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iAUDIT! - According to a recently completed annual audit of LAHSA’s fiscal year 2024-25 budget of $810.19 million, the City of Los Angeles and LA County contributed about $649.6 million, or about 80 percent of the Authority’s total budget. The City paid $277.5 million and the County contributed $372.1 million. The remainder came from the U.S. Department of Housing and Urban Development, (HUD), various state agencies, and other regional sources. The audit was the federally required Single Annual Audit that LAHSA should have submitted to HUD by March 31. The audit report gives us an idea of what LAHSA did with its $810 million. Before I describe some of the audit’s highlights, it is important to realize what a Single Audit is and what it isn’t.
The U.S. government requires state and local governments that use federal funds to submit an audit showing how the money was used. In the audit world, we call it a compliance audit, because it’s meant to ensure an agency is complying with federal funding guidelines. Its pretty straightforward. If you read the outside auditor’s report, the Single Audit checks for things like contracts tied to payments, that money was spent only for the intended purpose, and all the funds can be accounted for. The Single Audit is not a performance audit; it doesn’t make a statement about how well an agency used the money it was given. Nor is it a forensic audit--it does basic tests for fraud and raises red flags as appropriate, but it doesn’t take a deep dive into investigating for fraud. As an example, in 2014, a staff analyst for the City of Pasadena was arrested for embezzling about $6 million from a special utilities fund. The fraud went on for several years, and each year, the city passed its Single Audit and other financial reviews. The fraud wasn’t discovered until the analyst was placed on leave for an unrelated reason, and his replacement found questionable transactions. Then the city called in forensic auditors from KPMG who uncovered the extent of the embezzlement.
One term that comes up quite often in the auditors’ report is “internal controls” -- it appears 60 times. It’s another one of those apparently innocuous audit terms that have far more importance than they appear. Simply put, internal controls are the structures, policies, and practices an organization has in place to ensure its financial operations comply with professional standards--in LAHSA’s case Generally Accepted Government Accounting Practices. Following the standards ensures an organization’s financial statements and reports are accurate, that fraud risks are minimized, and all funds can be accounted for. Internal controls are more than just a set of written policies. When auditors examine an agency, they not only look for proper policies, but assess how well those policies are put into practice. In the Pasadena case, there were internal controls that should have prevented the fraud, but management didn’t enforce them.
On page 58 of the report, the audit firm mentions a “significant deficiency” in internal controls regarding the accuracy of its financial statements. Financial statements are a set of documents summarizing an organization’s financial performance, activities, and end-of-year position. They’re used by managers and outside entities to assess an agency’s financial health. LAHSA’s independent auditors found the Authority lacked properly designed and implemented controls to ensure its end-of-year financial statements were accurate. The need to go back and correct the records was one of the driving forces behind LAHSA’s tardy audit submission.
One consequence of poor internal controls is that LAHSA failed to reveal the “related party transactions” between former CEO Dr. Va Lecia Adams Kellum and a nonprofit where her husband is a senior manager (report page 43). Adams Kelum approved more than $4 million in payments to the nonprofit. Nothing in LAHSA’s financial records indicated the relationship between the CEO and the nonprofit manager. In fact, auditors only learned of the situation when they read about it in a series of LAist articles. As an April 21 LAist column describes, the Authority offered differing stories of the incident; LAHSA’s public relations person claimed Adams Kellum accidently signed the approvals, but an investigation found that Adams Kellum allowed subordinate staff to apply her approvals to documents, which is a serious breach of internal controls in itself. As LAist states, a LAHSA-commissioned investigation cleared Dr. Adams Kellum of wrongdoing, but the state’s Fair Political Practices Commission is still investigating the approvals.
The auditors found other problems like timecards being processed without proper approvals, meaning LAHSA can’t substantiate the use of restricted funding because time charged to special funds wasn’t reviewed.
Getting past the audit jargon, what does the Single Audit tell us? Considered by itself, it raises concerning issues like why LAHSA’s 100-person financial staff couldn’t produce required documentation in time to meet the audit deadline, and why management didn’t inform the Board of Commissioners of the delays. Inaccuracies in the financial statements mean Commissioners may not have been getting accurate data they need to make informed decisions. Processing timecards without approvals may mean salaries (and possibly other costs) are not being reviewed before being charged to special funds, endangering future revenues.
We must also consider the Single Audit in terms of other audits and reports. A November 2024 report from the L.A. County Auditor’s Office detailed how lax contract and financial controls have created a chaotic financial situation, where providers are paid late, funding requests are not submitted on time, payments are made without properly executed contracts, and millions in advance payments to providers have not been recouped. A March 2025 court-ordered review showed LAHSA and the City of LA routinely pay providers without proof of performance and cannot say with certainty what their programs cost.
Taken together, these reports show the cause and consequences of poor financial management. LAHSA’s management cannot fulfill basic financial functions like preparing accurate financial statements. In turn, the lack of financial controls and weak implementation means contract requirements are not enforced, the use of restricted funds cannot be traced, and mistakes like Dr. Adams Kellum approving contracts to her husband’s nonprofit happen in obscurity.
As LAHSA’s performance comes under increasing scrutiny from the City and County, more negative information is revealed with every new report. The real problem, of course, is that LAHSA’s operations weren’t scrutinized more closely until they became a political liability to elected officials on the City Council and County Board of Supervisors. Last year, Councilmember Raman was an ardent advocate of maintaining LAHSA’s funding. Now that she’s running for mayor, she’s displaying new-found concern about the hundreds of millions the city pays the Authority. Similarly, Supervisor Horvath, having declared “LAHSA is us” after the November 2024 audit, is one of its harshest critics now that the County has pulled its funding and created its own homelessness department.
For 30 years, LAHSA has struggled to find its place in Los Angeles’ homelessness ecosphere. Caught between the competing priorities of the City and County governments, it has been subjected to expectations it cannot meet. Despite earnest statements about bold new initiatives, the Authority has never developed a clearly-defined mission, and even now, Interim CEO Gita O’Neill’s announcement of a new path forward must be considered in the light of the Authority’s plan to layoff one-third of its workforce. It is exceedingly challenging for any organization to take on new initiatives while simultaneously downsizing, and even more so for an agency like LAHSA that is facing serious management issues. Given its history of failed projects, I do not hold out much hope for its latest attempt at reform.
I believe the question now is how long LAHSA can expect to survive in anything resembling its present form. LA’s City Council is considering joining the County in defunding the Authority. Candidates for office, some of whom once vociferously supported LAHSA, are now calling for reforming or eliminating it. The current presidential administration is placing more emphasis on performance and is attempting to move away from the Housing First model that has powered homelessness policy and funding for decades. These challenges will require visionary and proactive leadership, which has never been LAHSA’s strong suit. The next few years will certainly be interesting!
(Tim Campbell is a longtime Westchester resident and veteran public servant who spent his career managing a municipal performance audit program. Drawing on decades of experience in government accountability, he brings a results-driven approach to civic oversight. In his iAUDIT! column for CityWatchLA, Campbell emphasizes outcomes over bureaucratic process, offering readers clear-eyed analyses of how local programs perform—and where they fall short. His work advocates for greater transparency, efficiency, and effectiveness in Los Angeles government.)
