Recommendations

April 2018 Homelessness in California State Government and the Los Angeles Homeless Services Authority Need to Strengthen Their Efforts to Address Homelessness Report 2017-112 COMMITMENT INTEGRITY LEADERSHIP CALIFORNIA STATE AUDITOR 621 Capitol Mall, Suite 1200 | Sacramento | CA | 95814 916.445.0255 | TTY 916.445.0033 For complaints of state employee misconduct, contact us through the Whistleblower Hotline: 1.800.952.5665 Don’t want to miss any of our reports? Subscribe to our email list at auditor.ca.gov For questions regarding the contents of this report, please contact Margarita Fernández, Chief of Public Affairs, at 916.445.0255 This report is also available online at www.auditor.ca.gov | Alternate format reports available upon request | Permission is granted to reproduce reports Elaine M. Howle State Auditor April 19, 2018 2017-112 The Governor of California President pro Tempore of the Senate Speaker of the Assembly State Capitol Sacramento, California 95814 Dear Governor and Legislative Leaders: As requested by the Joint Legislative Audit Committee, the California State Auditor presents this audit report concerning homelessness in California and the Los Angeles Homeless Services Authority’s (Authority) administration of public funds. This report concludes that the State should increase its efforts to better address homelessness while the Authority should strengthen its process for reviewing applications to provide homeless services. Based on 2017 information from the U.S. Department of Housing and Urban Development (HUD), California leads the nation with both the highest number of people experiencing homelessness—about 134,000, or 24 percent of the nation’s total—and the highest proportion of unsheltered homeless persons (68 percent) of any state. In contrast, New York City and Boston shelter all but 5 percent and 3 percent, respectively, of their homeless populations. One factor that contributes to other entities having lower proportions of unsheltered homeless individuals is the existence of a specific organization dedicated to addressing homelessness. In 2016 state law created the Homeless Coordinating and Financing Council (state homeless council). However, because it has no permanent staff and no funding for such staff, the state homeless council faces challenges in establishing a coordinated response to address homelessness in California. For instance, the lead agencies for California’s Continuum of Care (CoC) areas (HUD administers the CoC program to provide funding to address homelessness) asserted that they are not equipped organizationally or financially to fully address homelessness. A single state entity could help the lead agencies resolve issues such as the need for additional resources to implement HUD-recommended activities and the ability to better implement HUD requirements and improve services for California’s homeless population. Regarding the Los Angeles City and County CoC area, its 55,000 homeless individuals is the largest homeless population in the State. The Authority is its lead agency and is responsible for distributing public funding to providers of homeless services in the county’s eight service planning areas (service areas). Primary sources of funding that the Authority distributes are HUD, Los Angeles County, and the city of Los Angeles. Although the Authority used a reasonable process to evaluate and approve applications for funding new homeless projects, it should address certain deficiencies, including outdated written procedures and a flawed documentation process. The Authority stated it has begun addressing some of these issues. Moreover, the Authority awarded the smallest funding amounts to service areas outside the city of Los Angeles. Two reasons cause this variation: some funding sources restrict the geographic areas where the Authority can allocate its funds and fewer providers apply for funding in these service areas. Although the Authority has technical assistance programs to help increase capacity of its service providers, its limited data hinder its ability to identify and address funding variations across service areas. Respectfully submitted, ELAINE M. HOWLE, CPA State Auditor 621 Capitol Mall, Suite 1200 Sacramento, CA 95814 916.445.0255 916.327.0019 fax www.auditor.ca.gov iv California State Auditor Report 2017-112 April 2018 Selected Abbreviations Used in This Report 2017 homeless report HUD’s 2017 annual homelessness report to Congress Authority Los Angeles Homeless Services Authority CoC Continuum of Care entry system coordinated entry system federal homelessness council U.S. Interagency Council on Homelessness federal plan Opening Doors: Federal Strategic Plan to Prevent and End Homelessness (2015) HCD Department of Housing and Community Development HMIS Homeless Management Information System HUD U.S. Department of Housing and Urban Development Los Angeles CoC Los Angeles City and County Continuum of Care Public Health California Department of Public Health RFP request for proposal service areas service planning areas state homeless council Homeless Coordinating and Financing Council California State Auditor Report 2017-112 v April 2018 Contents Summary 1 Introduction 9 Chapter 1 The State Should Take a Stronger Role in Addressing Homelessness 21 Recommendations 38 Chapter 2 Despite a Reasonable Process for Considering Funding Applications, the Authority Can Do More to Address Funding Variations Across Los Angeles County 39 Recommendations 53 Appendix A Although Providers From Some Service Areas Failed to Qualify More Often Than Others, the Authority’s Reasons for Its Funding Decisions Were Justified 57 Appendix B Funding for New Projects Varies Across Los Angeles County Because of Funding Restrictions and Lack of Provider Applicants 61 Response to the Audit Los Angeles Homeless Services Authority 65 vi California State Auditor Report 2017-112 April 2018 Blank page inserted for reproduction purposes only. California State Auditor Report 2017-112 1 April 2018 Summary Results in Brief Audit Highlights . . . California should do more to address homelessness. Currently, California Our audit on the administration of public funds has more people experiencing homelessness (the homeless by the Los Angeles Homeless Services Authority population) than any other state in the nation, and it does a poor (Authority) revealed the following: job of sheltering this vulnerable population. According to the U.S. Department of Housing and Urban Development’s (HUD) »California leads the nation with both 2017 annual homelessness report to Congress (2017 homeless the highest number of homeless report), in January 2017 California had about 134,000 homeless persons—24 percent of the nation’s individuals, which represented about 24 percent of the total total—and the highest proportion homeless population in the nation.1 California also has the of unsheltered homeless persons highest rate of unsheltered homeless: more than two‑thirds of (68 percent) of any state. California’s homeless are living in vehicles, abandoned buildings, parks, or on the street. Furthermore, 82 percent of California’s »Although created in 2016 to address the unaccompanied homeless youth are unsheltered; in contrast, State’s homeless crisis, the state homeless 38 percent of unaccompanied homeless youth in the rest of the council does not have its own permanent nation are unsheltered.2 staff resources, making it difficult to develop and implement a statewide plan The lack of shelter for California’s homeless population can be to address homelessness. expensive for communities and can have severe consequences for homeless people. Homelessness and lack of shelter for the homeless »Some lead agencies for California’s CoC population can affect the surrounding communities financially and areas stated they are not equipped physically. For example, according to the administrative officer for organizationally or financially to fully the city of Los Angeles in a 2015 report, at least 15 agencies regularly address homelessness, and a single state engaged with the homeless population, with some departments entity could help them resolve issues incurring large costs. Additionally, the unsheltered homeless to implement HUD requirements and population has an increased risk of exposure to communicable recommended activities. diseases. For example, the homeless populations in four California counties were affected by the largest person‑to‑person hepatitis A »Los Angeles County has the largest outbreak in the United States since a vaccine for it became available homeless population in the State, and the in 1996. In contrast to California, the New York City and Boston Authority is responsible for distributing Continuum of Care (CoC) areas shelter more than 95 percent of their public funding for homeless services in homeless populations. Two reasons may explain why California’s eight service planning areas. unsheltered homeless population exceeds that of other entities. »Although the Authority consistently 1 For its annual homeless report to Congress, HUD discloses the results of what it refers to as a used the same reasonable process to point‑in‑time count of homeless individuals. According to HUD’s regulations, a point‑in‑time evaluate competitive applications for count is a count of sheltered and unsheltered homeless persons carried out on one night in new homeless projects, it has outdated the last 10 calendar days of January or at such other time as HUD requires. Therefore, HUD based the homeless population numbers in its 2017 homeless report on counts that occurred in written procedures and a flawed January 2017. The numbers and percentages pertaining to homeless persons in our report are documentation process. based on the California State Auditor’s analyses of the results that HUD included in its annual h omeless reports and on HUD’s point‑in‑time counts obtained from its website. Furthermore, HUD administers homeless assistance grants, including grants for the CoC program. » The Authority lacks the ability to A CoC is a group organized to carry out the CoC program’s responsibilities within a specified adequately analyze its funding decisions geographic area. based on geographic area and does not 2 We provide additional information regarding homelessness in California on our website (see http://auditor.ca.gov/reports/2017-112/supplemental.html). An interactive map shows have an adequate database to track the conditions across the State, including the number of people who lack shelter and the amount of results of its application evaluation process. annual HUD funding awarded to various areas. Using HUD data, the map also shows changes in the size of the homeless population from 2007 to 2016. 2 California State Auditor Report 2017-112 April 2018 First, other entities have a single entity charged specifically with addressing homelessness. Furthermore, other entities invest significantly in administering and funding homeless services. California’s relative position regarding its homeless population points to the need for a single entity to oversee an effective and efficient system to address homelessness. However, until recently, California lacked such an entity and had no single mechanism by which to coordinate the multitude of homeless programs that the State funds. In 2016 state law created the Homeless Coordinating and Financing Council (state homeless council). The state homeless council’s goals include aligning existing state homeless service programs to ensure that they quickly and successfully connect individuals and families experiencing homelessness to permanent housing without preconditions or barriers to entry, such as sobriety. Another goal of the state homeless council is to create partnerships among state agencies and departments, local government agencies, and participants in HUD’s CoC program to arrive at specific strategies to end homelessness. Although creating the state homeless council is a first step toward addressing California’s homelessness at a statewide level, it could face critical challenges to quickly establishing a coordinated response to homelessness and meeting its statutory goals because it has no permanent staff and no funding for such staff. Even though state law dictates that any structures the state homeless council establishes to assist in its efforts must work “within existing funding” and that the Department of Housing and Community Development must provide staff assistance, it will be difficult for the state homeless council to develop and implement a statewide plan to address homelessness without its own permanent staff resources. To address homelessness at a local level, California currently has 43 CoC areas that cover the entire state. We surveyed the lead agencies for the CoC areas to obtain some perspective related to best practices of homeless services across the State. Lead agencies in each CoC area are responsible for planning the administration of homeless services. The CoC lead agencies indicated a need for additional resources and direction from the State. Specifically, lead agencies reported that they lacked funding, staff, and other resources to implement HUD‑recommended activities such as conducting annual counts of unsheltered homeless, raising funds from nonfederal sources, and coordinating with other homeless service agencies. Rural CoC lead agencies also reported difficulties in implementing HUD requirements related to developing a coordinated entry system (entry system) and administering their Homeless Management Information Systems (HMIS). California State Auditor Report 2017-112 3 April 2018 The state homeless council could address the absence of strong state leadership from a single state entity, which currently creates challenges for rural CoC areas. HUD encourages CoC areas to merge with one or more other CoC areas if they have struggled in the competition for HUD funding. A balance‑of‑state CoC area can consist of multiple rural counties. If the state homeless council facilitated discussions with existing CoC lead agencies about forming a balance‑of‑state CoC area, it could create opportunities to remove some of the administrative burdens from local entities. This could result in more resources to implement HUD‑recommended activities and improve services for California’s homeless population. Los Angeles County has the largest homeless population in the State and the second largest in the nation. The Los Angeles Homeless Services Authority (Authority) as well as the housing authorities for Los Angeles County and the city of Los Angeles are responsible for distributing public funding for homeless services in eight service planning areas (service areas) throughout Los Angeles County. Of the HUD CoC program amounts awarded to the Los Angeles City and County CoC (Los Angeles CoC) area for 2014 through 2016, the Authority received, on average, 27 percent, while the Housing Authority of Los Angeles County and the Housing Authority of the city of Los Angeles received approximately 16 percent and 45 percent, respectively. Regarding the Authority’s distributions, we found significant funding variations between the eight service areas. During fiscal years 2014–15 through 2016–17, the Authority generally awarded the smallest amount of new project funding to service areas outside the city of Los Angeles. However, we found that the Authority consistently used the same reasonable process to evaluate competitive applications for funding for new projects without regard to service area. Multiple reviewers from several departments within the Authority and one external reviewer evaluate various portions of funding applications, and score and rank them according to published criteria. The Authority then submits its recommendations for funding to its commission for approval. Although the Authority consistently followed its evaluation process for all applications we reviewed, it could make some improvements to its process. To begin with, although the Authority hired a contractor in 2016 to update policies and procedures, it does not have current written procedures for much of its application evaluation process. For example, the procedures it provided us did not include the electronic application system the Authority implemented in 2014, nor the steps its staff started using in 2016 for creating tools used to evaluate an application (evaluation tools), including scoring rubrics and summary scoring sheets. 4 California State Auditor Report 2017-112 April 2018 Additionally, we found that the Authority did not fully document certain aspects of its evaluation process. Specifically, it did not document its determination of whether an application passed or failed the first phase on 21 of the 26 applications we reviewed for fiscal years 2015–16 through 2016–17. It also did not include evidence of supervisory review on the evaluation tools, but instead completed the review process through email between staff members, management, and the director of finance. We also found that the Authority’s staff do not use its network hard drive consistently to store documents, which creates inefficiencies and decreases the transparency of the application evaluation process. The Authority has begun to address some of these issues. For example, after we brought our concerns to the attention of the Authority’s management, it began documenting meetings in which it discusses funding decisions. However, it should fully implement and formalize its improvements when it updates its policies and procedures to ensure that its efforts are efficient, effective, and transparent. One factor contributing to the funding variations across service areas is that allocation decisions can be outside the control of the Authority. First, the Authority does not have final control over which service areas it awards public funding. For instance, two funding sources—the city of Los Angeles and Los Angeles County—impose rules on the funds they provide. The city and county each have restrictions based on geography: the city of Los Angeles funds must be used to fund services within the city, whereas the Authority is required to consider the needs of urban county areas when evaluating a project for county funding. Second, HUD’s evaluation criteria do not include service areas; it makes the final determination on who receives its awards based on the strength of individual applications. In addition, some service areas appear to lack a sufficient number of service providers to apply for funding. The Authority has made attempts to offset some funding variations by reserving funds for underserved service areas and providing technical assistance to increase the pool of qualified service providers in these areas. For example, although the Authority cannot unilaterally reduce the amount of county funding to providers within the city boundaries, it sometimes gives preference for county funding to service areas outside those boundaries. The Authority has also revised its application process to improve the success of its applicants. It now evaluates whether providers meet minimum requirements to manage public funds before they apply for a competitive grant. This allows Authority staff to provide feedback that helps providers qualify to apply. California State Auditor Report 2017-112 5 April 2018 Despite these steps, we found that the Authority has not adequately used data to analyze the effects of its efforts. First, the Authority could not accurately determine how much money it distributed to each service area for our audit period. In addition, it lacked organized application evaluation data and struggled to provide us with a complete and accurate record of its evaluation results for fiscal years 2014–15 through 2016–17. The Authority’s limited data hinder its ability to identify and address funding variations across service areas. Specifically, the Authority has technical assistance programs to help increase the administrative capacity of its service providers, and if it aggregated and analyzed its application data, it could increase the efficiency of its technical assistance programs by proactively identifying the needs of and providing specialized assistance to service providers. In addition, it could more effectively identify and communicate its funding needs to funders. The Authority is beginning to improve its accounting system and is implementing a new contract management system. However, to have a complete picture of the homeless services in the Los Angeles CoC area, it should have complete and accurate data at each point of the funding process, including the application evaluation process. This should include the number of eligible providers, the reason providers do not apply for certain requests for proposals, which providers win funds and why, where they are located, and how programs are affecting homelessness. The Authority is the only entity that has access to all of this information and how it intersects. Recommendations Legislature To better serve the needs of homeless Californians, and to provide statewide leadership to agencies at all levels for better coordination of efforts to address homelessness, the Legislature should enact legislation and include funding within the Budget Act of 2018 that will allow for the following actions: • The state homeless council to hire permanent staff, including the appointment of an executive director. • California’s CoCs to obtain the state funding necessary to better implement HUD‑recommended activities, including annually counting unsheltered homeless, improving efforts to raise nonfederal funding, and improving their coordination with other agencies; and to more fully meet HUD requirements, including implementation and administration of the HMIS and entry systems. 