Homelessness in California

Homelessness in California San José and San Diego Must Do More to Plan and Evaluate Their Efforts to Reduce Homelessness April 2024 REPORT 2023‑102.2 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 our Communications Office at 916.445.0255 This report is also available online at www.auditor.ca.gov | Alternative format reports available upon request | Permission is granted to reproduce reports Grant Parks State Auditor Mike Tilden Chief Deputy April 9, 2024 2023‑102.2 The Governor of California President pro Tempore of the Senate Speaker of the Assembly State Capitol Sacramento, California 95814 Dear Governor and Legislative Leaders: The Joint Legislative Audit Committee requested an audit of the State’s homelessness funding, including an evaluation of the efforts undertaken by the State and two cities to monitor the cost‑effectiveness of such spending. We published a separate report (2023‑102.1) that details our findings related to the State’s activities. This report (2023‑102.2) focuses primarily on the activities of the two cities we reviewed, San José and San Diego, and it concludes that the cities must do more to better evaluate their efforts to reduce homelessness. San José and San Diego identified hundreds of millions of dollars in spending of federal, state, and local funding in recent years to respond to the homelessness crisis. However, neither city could definitively identify all its revenues and expenditures related to its homelessness efforts because neither has an established mechanism, such as a spending plan, to track and report its spending. The absence of such a mechanism limits the transparency and accountability of the cities’ uses of funding to address homelessness. Although both cities provide tens of millions of dollars for homelessness programs and services through agreements with external service providers, such as nonprofits, neither city evaluated the effectiveness of its agreements. San Diego has generally established clear performance measures, such as specifying the number of people the service provider will assist, to enable it to assess whether the providers’ efforts are an effective use of funds. However, San José has not consistently done so. Furthermore, neither city has evaluated the effectiveness of the programs it provides to address the profound health and safety risks associated with unsheltered homelessness. Both cities use interim housing as a way to provide shelter for people experiencing homelessness, but they both need to develop additional permanent housing. Data consistently show that placements into permanent housing results in significantly better outcomes than placements into interim housing. The cities have each made efforts to develop additional interim and permanent housing; however, neither has a clear, long‑term plan to ensure that they have the housing necessary. We recommend that San José and San Diego each publicly report on all of their homelessness funding, assess the effectiveness of their spending, and better plan to meet their permanent housing needs. Respectfully submitted, GRANT PARKS California 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 April 2024 | Report 2023-102.2 Selected Abbreviations Used in This Report Cal ICH California Interagency Council on Homelessness CoC Continuum of Care ERF Encampment Resolution Funding ESG Emergency Solutions Grant state data system Homeless Data Integration System HHAP Homeless Housing, Assistance and Prevention HMIS Homeless Management Information System HSSD Homelessness Strategies and Solutions Department HUD U.S. Department of Housing and Urban Development NPD Neighborhood Policing Division PIT count point‑in‑time count VASH Veterans Affairs Supportive Housing CALIFORNIA STATE AUDITOR v Report 2023-102.2 | April 2024 Contents Summary 1 Introduction 3 Audit Results San José and San Diego Have Adopted Plans for Addressing Homelessness but Do Not Completely Report on All of Their Homelessness Funding 13 Neither San José nor San Diego Has Consistently Evaluated the Effectiveness of Its Homelessness Programs 25 To Better Address Homelessness, San José and San Diego Will Need to Develop Additional Interim and Permanent Housing 41 Other Areas Reviewed 57 Recommendations 63 Appendix A Funding Sources and Eligible Uses 67 Appendix B Placements Into Interim and Permanent Housing 71 Appendix C Scope and Methodology 73 Response to the Audit City of San José 77 California State Auditor’s Comments on the Response From the City of San José 93 City of San Diego 97 California State Auditor’s Comments on the Response From the City of San Diego 103 San Diego Housing Commission 105 California State Auditor’s Comments on the Response From the San Diego Housing Commission 115 vi CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Blank page inserted for reproduction purposes only. CALIFORNIA STATE AUDITOR 1 Report 2023-102.2 | April 2024 Summary The Joint Legislative Audit Committee requested an audit of the State’s homelessness funding, including an evaluation of the efforts undertaken by the State and two cities to monitor the cost effectiveness of such spending. Separately, we published a report (2023‑102.1) that focuses primarily on the State’s activities to address homelessness. In this report (2023‑102.2), we present our findings and conclusions regarding the two cities we reviewed: the city of San José (San José) and the city of San Diego (San Diego). Since 2015 both San José and San Diego have seen increases in the number of individuals experiencing homelessness. In response, the cities have dedicated hundreds of millions of dollars in federal, state, and local funding to preventing and ending homelessness. In this audit, we reviewed the cities’ spending and their efforts to evaluate the effectiveness of the programs they funded, and we drew the following conclusions: San José and San Diego Have Adopted Plans for Addressing