WFCN –
A federal audit that was released today found that California’s anti-fraud rules were “disorganized” and “chaotic,” putting hundreds of millions of dollars meant to help the homeless at danger.
The audit examined the homelessness services that are overseen by the California Department of Housing and Community Development. Because it did not have sufficient policies to avoid, identify, and react to fraud, it ranked the California agency as low as it could go.
The audit concluded that the state agency was negligent in safeguarding the $319.5 million in federal homelessness funds that were disbursed during the COVID-19 outbreak.
The audit did not find any additional fraudulent activity.
Inspector General Rae Oliver Davis of the United States Department of Housing and Urban Development stated in a news release that “fraud poses a significant risk to the integrity of federal programs and erodes public trust in government.”
“The California Department of Housing and Community Development can better protect its pandemic grant funds and future funds for homelessness assistance from fraud by strengthening its antifraud program.”
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In response to the 2020 COVID-19 pandemic, the US government allocated $4 billion to the Emergency Solutions Grant program, which aimed to assist individuals facing homelessness. A 2,505% increase from its regular annual allotment, California’s portion of the pot was $319.5 million.
There was a higher chance that evildoers would try to use that massive windfall for their own ends because of the abundance of money. Federal housing officials, however, found that California had not done enough to strengthen its anti-fraud policies.
The state housing agency has promised to enhance its anti-fraud procedures and put the federal government’s suggestions into action.
“HCD is committed to a systematic and comprehensive approach to the management of risks, including fraud risk, as an integral part of its strategy formulation and implementation,” Director Gustavo Velasquez stated in a letter to the federal housing agency.
According to the audit, California’s administration of homelessness monies did not prioritize the prevention of fraud. According to the audit, the state failed to conduct routine fraud risk assessments, create a strategy to quickly detect and resolve any fraud, or establish a method to measure the efficacy of its anti-fraud measures.
All organizations receiving federal homelessness monies are expected to adhere to best practices, but these errors contradict such expectations.
“The public’s faith in government is weakened and federal program integrity is jeopardized by fraud.”
U.S. Department of Housing and Urban Development Inspector General Rae Oliver Davis
According to the audit, the state’s reaction was inadequate once it discovered allegations of fraud. The state housing department learned in March 2022 that a local police department was looking into possible fraud and abuse of money from the Emergency Solutions Grant.
Officials at the state agency were concerned that reporting the accusation could lead to negative publicity, so they refrained from doing so, as shown in the audit. The audit states that the agency did not report the incident until federal auditors began asking questions, which was approximately 1.5 years later.
The federal government and the state housing agency withheld further information regarding the purported scam prior to its publication.
Santa Clara County Democrat and recent supporter of an independent audit of the state’s programs for the homeless Dave Cortese was not surprised by the audit’s findings. Last month, an audit revealed that the state does not keep tabs on its spending on homelessness or the effectiveness of its initiatives.
He stated that the most recent government audit appears to highlight a more systemic absence of responsibility within the field of homelessness.
“The biggest reason of all that it’s frustrating is these are public sector dollars, they’re tax payer dollars,” Cortese said. “It’s disrespectful to the taxpayers to say, ‘Gee, we don’t really know what happened here to your money.’”
“Once again, California is failing to meet the mark on homelessness,” he said in an emailed statement. “If we truly want to solve homelessness, we have to start by holding our own bureaucracies accountable.”
Despite finding multiple holes in the California agency’s anti-fraud practices, the feds provided no evidence that fraud actually was rampant in the agency. Aside from the March 2022 case, the federal housing department stopped short of calling out any specific instances of suspected fraud. But that could come later: The feds recently launched a second audit looking into improper payments of Emergency Solutions Grants, which could include fraud. That report is expected some time next year.
The federal housing department also is auditing the agencies that administered Emergency Solutions Grants in Honolulu and New York City. Those results have not yet been published.
Fraud allegations have already surfaced in other programs overseen by California’s housing department. Earlier this year, the state agency sued a Los Angeles developer that received $114 million to develop homeless housing through the state’s Homekey program.
Though the majority of the COVID-era Emergency Solutions Grant funds have been distributed, California’s lack of fraud protections could continue to put future programs in jeopardy, the auditors wrote.