6 California State Auditor Report 2017-112 April 2018 Furthermore, the Legislature should require the state homeless council to take the following actions: • By April 1, 2019, develop and implement a statewide strategic plan for addressing homelessness in California, including goals and objectives and timelines for achieving them, and metrics for measuring their achievement. Included among the goals and objectives should be the identification of additional funding sources that state and local agencies can use to better address California’s homelessness issues. • By January 1, 2019, implement steps to assist CoC lead agencies in better implementing HUD‑recommended activities, including conducting annual counts of the unsheltered homeless population, raising nonfederal funding, and coordinating with other agencies. • By January 1, 2019, implement steps to assist CoC lead agencies in better meeting HUD requirements, including implementation of the HMIS and entry systems. The state homeless council should include among its considerations the establishment of a balance‑of‑state CoC area to help alleviate the administrative burdens imposed on CoC lead agencies, especially in rural areas. Selected Recommendations The Authority To ensure the consistency and transparency of its processes, the Authority should do the following: • Implement updated written policies and procedures by July 2018. • Update its written policies and procedures regularly to accurately reflect changes in its processes. To ensure that its funding recommendations are effective, consistent, and transparent, by July 2018 the Authority should do the following: • Develop and implement a process to ensure that staff use evaluation tools as intended. • Develop and implement a process to document supervisory review of its application evaluation process, and of meetings in which it makes funding decisions. • Include these changes in its updated written policies and procedures. California State Auditor Report 2017-112 7 April 2018 To expand the number of service providers through targeted technical assistance, the Authority should do the following: • Develop and implement a process to track aggregate application evaluation data, including the common reasons for failed applications, among other information, by December 2018. • Continue its efforts to develop and implement technical assistance programs for service providers, and track and analyze the results of its assistance by April 2019. Agency Comments The Authority concurs with the recommendations we addressed to it and asserts that it has already begun implementing some of them. 8 California State Auditor Report 2017-112 April 2018 Blank page inserted for reproduction purposes only. California State Auditor Report 2017-112 9 April 2018 Introduction Background Homelessness is an issue of concern to the United States generally and to California specifically. According to Opening Doors: Federal Strategic Plan to Prevent and End Homelessness (federal plan) issued in 2010 and updated in 2015 by the U.S. Interagency Council on Homelessness (federal homelessness council), more than 1 million Americans experience homelessness each year. The federal plan also states that for most of these people, homelessness is caused by the gap between income and the cost of housing. It adds that for many people living in poverty, the lack of stable housing leads to cycling through crisis‑driven systems, such as emergency rooms, psychiatric hospitals, detox centers, and jails. Homelessness therefore is costly not only to those who experience it firsthand but also to the entities that fund these crisis‑driven systems. The federal plan further mentions that stable housing is the foundation upon which people build their lives—without a safe, decent, affordable place to live, it is next to impossible to achieve good health, positive educational outcomes, or economic potential. According to a recent annual report issued by the U.S. Department of Housing and Urban Key Definitions Development (HUD), nearly 554,000 people were experiencing homelessness in the United States Homeless: People who lack a fixed, regular, and adequate on a single night in January 2017.3 The report nighttime residence. further states that the number of homeless people Sheltered homeless: People who are staying in emergency increased in 2017 for the first time in seven years, shelters, in housing programs that provide places to stay which HUD attributed to an increase in the and supportive services for up to 24 months, or in “safe number of those staying in unsheltered locations havens” that provide temporary shelters and services to in major cities. As indicated in the text box, the hard-to-serve individuals. unsheltered homeless include individuals whose Unsheltered homeless: People whose primary nighttime primary nighttime location is not normally used as a location is a public or private place not ordinarily used as a sleeping accommodation. HUD also stated that half regular sleeping accommodation (for example, the streets, of all people experiencing homelessness did so in vehicles, abandoned buildings, parks, or camping grounds). one of just five states: California, New York, Florida, Sources: California State Auditor’s analysis of federal law and Texas, or Washington. HUD’s report also points HUD’s 2017 homeless report. out that the largest absolute increase in the number of homeless between 2016 and 2017 occurred in California, where the homeless population increased 3 For its annual homeless report, HUD discloses the results of what it refers to as a point‑in‑time count of homeless individuals. According to HUD’s regulations, a point‑in‑time count is a count of sheltered and unsheltered homeless persons carried out on one night in the last 10 calendar days of January or at such other time as HUD requires. The numbers and percentages pertaining to homeless persons in our report are based on the California State Auditor’s (State Auditor) analyses of the results that HUD included in its annual homeless reports and on HUD’s point‑in‑time counts obtained from its website. 10 California State Auditor Report 2017-112 April 2018 by 16,136, or 14 percent.4 This increase was more than five times the increase of the next highest state—New York, with 3,151. According to the federal plan, homelessness is a problem that can be solved. Governments at the federal, state, and local levels are responding to the issue and have taken actions to address it. The Federal Continuum of Care Program for Addressing Homelessness At the federal level, HUD administers homeless assistance grants, including grants for the Continuum of Care (CoC) program. The purposes of the CoC program include promoting communitywide commitment to ending homelessness, providing funding for efforts by nonprofit providers and state and local governments to quickly rehouse homeless people, and optimizing self‑sufficiency among those experiencing homelessness. HUD has established CoC program requirements both for applying for and for administering grant funds as well as for the regulatory implementation of the CoC program and its responsibilities. Federal regulations define a CoC as a group Geographic Categories of organized to carry out the CoC program’s CoC Areas responsibilities. Each group consists of representatives from organizations within a Major city CoC areas: Cover the 50 largest cities in the specified geographic area (CoC area), including United States. nonprofit homeless service providers, victim Balance‑of‑state or statewide CoC areas: service providers, faith‑based organizations, Typically composed of multiple rural counties or cover an governments, businesses, advocates, and entire state. public housing agencies. For the purposes of its Smaller city, county, and regional CoC areas: annual homeless report, HUD classifies CoC Cover jurisdictions that are neither one of the 50 largest areas in three broad categories, as described in cities nor balance-of-state or statewide CoC areas. the text box. Source: HUD’s 2017 annual homelessness report to Congress (2017 homeless report). CoCs are responsible for coordinating implementation of a housing and service system within their geographic area. Each CoC must adopt and follow written procedures to establish a board (CoC board) to act on the CoC’s behalf. The CoCs are also required to designate and operate a Homeless Management Information 4 We provide additional information regarding homelessness in California on our website (see http://auditor.ca.gov/reports/2017-112/supplemental.html). An interactive map shows conditions across the State, including the number of people who lack shelter and the amount of annual HUD funding awarded to various areas. Using HUD data, the map also shows changes in the size of the homeless population from 2007 to 2016. California State Auditor Report 2017-112 11 April 2018 System (HMIS) and develop and use a coordinated entry system (entry system), which we describe in Requirements for CoCs the text box. Federal law requires CoCs to establish and administer the following: According to HUD, each CoC should designate a lead agency as part of its efforts to be effective. HMIS: A local information technology system used to collect client-level data and data on the provision of HUD advises that a lead agency with strong housing and services to homeless individuals and families leadership, access to resources, and high visibility and persons at risk of homelessness. Each CoC lead agency in the community can provide the CoC with is responsible for selecting an HMIS software solution that the credibility necessary to attract broad‑based complies with HUD’s data collection, management, and community participation. The lead agency can also reporting standards. be the collaborative applicant for CoC program Entry system: A process developed to ensure that all funding. According to federal regulations, the people experiencing a housing crisis have fair and equal collaborative applicant will collect and combine the access—and are quickly identified, assessed, referred, required application information from all projects and connected—to housing and assistance based on in the CoC area. The lead agency may also act as their strengths and needs. Entry systems can include the lead for the CoC area’s HMIS, and must develop components such as regional coordination, housing and administer the entry system for the CoC. navigation, outreach activities, case management, crisis and bridge housing, rapid rehousing, family solution centers, and prevention and diversion activities. The State’s Response to Homelessness Sources: Federal regulations, HUD publications, and documents obtained from the Authority. Instead of having a single state department in charge of managing the State’s efforts to address homelessness, multiple state entities in California administer a variety of homeless services programs. As shown in Table 1 on the following page, in fiscal years 2016–17 and 2017–18 six state entities administered at least 11 different programs that were funded in the State budget to provide direct assistance to homeless individuals and families. Entities including the Department of Housing and Community Development (HCD), the California Department of Social Services (CDSS), and the California Governor’s Office of Emergency Services administer programs for the homeless population. These programs provide services including housing, housing‑related supports, and outreach and advocacy services. We also identified other programs that address or likely address homelessness, but we did not include them in our table because the budget acts of 2016 and 2017 did not include discrete amounts for them or they only indirectly address homelessness. Entities administering these programs include the Department of Health Care Services, the California Department of Public Health (Public Health), and the California Department of Corrections and Rehabilitation. 12 California State Auditor Report 2017-112 April 2018 Table 1 Several California Entities Administer Many Programs to Address Homelessness (In Thousands) BUDGET ACT APPROPRIATION EXAMPLES FOR FISCAL YEARS ADMINISTERED BY/ PROGRAM NAME* PURPOSE OF APPROPRIATION OR PROGRAM 2016–17 2017–18 HCD† No Place Like Home Program To finance permanent supportive housing for individuals or households that include $263,640 $262,000 individuals with a mental disorder who are homeless, chronically homeless, or at risk of chronic homelessness. California Emergency Solutions To make grants to qualifying subrecipients throughout the State to implement activities 35,000 None Grants Program that address the needs of homeless individuals and families and assist them to regain stability in permanent housing as quickly as possible. Financial Assistance Program To provide funds to certain local governments and organizations for navigation centers None 28,000 for homeless individuals, and for permanent supportive and transitional housing to serve homeless and low‑income individuals and families and those at risk of homelessness. Multiple‡ Veterans Housing and Homeless To provide for the acquisition, construction, rehabilitation, and preservation of $75,000 $75,000 Prevention Program affordable multifamily supportive housing, affordable transitional housing, affordable rental housing, or related facilities for veterans and their families to allow veterans to access and maintain housing stability. CDSS CalWORKs Housing Support Program To provide housing support, including financial assistance, and housing stabilization $46,675 $46,675 and relocation services to CalWORKs recipients who are experiencing homelessness or housing instability. Housing and Disability Income To provide outreach, case management, advocacy services, and housing assistance to 43,461 43,461 Advocacy Program homeless Californians with disabilities. Bringing Families Home Program To provide housing‑related supports, including needs assessments, housing search services, 9,694 None and financial assistance, to eligible individuals and families experiencing homelessness. School Supplies for Homeless To provide school supplies and health‑related products to homeless children. 530 530 Children Fund California Department of Education McKinney‑Vento Homeless Children To facilitate the identification, enrollment, attendance, and success in school of homeless $7,930 $9,711 Education Program children and youth. Homeless Youth Assessment Fee To waive application fee for the high school certificate of proficiency exam for homeless 25 21 Waiver Program children and youth. California Governor’s Office of Emergency Services Homeless Youth Emergency Service To provide shelter and related services to homeless youth. $10,000 $10,000 Pilot Projects Sources: California State Auditor’s review of the Legislative Analyst’s Office’s 2016 Overview of State Homelessness Programs, the budget acts of 2016 and 2017, other California and federal laws, and internet searches. * Based on our review, this table presents a partial list of California programs intended to address various aspects of homelessness. These amounts are generally appropriations for local assistance and do not include amounts for state operations and other departments. These amounts are generally appropriations for local assistance, and do not include amounts for State operations and other departments. Our review identified other programs through which the State addresses or potentially addresses homelessness. However, we did not include them here because they directly serve the homeless, but the two budget acts we examined did not include discrete budget amounts for them; indirectly address homelessness by promoting the provision of affordable housing generally, whose beneficiaries could include populations in addition to homeless people; or provide benefits other than housing, including food assistance and health care, to populations that may include homeless people. Examples of these programs include Medi‑Cal, Supplemental Security Income/State Supplementary Payment, Community Services Block Grant, Housing Opportunities for Persons with AIDS, and CalFresh. † HCD also administers the federal Emergency Solutions Grants program. The budget acts did not contain specific line item information for this program. ‡ State law requires HCD, the California Housing Finance Agency, and the California Department of Veterans Affairs to work collaboratively pursuant to a memorandum of understanding to carry out the duties and functions associated with these programs. California State Auditor Report 2017-112 13 April 2018 Funding for California’s homelessness programs comes from a variety of sources and sometimes targets particular subpopulations within the homeless community. Some programs, such as the Homeless Children Education Program, are federally funded. Other programs, such as CDSS’s Housing and Disability Income Advocacy Program, which serves homeless Californians with disabilities, are funded by the State and require counties to provide matching funds. In 2016 California passed a law requiring state agencies and departments that fund, implement, or administer housing or housing‑based services for homeless persons or those at risk of homelessness to adopt or revise guidelines and regulations to incorporate core components of the Housing First model of housing assistance.5 The same law required the Governor to create the Homeless Coordinating and Financing Council (state homeless council) by June 30, 2017. Aside from overseeing implementation of the adoption of Housing First core components, the state homeless council is responsible for identifying resources, benefits, and services that can be accessed to address homelessness in California, and for creating partnerships among federal, state, and local entities to develop specific strategies to reduce homelessness. Los Angeles County’s Response to Homelessness At the local level in California, there are 43 CoC areas. The CoC for each area must design, operate, and follow a collaborative process for applying for HUD funding. The Los Angeles City and County CoC The Authority’s Structure (Los Angeles CoC) area is composed of Los Angeles County, except the cities of Glendale, Long Beach, The commission: The 10-member body that governs and Pasadena, each of which has its own CoC. The the Authority. Los Angeles Homeless Services Authority Commission member appointment: The Los Angeles (Authority) is the Los Angeles CoC’s lead agency. In County Board of Supervisors appoints five members. December 1993, Los Angeles County and the city of The Los Angeles mayor appoints and the city council Los Angeles entered into a joint exercise of powers confirms five members. agreement to create the Authority. The purpose of Committees: The commission may create standing and the Authority is to coordinate the operation of ad hoc committees, consisting of commission members existing services to the homeless population that and/or nonmembers, to assist the commission in its work. each entity formerly provided separately and to design, fund, and operate other homeless and related Sources: Bylaws for the Los Angeles CoC area and for the Authority, and the joint exercise of powers agreement social services to assist those in the community. As between Los Angeles County and the city of Los Angeles. the text box describes, a 10‑member commission governs the Authority. The Authority’s mission is to 5 According to HUD, Housing First is a model for offering housing assistance without preconditions—such as sobriety or a minimum income threshold—or service participation requirements. Rapid placement and stabilization in permanent housing are its primary goals. 