Homelessness but Do Not Completely Report on All of Page 13 Their Homelessness Funding Both San José and San Diego identified hundreds of millions of dollars in spending on programs to prevent and end homelessness in recent years. Nonetheless, neither city could definitively identify all its revenues and expenditures related to its homelessness efforts because the cities have not established a mechanism, such as a spending plan, to track and report their spending. Such a mechanism would increase transparency and accountability regarding the cities’ use of homelessness funds. Further, it might enable the cities to better align their spending with the action plans they follow. While San Diego has a city‑specific action plan that details its goals and the services it intends to provide, San José has historically followed a broader regional action plan and has only recently identified the specific steps it will take to implement that regional plan. Neither San José nor San Diego Has Consistently Evaluated the Page 25 Effectiveness of Its Homelessness Programs Both San José and San Diego spend tens of millions of dollars on agreements with external service providers, such as nonprofits, to provide homelessness programs and services. Although San Diego has generally established clear performance measures to assess whether these efforts are an effective use of funds, San José has not consistently done so. In addition, neither San José nor San Diego has evaluated the effectiveness of these agreements or of other city‑provided programs that address the profound health and safety risks associated specifically with unsheltered homelessness. 2 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 To Better Address Homelessness, San José and San Diego Will Page 41 Need to Develop Additional Interim and Permanent Housing Data consistently show that placing individuals who are experiencing homelessness into permanent housing results in significantly better outcomes than placements into interim housing. Nonetheless, interim housing plays a critical role in providing shelter to people who need it. In recent years, both San José and San Diego have taken steps to develop additional interim housing sites. However, neither city currently has the shelter capacity it requires to house its residents who are experiencing unsheltered homelessness. Moreover, although the two cities have made efforts to develop additional permanent housing, neither has a clear, long‑term plan to ensure that it has the housing necessary to support individuals who require it. Agency Comments The city of San José provided additional context it asserted was lacking in the report, but the city generally agreed with our recommendations and has indicated the steps it plans to take to implement them. The city of San Diego generally agreed with the recommendations and indicated that it will take appropriate steps to implement them where feasible. Although we did not make recommendations to the San Diego Housing Commission, it disagreed with some of our findings and conclusions. CALIFORNIA STATE AUDITOR 3 Report 2023-102.2 | April 2024 Introduction Background The number of people experiencing homelessness in the State has increased significantly during the last 10 years. According to federal regulations, any individual or family who lacks a fixed, regular, and adequate nighttime residence is experiencing homelessness. When people primarily spend their nights in public or private locations not normally used for sleeping, it is considered unsheltered homelessness. When people stay in emergency shelters, transitional housing programs, or safe havens, it is considered sheltered homelessness. People experiencing homelessness face devastating challenges to their health and well‑being. For example, a study found that two‑thirds of participants reported current mental health symptoms and that homelessness worsened participants’ mental health symptoms. To identify the number of people experiencing homelessness, the U.S. Department of Housing and Urban Development (HUD) requires annual point‑in‑time (PIT) counts of those experiencing sheltered homelessness and biennial counts of those experiencing unsheltered homelessness. Figure 1 shows that although the number of people experiencing homelessness in California decreased slightly from 2013 through 2015 to fewer than 116,000 individuals, it has increased to more than 181,000 individuals as of 2023. Figure 1 California’s Population of People Experiencing Homelessness Has Increased Since 2013 200,000 Unsheltered Count 181,399 Sheltered Count 180,000 171,521 123,423 115,491 160,000 151,278 108,432 140,000 131,532 118,552 88,896 115,738 120,000 72,998 73,699 100,000 80,000 60,000 56,030 57,976 40,000 45,554 42,039 42,636 42,846 20,000 0 2013 2015 2017 2019 2022* 2023 Source: The U.S. Department of Housing and Urban Development (HUD) point‑in‑time (PIT) counts, Annual Homeless Assessment Report, and HUD memorandum. Note: HUD requires Continuums of Care (CoCs) to conduct a PIT count of people experiencing sheltered homelessness annually and a count of people experiencing unsheltered homelessness at least biennially. To present the total number of people experiencing homelessness, we therefore used the year in which both categories of PIT counts were conducted. * HUD waived the PIT count requirement for unsheltered homelessness in 2021 because of the COVID‑19 pandemic, but it required the count again in 2022. 