up on the matter.
So what’s the solution? Turn off the money flow until someone figures out how to properly account for spending much less get a fully accurate list of contracts to the auditors to review. The idea of freezing spending would assuredly create panic among those providing services and lead to the loss of jobs; it could also harm those being served. How do you tame such a bureaucratic beast, though, if there are no consequences for failures and if the system simply re-entrenches itself? For its part, the LA Alliance for Human Rights seemed simultaneously inclined to both celebrate the audit and condemn it for what it demonstrated. The group, funded by the business interests of Los Angeles, has been behind the landmark lawsuit, which is now several years into settlement, largely already confirmed what people widely know. The system isn’t producing the desired results, and the results it does produce are highly inefficient. The audit suggests there’s understaffing in accounting, and for their part, the Office of Controller Kenneth Mejia maintains they could have produced similar findings for no additional cost.
Already, the parties are conflicting again in court at even greater expense, as hundreds of thousands of dollars are expended on litigation to no direct benefit to the unhoused. The most recent filing from the City of Los Angeles objecting to the LA Alliance’s aggressive litigation reads like something out of Charles Dickens. It begins with the longest single sentence filed in court in recent memory, a true art of lawyering, worthy of their hefty salaries:
In the midst of a tragic time for the City of Los Angeles (the “City”), when the City’s elected leaders and employees are working diligently to address the aftermath of the recent devastating wildfires in addition to their ongoing work to address the homelessness crisis, the City should not find itself needing to respond to Plaintiff LA Alliance for Human Rights’ (“Alliance’s”) baseless motion to compel compliance with obligations Alliance agreed to pause, and meet and confer about, during precisely the situation the City is currently facing.
Perhaps the biggest real challenge is the fiscal cliff that the City of Los Angeles is facing due to a multitude of costs. Were the City of Los Angeles to ultimately go bankrupt, the question that would have to be asked is not only how we got there, much less where a bailout would come from, but why the wealthiest people in the city, instead of taking responsibility, instead moved to only exacerbate a financial and human crisis without even demanding structural change. Is Los Angeles simply beyond all possible salvation, and has the city foolishly done this to itself?
Chief Deputy City Controller Rick Cole, in noting that the Controller’s Office has been all but blocked from auditing the Mayor’s Office signature program, Inside Safe wrote recently on LinkedIn about their music video response to the audit: “Kenneth Mejia, the 33 year-old CPA who got more votes than any candidate for any office in the history of Los Angeles, continues to champion transparency and accountability on fiscal issues.” Speculation about whether Mejia would challenge Bass for the mayorship has run wild, much less Rick Caruso, who clearly hasn’t forgotten his loss to Bass in November 2022. The compounding threat of loss of funding from the federal government in the age of Donald Trump has also clearly been keeping Cole’s LinkedIn posts running, quoting City Administrative Officer Matt Szabo: “So immediate spending reductions are required and we must prepare for further reductions – and very likely much more serious reductions if revenues continue to decline.” Can revenues be increased, though?
Voters in Los Angeles are unlikely to stomach increased taxes, even those who can afford to pay, and most especially without serious reforms. The people complaining the loudest about homelessness are not the unhoused, but rather the wealthy, with the LA Alliance being a prime example, having received major backing from real estate developer Izek Shomof as detailed in his 2023 book Dreams Don’t Die. Shomof remains embroiled in litigation with his brother-in-law Patrick Wizmann, who brought a lawsuit against Shomof over the book along with a fraud allegation with regard to a property dispute. Wizmann alleged that Shomof’s publisher misrepresented his past on the book cover, a matter that is still under appeal, with the fraud lawsuit approaching possible mediation before going to trial. An influential figure in Los Angeles politics, Shomof donated to Kevin de León in his re-election campaign before he lost despite trashing him in his book. Having backed a controversial proposal to turn the Sears Mail Order Building in Boyle Heights into the city’s largest homeless shelter, the project has now been stalled since de León turned against it after significant opposition from neighbors over the plan.
A request for comment to a spokeswoman on whether current Councilmember Ysabel Jurado has been approached by Izek Shomof wasn’t immediately responded to, and Jurado didn’t take a position on the project during the campaign. It was unclear if Jurado would attend the March 27 hearing with Judge Carter, with de León having attended previously and even written to Judge Carter to complain about the lack of implementation of the coordinated entry system (CES) by the County of Los Angeles while attacking County Supervisor Hilda Solis, who backed Jurado in the election. The A&M audit found that the referral system was largely broken, concluding that “multiple siloed referral processes and disparate data systems, along with differing prioritization and matching processes to connect people experiencing homelessness to services, impeded the establishment of a uniform coordinated entry system.” The auditors added: “This fractured system contributed to potential inequities in resource allocation and a lack of transparency in the prioritization of unsheltered individuals experiencing homelessness for various shelter and housing interventions and supportive services.” Whether consolidation into a single massive project would resolve this certainly remains an unanswered question, and wasn’t addressed by the audit’s recommendations that were largely quite cautious on solutions.