14 California State Auditor Report 2017-112 April 2018 support, create, and sustain solutions to address homelessness in Los Angeles County by providing leadership, advocacy, planning, and management of program funding. According to the Authority, it partners with more than 100 nonprofit organizations that assist homeless persons to achieve independence and stability in permanent housing. The bylaws for the Los Angeles CoC name the Authority as the collaborative applicant for submitting funding applications to HUD. Most service providers in the Los Angeles CoC apply for HUD CoC program funding by submitting applications to the Authority, the Housing Authority of the County of Los Angeles, or the Housing Authority of the City of Los Angeles. As the collaborative applicant, the Authority then submits a consolidated application for the Los Angeles CoC area to HUD for CoC program funding. Of the HUD CoC program amounts awarded to the Los Angeles CoC area for 2014 through 2016, the Authority received, on average, about 27 percent, while the Housing Authority of the County of Los Angeles and the Housing Authority of the city of Los Angeles received approximately 16 percent and 45 percent, respectively. Other entities within the Los Angeles CoC area, including housing authorities of cities other than Los Angeles and service providers, received the remaining 12 percent. The Authority’s financial information shows that HUD, the city of Los Angeles, and Los Angeles County provide the majority of the Authority’s funding. The Authority also receives a minimal amount of funding from the State and other sources. As Figure 1 shows, the Authority’s funding has fluctuated over time. HUD selects the projects and service providers that will receive its grant awards. The Authority, along with the Housing Authority of the city of Los Angeles and the Housing Authority of the County of Los Angeles, then reimburses the providers after they have rendered services. The city of Los Angeles and Los Angeles County also impose restrictions or priorities for the funds they contribute from their annual budgets. For example, the joint exercise of powers agreement states that city contributions shall be used only within the city while request for proposals (RFPs) can impose “priority consideration” for projects located within specific areas of the county. As shown in Figure 2 on page 16, the Los Angeles CoC area is divided into eight geographic regions called service planning areas (service areas). California State Auditor Report 2017-112 15 April 2018 Figure 1 The Authority’s Revenue Has Fluctuated Over Time euneveR )snoilliM nI( Los Angeles County City of Los Angeles HUD $120 100 80 60 40 20 0 2009–10 2010–11 2011–12 2012–13 2013–14 2014–15 2015–16 2016–17* Fiscal Year Sources: California State Auditor’s analysis of financial information obtained from the Authority for the fiscal years shown. Note: Because of their inconsistency, we do not include within the Authority’s funding displayed here annual amounts of state, local, or other funds, the totals of which ranged from a low of approximately $73,000 in fiscal year 2013–14 to a high of $1.2 million in fiscal year 2011–12. * In fiscal year 2016–17 the Authority received funding increases from Los Angeles County and the city of Los Angeles for several purposes, including about $30 million to implement countywide strategies to address homelessness and for entry system programs. 16 California State Auditor Report 2017-112 April 2018 Figure 2 Eight Service Areas Cover the Los Angeles CoC Area 1ANTELOPE VALLEY 2SAN FERNANDO VALLEY CITY BOUNDARY 3SAN GABRIEL VALLEY City of Los Angeles 4METRO 5WEST LA 6 SOUTH LA 7EAST LA 8SOUTH BAY/ HARBOR Source: California State Auditor generated using geographic information system data. Scope and Methodology The Joint Legislative Audit Committee (Audit Committee) directed the State Auditor to audit the Authority’s administration of public funds. Table 2 lists the Audit Committee’s objectives and the methods we used to address them. California State Auditor Report 2017-112 17 April 2018 Table 2 Audit Objectives and the Methods Used to Address Them AUDIT OBJECTIVE METHOD 1 Review and evaluate the laws, rules, Reviewed relevant laws, regulations, and other background materials applicable to the Authority and and regulations significant to the programs aimed at addressing homelessness. audit objectives. 2 Review and evaluate the Authority’s • Interviewed relevant Authority staff. methods for processing applications • Obtained and evaluated the Authority’s policies and procedures related to processing applications for public funding during the most for public funding. recent three fiscal years and do • Reviewed and analyzed the list of applications and other relevant data obtained from the the following: Authority. Also, reviewed the minutes of certain commission and committee meetings. a. Identify by program the number • Reviewed and analyzed information related to 34 applications for funding for new projects that of applications the Authority we selected. received, reviewed, approved, • Reviewed relevant documents related to 20 renewal projects for HUD’s CoC program that we denied, or deemed deficient. For selected, and five providers whose funding the Authority reallocated. those applications that were denied or deemed deficient, identify the • Reviewed and analyzed documents from the Authority’s website, and email blasts to the “Funding reasons for denial or deficiency. Opportunities” and “General Interest” distribution lists. b. Determine the consistency of • Reviewed and analyzed criteria for the evaluation of applications listed in three RFPs and the review of applications for compared the criteria to the instructions to reviewers and evaluation tools. HUD’s CoC program and other • Summarized the results of the Authority’s application reviews by service area in Appendix A similar programs across the eight beginning on page 57. service areas. If there is significant variation in the approval process between service areas, determine the cause. c. Assess the Authority’s practices for communicating and publicizing its criteria for approving or denying applications. Determine whether the process is transparent. 3. Review the Authority’s methods for • Interviewed staff and reviewed laws, regulations, policies, and other criteria to gain an calculating and distributing public understanding of the Authority’s methods for calculating and distributing public funding. funding. Determine whether the • Obtained and examined the contracts and accounting data for a selection of 40 new projects to Authority’s methods are consistent determine whether the contract requirements matched the grant requirements and applicant’s with relevant laws, regulations, and proposal, and to determine whether the Authority distributed funds according to the contracts. policies. For a selection of approved • We determined that the Authority’s distribution complied with its methods for calculating and applications for public funding, distributing public funds. determine whether the Authority’s distribution complied with the Authority’s methods for calculating and distributing public funds. 4. Determine the total amount of public • Interviewed relevant Authority staff. funding and CoC program funding • Reviewed contracts, accounting records, and other relevant information. the Authority distributed to the eight • Determined the total amount awarded related to applications for new projects by each service area service areas. Analyze these amounts for fiscal years 2014–15 through 2016–17. in relation to each service area’s per‑ capita homeless population or other • Analyzed the amount of public funding each service area received for new projects in relation to relevant measurement. If there is its homeless population. significant variation in funding levels • Summarized funding award amounts for new projects by service area in Appendix B beginning on between service areas, determine page 61. the cause. continued on next page . . . 18 California State Auditor Report 2017-112 April 2018 AUDIT OBJECTIVE METHOD 5. Research best practices for the • Interviewed staff of the Authority, HUD, and HCD to obtain an understanding of best practices administration of public funding for relevant to the administration of homeless services. homeless services and determine • Researched best practices for the administration of public funding for homeless services from whether the Authority should relevant agencies. implement any alternative structures • Reviewed HUD’s fiscal year 2016–17 CoC Notice of Funding Availability criteria. or processes. • Surveyed the lead agencies for California’s 43 CoC areas and analyzed the results. 6. Review and assess any other issues • Reviewed and analyzed national homeless population information from HUD’s 2017 homeless that are significant to the audit. report and 2017 point‑in‑time data. • Reviewed public agencies’ responses to homelessness. Sources: California State Auditor’s analysis of the Audit Committee’s audit request number 2017‑112, as well as information and documentation identified in the column Method. Assessment of Data Reliability In performing this audit, we obtained electronic data files extracted from the data sources listed in Table 3. The U.S. Government Accountability Office, whose standards we are statutorily required to follow, requires us to assess the sufficiency and appropriateness of the computer‑processed information that we use to support our findings, conclusions, or recommendations. Table 3 describes the analyses we conducted using the data from these sources, our methods for testing, and the results of our assessments. Although these determinations may affect the precision of the numbers we present, there is sufficient evidence in total to support our audit findings, conclusions, and recommendations. California State Auditor Report 2017-112 19 April 2018 Table 3 Methods Used to Assess Data Reliability INFORMATION SYSTEM PURPOSE METHOD AND RESULT CONCLUSION The Authority To categorize and to calculate • Performed data‑set verification procedures and electronic Undetermined total expense and revenue testing of key data elements and we did not identify any reliability for the MIP Fund Accounting transactions for the period issues. purpose of this audit. reports (accounting July 1, 2014, through • To test the accuracy of the Authority’s accounting reports) as of June 30, 2017. reports, we traced key data elements to supporting Although this September 2017 documentation for a selection of 29 revenue and expense determination may transactions from July 1, 2014, through June 30, 2017, affect the precision and found no errors. of the numbers we present, sufficient • To test the completeness of these accounting reports, evidence exists in total we traced the total amounts of the expense and revenue to support our audit transactions to the Authority’s fiscal years 2014–15 findings, conclusions, and 2015–16 audited financial statements and found the and recommendations. accounting reports to be complete. We were unable to trace the total amounts for fiscal year 2016–17 because the Authority had not published its audited financial statement for fiscal year 2016–17. HUD • To determine the Did not perform accuracy and completeness testing of these Undetermined number of sheltered and data because HUD does not fall within our audit authority. reliability for the Point‑in‑time unsheltered homeless To gain some assurance of the accuracy and completeness purpose of this audit. homeless counts persons by CoC. of these data, we performed data‑set verification procedures and housing inventory and electronic testing of key data elements, and found Although this • To determine the number counts no issues. determination may of homeless shelter beds affect the precision by CoC. 2017 of the numbers we present, sufficient evidence exists in total to support our audit findings, conclusions, and recommendations. The Authority • To determine the • To gain assurance of the completeness of the Authority’s list, Not sufficiently reliable number of applications we compared the list to the records of public meetings and for the purpose of List of applications the Authority received, worked with the Authority until we were satisfied that we this audit. for RFPs reviewed, approved, had a complete set of data. denied, or deemed Although this • To gain assurance of the accuracy of the Authority’s list, we Fiscal years 2014–15 deficient. determination may traced data for 23 fields to supporting documentation and through 2016–17 affect the precision • To select applications found that nine of the 23 fields tested had two or more errors. of the numbers we for new projects to test present, sufficient the consistency of the evidence exists in total Authority’s review. to support our findings, conclusions, and recommendations. The Authority To select renewal projects • Performed key data‑set verification procedures and did not Did not test the for testing. identify any significant issues. reliability of the Grant Inventory data, but instead • To gain assurance of the completeness of the 2016 Grant Worksheet gained assurance Inventory Worksheet, we agreed certain information from that the population the worksheet we acquired from the Authority to equivalent Fiscal Year 2016–17 was complete. information in a worksheet that HUD provided to the Authority and to HUD’s summary sheet showing its 2016 CoC funding awards to California. We found the data to be complete. Source: California State Auditor’s analysis of various documents, interviews, and data obtained from the Authority. 20 California State Auditor Report 2017-112 April 2018 Blank page inserted for reproduction purposes only. California State Auditor Report 2017-112 21 April 2018 Chapter 1 THE STATE SHOULD TAKE A STRONGER ROLE IN ADDRESSING HOMELESSNESS Chapter Summary California has more people experiencing homelessness than any other state in the nation, and it does a poor job of sheltering this vulnerable population. According to HUD’s 2017 homeless report, California leads the nation with both the highest number of homeless persons and the highest proportion of unsheltered homeless persons of any state. This is particularly true of unaccompanied homeless youth, 82 percent of whom live without shelter, while the rest of the nation’s average is 38 percent for this group. Until recently, California lacked a single statewide entity for addressing homelessness and had no mechanism for coordinating the many homeless programs that the State funds. Although the State created it in 2016, the state homeless council has no permanent staff and no funding for such staff. In fact, state law dictates that any structures the state homeless council establishes to assist in its work must do so “within existing funding” and that HCD must provide staff to assist the council. However, it will be difficult for the state homeless council to develop and implement a plan that documents the State’s approach to addressing and reducing homelessness without its own permanent resources. The need for a state homeless council equipped with resources and authority is apparent in the responses we received from a survey of California’s CoC area lead agencies about best practices for homeless services. The responses indicate that their CoC areas were not equipped organizationally or financially to fully address homelessness. Specifically, lead agencies for CoC areas mentioned challenges in implementing HUD‑recommended activities such as conducting annual counts of unsheltered homeless, raising funds from nonfederal sources, and creating strategic plans to help ensure coordination with other homeless service agencies. Rural CoC lead agencies also mentioned difficulties in implementing HUD requirements related to administering an entry system and their HMIS. California Has the Largest Homeless Population in the Nation Relative to other states in the nation, California is not doing a good job addressing homelessness. According to HUD’s 2017 homeless report, approximately 134,000 people in California were homeless on a single night in January 2017, which accounted for about 24 percent 22 California State Auditor Report 2017-112 April 2018 of the nation’s total homeless population. Furthermore, California led the nation with the highest proportion of unsheltered homeless persons of any state. As Figure 3 shows, more than two‑thirds—or 68 percent—of California’s homeless population were unsheltered, while the proportion for the remaining states was about one‑quarter, or 24 percent, in 2017. What is more, according to the 2017 homeless report, the Los Angeles CoC area by itself had the second largest homeless population in the nation. This population exceeded the homeless populations of all but one state, and accounted for half (8,758) of the entire increase in unsheltered individuals in the nation’s major metropolitan areas from 2016 to 2017. In addition to having a higher proportion of unsheltered homeless individuals than other states, the 2017 homeless report shows that California had the largest number of unsheltered unaccompanied youth.6 According to HUD, youth homelessness is of unique concern because young people are still developing and are especially vulnerable to criminal victimization, sexual exploitation, labor and sex trafficking, or traumatic stress. The 2017 homeless In addition to having a higher report shows that California’s CoC areas had 15,458 homeless proportion of unsheltered homeless unaccompanied youth, representing 38 percent of the national total. individuals than other states, In 2017 more than four out of five, or 82 percent, of California’s California had the largest number homeless unaccompanied youth were unsheltered; in comparison, of unsheltered unaccompanied 38 percent of the rest of the nation’s total homeless unaccompanied youth in 2017. youth were unsheltered.7 Unlike California, some areas of the nation with relatively large homeless populations had low proportions of unsheltered homeless, as we show in Table 4 on page 24. For example, the 2017 homeless report shows that the New York City CoC area had the largest homeless population in the nation, with 76,501 homeless individuals, but the unsheltered proportion was 5 percent. In contrast, the Los Angeles CoC area had the second largest homeless population in the nation (55,188) and had an unsheltered proportion of 75 percent. Furthermore, some CoC areas also sheltered more of their homeless unaccompanied youth than CoC areas in California did. For example, only 4 percent of the Boston CoC area’s unaccompanied youth were unsheltered, while the proportion for the San Jose/Santa Clara City and County CoC area was 96 percent and the San Francisco CoC area’s proportion was 88 percent. 6 HUD defines homeless unaccompanied youth as homeless individuals under the age of 25 who are not accompanied by a parent or a guardian and are not themselves a parent staying in the same place as his or her child or children. 7 We provide additional information regarding homelessness in California on our website (see http://auditor.ca.gov/reports/2017-112/supplemental.html). An interactive map shows conditions across the State, including the number of people who lack shelter and the amount of annual HUD funding awarded to various areas. Using HUD data, the map also shows changes in the size of the homeless population from 2007 to 2016. California State Auditor Report 2017-112 23 April 2018 Figure 3 California’s Large Homeless Population in January 2017 Was Unsheltered More Often Than in Other States Homeless Population California 134,278 (24.2 %) + Total of other states 419,464 (75.8 %) 553,742 NATIONAL HOMELESS POPULATION Percentage of Homeless Individuals Who Were Unsheltered California Total of other states 68% 24% Sources: California State Auditor’s analysis of HUD’s 2017 homeless report and 2017 point‑in‑time count data obtained from HUD’s website. 