4 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Figure 2 shows the three main phases of homelessness: entering homelessness, experiencing homelessness, and exiting homelessness. The University of California, San Francisco’s June 2023 study of people experiencing homelessness describes economic, social, and health factors that can lead to homelessness. The study found that high housing costs and low incomes had left participants vulnerable to homelessness and that the most frequently reported economic reason for entering homelessness was loss of income. Resolutions to this situation include preventing people from entering homelessness and helping people exit homelessness to live in permanent housing. Factors such as scarcity of housing, high cost of housing, lack of rental subsidies, and lack of assistance in identifying housing create barriers to accessing housing. Figure 2 The Three Phases of Homelessness Each Have Mitigating Solutions ENTERING EXPERIENCING EXITING HOMELESSNESS HOMELESSNESS HOMELESSNESS PREVENTION PERMANENT HOUSING • Housing relocation and stabilization SUPPORTIVE • Permanent Supportive Housing services, such as providing the following: SERVICE • Rapid Rehousing - Moving costs COORDINATION • Other Permanent Housing - Security deposits - Utility payments • Rental assistance OUTREACH INTERIM HOUSING High housing costs and low incomes leave People who lack a fixed, regular, and adequate People are exiting homelessness when people vulnerable to homelessness. nighttime residence are considered to be they find permanent housing. They Individuals or families with annual experiencing homelessness. This experience can often face barriers, such as housing incomes below 30 percent of median be devastating to their health and well-being. scarcity and high costs. family income and who meet certain other criteria are categorized as at risk of homelessness. Source: Federal regulations, Federal Strategic Plan, Business, Consumer Services, and Housing Agency documentation, and Toward a New Understanding: The California Statewide Study of People Experiencing Homelessness, a study published by the University of California San Francisco Benioff Homelessness and Housing Initiative in June 2023. CALIFORNIA STATE AUDITOR 5 Report 2023-102.2 | April 2024 Numerous Entities Have Roles in Funding Homelessness Services in California Numerous entities are involved in funding homelessness prevention, homelessness support services, and the provision of permanent housing in California. Federal, state, and local governments all issue funding that flows through other entities before reaching people at risk of or experiencing homelessness. Most notably, the State recently increased its financial role in addressing housing affordability and homelessness. According to the Legislative Analyst’s Office, the State allocated nearly $24 billion to addressing homelessness and housing affordability during the last five fiscal years, from fiscal years 2018–19 through 2022–23. As Figure 3 shows, Continuums of Care (CoCs) are central to California’s provision of homelessness services. In 1993 HUD established the CoC system. Formed according to federal regulations to achieve the goal of ending homelessness within a geographic area, each CoC is a group of individuals and entities that may include homelessness service providers, cities, and counties. Congress codified the CoC system into law to provide federal funding for states, local governments, and nonprofit service providers to quickly rehouse people experiencing homelessness. California has 44 CoCs that cover its 58 counties. Each CoC enables collaboration among member entities in its area but does not direct the actions of those member entities. The State and HUD provide funding through a variety of programs to CoCs and the entities within CoCs, such as counties, cities, and nonprofits. Those entities are responsible for following the eligible uses and reporting requirements of the funding they receive. Data show that nearly 316,000 individuals experiencing homelessness accessed housing and services in California’s 44 CoCs in 2022.1 The COVID‑19 pandemic, which occurred during the period we reviewed, profoundly affected individuals at risk of or experiencing homelessness and resulted in both the federal and state governments dedicating substantial funding to addressing the crisis. San José and San Diego Provide Homelessness Services Through Multiple Departments We reviewed two cities as part of our audit. The Joint Legislative Audit Committee specifically requested that we review the city of San José (San José). For the second city, we selected the city of San Diego (San Diego) based on its population, its geographic location, the number of people in it experiencing homelessness, and its available funding to reduce homelessness, among other factors. Both San José and San Diego operate as member entities of their respective CoCs, which also have responsibilities for the people experiencing homelessness in each city. The cities should spend the funding they receive as effectively as possible to meet the needs of their residents. 1 Because the PIT count of people experiencing homelessness takes place on a single night in a given year, the number derived from that count may be less than the total number of people who experience homelessness at some point during that year. 6 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Figure 3 There Are Many Layers to Homelessness Funding and Services Funding Services FUNDING The State and HUD provide funding through a variety of HUD STATE programs to CoCs and individual entities within CoCs such as counties, cities, and nonprofits. Each program has its own eligible uses, reporting requirements, and populations to serve. CoCs include: COUNTIES CITIES OTHER (such as faith-based NONPROFIT HOMELESSNESS organizations, businesses, and public housing agencies) SERVICE PROVIDERS SERVICES Each entity within a CoC uses SUBCONTRACTORS multiple sources of funding to provide a variety of services that address different aspects of homelessness. People at Risk of or Experiencing Homelessness Source: State law; grant agreements; documentation from the California Interagency Council on Homelessness (Cal ICH), HUD, California Department of Social Services, California Department of Housing and Community Development, cities and counties; and a service provider's website. CALIFORNIA STATE AUDITOR 