Warehousing the unhoused, as critics have suggested the project would constitute, might not be the solution either. But if Los Angeles is incapable of reforming itself, does the private sector have a solution? Getting a settlement out of the City and County of Los Angeles is one thing, but actually meeting its terms is a whole other issue. The LA Alliance has been aggressively fundraising for its cause, with its website now featuring a large fundraising thermometer with what appears to be a $40,000 goal and roughly $16,000 raised to date. Gone are the quote bubbles from employees of the Shomof group. If Shomof had helped to fund the lawsuit in hiring attorney Elizabeth Mitchell, who formerly served in the City Attorney’s office before going into private practice and landing at the downtown law firm Umhofer, Mitchell & King LLP, his preferred solution hasn’t been implemented. Mitchell has been widely featured in news coverage of the audit and recently wrote in her February 20 filing under penalty of perjury about a December 12 meeting with Special Master Michelle Martinez and the City that “no reason was given for the delay in bed production other than vague references to delays being common in housing production” in alleging that the City wasn’t meeting the terms of its agreement.
The LA Alliance accuses the City of Los Angeles of gross mismanagement of funds in relation to Inside Safe, arguing that “it has no plan for the additional 3,800+ beds that must be created under this agreement in the next two years—and has not budgeted adequately for the operation of existing beds.” Last January 7, in discussing the existing systems, Controller Kenneth Mejia told Judge Carter in describing how the current City placement system doesn’t allow for unhoused persons, or “PEH (Persons Experiencing Homelessness),” as termed in the audit, to be moved out of the existing “catchment areas” that roughly align with City Council boundaries. LAHSA, which is supposed to operate within the City of Los Angeles, but also countywide, has a completely different service planning areas with interchangability for services.
To the extent that the City and County don’t have any alignment, the failure to confront these issues is a regional failure. Judge Carter summoned CAO Matt Szabo to the lectern alongside Mejia, stating per the transcript, “Yeah, that's an order, that's not a request, come up here, saving me getting the Mayor, I think she's in Ghana though.” Mejia stated that his office estimates that 70-80% of those with intake presumably through the CES end up right back in homelessness. Mejia and other advocates noted that getting people into permanent housing with direct subsidy was the best check against a return to the streets.
Reforming the system to actually achieve steady outcomes won’t be easy, but something has to change, and Ghana or no Ghana, the hearing on March 27 promises to be another battle royale of public officials even as the private interests of the City of Los Angeles largely miss being called to the lectern. It’s one thing to talk-the-talk on homelessness results, but delivering successful policy outcomes might as well be a phantom. Judge Carter finished the January 7 hearing declaring, “So 2025, I'm not saying February and I'm not saying December, but 2025 will be the year that unless you can get this functioning in these different institutions and come together, I will take some kind of action.” Carter added, Now you can guess what that will be, okay?” before declaring, “All right, we're on recess.” And 2025 is still just getting started.
Link: Dkt. 870 Second Amended Draft of the Alvarez and Marsal Assessment of LA City Homelessness Programs
Link: Court-ordered audit finds major flaws in L.A.’s homeless services
Link: Homelessness service officials outline new ethics procedures after LAist reporting
Link: Rick Cole LinkedIn Post RE: A&M Audit
Link: Rick Cole LinkedIn Post RE: Budget Crisis
Link: Publishers Win Anti-SLAPP Motion and Fee Award in Lawsuit Over Book Cover
Link: The LA Alliance for Human Rights
Link: Dkt. 863 LA Alliance Motion for Order Re City Settlement Compliance
Link: Dkt. 850 Transcript of January 7, 2025 Hearing
Please support my work with your subscription, or for direct support, use Venmo, CashApp, PayPal, or Zelle using zachary.b.ellison@gmail.com
Ruth Roofless has lived outside in the City of Los Angeles continuously for over five years. She attends public meetings about homelessness and exposes widespread programmatic corruption from within.
Zachary Ellison is a whistleblower journalist who is writing an investigative journalism series about Los Angeles on politics, investigations, and media.
Ruth and Zachary have teamed up to collaborate on a series covering the LA Alliance lawsuit and more. We hope to expose the inner workings of the government real estate development world and the impact felt by the people residing there.
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