24 California State Auditor Report 2017-112 April 2018 Table 4 Some Areas of the Nation With Large Populations of Homeless Adults and Unaccompanied Homeless Youth Had Lower Proportions of Unsheltered Homeless Than Areas in California in 2017 PERCENTAGE PERCENTAGE OF NUMBER OF OF HOMELESS NUMBER OF UNACCOMPANIED HOMELESS PERSONS WHO ARE UNACCOMPANIED HOMELESS YOUTH WHO LOCATION PERSONS UNSHELTERED HOMELESS YOUTH ARE UNSHELTERED California Major City CoC areas Los Angeles City and County 55,188 75% 5,163 80% San Diego City and County 9,160 61 1,160 76 San Jose/Santa Clara City and County 7,394 74 2,530 96 San Francisco 6,858 64 1,274 88 Other Major City CoC areas New York City, NY 76,501 5% 2,003 13% Seattle/King County, WA 11,643 47 1,498 76 District of Columbia 7,473 12 228 15 Las Vegas/Clark County, NV 6,490 67 2,052 93 Boston, MA 6,135 3 190 4 Philadelphia, PA 5,693 17 297 29 Sources: California State Auditor’s analysis of HUD’s 2017 homeless report and 2017 point‑in‑time count data obtained from HUD’s website. Note: The locations listed are the 10 CoC metropolitan areas with the largest homeless populations in the nation. Lack of Shelter Is Detrimental to Both the Homeless Population and the Surrounding Communities According to the federal plan, homelessness is costly in its negative impact on human life, health, and productivity. Without shelter, the homeless population is more likely to miss opportunities to participate in programs and obtain services that shelters provide. For example, unaccompanied minors who go to an emergency shelter funded by the city of Los Angeles can receive access to medical, mental health, substance abuse recovery, legal, educational, and life skills services as needed as well as trauma‑informed case management, counseling, and crisis intervention services. They can also receive connections to transitional and permanent housing to work toward breaking the cycle of homelessness. The unsheltered homeless population also has an increased risk of exposure to communicable diseases. According to Public Health, as of February 2018, California was experiencing the largest person‑to‑person hepatitis A outbreak not related to a common source or a contaminated food product in the United States since the hepatitis A vaccine became available in 1996, and four counties had declared local outbreaks of the disease.8 The homeless 8 According to the World Health Organization (WHO), hepatitis A is a viral liver disease that can cause mild to severe illness. WHO states that the virus is primarily spread when an uninfected and unvaccinated person ingests food or water that is contaminated with the feces of an infected person and that the disease is closely associated with unsafe water or food, inadequate sanitation, and poor personal hygiene. California State Auditor Report 2017-112 25 April 2018 populations in the CoC areas for Los Angeles, San Diego, Santa Cruz, and Monterey counties, which have rates of unsheltered homelessness ranging between 60 percent and 80 percent, have been affected by these recent outbreaks. For example, according to minute orders approved by the San Diego County Board of Supervisors, from September 2017 through January 2018, San Diego County experienced a local health emergency caused by a hepatitis A outbreak in the homeless and illicit drug‑using populations. Public Health reported that as of February 2018, 580 cases, 398 hospitalizations, and 20 deaths were associated with the hepatitis A outbreak in that county. Homelessness and lack of shelter for the homeless population can also affect the surrounding communities financially and physically. According to the federal plan, homelessness is costly to society because homeless people frequently require the most expensive publicly funded services. For example, according to the administrative officer for the city of Los Angeles in a 2015 report, although only four agencies and departments had budgetary allocations for homeless programs, at least 15 regularly engaged with homeless people, with some departments incurring large costs. For example, the report cited that the Los Angeles Police Department estimated it spent from $53.6 million to $87.3 million in one year on interactions with homeless people and the Bureau of Sanitation spent at least $547,000 in a year on cleanup of homeless encampments like the one pictured in Figure 4. Figure 4 Homeless Camps Such as This One Can Be Costly in Terms of City Services Source: Grzegorz Czapski/Shutterstock.com 26 California State Auditor Report 2017-112 April 2018 Conversely, housing the homeless population can help decrease some public costs. According to a 2015 Economic Roundtable report on the cost of homelessness in Silicon Valley, some public costs can decrease substantially when homeless people are housed.9 According to a 2015 report For instance, the estimated average annual cost of an unhoused the estimated average annual cost homeless person in Silicon Valley who made significant use of of an unhoused homeless person in public services like emergency rooms was just under $62,500, while Silicon Valley who made significant the estimated cost for a housed homeless person in the same area use of public services was $62,500, fell to just under $20,000. Unsheltered homelessness can also have while the cost for a housed a physical impact on communities. According to the Los Angeles homeless person in the same area Fire Department, in December 2017 an illegal cooking fire in an fell to just under $20,000. encampment under a freeway caused the Skirball Fire, which burned more than 400 acres, destroyed six homes, and damaged 12 other homes in the Bel‑Air community in the city of Los Angeles. Two Factors Contribute to Other States’ Lower Numbers of Unsheltered Homeless We believe two factors contribute to other states having lower proportions of unsheltered homeless individuals than California. The first factor is the existence of a specific entity dedicated to addressing homelessness. For example, Massachusetts charged the Division of Housing Stabilization within its Department of Housing and Community Development, with preventing homelessness; sheltering those for whom homelessness is unavoidable; and rehousing homeless people in stable, permanent housing. One program the division is responsible for provides emergency housing assistance to needy families with children and pregnant women for the entire state. Similarly, New York City, whose CoC area has more than 85 percent of New York State’s homeless population, has a citywide entity that administers homeless services: the New York City Department of Homeless Services. It counts among its objectives increasing the number of households prevented from becoming homeless; reducing the number of individuals living on city streets; ensuring the availability of temporary, emergency shelters; and ensuring that those who exit shelter remain stably housed in the community. According to its website, New York City’s Department of Homeless Services has 2,000 employees and an annual operating budget of approximately $1 billion. The other factor likely contributing to lower rates of unsheltered homeless persons is higher spending to address homelessness. New York City and Massachusetts invest significantly in 9 According to its website, the Economic Roundtable is a nonprofit urban research organization whose mission is to conduct research and implement programs that contribute to the sustainability of individuals and communities. California State Auditor Report 2017-112 27 April 2018 administering and funding homeless services. New York City’s Department of Homeless Services budgeted nearly $17,000 per homeless person (per capita) in federal, state, city, and other funds in 2017 for homeless services. One factor that appears to contribute to New York City’s high spending on homelessness is the legal right to shelter. According to its 2017 homelessness plan, the right to shelter in New York City is legally mandated and plays a central role in shaping its response to homelessness. Where other cities provide shelter to homeless people based on capacity, New York City provides it based on need. Also, Massachusetts’ Department of Housing and Community Development budgeted more than $14,000 per capita for operation of its homeless programs. Although California does fund multiple programs for homeless services, as shown in Table 1 on page 12, the State does not have a comprehensive list of the funding sources for homeless service programs, and we were unable to calculate a similar per capita rate for California. However, we note that in 2016, HUD CoC program funding for Los Angeles County plus other types of funding administered through the Authority amounted to about $5,000 per capita, or about 30 percent of New York City’s funding.10 Until Recently, California Lacked a Single Statewide Entity to Coordinate Its Efforts to Address Homelessness California’s position regarding its homeless population, relative to states like New York and Massachusetts, points to the need for a single entity to provide the statewide leadership necessary to better address the effects of homelessness. Recognizing that the federal government had a clear responsibility and a capacity to fulfill a more effective and responsible role in meeting basic human needs and engendering respect for the dignity of homeless people, Congress established the federal homelessness council Congress established the federal in 1987 to coordinate the federal response to homelessness and homelessness council in 1987 to to create national partnerships to reduce and end homelessness. coordinate the federal response The federal homelessness council is composed of leaders from to homelessness and to create 19 federal organizations, is staffed by about 20 full‑time employees national partnerships to reduce and who are led by an executive director, and has an annual budget end homelessness. of approximately $3.5 million. Furthermore, in 2010 the federal homelessness council released a federal strategic plan to prevent and end homelessness and updated it in 2015.11 The federal strategic plan reflects agreement by the federal homelessness council’s participating agencies on a set of priorities and strategies, and it 10 We included the 2016 HUD CoC program awards for the Los Angeles, Glendale, Pasadena, and Long Beach CoC areas and the Authority’s budgeted non‑HUD funding amounts to calculate Los Angeles County’s homeless funding per capita. 11 The federal homelessness council intends to issue a new update in 2018. 28 California State Auditor Report 2017-112 April 2018 includes criteria and benchmarks to help guide communities as they take action to end homelessness for veterans, families, youth, and people with disabilities. Local California governments also demonstrated leadership when they came together to collaborate to identify solutions to end homelessness. Recognizing that no single California city or county has the resources to solve homelessness on its own, the League of California Cities (League) and the California State Association of Counties (Association) partnered in fall 2016 to create a Joint Homelessness Task Force (joint task force) to identify tools, resources, and examples of best practices for local governments. The joint task force consisted of elected officials and staff from cities and counties around the State as well as representatives from the League and the Association. According to the joint task force, because the burden of addressing homelessness often falls on local governments, it intended to examine strategies local governments can implement to overcome challenges, foster best practices, and share ideas to address homelessness. The joint task force also noted that many smaller cities and counties that previously had little experience with homelessness were now wrestling with how to address a problem frequently called a humanitarian crisis. Since its inception, the task force has held three meetings and published a report in February 2018 that highlighted the recent increase in and changing demographics of homelessness, and offered tools for cities and counties to use in addressing homelessness in their communities. In addition, although at least one state agency recognized the need for a single entity to coordinate services to homeless people in California in 1989, it was not until recently that California named an entity to lead that effort. In a June 1989 report, the Commission on State Government Organization and Economy recommended that the diverse state programs dealing with homelessness should be unified under a single state agency and that the State should take an aggressive leadership role in coordinating services. However, California continues to have a number of state entities California continues to have administering separate programs to address specific aspects of a number of state entities homelessness. As indicated in Table 1 in the Introduction, at least administering separate programs six state entities administer at least 11 different programs that to address specific aspects provide assistance to homeless persons. These state programs of homelessness—at least provide funding for several purposes, including the acquisition six state entities administer and construction of new housing for homeless people, relocation 11 different programs. assistance, and financial assistance. The enactment of Chapter 847, Statutes of 2016, created the state homeless council. The law requires the state homeless council to pursue 13 goals related to homeless services, including creating partnerships among state agencies and departments, local California State Auditor Report 2017-112 29 April 2018 government agencies, participants in HUD’s CoC program, and other entities; arriving at specific strategies to end homelessness; as well as coordinating existing funding and applications for competitive funding. The law states that the state homeless council can include up to 17 members: eight members from state entities;12 two members from local entities participating in HUD’s CoC program; one member each from two different stakeholder groups; a formerly homeless person who lives in California; and up to four members who are state advocates, members of the public, or members of state agencies. State law requires agencies and departments that administer existing programs to collaborate with the state homeless council to adopt or revise guidelines and regulations to incorporate core components of Housing First, such as offering housing assistance without preconditions or service participation requirements, by July 1, 2019. However, the state homeless council may face critical challenges in coordinating California’s response to homelessness and meeting its statutory goals. First, unlike its federal counterpart, it has no permanent staff of its own and no budget for such staff. State law requires that any structures the state homeless council establishes to assist in its work must do so “within existing funding” and requires HCD to provide staff to the state homeless council. Currently, HCD redirects existing staff to perform the state homeless council’s work. According to HCD’s deputy director of housing and policy development (deputy director), HCD has one lead staff member and several supporting staff members who work on state homeless council matters in addition to their other assignments. The lead staff member spends roughly 25 percent of her time on state homeless council‑related assignments. In addition, the deputy director stated that HCD has received commitments of staff from several other departments represented in the state homeless council. Regardless of who provides the resources, it is critical that the It is critical that the state homeless state homeless council focus on developing and implementing a council focus on developing statewide strategic plan that documents the State’s approach to and implementing a statewide addressing homelessness in California. The federal homelessness strategic plan that documents the council stated that its strategic plan serves as a blueprint for State’s approach to addressing individual agencies to follow in defining and implementing activities homelessness in California. and in setting policy priorities to address homelessness. Similar to the federal strategic plan, a statewide strategic plan could align and strengthen the efforts by the eight state entities serving on the state homeless council to address homelessness, and it could integrate existing and future revenue streams to best serve a vulnerable California population. 12 The state entities providing members to the state homeless council include HCD, the Department of Health Care Services, CDSS, and the California Department of Veterans Affairs, among others. 30 California State Auditor Report 2017-112 April 2018 A component of the statewide strategic plan could be, for instance, an outline of the steps for integrating funding from previously untapped sources. One such source could be the Control, Regulate and Tax Adult Use of Marijuana Act, enacted under Proposition 64 in 2016. As of January 1, 2018, this law imposes a 15‑percent excise tax on retail sales of cannabis and cannabis products, and a per‑ounce cultivation tax on all harvested cannabis that enters the commercial market. The Legislative Analyst’s Office estimates that the net additional state and local tax revenue from the proposition could eventually range from the high hundreds of millions of dollars to over $1 billion annually. State law requires that 60 percent of that revenue—after certain specified expenses—be deposited into the Youth Education, Prevention, Early Intervention, and Treatment Account to support programs designed to educate youth about and to prevent substance use disorders and harm from substance abuse. Among other things, these programs may include grants to programs for outreach, education, and treatment for homeless youth and out‑of‑school youth with substance use disorders. State Homeless Council’s Goals to Be Achieved by June 2019 However, the law establishing the state homeless • Authorize an interagency working group to build a council currently does not require it to develop comprehensive list of state homeless programs. a statewide strategic plan. Instead, the state homeless council’s legally mandated goals include • Conduct a needs analysis to provide the state homeless making policy and procedural recommendations council with data on needs throughout the State. to legislators and other government entities and to • Streamline efforts and reduce redundancies by looking serve as a statewide facilitator, coordinator, for opportunities to provide input on the design or and policy development resource on ending development of programs affecting homeless Californians. homelessness in California. According to the • Authorize an interagency working group to provide deputy director, individual state departments are technical assistance to agencies as they adopt and still the program authorities on homeless services. incorporate the core components of Housing First. He also stated that the state homeless council • Act as a policy development resource on ending has not discussed creating a statewide strategic homelessness in California by setting basic expectations plan; however, creating one would be within its for all California entry systems and goals for how state purview. He stated that in order to adequately programs could interact with these entry systems. develop a plan, the state homeless council would need dedicated staff; however, the number of staff • Authorize an interagency working group to develop a needed would depend on the breadth and scope of scope of work and implementation plan for building a statewide data warehouse that receives data from what the plan would need to encompass. local HMIS. Although authorized by legislation effective • Explore opportunities to access HUD technical assistance January 1, 2017, the state homeless council has to develop a data warehouse. taken limited action thus far. As of January 2018, it • Summarize the state homeless council’s work and progress had met twice: in October 2017 and January 2018. in a cumulative report to the Legislature. The first two meetings focused on developing Source: Draft minutes of the state homeless council’s a process to align state programs with Housing January 2018 meeting obtained from HCD’s website, and First principles and establishing its governance confirmed as generally accurate by HCD’s deputy director. structure. At its second meeting in January 2018, the state homeless council also agreed to eight goals to achieve by June 2019, which we describe California State Auditor Report 2017-112 31 April 2018 in the text box. Finally, it identified other matters for consideration at a future meeting, including establishing a work group to address issues such as those affecting homeless or formerly homeless youth. Many believe that California is in the midst of a homelessness crisis. Since 2015 multiple local government entities and the California State Legislature have declared crises or emergencies related to homelessness or sheltering homeless people. From October 2015 through September 2017 several local entities—including the Santa Clara County Housing Task Force, the San Diego City Council, the Santa Rosa City Council, and the Anaheim City Council—declared homelessness‑related crises or emergencies. Furthermore, two counties called for the Governor to issue a statewide declaration of emergency. In June 2016, the Board of Supervisors of the County of Los Angeles wrote to members of the California State Legislature requesting that they pass a resolution urging the Governor to declare a state of emergency with respect to homelessness. Later that month the California State Assembly passed such a resolution, acknowledging that the challenge of confronting homelessness requires the active engagement and leadership of all arms of government. Similarly, in August 2016, the City and County of San Francisco Board of Supervisors informed the Governor of a resolution it passed in which it requested that he issue a statewide declaration of emergency to help coordinate the response and resources for homeless individuals and families. Furthermore, state law enacted in 2016 also acknowledges that homelessness is a crisis in California. It is time for the State to do more to address this crisis. Local Local government entities have government entities have expressed the need for statewide expressed the need for statewide coordination. For instance, the City and County of San Francisco coordination to address the Board of Supervisors stated that homelessness knows no city homelessness crisis. or county boundaries but is a regional and statewide issue, and that only a coordinated response will alleviate this crisis. It also stated that only through a statewide effort will it truly be able to respond effectively to this crisis. In addition, the Anaheim City Council resolved that the challenge of confronting homelessness requires the active engagement, collaboration, and leadership of all levels of government. Furthermore, the Santa Rosa City Council declared that the scope of the local homeless crisis is beyond the resources of the city alone and will require the combined forces of adjacent jurisdictions and state agencies. We believe that one of California’s most vulnerable populations deserves to have strong leadership from a single state entity, like the state homeless council, to coordinate efforts and ensure an effective and efficient statewide system for addressing homelessness in the State. 