7 Report 2023-102.2 | April 2024 San José Located in the San Francisco Bay Area in Santa Clara County, San José had nearly 1 million residents as of July 2022. It operates as a council‑manager form of government. Its city council consists of one representative from each of the 10 council districts and a mayor. The council determines all matters of policy for the city. The city manager serves as the city’s chief administrative officer and directs and supervises the administration of all city departments, offices, and agencies. The number of people experiencing both sheltered and unsheltered homelessness in San José increased from 2015 through 2022, as Figure 4 shows. However, San José saw a slight drop in the number of people experiencing homelessness from 2022 to 2023. Figure 4 The Number of People Experiencing Homelessness in San José Has Increased Since 2015 8,000 6,650 6,340 Unsheltered Count 6,097 6,000 4,975 4,411 Sheltered Count 5,117 4,350 4,063 4,000 3,231 2,810 2,000 1,929 1,675 1,253 1,119 980 0 2015 2017 2019 2022* 2023 Source: City homelessness PIT count data. Note: HUD requires CoCs to conduct PIT counts of people experiencing sheltered homelessness annually and of people experiencing unsheltered homelessness at least biennially. To present the total number of people experiencing homelessness, we used the year in which both categories of PIT counts were conducted. * HUD waived the PIT count requirement for unsheltered homelessness in 2021 because of the COVID‑19 pandemic, but it required the count again in 2022. As we show in Figure 5, multiple city departments have roles in San José’s efforts to address homelessness. These departments operate under the direction of the city council, the city manager, and a deputy city manager, whom the city manager appointed in 2022 to focus on addressing homelessness. Some departments’ work involves city staff directly providing homelessness services. For example, the fire department responds to incidents at encampments, and the Parks, Recreation and Neighborhood Services’ BeautifySJ program collects trash from encampment areas and performs abatements when necessary.2 However, the city also supplies 2 In San José, encampment abatement is the removal of encampments and the people inhabiting them that are in certain setback areas, such as those that are within 150 feet of schools; block streets, sidewalks, or trails; or present serious health or safety conditions according to a risk assessment. 8 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 grant funding to external service providers, such as nonprofits, that provide rental assistance, housing searches, and other services. Finally, the city funds the development of interim and permanent housing. Figure 5 Several Entities Are Involved in Efforts to Address Homelessness in San José City of San José Santa Clara County serves as The city council and the region's CoC collaborative mayor set city policy. applicant and Homeless Management Information System (HMIS) lead, and it collaborates with the city to end homelessness. The City Manager’s Office, which includes the deputy city manager for homelessness, oversees city departments. Parks, Recreation and Housing Fire Neighborhood Services Department Department Department External service providers Source: San José’s organizational chart in its adopted budget, website, City Charter, Municipal Code, City Council memo, and an interview with city staff. CALIFORNIA STATE AUDITOR 9 Report 2023-102.2 | April 2024 In addition to the state and federal funding San José receives for homelessness services and affordable housing, the city also uses local tax revenue for these purposes. In 2020 voters in San José approved Measure E—a real property transfer tax imposed on properties priced at $2 million or more—to fund any city purpose. Although the city council’s spending priorities for Measure E have changed over the years, its 2023 adopted priorities required that it use 10 percent of the funding on homelessness prevention, gender‑based violence programs, legal services, and rental assistance. The spending priorities required that it use another 15 percent primarily on homelessness support programs, including shelter construction and operations. When implementing its efforts to address homelessness, San José works closely with Santa Clara County. The county serves as the CoC’s Homeless Management Information System (HMIS) lead agency.3 The county’s responsibilities also include creating and operating a coordinated assessment system that helps identify the best housing intervention for each person and monitoring the performance of jurisdictions within the CoC. With nearly 1 million residents, San José has over half of the population in Santa Clara County and its CoC’s area; thus, the city’s efforts are crucial to its CoC’s ability to reduce and end homelessness. San Diego Located on the southern California coast, San Diego had nearly 1.4 million residents as of July 2022. It operates as a strong mayor form of municipal government. Under this form of government, the mayor is the chief executive of the city and has significant authority over the city’s operations. The city has seen a recent increase in the number of its residents experiencing homelessness, as Figure 6 shows. Figure 6 The Number of People Experiencing Homelessness in San Diego Has Increased Since 2015 8,000 6,500 Unsheltered Count 6,000 5,538 5,619 3,285 Sheltered Count 5,082 2,765 3,231 4,801 2,600 2,494 4,000 3,215 2,773 2,000 2,388 2,482 2,307 0 2015 2017 2019 2022* 2023 Source: CoC PIT count data. Note: HUD requires CoCs to conduct PIT counts of people experiencing sheltered homelessness annually and of people experiencing unsheltered homelessness at least biennially. To present the total number of people experiencing homelessness, we used the year in which both categories of PIT counts were conducted. * HUD waived the PIT count requirement for unsheltered homelessness in 2021 because of the COVID‑19 pandemic, but it required the count again in 2022. 3 HMIS lead agency means the entity designated by the CoC to operate the Continuum’s HMIS on its behalf. 10 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 As Figure 7 describes, San Diego’s efforts to address homelessness involve multiple entities. The San Diego Housing Commission (housing commission) is the primary entity responsible for administering most of San Diego’s homelessness programs. The city created the housing commission and, with some exceptions, granted it all rights, powers, and duties of a housing authority.4 The Housing Authority of the City of San Diego (housing authority)—composed of the nine members of San Diego’s city council—governs the housing commission. In addition, the city officially established in its municipal code its Homelessness Strategies and Solutions Department (HSSD) effective February 2022. HSSD is responsible for planning, developing, and overseeing a comprehensive network of citywide programs that provide immediate assistance and long‑term solutions to meet the needs of those experiencing homelessness. This includes handling the city’s homelessness program funding and overall management of the city’s homelessness efforts. HSSD also administers some of the city’s homelessness programs; however, the housing commission administers most programs through a memorandum of understanding with the city. The city is a member of the San Diego City and County CoC. The lead agency for this CoC is the Regional Task Force on Homelessness (Regional Task Force), a nonprofit organization. The Regional Task Force performs a variety of functions related to San Diego’s homelessness efforts, such as conducting PIT counts of the individuals experiencing homelessness in the city. 4 State law provides housing authorities with powers and duties that include providing for the construction or repair of housing projects, acquiring or developing low‑income housing, and financing low‑income housing. CALIFORNIA STATE AUDITOR 11 Report 2023-102.2 | April 2024 Figure 7 Several Entities Are Involved in Efforts to Address Homelessness in San Diego City of San Diego San Diego Regional Task Force Mayor City Council Housing Authority* on Homelessness The mayor The city council The housing authority consists The Regional Task oversees the city sets city policy and of the nine members of the Force is the lead departments. allocates funding. city council and governs agency for the the housing commission. region's CoC and collaborates with the city to end City Departments homelessness. Environmental San Diego Police Services Department Department San Diego Homelessness Housing Commission Economic Strategies Development and Solutions The housing commission and Department Department the city departments administer the city's homelessness programs. Through a memorandum of understanding between the city and the housing commission, the housing commission administers most city-funded programs. Source: State law, San Diego's municipal code, charter, resolutions, memorandums of understanding, organizational chart, and Independent Budget Analyst; the housing commission; and the Regional Task Force. * The housing authority is a separate legal entity from the city. The housing commission is a public agency of the housing authority. 12 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Blank page inserted for reproduction purposes only. CALIFORNIA STATE AUDITOR 13 Report 2023-102.2 | April 2024 San José and San Diego Have Adopted Plans for Addressing Homelessness but Do Not Completely Report on All of Their Homelessness Funding Key Points • Neither San José nor San Diego tracks and reports in one location, such as a spending plan, all of its funding and spending related to homelessness. The cities’ fragmented reporting limits public transparency and accountability for hundreds of millions of dollars in state, federal, and local funding. It also impedes the cities’ ability to assess the effectiveness of their spending. • San José did not develop a plan with city‑specific goals for reducing homelessness until January 2024. As a result, it has struggled to evaluate the effectiveness of its actions. • San Diego established a city‑specific plan for reducing homelessness in 2019. This plan identifies clear strategies and goals that have enabled San Diego to prioritize the needs of its residents who are experiencing homelessness. The city recently updated its goals to reflect changing conditions. Neither San José nor San Diego Centrally Tracks and Reports Its Spending on Homelessness Efforts Both San José and San Diego identified hundreds of millions of dollars in spending of federal, state, and local funding to respond to the homelessness crisis over the last three years. However, neither city has established a method—such as a spending plan— for collecting and tracking in a central location information about the homelessness funding it receives and spends. As a result, the cities lack the information necessary to easily assess the effectiveness of their spending. Further, by not providing comprehensive funding and spending information to the public and policymakers, the cities have limited transparency and accountability. In our attempt to create a complete list of their homelessness funding and spending, we worked extensively with the two cities to develop methods to identify from their accounting records the amounts they had received and spent on homelessness efforts from fiscal year 2020–21 through 2022–23. In the absence of an independent source to verify the amounts of homelessness funding the cities received and spent, we relied upon each city to ensure that they accurately identified the information they provided to us. Therefore, we could not validate the accuracy and completeness of these amounts. During the three‑year period of our review, the cities were each awarded federal and state grant funding for which they had to apply, as well as federal stimulus funding. Each funding source typically has a deadline by which the cities must spend the funding. Each source also has established eligible uses for the funding, which Appendix A lists. In addition to the federal and state funding they received, both cities allocated local funds for homelessness purposes. For example, San José allocated some Measure E funding for homelessness, as we discuss in the Introduction. 