32 California State Auditor Report 2017-112 April 2018 Concerns Raised by CoC Areas Highlight Opportunities for California’s New State Homeless Council It is not only the size of California’s homeless population that points to the need for leadership by a single state entity; concerns expressed by lead agencies for California’s CoC areas also highlight this need. To obtain a statewide perspective on best Many lead agencies for California’s practices related to planning and funding homeless services, we 43 CoC areas believe that their surveyed the lead agencies for California’s 43 CoC areas.13 The CoC areas are not equipped survey results indicate that many of them believe that their CoC organizationally or financially to areas are not equipped organizationally or financially to fully fully address homelessness. address homelessness. Respondents collectively reported several challenges they faced, including the need for additional resources to implement HUD‑recommended activities and problems in implementing HUD requirements. A single state entity could help CoC lead agencies to resolve these issues. Many CoC Lead Agencies Report Challenges in Implementing HUD‑Recommended Activities Responses to our survey indicate that many CoC lead agencies face challenges in implementing certain HUD‑recommended activities. These activities include conducting annual point‑in‑time counts of the CoC areas’ unsheltered homeless populations, obtaining funds from nonfederal sources, and coordinating with other agencies to provide homeless services. To begin with, according to HUD, it is not possible to address homelessness in a community without understanding how many people need assistance. HUD’s regulations require CoC lead agencies to plan and conduct a point‑in‑time count of the sheltered and unsheltered homeless population within their geographic area at least biennially in the last 10 days of January. Although it has a two‑year regulatory requirement, information from its website states that HUD requires CoCs to count every year those homeless people sheltered in emergency shelters, transitional housing, and “safe havens”; additionally, HUD has historically required CoC areas to conduct annual counts to receive the maximum number of points in the annual CoC program competition for funding, thus increasing the value of annual counts. 13 We received complete responses from 40 of the 43 CoC lead agencies. Lead agencies for the Oakland, Berkeley/Alameda County CoC area and the Daly City/San Mateo County CoC area did not respond to our survey. Additionally, the lead agency for the Imperial County CoC area submitted only a partial response. We provide the CoC lead agencies’ survey responses on our website (see http://auditor.ca.gov/reports/2017-112/surveylist.html). California State Auditor Report 2017-112 33 April 2018 According to the Authority, it conducts annual unsheltered counts to better understand and assess the situation of homelessness in the Los Angeles CoC area for grant and service planning. Annual unsheltered counts have allowed it to more closely monitor trends in homelessness and better understand needs for housing and services. The Authority noted that about 75 percent of persons experiencing homelessness in the Los Angeles CoC area are unsheltered, which makes a regular unsheltered count critical to understanding the current needs for housing and services. Because HUD’s data show that California has the highest rate of unsheltered homelessness of any state in the nation, annually determining the size of the unsheltered homeless population is particularly important for the State’s CoC areas. Furthermore, according to HUD, current and accurate data on the number and characteristics of homeless persons in the community are useful for policy and planning decisions and allow CoC areas to adjust the types of services available according to need, resulting in more efficient use of limited resources. Homeless population sizes can also change quickly; for example, in its survey response the lead agency for the Tuolumne, Amador, Calaveras, Mariposa Counties CoC area reported that Tuolumne County identified three times more homeless people in a summer 2017 count than it did in its January 2017 count. However, 18 of the 40 CoC lead agencies responding to our survey stated that they did not perform an annual unsheltered count for several reasons: 14 stated that it was because they lacked funding, eight because they lacked volunteers, and 14 because HUD does not require an annual count (respondents could provide more than one answer). For example, the lead agencies for both the Sacramento City and County CoC area and the San Luis Obispo County CoC area stated in their survey responses that they lacked funding and internal capacity to conduct an annual unsheltered count. Similarly, the lead agency for the Santa Ana, Anaheim/Orange County CoC area stated that expense and manpower needs are too great to conduct an annual unsheltered count. Annual point‑in‑time counts Annual point‑in‑time counts can can be expensive; the average cost per CoC area in California, based be expensive; the average cost on information reported by 34 lead agencies, was nearly $89,500.14 per CoC area in California was Even with the Los Angeles CoC area’s $1.5 million reported cost nearly $89,500. excluded, the average reported cost was about $46,700. Lead agencies reported that they used city, county, HUD planning, private, and other nonstate funding to cover the costs of their point‑in‑time counts of unsheltered homeless. Thirteen CoC lead agencies also said that more funding would enable them to conduct 14 Six of the 40 CoC lead agencies that fully responded to our survey did not report their costs for performing their point‑in‑time counts. 34 California State Auditor Report 2017-112 April 2018 annual unsheltered counts. For instance, the lead agency for the El Dorado County CoC responded that if it had funding to support the annual count, as well as to support general CoC administration, HMIS administration, entry system administration, and the basic essentials for administering a CoC, there would likely be value in conducting an annual count, but it could not justify conducting an annual unsheltered count now because its resources are limited and they are needed for CoC administration. HUD acknowledges that significant Another activity that HUD recommends is raising funds from resources are needed to address sources other than the federal government. It acknowledges that the various housing and supportive significant resources are needed to address the various housing and service needs of homeless persons supportive service needs of homeless persons or those at risk of and that it is difficult to rely on becoming homeless, and that it is becoming increasingly difficult CoC funding alone to address for homeless programs to rely on CoC funding alone to address these needs. a community’s homelessness needs. Therefore, it is critical that CoC areas seek out other resources to ensure that they can provide adequate housing and support services. Our survey asked CoC lead agencies to identify the grant‑seeking or fundraising activities they engage in. Three CoC lead agencies indicated they were not able to conduct these activities because they had insufficient or no staffing. For example, the lead agency for the Colusa, Glenn, Trinity Counties CoC area stated that its fund‑seeking activities were minimal because it had no staff to conduct grant research or grant writing in addition to supporting CoC administration. Furthermore, some CoC lead agencies reported that they did not have strategic plans in place to help ensure coordination with other agencies that provide services to the homeless population. HUD recommends that communities attempting to address the complex and interrelated problems associated with homelessness marshal resources from a variety of partners, including community and economic development agencies, social service providers, local businesses, the philanthropic community, law enforcement, health care providers, and housing and homeless organizations. HUD further states that a communitywide planning approach under the CoC program encourages communities to move toward more broad‑based planning and coordinated program development than would occur without that approach and that the effort to form and maintain a broad‑based coalition requires a significant amount of time and resources from its participants. In our survey, we asked CoC lead agencies if they have a strategic plan that integrates other publicly funded programs that provide services to the homeless population. The lead agencies for 12 CoC areas said that they lacked a strategic plan and, although seven of these were developing a plan, the others indicated that the lack of funding, staffing, and leadership as well as limited community involvement were challenges to having an integrated strategic California State Auditor Report 2017-112 35 April 2018 plan. For example, the Tehama County CoC lead agency reported that in the past, limited funding as well as limited participation in CoC activities by community providers were obstacles to the development of its strategic plan. This lead agency also reported that recent opportunities, including private community grants, have provided necessary resources and have motivated participation in the CoC area’s development of a strategic plan. Rural CoC Lead Agencies Identified Challenges in Implementing HUD Requirements Thirty‑three of California’s 58 counties fall within 17 CoC areas that we identified as rural.15 Responses to our survey show that some of these rural CoC lead agencies reported having difficulties implementing HUD requirements. For example, according to the lead agency for the Mendocino County CoC area, it is extremely difficult for small communities to sustain HUD‑required activities without dedicated funding. Two such requirements are the entry system and HMIS, which we describe in the Introduction. In particular, three lead agencies serving 11 rural counties indicated that administering the entry system is difficult to do, in some cases over large geographic areas. One CoC lead agency also mentioned funding challenges in implementing the entry system. The lead agency for another CoC area noted that the CoC’s area covers seven counties (Shasta, Siskiyou, Lassen, Plumas, Del Norte, Modoc, and Sierra) and that trying to serve more than 1,100 homeless individuals on extremely limited funding, including attempting to get a compliant entry system in place with three providers across those seven counties, is a huge task. The Authority’s experience in the Los Angeles CoC area demonstrates that implementing and operating entry systems can be expensive. According to its associate director of operations, it took approximately $26 million to establish its entry system’s components, and it takes approximately $65 million annually to operate the entry system. We describe the required entry systems in a text box on page 11 in the Introduction. Survey responses also demonstrate that some CoC areas face challenges in administering HMIS. As we discuss in the Introduction, each CoC area needs to have an HMIS lead. Furthermore, HUD requires CoC program funding recipients to submit an annual performance report prepared using data from HMIS. Although federal regulations allow HMIS leads to use CoC program funds for implementing and complying with HMIS 15 We identified California’s rural counties by calculating the percentage of each county’s population living in rural areas based on data from the 2010 federal census. We included three urban counties (Fresno, Placer, and Sutter) among the 33 counties in this group because their CoC areas also included rural counties we identified. 36 California State Auditor Report 2017-112 April 2018 requirements, the lead agency for the El Dorado County CoC area (El Dorado) stated that it uses nearly all $10,000 of its annual HUD grant to fund its HMIS software licenses. Additionally, El Dorado said that for small counties with little resources, few systems have been developed to help address homelessness, and that visible homelessness will continue to increase for some years to come. It reported that it simply did not have the capital to invest in this system, and that it takes time to develop data, demonstrate need, express cost savings, and grow support from partners when none of the administrative infrastructure has been developed. El Dorado noted that it would be helpful if rural counties were able to apply for grant funds that would be strictly dedicated to CoC administration. Opportunities Exist for the State Homeless Council to Help CoC Lead Agencies Better Address Homelessness Opportunities exist through which the state homeless council can help California’s CoC lead agencies better address homelessness in their areas. As discussed earlier, the state homeless council agreed to several goals to be achieved between now and July 2019. Included among these goals is an analysis to provide it with data on needs throughout the State. If the results of this analysis also identify best practices, and perhaps even promising or emerging practices, for administering homeless programs and services, the state homeless council may be HUD considers information able to identify opportunities to increase the use of these practices about the CoC’s planning body, in more CoC areas. This could increase California CoC areas’ governance structure, overall competitiveness in HUD’s national competition for funding: HUD performance, and strategic considers information about the CoC’s planning body, governance planning process to determine the structure, overall performance, and strategic planning process to order in which CoC areas across the determine the order in which CoC areas across the nation are funded. nation are funded. Additionally, because the state homeless council included actions related to the entry system and HMIS on its list of prioritized goals and actions to be achieved by June 2019, it has an opportunity to help rural CoC lead agencies better implement these HUD requirements. In its January 2018 meeting, the state homeless council included among its prioritized goals and actions acting as a policy development resource on ending homelessness in California by setting basic expectations for all California entry systems and goals for how state programs could interact with these entry systems. The prioritized goals and actions also included authorizing an interagency working group to develop a scope of work and implementation plan for building a statewide warehouse for data from local information systems. Through the accomplishment of these goals and actions, the state homeless council could identify additional assistance for CoC lead agencies to better support their entry systems and HMIS. California State Auditor Report 2017-112 37 April 2018 Furthermore, the state homeless council could address the absence of strong state leadership, which currently creates challenges for rural CoC areas. At the moment, lead agencies for each CoC area are responsible for planning and administering homeless services within their geographic area. In contrast to this structure, more than 30 states have a balance‑of‑state CoC area, which can consist of multiple rural counties, and thus can maximize the funding potential and take advantage of economies of scale for large geographic areas. For instance, Nevada has a balance‑of‑state CoC area for those parts of the state outside of the Las Vegas/ Clark County and Reno/Sparks/Washoe County CoC areas. For 2016 HUD awarded the Nevada balance‑of‑state CoC area about $575,000, or $2,861 per homeless person in its area. In contrast, 13 of California’s 17 rural CoC areas received HUD awards amounting to less than $1,000 per homeless person, and two of these received no HUD CoC awards.16 For the other 11 California rural CoC areas the average HUD award per homeless person was about $533. As noted earlier, HUD considers information about the CoC’s planning body, governance structure, overall performance, and strategic planning process to determine the order in which CoC areas across the nation are funded. Helping rural CoC areas improve these factors could increase their competitiveness in HUD’s CoC grant program competition for funding. One benefit of a balance‑of‑state One benefit of a balance‑of‑state CoC structure is that the lead agency CoC structure is that the lead (which can be a state agency) can be responsible for administrative agency (which can be a state duties that can overwhelm lead agencies for rural CoC areas, agency) can be responsible for including coordinating the annual homeless counts and submitting administrative duties that can the area’s applications for CoC program funding. HUD acknowledges overwhelm lead agencies for rural that operating a CoC area can impose administrative burdens. In fact, CoC areas. HUD strongly encourages CoC areas to merge with one or more other CoC areas if they have struggled in the CoC funding competition and if managing their homelessness system is overwhelming. Merging CoC areas means creating a single governance structure from existing, separate structures, and the decision to merge is made by the CoC areas involved. HUD acknowledges that mergers can be complicated and require lots of planning and coordination. As of February 2018, HUD plans to provide resources to CoCs to address concerns and show how CoC areas have successfully overcome them. HUD also reported that in the most recent CoC program competition it provided bonus points to CoC areas that had merged. Further, HUD stated that it is committed to helping CoCs successfully merge and intends to continue to find ways to incentivize those mergers. According to HUD, such mergers can result in improved coordination of services, effective HMIS implementation, more efficient resource 16 HUD awarded no CoC funding for 2016 to the Colusa, Glenn, Trinity Counties CoC and the Lake County CoC. 38 California State Auditor Report 2017-112 April 2018 allocation and planning, and improved competitiveness for new resources. If the state homeless council facilitated discussions with existing CoC lead agencies about creating a balance‑of‑state CoC area, it could create opportunities to remove the administrative burden from local entities, thus giving them more resources to implement HUD‑recommended activities and improve their services for California’s homeless population. Recommendations To better serve the needs of homeless Californians, and to provide statewide leadership to agencies at all levels for better coordination of efforts to address homelessness, the Legislature should enact legislation and include funding within the Budget Act of 2018 that will allow for the following actions: • The state homeless council to hire permanent staff, including the appointment of an executive director. • California’s CoCs to obtain the state funding necessary to better implement HUD‑recommended activities, including annually counting the unsheltered homeless population, improving efforts to raise nonfederal funding, and improving their coordination with other agencies; and to more fully meet HUD requirements, including implementation and administration of the HMIS and entry systems. Furthermore, the Legislature should require the state homeless council to take the following actions: • By April 1, 2019, develop and implement a statewide strategic plan for addressing homelessness in California, including goals and objectives and timelines for achieving them, and metrics for measuring their achievements. Included among the goals and objectives should be the identification of additional funding sources that state and local agencies can use to better address California’s homelessness issues. • By January 1, 2019, implement steps to assist CoC lead agencies in better implementing HUD‑recommended activities, including conducting annual counts of the unsheltered homeless population, raising nonfederal funding, and coordinating with other agencies. • By January 1, 2019, implement steps to assist CoC lead agencies in better meeting HUD requirements, including implementation of the HMIS and entry systems. The state homeless council should include among its considerations the establishment of a balance‑of‑state CoC area to help alleviate the administrative burdens imposed on CoC lead agencies, especially in rural areas. California State Auditor Report 2017-112 39 April 2018 Chapter 2 DESPITE A REASONABLE PROCESS FOR CONSIDERING FUNDING APPLICATIONS, THE AUTHORITY CAN DO MORE TO ADDRESS FUNDING VARIATIONS ACROSS LOS ANGELES COUNTY Chapter Summary The Authority employs a reasonable process for evaluating and approving applications for funding for new projects. Multiple staff from several departments review portions of each application and assign a score to their portion. Following the evaluation, one unit consolidates the scores and ranks each application according to criteria approved by the Authority’s commission. We reviewed a selection of applications for funding for new projects and found that the Authority consistently followed its evaluation process. Moreover, the Authority revised its application process in 2017 to address issues it identified as inefficient and as impeding the success of some applicants. Specifically, the Authority now requires that applicants prequalify before applying for funding through a competitive grant. This allows the Authority to provide feedback and assistance to applicants to improve their chances of