14 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Table 1 (spanning pages 14 through 17) shows the aggregate amounts of federal, state, and local funding that San José identified that it had received or allocated for its homelessness efforts in the past three fiscal years. As the table shows, at the end of fiscal year 2022–23, San José had more than $13 million remaining of the federal funding and more than $53 million of the state funding it had received. About $46 million of that remaining funding related to two statewide programs: Homekey and the Homeless Housing, Assistance and Prevention Program (HHAP). The State awarded Homekey funding to San José for specific projects that involve remodeling hotels and motels to create housing. In contrast, San José can use HHAP funding for a number of purposes, which we list in Appendix A. The spending deadlines for both programs are still years away. In fact, the State allocated San José more than $55 million in additional HHAP funding for Rounds 4 and 5 that it had not yet received during our audit period. At the end of fiscal year 2022–23, San José also had more than $86 million remaining of the local funds that it had budgeted that year for homelessness purposes. This amount includes its Measure E funding. Some local appropriations are multi‑year appropriations and therefore have remaining balances. Table 1 identifies the purposes for which the city budgeted that funding. Over the last three fiscal years, the city spent more than $20 million in Measure E funding for purposes related to homelessness. It spent 69 percent of this amount—or about $14 million—in fiscal year 2022–23. Table 1 As of June 2023, San José Had Millions of Dollars in Funding to Reduce Homelessness Remaining Fiscal Years 2020–21 Through 2022–23 HOMELESSNESS- RELATED REMAINING SPEND AWARD SPENT BALANCE AS OF DEADLINE (AS DESCRIPTION AMOUNT* RECEIVED† (3 YR TOTAL) 6/30/23 APPLICABLE) FEDERAL Community Development Block Grant Fund (CDBG) ‡ ‡ $2,685,949 — CDBG—FY21 1,986,534 — CDBG—FY22 337,557 — CDBG—FY23 361,858 — Community Development Block Grant—CARES Act ‡ ‡ 9,007,893 — CDBG‑CV—FY21 6,204,799 — CDBG‑CV—FY23 2,803,094 — Emergency Solutions Grant (ESG) $2,253,464 $2,253,464 $1,040,956 $1,212,508 24 months after HUD ESG—FY21 763,052 763,052 763,052 — signed the ESG—FY22 747,341 747,341 277,904 469,437 agreement with recipient ESG—FY23 743,071 743,071 — 743,071 Emergency Solutions Grant—CARES Act§ 19,240,322 221,244 09/30/23 ESG‑CV—FY22 10,988,375 — ESG‑CV—FY23 8,251,947 — HOME Investment Partnerships American Rescue 11,676,334 — — 11,676,334 09/30/30 Plan Program Subtotal—Federal fundingll $13,929,798 $2,253,464 $31,975,120 $13,110,086 CALIFORNIA STATE AUDITOR 15 Report 2023-102.2 | April 2024 HOMELESSNESS- RELATED REMAINING SPEND AWARD SPENT BALANCE AS OF DEADLINE (AS DESCRIPTION AMOUNT* RECEIVED† (3 YR TOTAL) 6/30/23 APPLICABLE) STATE SB 89—COVID‑19 Emergency Homelessness Funding $3,919,821 $3,988,451 $3,988,451 — Encampment Resolution Funding Grant# 2,085,216 2,085,216 1,362,522 $102,539 6/30/24 Homeless Emergency Aid Program (HEAP)** 11,389,987 11,716,180 11,716,180 — Homeless Housing, Assistance, and Prevention 119,879,562 65,127,846 29,994,846 35,133,000 (HHAP) Fund HHAP Grant 23,832,511 24,052,124 22,902,995 1,149,129 6/30/25 HHAP Grant II 11,266,278 11,457,003 6,459,985 4,997,018 6/30/26 HHAP Grant III 29,118,995 29,618,719 631,866 28,986,853 6/30/26 HHAP Grant IV 26,795,466 — — — 6/30/27 HHAP Grant V 28,866,312 — — — 6/30/28 Permanent Local Housing Allocation Program (PLHA) 18,546,014 11,189,072 4,415,558 6,773,514 58 months from PLHA Program I—FY20 4,348,646 4,368,878 4,368,878 — appropriation PLHA Program II—FY21 6,759,142 6,820,194 46,680 6,773,514 PLHA Program III—FY22 7,438,226 — — — HomeKey 108,612,760 47,154,609 37,148,785 11,193,556 HomeKey Round 1†† 11,953,474 11,953,474 12,895,252 365,722 6/30/21 for federal Coronavirus Relief funds & 6/30/23 for state general fund HomeKey Round 2‡‡ 96,659,286 35,201,135 24,253,533 10,827,834 8 Months for certain federal funds & 6/30/26 for state general fund Subtotal—State fundingll $264,433,360 $141,261,374 $88,626,342 $53,202,609 LOCAL§§ ll ll General Fund $159,236,822 $76,258,375 BeautifySJ and Encampment Waste Pick Up— 2,603 — BeautifySJ Consolidated Model BeautifySJ and Encampment Waste Pick Up— 1,735,729 — BeautifySJ Consolidated Model BeautifySJ and Encampment Waste Pick Up— 324,125 — BeautifySJ Consolidated Model BeautifySJ and Encampment Waste Pick Up— 8,735,858 — BeautifySJ Consolidated Model BeautifySJ and Encampment Waste Pick Up— 3,511,880 1,805,605 San José Bridge Program Emergency Housing—Downtown Homeless Health 468,236 982,507 Response and Support Emergency Housing—Emergency Housing 4,760,744 8,301,022 Construction and Operation continued on next page … 16 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 HOMELESSNESS- RELATED REMAINING SPEND AWARD SPENT BALANCE AS OF DEADLINE (AS DESCRIPTION AMOUNT* RECEIVED† (3 YR TOTAL) 6/30/23 APPLICABLE) Emergency Housing—Sheltering and Enhanced 2,840,915 198,085 Encampment Services Emergency Interim Housing Construction and Operation 5,949,659 14,846,861 Fire—Personal Services## 84,949,314 — Google Community Benefits—Community Stabilization 750,406 — Homeless Response Team 1,235,139 269 Housing Stabilization—Eviction Help Center 1,389,220 425,427 Housing Stabilization—Hotel Sheltering Operations 16,366 3,480,634 and Services Housing