success. However, despite its reasonableness, we identified certain deficiencies associated with the Authority’s evaluation process, including outdated written procedures, staffs’ poor use of its computer network, and a flawed documentation process. Although the Authority has begun to address some of these issues, it needs to fully implement improvements to ensure that the evaluation process is more efficient, effective, and transparent. Additionally, the Authority was unable to provide a complete list of its renewal projects or sole‑source projects funded through the city of Los Angeles or Los Angeles County because it does not track which procurement method it uses to award funds. However, it could identify its renewal projects funded through HUD, and we found that the Authority employed a prudent process for prioritizing, scoring, and ranking those projects. Although its application evaluation process is reasonable and consistent, we found that the Authority awarded the smallest amount of funding for new projects to providers in service areas outside the city of Los Angeles. This variation exists primarily for two reasons. First, some fund sources restrict the geographic areas where the Authority can allocate their funds, and second, fewer homeless service providers apply for funding in some service areas. In fact, the providers in those service areas that were awarded the least amount of funding also generally submitted the fewest applications. However, the Authority has taken some actions that could somewhat rebalance funding distributions. For example, it employs a reallocation strategy for HUD‑funded projects 40 California State Auditor Report 2017-112 April 2018 that provides new funding opportunities for service providers that apply for new projects without regard to service area, which satisfies HUD priorities. It has also recruited service providers to fill services The Authority lacks the ability to gaps in certain service areas. But the Authority lacks the ability to adequately analyze its funding adequately analyze its funding decisions based on geographic area decisions based on geographic area and does not have an adequate database to track the results of its and does not have an adequate application evaluation process. Although the Authority is providing database to track the results of its technical assistance in an attempt to increase its service provider base, it application evaluation process. is hindered in doing so without analyzing why providers do not qualify for funding during the evaluation process. Because it lacks these data, the Authority is missing an opportunity to address at least some of the causes of its funding variations. The Authority Consistently Uses a Reasonable Process to Evaluate Applications for Funding, Although Some Areas Need Improvement The Authority’s multiple‑reviewer evaluation process mitigates the possibility of preference in its funding recommendations. During fiscal years 2014–15 through 2016–17, the Authority evaluated whether applicants met the minimum requirements to manage public funds in a portion of the competitive process called the threshold review. Additionally, the Authority measured the ability of applicants to carry out the specific project during a second phase, quality review. During both of these phases, multiple staff from different units within the Authority evaluated portions of the application based on their expertise. Recently, the Authority made a change to its application process to address inefficiencies and other issues that it believed were impeding the success of some applicants. However, we still found certain deficiencies in the evaluation process. Additionally, although the Authority also employed a prudent process for prioritizing, scoring, and ranking renewal projects funded through HUD, it was unable to provide a complete list of either renewal projects or sole‑source projects funded through the city of Los Angeles or Los Angeles County because it does not track its contracts by the procurement method. The Authority’s Process for Evaluating Applications Is Reasonable According to the Authority’s policy, during fiscal years 2014–15 through 2016–17 it could use one of three procurement methods for selecting service providers and determining or renewing award amounts for contracts to provide homeless services within the Los Angeles CoC area. For projects that had not been previously funded, either it could use a competitive process by issuing an RFP (new projects) or it could issue noncompetitive sole‑source contracts (sole‑source projects). For previously funded projects that had reached the end of their contract and were eligible for renewal (renewal projects), the Authority evaluated the existing provider to California State Auditor Report 2017-112 41 April 2018 determine if it should continue to fund the project. Depending on the procurement type, the Authority used a different review process when it considered whether to contract with service providers. We summarize the process the Authority used to evaluate applications for new projects using a competitive bidding process that Figure 5 on the following page shows. For sole‑source projects, the Authority’s procurement policy required that it use criteria set forth in federal regulations when choosing a service provider because it is the only one able to provide a desired service; because the matter is exigent, emergent, or urgent and does not permit the time to use a competitive process; or because after solicitation of a number of service providers, competition is determined to be inadequate. For renewal projects, the Authority first determined whether funds were available and subsequently evaluated whether the service provider was in good standing. Documents the Authority Uses to Measure a Service Provider’s Ability to Manage Public We found that the Authority consistently used the Grants and to Assess Application Completeness same process to evaluate competitive applications for funding for new projects without regard to the • Articles of incorporation service area. To evaluate applications it received during • Business licenses fiscal years 2014–15 through 2016–17, staff used a • Current applicable IRS filings two‑phase process modeled after HUD’s two‑tiered application evaluation method. As shown in Figure 5, • Proof of active nonprofit status with the IRS multiple departments and one external reviewer • Proof of active business entity status with the evaluated different portions of the application, and State of California both the Authority’s Programs and Evaluations • Proof of IRS tax-exempt status (501(c)3 letter) Committee or its commission approved the Authority’s recommendations for both phases of the • Bylaws process. We confirmed that during the first phase— • Organizational chart threshold review—the Authority verified that service provider applicants met basic requirements relevant • Executive leadership and/or senior management resumes or biographies to successfully managing a public grant. During the second phase—quality review—we found that the • Nepotism policy Authority assessed the applicant’s ability to provide • Financial statements the services outlined in the funding opportunity. Detailed information on applications for funding for • Conflict-of-interest policy new projects received by the Authority during fiscal • Current organization budget approved by its board years 2014–15 through 2016–17 and their evaluation • A plan showing how different costs will be allocated to results are shown in Appendix A beginning on page 57. different funding sources (if applicable) Although applicants usually failed threshold review • Proof of site control, such as a lease or certification for common, easily correctable reasons, they had the of occupancy option to appeal the Authority’s recommendation if • Americans with Disabilities Act policy and procedures the Authority did not follow its process. As Table 5 on • Proof of liability and workers’ compensation insurance page 43 shows, the most common reason for failure at this phase was a lack of completeness. Specifically, • Grievance policy applicants did not submit required documents, as Source: Core documents list obtained from the Authority. described in the text box, or did not complete some portion of the application. 42 California State Auditor Report 2017-112 April 2018 Figure 5 The Authority Uses a Reasonable Process to Evaluate Applications for Funding New Projects for Homeless Services The Authority's Evaluation Process Portions that are consistent pre- and post- August 2017 Post-August 2017, The Authority issues an RFP the Authority implemented to fund homeless services Request for Statement of Qualifications (RFSQ) Certification. RFSQ CERTIFICATION Mandatory bidders  conference • Valid for five years. Pre-August 2017, • Allows applicants the Threshold Review was the standard to bypass the Q&A process before Quality Review. period Threshold Review Process. Agencies TThhrreesshhoolldd RReevviieeww submit applications Procurement Unit Finance Monitoring Unit • Verified application • Assessed financial stability completeness • Assessed organizational • Determined eligibility per capacity Quality Review—applicants need at least 75% of total points to pass HUD requirements and priorities • Notified applicants if they Data Management passed or failed. Procurement and Department Performance 25% Evaluates service providers' Department Total past performance PASS The Authority’s Program Evaluates program 65% Score 10% NO YES and Evaluation Committee c a o s m th p e o p n r e o n g t r s a m su ' c s h Finance Department or its commission design and readiness Evaluates program budget APPEAL gives final determination and cost efficiency for approval. Procurement Unit NO YES NO. YES • Notifies applicants of results • Ranks applications and allocates the funds to successful projects until funds are exhausted APPLICANT PASS EXITS THE ARE PROCESS NO YES FUNDS AVAILABLE? APPEAL NO YES NO YES The Authority’s Program and Evaluation committee gives approval The Authority’s commission gives approval* APPLICANT EXITS THE Contract Agency provides PROCESS with services to agency the homeless Sources: California State Auditor’s analysis of the Authority’s policies and interviews with staff. * The commission approved all recommendations the procurement unit presented to it during our testing period. California State Auditor Report 2017-112 43 April 2018 Table 5 Between Fiscal Years 2014–15 and 2016–17 Applicants Usually Failed Threshold Review for Reasons That Might Have Been Remedied Through Technical Assistance REASON FOR FAILING NUMBER OF APPLICATIONS Completeness 22 Financial stability 5 Ineligible component or entity 5 Organizational capacity 3 Total Threshold Failures 35 Source: California State Auditor’s analysis of application results for fiscal years 2014–15 through 2016–17 obtained from the Authority. Note: During fiscal years 2014–15 through 2016–17, six of the 25 applicants that applied failed threshold review multiple times. We found that once an applicant passed the first phase, the Authority evaluated the merits of the proposed project and whether the applicant had the capacity to carry it out. During this second phase of the evaluation, the Procurement and Performance Department, the Data Management Department, and the Finance Department all evaluated different portions of the application. Given the number of departments and individuals who evaluated some portion of each project proposal, it would be difficult for any one individual to significantly influence the evaluation process. The Authority Has Started Making Changes to Improve Its Application Process for New Projects In August 2017, the Authority implemented a review process that eliminated the need for threshold review. The Authority began evaluating applications for basic requirements before, rather than during, the competitive process to increase efficiency for the Authority as well as the service providers. As we depict in Figure 5, in the Authority’s new RFSQ process, providers must be certified as qualified bidders before applying for a competitive funding opportunity. The Authority evaluates providers’ qualifications using a process and criteria similar to threshold review. Once a provider qualifies, it does not need to requalify every time it responds to an RFP. This saves the provider time and resources because it only needs to update some information each time it submits an application in response to an RFP. The Authority issued its first RFP requiring the RFSQ process in August 2017. The Authority reported that prequalifying providers speeds up the RFP timeline by four to six weeks. Additionally, because the RFSQ evaluation occurs before the competitive process, Authority staff can provide feedback and assistance to help providers prequalify to apply. For example, during our fieldwork we observed procurement unit staff working with service providers to ensure that they submitted the correct and 44 California State Auditor Report 2017-112 April 2018 current documents to increase the likelihood they would be approved for certification as a qualified bidder. As a result, more providers are likely to qualify to compete for funding since the Authority implemented its RFSQ process. According to the Authority’s year‑to‑date report of RFSQ application results to its commission in January 2018, the Authority certified 11 new providers. The Authority Should Still Make Certain Improvements to Its Application Review Process Although the Authority consistently followed its process for evaluating applications for publicly funded new projects and has made some improvements to its process, others are still needed. First, to protect institutional knowledge, the Authority should update its written policies and procedures. Next, to improve transparency and accountability, the Authority should better document its application review process. Additionally, to manage tasks effectively and efficiently, the Authority should improve its staffs’ use of its computer network. Finally, to identify barriers to applying for funding, the Authority should survey those who attend the mandatory bidders conference but do not apply. The Authority has not updated its The Authority has not updated its policies and procedures policies and procedures since 2010, since 2010, and thus it does not have current written procedures and thus it does not have current for much of its application evaluation process. For example, written procedures for much of its although the Authority implemented an electronic application application evaluation process. system in 2014, the written procedures still require applicants to submit multiple copies of their proposal to front desk personnel, who then create a paper receipt and time‑stamp the documents. Furthermore, in 2016 the procurement unit implemented a new process in which it creates the review instructions and evaluation tools while drafting the RFP. This helps ensure that reviewers score proposals based on the criteria included in the specific published RFP. To determine the transparency of the evaluation criteria, we reviewed three RFPs—one issued before the new process was implemented and two issued after it. We did so by comparing the criteria in the RFP information posted on the Authority’s website to the instructions and evaluation tools the Authority developed. For the 2015 Crisis Housing for Individuals RFP, issued before the new process, we found that the criteria for six of 17 points of evaluation in the tools reviewers used did not match the published criteria. On the other hand, all points of evaluation agreed for the RFPs we reviewed for fiscal years 2015–16 and 2016–17. However, because the Authority has not updated its policies and procedures to include changes like these, it risks having staff use outdated processes that could reduce transparency. The Authority recognized the need for updated policies and procedures and hired a contractor in 2016 to create them. The contract term runs through December 2018. California State Auditor Report 2017-112 45 April 2018 We also found that the Authority did not indicate in the evaluation tool whether the applicant passed. Specifically, to determine whether the Authority used its evaluation process consistently, we selected 34 applications that the Authority evaluated during fiscal years 2014–15 through 2016–17, and we noted that after fiscal year 2014–15, staff did not always indicate in the evaluation tool whether the applicant passed or failed. In fact, staff did not include this determination on tools for 21 of the 26 applications we reviewed for fiscal years 2015–16 through 2016–17. Although the formulas in the tools calculate the score for financial stability, which is an important indicator of whether an applicant would be a good steward of public funds, staff still should have completed the remainder of the tools used to evaluate applicants’ success. Alternatively, the Authority should build tools that reflect its actual process. According to the Authority’s associate director of monitoring and compliance, the Authority tracked passing and failing on separate tracking lists, not on the individual tools. However, these tracking lists do not show how the Authority calculated the score, the reason for the pass or fail, or staff notes. Additionally, we found that the Authority did not fully document the supervisory review of its evaluation process. Although training documents we obtained from the Authority’s director of finance show that both staff and management reviewed the evaluation tools, we were unable to confirm that these reviews took place by observing the tools themselves because the review process happens via email between staff members, management, and the director of finance. After we brought our concerns to the attention of the Authority’s management, it began documenting meetings in which it discusses funding decisions. However, the Authority still needs to formalize this practice when it updates its policy and procedures. Moreover, the Authority’s staff do not use the network hard drive, which can reduce the effectiveness and efficiency of its feedback process. As we described earlier, different departments review different sections of funding applications. According to the Authority’s policy, staff must save all evaluation documents in Authority staff failed to save one location on its network hard drive. When a service provider evaluation documents in the requests information about how it fared during the application specified location, potentially evaluation process, the procurement unit is responsible for impeding the procurement unit’s providing a scoring debrief that details all the scores and comments. ability to effectively debrief service However, we found that in multiple instances, staff failed to save providers on scores and comments. documents in the specified location, potentially impeding the procurement unit’s ability to effectively debrief service providers. We also found evidence at the specified location of broken links, empty folders, and multiple versions of documents on the network hard drive, which increases the risk of inadvertently withholding information that should be easily accessible. To increase efficiency and transparency, the Authority is in the process of implementing 46 California State Auditor Report 2017-112 April 2018 a document management and storage system. This system will label and organize documents and maintain a history of document versions to support interdepartmental and cross‑team work. According to the chief operating officer, the Authority is attempting to implement the new system by June 2018. The Authority has also missed an opportunity to identify barriers to potential service providers by not reaching out to attendees of the mandatory bidders conference who did not subsequently apply for funding to determine why they did not apply. For example, in the 2015 Crisis Housing and Services RFP, we found that no providers from service area 1 (Antelope Valley) submitted an application for funding. However, two representatives from the city of Lancaster attended the mandatory bidders conference. When we asked the Authority why representatives from service area 1 attended the conference but no service providers applied, the associate director of operations speculated that the reason might be that the RFP consisted of over $9 million in city of Los Angeles funding and only about $400,000 in Los Angeles County funding, and providers in service area 1 are ineligible to receive city of Los Angeles funding. However, without following up with attendees, the Authority does The Authority should determine not know why they did not apply. The Authority should obtain whether barriers exist that deter and track the reasons attendees of the bidders conference do not service providers from applying for apply for funding to determine whether barriers exist that deter funding and, if so, develop solutions service providers from applying and, if so, develop solutions to to address them. address them. Although Its Data Lacked Service Area Identifiers, the Authority’s Process for Evaluating HUD Renewal Projects Is Sound The Authority does not track projects by type—such as new, renewal, or sole‑source—as its policy requires and could not provide us with a list of renewal projects or sole‑source projects. Thus, we could not determine whether it followed its process for vetting those providers and awarding funds for those projects. However, the Authority and HUD work together to produce a grant inventory worksheet for all HUD projects up for renewal each year. This worksheet allowed us to select HUD renewal projects for review. Even though we were able to identify HUD projects up for renewal and test the HUD renewal process, we were not able to determine the amount of funding that HUD awarded by service area because the Authority’s data system lacked an identifier to tie these projects to a specific service area. Although we recognize that some projects operate across multiple service areas, we cannot determine what proportion of HUD projects operate this way, California State Auditor Report 2017-112 47 April 2018 because the Authority does not track this information. However, during our testing of new projects over three years, only 19 of 297, or about 6 percent, applied to serve more than one service area. Although the Authority uses the same evaluation process for all new projects regardless of funding source, new projects competing for HUD funds must be incorporated into the consolidated application with the renewal projects for that year. This also means that HUD makes the final decisions as to which projects to fund and for how much. The Authority is responsible for evaluating and ranking the projects and for submitting one consolidated application to HUD on behalf of the entire Los Angeles CoC area. The Authority’s goal is to submit the strongest application to HUD for the Los Angeles CoC area The Authority’s Reallocation Criteria for the as a whole, given the criteria HUD disseminates in 2016 HUD CoC Program Competition each notice of funding. If a renewal project meets the criteria for reallocation set forth in the CoC The Authority reallocated funding from projects for board‑approved policy, as described in the text box, which the service provider: the Authority can elect not to include the project • Underspent its grant by 5 percent or more for in the consolidated application. The Authority three consecutive years. then includes that amount in its solicitation for applications for funding for new projects within • Exceeded reasonable costs to move persons from the CoC area that align with HUD priorities. We transitional housing to permanent housing. described the evaluation process for applications for • Performed below reasonable standards. new projects earlier in this chapter and in Figure 5. • Failed to commit to HUD’s policy priorities, such as We selected 20 renewal projects in the 2016 HUD Housing First. application and found that the Authority ranked all of them according to its approved policies. We also Sources: California State Auditor’s analysis of the Authority’s reallocation policy for the 2016 CoC Program Notice of looked at all five projects that had part or all of their Funding Available. funds reallocated by the Authority during fiscal year 2016–17 and found that the Authority followed its reallocation policy in each instance. Even Though the Authority Has Made Efforts to Address Funding Variations Across Service Areas, It Has Not Adequately Used Data to Analyze These Efforts The Authority has taken steps to address the causes of funding variation, including reallocating funds to increase amounts of new funding opportunities, reserving funds for underserved service areas, and providing technical assistance to increase the pool of qualified service providers. However, it lacks the ability to adequately analyze the effects of its funding decisions based on service area, and it does not adequately track data regarding its application evaluation process. Because it does not track or use its application process data effectively, the Authority is missing an opportunity to better address funding variances across service 48 California State Auditor Report 2017-112 April 2018 areas within its CoC area. Furthermore, the Authority is the only entity that has access to information regarding HUD CoC program awards as well as new or ongoing projects with city of Los Angeles or Los Angeles County funding within the Los Angeles CoC area. Being able to track and report that information, as well as to track project awards and outcomes by service area, is imperative if it is to fulfill its responsibilities as the lead agency for the CoC area. The Authority Has Taken Some Steps to Address Restrictions and Difficulties That Cause Funding Variations The Authority does not have final control over which service areas it awards public funding to. First, the city of Los Angeles and Los Angeles County impose rules on the funds they provide. For instance, the city and county agreed that city funds must be used to fund services within the city. Thus, providers proposing projects in areas outside these boundaries—service areas 1, 3, 7, and certain portions of service areas 2, 5, and 8—are not eligible to receive city of Los Angeles funds. Furthermore, although the Authority is required to consider the needs identified in the urban county areas when evaluating a project funded by Los Angeles County funds, it sometimes gives priority consideration to projects located in service areas outside the city limits. Additionally, Los Angeles County cannot unilaterally reduce the amount of its funding to providers in service areas within the city boundaries. For example, when Los Angeles County voters passed Measure H in March 2017, which will provide $355 million a year for 10 years to address homelessness, the county required that, to the extent feasible, Measure H funds were to be allocated based on geographic need as set forth in the Authority’s point‑in‑time count. Second, as mentioned earlier, HUD makes the final decisions as to which projects it will fund and does so without regard to service area. In Appendix B, we discuss the details of the amounts the Authority awarded for new projects per capita for fiscal years 2014–15 through 2016–17, displayed by service area and the source of the funding. The lack of service providers In addition to restrictions or requirements placed on certain applying for funding in certain funding streams, the lack of service providers applying for funding service areas can cause variation in in certain service areas can cause variation in the funding the the funding the Authority awards Authority awards each service area. As we discuss in Appendix B, each service area. during fiscal years 2014–15 through 2016–17, providers in service areas 1, 3, and 7 generally received less funding per capita. We also found that providers applying for funding to provide services in these areas submitted fewer applications than those applying to provide services within the city, as shown in Table 6. California State Auditor Report 2017-112 49 April 2018 Table 6 Fewer Providers Applied for Funding in Service Areas Outside the City of Los Angeles Boundaries During Fiscal Years 2014–15 Through 2016–17 NUMBER OF SERVICE PROVIDERS THAT SERVICE AREA APPLIED FOR FUNDING Ineligible for city funds 1–Antelope Valley 4 3–San Gabriel Valley 7 7–East LA 6 Partially eligible for city funds 2–San Fernando Valley 11 5–West LA 10 8–South Bay/Harbor 10 Mostly eligible for city funds 4–Metro 23 6–South LA 27 Sources: California State Auditor’s analysis of application data, map of service areas within Los Angeles County and the city of Los Angeles, and the joint exercise of powers agreement between Los Angeles County and the city of Los Angeles. However, as discussed previously, the Authority reallocates some HUD funding, which could help offset some of the funding variation across service areas. Specifically, when the Authority reallocates HUD funding, it creates opportunities for providers in any service area to apply for funding for new projects and at the same time preserves those HUD funds for the Los Angeles CoC area. For example, if service providers in underserved areas submit strong applications that include projects that address HUD priorities, this strategy could result in HUD awarding more money to those areas. However, although the Authority scores and ranks new project applications according to HUD’s priorities, HUD makes the final funding decisions. Thus, a reallocation strategy may help, but it will not guarantee that providers in underserved areas receive awards. The Authority also took steps to ensure that it provided program funding to serve the homeless population in all service areas, even when no service providers applied. For example, no providers from service area 5 applied for funding under the February 2017 RFP for the Independent Living Program (ILP). This program provides transitional housing for former foster youth. Because no service provider applied to run this program in service area 5, the Authority set aside about $101,000 for that area. According to the performance management supervisor, the Authority then took 50 California State Auditor Report 2017-112 April 2018 several steps to secure a qualified service provider. For instance, according to the supervisor, the Authority contacted a service provider operating in service area 5 about expanding the services it provided to include ILP, it contacted a service provider operating outside service area 5 about expanding its services to include ILP services in service area 5, and it met with a service provider with whom the Authority had not previously contracted to provide ILP services in service area 5. However, the supervisor stated that as of January 2018, the Authority had been unable to contract with a provider to run an ILP project in service area 5. According to the Authority’s performance management supervisor, the high rents in service area 5, coupled with the low amount of funding per bed provided in that RFP, made locating and securing a provider difficult. In fact, she stated that one potential provider had said that it did not see how it could run an effective program with the low amount of funding per bed, given the scope of required services. Thus, as of January 2018, these funds remained on hold, and the 325 homeless youth in service area 5 who might be eligible remained without ILP services. Moreover, the Authority has worked with government entities to prevent service disruption in service area 1. For example, in Lancaster, a service provider operated a shelter in a building it leased from the Lancaster Redevelopment Agency at a cost of $1 per year, and the Lancaster Redevelopment Agency covered the cost of the building maintenance.17 However, according to the Authority’s director of programs, the service provider’s board of directors closed the shelter because resources were lacking. According to the city of Lancaster’s director of housing and neighborhood revitalization (housing director), the city decided not to have a different provider operate the shelter because the building was old and unsuitable, among other reasons. The housing director also indicated that the city of Lancaster has shifted its strategy for homeless services: it recently committed resources, such as land and funding, to develop permanent supportive housing for the homeless population by December 2018. To mitigate the immediate effects of the shelter’s closure, the Authority contacted officials from the Board of Supervisors of the County of Los Angeles about identifying another site for the shelter. The Authority subsequently contracted with a provider to operate a winter shelter program in the Lancaster Armory. Additionally, the Authority took other steps to relocate homeless individuals to other shelters. 17 In 2011 the Legislature enacted a law to abolish redevelopment agencies. The city of Lancaster is the successor agency to the former Lancaster Redevelopment Agency. California State Auditor Report 2017-112 51 April 2018 The Authority Lacks Data to Effectively Target Assistance to Service Providers and to Communicate Areas of Need to Funders The Authority’s limited data hinder its ability to identify and address funding variations and unmet demand for services across its service areas. Although the Authority has taken some steps Although the Authority has taken to address funding variations across service areas while making some steps to address funding funding decisions, it has not adequately used data to analyze variations across service areas the effects of its efforts. To begin with, the Authority could not while making funding decisions, determine how much money it distributed to each service area it has not adequately used data to for our audit period because its accounting system lacked a analyze the effects of its efforts. field to record the service area. Although the accounting system could identify funding distribution by contract, we found that the Authority’s contract database contained errors that made it impossible to accurately tie contract distributions to service areas. Furthermore, as we discussed previously, because the Authority does not track contracts by procurement method, we could not identify contracts for renewal projects funded by the city of Los Angeles and Los Angeles County, or any sole‑source contracts. Additionally, the Authority lacks organized application evaluation data because it does not have a database that can track these processes or their results. The Authority was initially unable to provide us a complete or accurate list of RFPs and applications for funding for fiscal years 2014–15 through 2016–17 because instead of a data system, the Authority stores application information for each RFP in multiple spreadsheets. For the 11 RFPs the Authority issued from fiscal years 2014–15 through 2016–17, we requested a list of applications with key data fields. The Authority provided us with information for each RFP from multiple spreadsheets. However, even after it provided multiple iterations of the list at our request to clarify missing, incomplete, and inconsistent information, the list still contained inaccurate or inconsistent information in numerous fields, including applicant name, service area, program, funding source, and amount awarded. We found that the Authority inconsistently shortened titles, which resulted in several versions of the same document and files being mislabeled and caused many of the errors we identified. The Authority could have avoided these errors by using a data system to track RFP results and application evaluation results in the aggregate. According to the director of procurement and performance management, using spreadsheets was sufficient when the Authority received less funding and issued fewer RFPs. For example, the Authority issued only two RFPs in fiscal year 2014–15 compared with three and six in the subsequent years. However, given the increase in the number of RFPs it will issue because of Measure H revenues, the Authority should implement a tracking system. Such a system should enable the Authority to track its process and workflow so that it can report the results of its application review process as well as track funding 52 California State Auditor Report 2017-112 April 2018 amounts by service area and homeless subpopulation. Because the Authority does not track the results of its application evaluation process or funding amounts by service area, it cannot effectively track its results or effectively plan its homeless services. Although the Authority recently made changes to both its accounting system and its contract database, it needs to do more to address its data issues. The Authority added new fields to its accounting system that could address its inability to determine how much funding it distributes to each service area. However, according to the associate director of finance, service area designation is only an option for these fields and the Authority has not decided on the exact usage of those fields. Furthermore, in 2016 the Authority began implementing a new contract lifecycle management system. This system allows the Authority to search and report on key data fields such as procurement type, award amount, total bed capacity, and service area. According to the grants and contracts supervisor, as of March 2018, the Authority was in the process of implementing this system for contracts. Finally, the new system also has the capability to track the application evaluation process and store application information for providers. However, according to the Authority’s director of procurement and performance management, the Authority has not decided if it will use this capability or if it will seek another technology solution that would better meet this need, and it is evaluating alternate products for this purpose. To limit errors in The Authority should promptly its information, measure funding across its CoC area, report to either implement a new data stakeholders, and effectively plan for homeless services across its system or adjust its contract service areas, the Authority should promptly either implement a database to track the results of new data system or adjust its contract database to track the results its application process. of its application evaluation process. The Authority has technical assistance programs to help increase the administrative capacity of its service providers; however, if the Authority could analyze its application evaluation data, it could better identify providers’ needs. Specifically, if it had these data, the Authority could track trends in the number of providers that apply in each service area over time, determine the most common reasons applicants fail, and target technical assistance to address those deficiencies. For example, during our analysis of the Authority’s application evaluation data, we found that during fiscal years 2014–15 through 2016–17, providers from service area 6 submitted 74 applications; 20 failed the threshold review, and another 11 providers failed quality review. Additionally, eight providers from service area 4 failed quality review. As we mentioned previously, many of these providers failed to submit the proper core documents, which was the most common reason for failing threshold review. With adequate information, the Authority could have identified common problems and provided California State Auditor Report 2017-112 53 April 2018 technical assistance by holding workshops or publishing additional information to address common weaknesses. According to the Authority’s capacity building manager, she used application evaluation results from one funding opportunity to target technical assistance to those providers. Additionally, she confirmed that it would be helpful to have aggregate application evaluation data for all funding opportunities to further target technical assistance. Finally, if the Authority had better data, it could more effectively communicate its CoC area’s needs to potential funding sources. For example, after we analyzed the Authority’s application evaluation results, we found that the RFPs often do not have sufficient funding for all qualified projects. During our audit period, 16 applications for projects that qualified for funding requested a total of $8.5 million but did not receive any of it because higher‑ranked applicants exhausted the available resources or the applicant was not eligible for those funds that were available. Although the Authority identifies needs in its community by periodically analyzing housing gaps, it should identify service provider needs in its application evaluation process and communicate these to potential funding sources. For the Authority to have a complete picture of the state of homeless services in the Los Angeles CoC, it should have accurate and reliable data at each point of the funding process, including the number of eligible providers, why providers do not apply for certain RFPs, which providers win funds and why, where they are located, and how programs are affecting the homeless population. The Authority is the only entity that has access to all of this information and how it intersects. This information is especially important given the expected influx of Measure H funds we mentioned previously. Recommendations To ensure the consistency and transparency of its processes, the Authority should do the following: • Implement updated written policies and procedures by July 2018. • Update its written policies and procedures regularly to reflect changes in its processes. To ensure that its funding recommendations are effective, consistent, and transparent, by July 2018 the Authority should do the following: • Develop and implement a process to ensure that staff complete evaluation tools as intended. 