Stabilization—South Hall Demobilization and 1,895,605 158,114 Housing Assistance Center Measure E—Guadalupe River Park Housing Support 300,000 2,580,000 [10% Homeless Prevention and Rental Assistance (HPRA)] Measure E—Homeless Outreach and Engagement 532,944 44,177 [15% Homeless Support Programs (HSP)] Measure E—Homeless Student Housing (10% HPRA) 162,135 — Measure E—Homeless Support Programs (15% HSP) 1,003,163 1,400,000 Measure E—Housing Properties Maintenance (15% HSP) 356,079 1,076,813 Measure E—Project HomeKey 2.0 (40% Extremely 849,928 35,725,474 Low Income) Measure E—Rental Assistance (10% HPRA) 14,924,548 2,144,118 Measure E—Storm Evacuee Transition Facilities (15% HSP) 644,948 1,972,896 Measure E—Supportive Services and Operations 1,317,159 — (15% HSP) Parks, Recreation and Neighborhood Services (PRNS)— 758,494 — Non‑personal/Equipment PRNS—Non‑personal/Equipment 246,137 — PRNS—Non‑personal/Equipment 11,939 — PRNS—Personal Services 874,595 — PRNS—Personal Services 160,895 — PRNS—Personal Services 1,457,971 — Rapid Rehousing 7,069,540 1,096,921 Safe RV Parking 548 19,452 Testing, Tracing, and Isolation 10,000,000 — Low and Moderate Income Housing Asset Fund 250,000 — Homeless Services 250,000 — Emergency Reserve Fund 1,802,595 3,197,405 2022–2023 Storm Response and Recovery 1,802,595 3,197,405 Housing Trust Fund 7,050,956 248,000 Disaster Assistance 4,140 248,000 Employment Initiative Program 298,631 — Housing and Homeless Projects 4,305,714 — Housing and Homeless Projects 838,632 — Housing Personal Services 1,603,839 — CALIFORNIA STATE AUDITOR 17 Report 2023-102.2 | April 2024 HOMELESSNESS- RELATED REMAINING SPEND AWARD SPENT BALANCE AS OF DEADLINE (AS DESCRIPTION AMOUNT* RECEIVED† (3 YR TOTAL) 6/30/23 APPLICABLE) Multi‑Source Housing Fund 128,516 — Rapid Rehousing 128,516 — Housing Authority Litigation Award Fund 13,029,833 6,707,215 Bridge Housing Communities 2,819,288 — Homeless Outreach Services 275,680 — Job Readiness Training Project 166,500 450,000 Permanent Supportive Housing (40,000) — Rapid Rehousing 7,814,133 4,757,215 Rebuilding for Heroes 100,000 — Survivors of Violence Housing Assistance 70,098 — VA Rental Subsidy Program 1,824,134 1,500,000 Subtotal—Local fundingll $181,498,722 $86,410,995 TOTAL $278,363,158 $143,514,838 $302,100,184 $152,723,690 Source: San José's approved budgets, grant award letters, and city financial records. * City was awarded some of the funds before or after our audit period. † Amount received may be larger than award amount due to interest income. Additionally, some funds were received before or after our audit period. ‡ CDBG, CDBG‑CV—These grants were not solely for homelessness purposes; rather, the city identified how much it planned to spend for homelessness purposes and was reimbursed for those efforts. Therefore, we present only spent amounts for these funding sources. § Award was received prior to the audit period, and remaining balance is as of January 30, 2024. The city did not identify the amount of expenditures for ESG‑CV for fiscal year 2020–21. ll Because some funding sources do not have award and received amounts we do not include them in the subtotals for those columns. # The remaining balance also accounts for encumbered funds. ** HEAP—Award was received prior to the audit period and some funds were spent during that period. Spent reflects total expenditures on the grant (through end of grant, fiscal year 2021–22). †† HomeKey Round 1—Includes $1.085 million from Enterprise Community Parterns, Inc., a private organization, which therefore is not state funding. ‡‡ HomeKey Round 2—Although the city was awarded $96.7 million in HomeKey Round 2 funding, the city council approved $51.6 million to be paid directly to LifeMoves, its co‑grantee, with the stipulation that LifeMoves was to establish a separate bank account that the city would have access to monitor. As a result, the city’s accounting records do not include all information. §§ Some local appropriations are multi‑year appropriations and therefore have remaining balances. ll ll Local funding is generally not awarded from a non‑city source, so award or received amounts are not included for local funds. ## Fire—Personal Services—The fire department estimated its homelessness‑related expenditures based on the number of homelessness‑related incidents it responded to. Table 2 similarly shows the aggregate amounts of federal, state and local funding that San Diego identified that it had received or allocated for its homelessness efforts in the past three fiscal years. At the end of fiscal year 2022–23, San Diego had more than $52 million in funding designated for homelessness efforts still available. The State also allocated San Diego additional HHAP funding—about $52 million—that it had not received during our audit period. From fiscal year 2020–21 through 2022–23, San Diego spent more than $87 million of its local funding for homelessness purposes. However, the city does not roll over unspent amounts from local funds, so the table does not include a remaining balance for these funds. 