54 California State Auditor Report 2017-112 April 2018 • Develop and implement a process to document supervisory review of its application evaluation process and of meetings in which it discusses funding decisions. • Include these changes in its updated written policies and procedures. To expand the number of service providers through targeted technical assistance, the Authority should do the following: • Evaluate the use of a document management system to support the application evaluation process and implement the appropriate system by December 2018. • Evaluate the effectiveness of the selected system within 12 months after implementation. • Develop and implement a process to track aggregate application evaluation data, including the common reasons applicants fail to qualify for funding, among other information, by December 2018. • Track service areas in its database management system or by another mechanism to identify accurately the results of its application evaluation process, amounts awarded, amounts funded, and amounts disbursed by service area by July 2018. • Track HUD awards, including renewal projects, by service area by July 2018. • Track the reasons that service providers who attend the mandatory bidders conference do not apply for funding, and address any barriers by July 2018. • Continue its efforts to develop and implement technical assistance programs for service providers, and track and analyze the results of that assistance by April 2019. California State Auditor Report 2017-112 55 April 2018 We conducted this audit under the authority vested in the California State Auditor by Section 8543 et seq. of the California Government Code and according to generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives specified in the Scope and Methodology section of the report. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Respectfully submitted, ELAINE M. HOWLE, CPA State Auditor Date: April 19, 2018 Staff: Dale A. Carlson, MPA, CGFM, Audit Principal Angela Dickison, CPA, CIA Aren Knighton, MPA Ashley R. Mockett, MBA Caroline Julia von Wurden IT Audits: Lindsay Harris, MBA, CISA Ryan Coe, MBA, CISA Shauna Pellman, MPPA Legal Counsel: Joseph L. Porche, Staff Counsel For questions regarding the contents of this report, please contact Margarita Fernández, Chief of Public Affairs, at 916.445.0255. 56 California State Auditor Report 2017-112 April 2018 Blank page inserted for reproduction purposes only. California State Auditor Report 2017-112 57 April 2018 Appendix A ALTHOUGH PROVIDERS FROM SOME SERVICE AREAS FAILED TO QUALIFY MORE OFTEN THAN OTHERS, THE AUTHORITY’S REASONS FOR ITS FUNDING DECISIONS WERE JUSTIFIED From fiscal years 2014–15 through 2016–17, the Authority evaluated 297 applications in response to 11 RFPs. In general, the number of applications it receives fluctuates depending on the amount of funding available. For instance, in fiscal year 2015–16, Los Angeles County funds increased after the county Board of Supervisors approved $51.1 million to be used to combat homelessness. Additionally, in 2015 the Authority completely reallocated 58 and partially reallocated another 42 HUD grants that were up for renewal and at risk of losing funding; this caused over $14 million in funds to be available for new projects and resulted in an increase in applications for new projects in fiscal year 2015–16. The smaller number of applications in fiscal year 2016–17 resulted from the Authority reallocating only five HUD grants in that year. Although provider applicants from certain service areas failed to qualify at either threshold review or quality review more often than those in other service areas, the Authority’s review process is reasonable. In addition, the reasons for failure at both threshold and quality review were justified. In general, fewer than 10 percent of applicants failed either review for most service areas. However, as noted in Table A beginning on the following page, applicants from service areas 4 and 6 experienced higher failure rates, as did those that proposed to serve multiple service areas. In addition, some applicants failed for the same reasons year after year. For example, one applicant in service area 6 applied for HUD funds four times during all three years of our audit period, and each time it failed threshold review for issues related to completeness or not being an eligible entity. In addition, some applicants were able to rectify one error but later failed for another reason. For example, one applicant in service area 6 failed multiple times in a single year: first because of financial stability and then for completeness issues only four months later. This type of iterative failure also caused the failure rate in certain service areas to appear higher than it would otherwise. 58 California State Auditor Report 2017-112 April 2018 Table A The Authority Approved the Majority of Applications It Evaluated for Most Service Areas NUMBER OF APPLICATIONS FAILED FAILED THRESHOLD QUALITY SERVICE PLANNING AREA REVIEWED REVIEW REVIEW APPROVED Fiscal Year 2014–15 1‑ Antelope Valley 2 0 1 1 2‑San Fernando Valley 9 0 2 7 3‑San Gabriel Valley 2 0 0 2 4‑Metro 26 3 2 21 5‑West LA 5 0 0 5 6‑South LA 12 2 3 7 7‑East LA 4 1 0 3 8‑South Bay/Harbor 2 0 0 2 Subtotals 62 6 8 48 Multiple areas 4 2 0 2 Totals 66 8 8 50 Fiscal Year 2015–16 1‑ Antelope Valley 10 0 0 10 2‑San Fernando Valley 18 2 0 16 3‑San Gabriel Valley 13 0 2 11 4‑Metro 21 1 4 16 5‑West LA 17 0 0 17 6‑South LA 30 3 1 26 7‑East LA 8 0 0 8 8‑South Bay/Harbor 14* 0 0 14 Subtotals 131 6 7 118 Multiple areas 9 0 2 7 Totals 140* 6 9 125 Fiscal Year 2016–17 1‑ Antelope Valley 4 0 0 4 2‑San Fernando Valley 6 1 0 5 3‑San Gabriel Valley 9 1 0 8 4‑Metro 14 1 2 11 5‑West LA 6 0 0 6 6‑South LA 32 15 7 10 7‑East LA 4 0 0 4 8‑South Bay/Harbor 9 1 2 6 Subtotals 84 19 11 54 Multiple areas 6 2 0 4 Totals 90 21 11 58 California State Auditor Report 2017-112 59 April 2018 FAILED THRESHOLD REVIEW FAILED QUALITY REVIEW APPROVED SERVICE PLANNING AREA REVIEWED NUMBER PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE Fiscal Years 2014–15 through 2016–17 Combined Percentages 1–Antelope Valley 16 0 0% 1 6% 15 94% 2–San Fernando Valley 33 3 9 2 6 28 85 3–San Gabriel Valley 24 1 4 2 8 21 88 4–Metro 61 5 8 8 13 48 79 5–West LA 28 0 0 0 0 28 100 6–South LA 74 20 27 11 15 43 58 7–East LA 16 1 6 0 0 15 94 8–South Bay/Harbor 25* 1 4 2 8 22 88 Multiple areas 21 11 68 21 2 13 68 Totals 296* 35 12% 28 9% 233 79% Source: California State Auditor’s analysis of application information obtained from the Authority. * In fiscal year 2015–16, one applicant withdrew its application after the Authority completed it threshold review, but before it completed its quality review. We omitted this applicant from this table. 60 California State Auditor Report 2017-112 April 2018 Blank page inserted for reproduction purposes only. California State Auditor Report 2017-112 61 April 2018 Appendix B FUNDING FOR NEW PROJECTS VARIES ACROSS LOS ANGELES COUNTY BECAUSE OF FUNDING RESTRICTIONS AND LACK OF PROVIDER APPLICANTS Service areas with providers that submit more applications generally receive more funding per capita. Although the Authority does not yet track its funding by service area or procurement type, we were able to analyze funding for new projects across service areas. As Table B beginning on the following page shows, service areas 1, 3, and 7 had no funding awards from the city of Los Angeles for new projects for fiscal years 2014–15 through 2016–17. These service areas are located outside the city of Los Angeles and therefore are not eligible for city funds. The table also shows an increase in county‑funded awards for new projects starting in fiscal year 2015–16 and less variation in awards for funding across service areas in fiscal year 2016–17 than in fiscal year 2015–16. This is because in fiscal year 2016–17 programs for two RFPs required that services be provided in all service areas and that the funding amount be based on the point‑in‑time count. The Authority also awarded a minimal amount of state funding for new projects, all of which were associated with State Emergency Services Grants and limited to nonentitlement areas. 62 California State Auditor Report 2017-112 April 2018 Table B For New Projects Awarded During Fiscal Years 2014–15 Through 2016–17, the City of Los Angeles Funded More Per Homeless Person, but Los Angeles County Funded More Per Homeless Person for the Service Areas Outside the City Boundaries AMOUNT AWARDED PER HOMELESS INDIVIDUAL BY FISCAL YEAR FUNDING SOURCE BY SERVICE AREA 2014–15 2015–16 2016–17 Service Area 1 Antelope Valley* City funded County funded $497 $562 State funded 270 HUD funded $46 43 TOTALS FOR SERVICE AREA 1 $46 $810 $562 Service Area 2 San Fernando Valley City funded $200 $465 $64 County funded 124 776 State funded HUD funded 193 554 TOTALS FOR SERVICE AREA 2 $393 $1,143 $840 Service Area 3 San Gabriel Valley* City funded County funded $686 $1,025 State funded HUD funded 331 227 TOTALS FOR SERVICE AREA 3 $1,017 $1,252 Service Area 4 Metro City funded $379 $474 $153 County funded 61 394 State funded HUD funded 20 TOTALS FOR SERVICE AREA 4 $379 $555 $547 Service Area 5 West LA City funded $853 $77 County funded $33 111 581 State funded HUD funded 122 540 58 TOTALS FOR SERVICE AREA 5 $155 $1,504 $716 California State Auditor Report 2017-112 63 April 2018 AMOUNT AWARDED PER HOMELESS INDIVIDUAL BY FISCAL YEAR FUNDING SOURCE BY SERVICE AREA 2014–15 2015–16 2016–17 Service Area 6 South LA City funded $472 $1,157 $106 County funded 167 624 State funded HUD funded 193 480 TOTALS FOR SERVICE AREA 6 $665 $1,804 $730 Service Area 7 East LA* City funded County funded $38 $553 $476 State funded 139 HUD funded 136 TOTALS FOR SERVICE AREA 7 $174 $692 $476 Service Area 8 South Bay/Harbor City funded $579 $99 County funded $23 215 827 State funded Hud funded 145 211 TOTALS FOR SERVICE AREA 8 $168 $1,005 $926 Total of All Service Areas Combined City funded† $351 $831 $137 County funded 8 214 617 State funded 30 HUD funded 162 348 48 CONSOLIDATED TOTALS $521 $1,423 $802 Sources: California State Auditor’s analysis of the Authority’s application evaluation results for new project awards, including funding from the city of Los Angeles, Los Angeles County, and HUD CoC program, from July 1, 2014, through June 30, 2017, and the point‑in‑time homeless counts for 2015, 2016, and 2017. Note: Some applicants applied to operate projects to serve the homeless populations in multiple service areas. We omitted these applications from this table. * Service areas 1, 3, and 7 are located outside the city of Los Angeles and therefore are not eligible for city funds. † For the combined total of the city of Los Angeles funded applicants, we used the point‑in‑time count of homeless population within the city of Los Angeles boundaries only, not the count of the homeless within the entire Los Angeles CoC. The Authority cannot award city of Los Angeles funds to serve the homeless individuals outside city boundaries. 64 California State Auditor Report 2017-112 April 2018 Blank page inserted for reproduction purposes only. California State Auditor Report 2017-112 65 April 2018 March 29, 2018 Elaine M. Howle, CPA California State Auditor 621 Capitol Mall, Suite 1200 Sacramento, CA 95814 Subject: Response to State Auditor’s Report No. 2017-112 regarding Los Angeles Homeless Authority Dear Ms. Howle: Thank you for the opportunity to review the California State Auditor’s Report No. 2017- Peter Lynn Executive Director 112. This report provides several recommendations that, once implemented, will enhance LAHSA's ability to track, report, and analyze funding decision data. LAHSA appreciates the professionalism and attention to detail your staff exhibited during the audit process and Board of Commissioners the final document reflects their effort. Noah Farkas Chair General Comments LAHSA appreciates the State Auditor’s assertion that LAHSA’s evaluation process mitigates Wendy Gruel Vice Chair preference in funding recommendations and that we consistently use a standardized process for evaluating competitive applications for funding projects. Kelli Bernard As noted by the State Auditor, LAHSA’s HUD evaluation methodology for HUD renewal Sarah Dusseault projects is sound. LAHSA’s CoC evaluation methodology, as approved by the CoC Board, Mitchell Kamin ensures the Los Angeles CoC submits the strongest application to HUD. HUD does not award a majority of points based on underserved areas, but rather on applications which Lawson Martin demonstrate alignment with HUD priorities as stated in each year’s NOFA. LAHSA does Irene Muro consider the need in service areas in its efforts to encourage the submission of new project Booker Pearson applications from these areas, however cannot control which agencies will apply nor the areas new projects will serve. Strong applications, regardless of service area, must be Kelvin Sauls submitted during the national HUD NOFA competition in order for the CoC as a whole to be Jacqueline Waggoner awarded the maximum amount of funds available. LAHSA’s ability to continually secure additional CoC funds illustrates the soundness of the CoC’s reallocation policy. In NOFA 2014, LA CoC received a $10 million bonus and in NOFA 2017 LAHSA received $109,398,295 in funds, an increase of nearly $5 million from last year. This represented the largest HUD Award the LA CoC has ever received. Administrative Office As the funding available to homeless services has grown, LAHSA continues to evaluate our 811 Wilshire Blvd. procurement process and seeks to make improvements to this system to ensure fair and 6th Floor unbiased evaluations. As mentioned by the State Auditors, LAHSA has taken steps to Los Angeles, CA 90017 address funding variations such as creating new funding opportunities, reserving funds for underserved service areas, and providing technical assistance to increase the qualified applicant pool. 213 683.3333 - PH 213 892.0092 - FX The Request for Statement of Qualifications (RFSQ) process represents LAHSA’s 213 553.8488 - TTY commitment to streamlining the procurement process and expanding the eligible applicant base for new funding opportunities. LAHSA understood that many applications failed www.lahsa.org threshold review mainly due to incomplete applications such as 66 California State Auditor Report 2017-112 April 2018 California State Auditor Los Angeles Homeless Services Authority Review Audit Report 2017-112 March 29, 2018 Page 2 of 4 failure to submit required documents or provide clear responses to basic application questions. In an effort to combat this, LAHSA developed the RFSQ process. As acknowledged by the State Auditor, the RFSQ process allows LAHSA staff to provide feedback and assistance to applicants and speeds up the Request for Proposal (RFP) timeline. In November 2017, LAHSA surveyed RFSQ participants in order to identify common issues and barriers. LAHSA is incorporating the results of these surveys into a RFSQ webinar which will be published by July 2018. LAHSA acknowledges that funding decisions based on service area were not comprehensively tracked; however, this information was tracked on the individual RFP level since many funders require funding decisions based on the most recent homeless count results per service area. Through this individual tracking, LAHSA is able to assess service area shortages by RFP and will attempt to secure providers in the underserved service areas. As LAHSA is committed to ensure fair allocation of funding across service areas, LAHSA appreciates that comprehensive, aggregate data tracking would enhance our funding policies and decisions. LAHSA agrees with the State Auditors assessment regarding the organization’s application data. Starting with the influx of funding during fiscal year 2016-2017, LAHSA understood that our data storage system was not sufficient to meet the demand. As mentioned by the State Auditor, LAHSA procured Contract Logix in 2016. In addition, LAHSA began implementation of SharePoint to replace the network hard-drive with a cloud-based system. Once implemented, SharePoint will increase efficiency and transparency while eliminating information silos and duplicative work. An internal workgroup was created to ensure that SharePoint’s structure and implementation matches staff needs and workflow processes. SharePoint’s implementation timeline is on target and should be live June 2018. Furthermore, with the assistance of ABT Associates, a HUD Technical Assistance consulting firm, LAHSA has started planning the development of a grant management system. Through Contract Logix implementation, the SharePoint implementation, and the grant management system, LAHSA is enhancing our data standards, governance, and management. Recommendations To ensure the consistency and transparency of its processes, the Authority should: Recommendation: Implement updated written policies and procedures by July 2018. Concur. LAHSA recognized that necessary improvements to our policies and procedures were not formalized and hired a consultant in 2016 to assist in revising and formalizing policies and procedures. In December 2017, LAHSA revised and adopted the Request for Proposals (RFP) and Request for Information (RFI) policies. In February 2018, the RFSQ policies were adopted. In addition, LAHSA is revising the Procurement Policy and will create an instructional procedures guide for staff. Recommendation: Update its written policies and procedures regularly to reflect changes in its processes. Concur. LAHSA agrees regularly updating policies and procedures is essential. In 2017, LAHSA began separating Board-approved policies from procedures. Prior to this, we recognized that intertwining Board- approved policies with procedures created additional barriers to change processes. LAHSA will work with our Policies and Procedures consultant to develop mechanisms ensuring procedures are reviewed and updated on a regular basis. To ensure that its funding recommendations are effective, consistent, and transparent, by July 2018 the Authority should: Recommendation: Develop and implement processes to ensure that staff complete evaluation tools as intended. California State Auditor Report 2017-112 67 April 2018 California State Auditor Los Angeles Homeless Services Authority Review Audit Report 2017-112 March 29, 2018 Page 3 of 4 Concur. The revised RFSQ process, adopted February 2018, includes additional supervisor oversight, to ensure staff are consistently completing evaluation tools. LAHSA is currently creating a handbook to accompany these formalized policies and procedures. LAHSA has been working to incorporate clear and detailed instructions for completion of its RFP evaluation tools to ensure consistent data completeness and integrity on the part of all evaluators. In addition, LAHSA will continue to review processes to ensure data accuracy. As LAHSA creates system automation, we will create additional data accuracy mechanisms. Recommendation: Develop and implement a process to document supervisory review of its application evaluation process and meetings in which it makes funding discussions. Concur. As stated above, LAHSA has revised the RFSQ process which enhances the supervisory review process. As LAHSA revises our procurement policies and procedures, LAHSA will ensure appropriate documentation standards, such as meeting minutes which are reviewed and approved by department directors, are incorporated. Recommendation: Formalize these changes in its written policies and procedures. Concur. LAHSA acknowledges that in the past, changes to policies and procedures were not formalized. As previously stated, in December 2017, LAHSA revised and adopted Request for Proposals (RFP) and Request for Information (RFI) policies. In February 2018, the Request for Funding Statement of Qualifications (RFSQ) policies were adopted. In addition, LAHSA is in the process of revising the Procurement Policy and will create an instructional procedures guide for staff. To expand the number of service providers through targeted technical assistance effectively, the Authority should: Recommendation: Evaluate the use of a document management system to document the application evaluation process and implement the appropriate system by December 2018. Concur. With the assistance of ABT Associates, LAHSA created a workgroup to develop a grant management system. This workgroup will review the capacity of existing systems, such as Contract Logix, to inform this recommendation. LAHSA will ensure the application evaluation tracking and reporting is incorporated into LAHSA data management systems. Recommendation: Evaluate the effectiveness of the selected system within 12 months after implementation. Concur. LAHSA agrees with this recommendation and will evaluate our data systems within a year of implementation. Recommendation: Develop and implement a process to track aggregate application evaluation data, including the common reasons for failing, among other information by December 2018. Concur. While LAHSA currently collects evaluation data on an individual level, LAHSA agrees that readily accessible aggregate data would provide additional information which may increase capacity building and technical assistance to service providers. LAHSA is committed to increasing the application pool for homeless funds and believes this recommendation is essential. LAHSA will ensure this recommendation is incorporated into the data systems currently under development. Recommendation: Track service areas in its database management system or other mechanism to identify accurately the results of its application evaluation process, amounts awarded, amounts funded and amounts disbursed by service area by July 2018. Concur. LAHSA acknowledges that tracking mechanisms in place during the State Audit were not robust enough to meet the current need and reporting expectations. Through the implementation of Contract 68 California State Auditor Report 2017-112 April 2018