18 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Table 2 As of June 2023, San Diego Had Millions of Dollars in Funding to Reduce Homelessness Remaining Fiscal Years 2020–21 Through 2022–23 HOMELESSNESS- RELATED REMAINING AWARD SPENT BALANCE AS OF SPEND DEADLINE DESCRIPTION AMOUNT* RECEIVED† (3 YR TOTAL) 6/30/23 (AS APPLICABLE) FEDERAL Community Development Block Grant Fund (CDBG) ‡ ‡ $8,165,853 — CDBG—FY21 4,124,811 — CDBG—FY22 1,557,047 — CDBG—FY23 2,483,995 — Community Development Block Grant— ‡ ‡ 4,599,062 $609,938 9/22/26 CARES Act—FY21 Emergency Solutions Grant (ESG) $3,139,753 $3,139,753 3,091,466 48,287 24 months after HUD signed the ESG—FY21 1,043,517 1,043,517 1,043,286 231 agreement with ESG—FY22 1,047,275 1,047,275 1,047,274 1 recipient ESG—FY23 1,048,961 1,048,961 1,000,906 48,055 Emergency Solutions Grant—CARES Act 26,394,450 26,394,450 25,908,440 486,010 9/30/23 HOME Investment Partnerships American Rescue ‡ ‡ — 2,000,000 9/30/30 Plan Program CARES Act ‡ ‡ 29,274,809 — Subtotal—Federal funding§ $29,534,203 $29,534,203 $71,039,630 $3,144,235 STATE AB 179—Emergency Shelter for Victims of $2,000,000 — — $2,000,000 6/30/26 Domestic Violence SB 89—COVID‑19 Emergency Homelessness Funding 3,699,316 $3,736,627 $3,736,627 — Must be encumbered by 6/30/20 Encampment Resolution Funding Grant—Round 2 2,446,500 2,446,500 — 2,446,500 Within three years of appropriation Family Homelessness Challenge Grant 441,151 441,151 — 441,151 6/30/26 Homeless Emergency Aid Program 14,110,398 14,633,673 14,633,673 — Homeless Housing Assistance and Prevention 113,041,368 60,636,117 39,438,869 21,197,247 (HHAP) Grant HHAP Grant 22,491,840 22,522,672 16,716,890 5,805,782 6/30/25 HHAP Grant II 10,632,506 10,632,506 8,090,798 2,541,708 6/30/26 HHAP Grant III 27,480,939 27,480,939 14,631,181 12,849,757 6/30/26 HHAP Grant IV 22,517,490 — — — 6/30/27 HHAP Grant V 29,918,593 — — — 6/30/28 Permanent Local Housing Allocation Program 24,693,854 24,693,854 1,724,184 22,969,670 58 months from appropriation Subtotal—State funding§ $160,432,587 $106,587,922 $59,533,353 $49,054,568 CALIFORNIA STATE AUDITOR 19 Report 2023-102.2 | April 2024 HOMELESSNESS- RELATED REMAINING AWARD SPENT BALANCE AS OF SPEND DEADLINE DESCRIPTION AMOUNT* RECEIVED† (3 YR TOTAL) 6/30/23 (AS APPLICABLE) LOCALll General Fund $86,864,918 — Clean SD—Overtime for Police Department 7,897,992 — Contracts & Services 59,675,602 — HSSD—Energy and Utilities 738,408 — Fringe Benefits 1,523,060 — Homeless Outreach Team (HOT) 10,563,890 — HSSD—Information Technology 174,610 — General Services—Maintenance Expenses—Shelters 394,269 — HSSD—Other Expenses 13,271 — Personnel Costs 3,067,505 — Parks & Rec—Shigellosis Remediation 1,208,373 — HSSD—Supplies 1,550,605 — Parks & Rec—Temporary Shelter‑GH Relocation 57,333 — Low and Moderate Income Housing Asset Fund 786,031 — Subtotal—Local funding§ $87,650,949 — TOTAL $189,966,790 $136,122,125 $218,223,932 $52,198,803 Source: San Diego's approved budgets, grant awards, and financial management systems information. * City was awarded some of the funds before or after our audit period. † Amount received may be larger than award amount due to interest income. Additionally, some funds were received before or after our audit period. ‡ These grants were not solely for homelessness purposes; rather, the city identified how much it planned to spend for homelessness purposes and was reimbursed for those efforts. § Because some funding sources do not have award and received amounts we do not include them in the subtotals for those columns. ll Local funding is generally not awarded from a non‑city source, so award or received amounts are not included for local funds. Nonetheless, neither San José nor San Diego could definitively identify all the revenues and expenditures related to its homelessness efforts. This limitation is in part because their city departments budget for and track homelessness funding in a variety of ways. For example, some departments receive a budget for homelessness services and track that spending so it is clearly distinguishable. However, other departments commingle in a single fund their budget for addressing homelessness with funding for other purposes, such as the BeautifySJ program. In these instances, the cities cannot distinguish the amounts intended for addressing homelessness. Although these types of challenges primarily involve local funding, cities can also use some state and federal funding sources for more than just homelessness‑related efforts. If cities do not carefully track their usage of these funds for homelessness‑specific expenditures, it may impede their ability to identify all of their homelessness‑related spending. To inform decision‑makers and provide transparency, the cities should track and report in a single location all funding they receive and use to reduce homelessness. Tracking this funding will require the cities to create and document a methodology 20 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 for identifying from their financial systems the amounts of homelessness funding they have received, budgeted, and spent. As part of this process, the cities should develop a spending plan for their homelessness funding that identifies the available funding and how they intend to allocate that funding. For example, the cities could identify the amounts of funding they have available from federal, state, and local sources each year and indicate the amounts of that funding they plan to allocate to specific homelessness‑related activities, such as developing permanent supportive housing or conducting outreach. The cities should then report on their spending at the end of each year. San Diego’s independent budget analyst’s office acknowledged that the city needs such a plan when it wrote, “Having a clear, publicly available spending plan enables the Council and the public to monitor program expenses, ensure that existing funds are being maximized, and provides transparency regarding the city’s efforts to address homelessness.” San José Did Not Develop a City‑Specific Plan for Addressing Homelessness Until January 2024 Careful planning is critical to ensuring that a city’s efforts to address the complex problem of homelessness are effective. As we discuss in the previous section, the cities should develop spending plans to ensure that they maximize their funds and to provide transparency regarding their efforts to address homelessness. However, in addition to spending plans, the cities should also develop action plans with city‑specific goals that identify the actions they will take to address homelessness. This type of plan enables a city to track its progress and evaluate the effectiveness of the actions it takes to achieve its goals. San José has historically relied on the county‑level community action plan (county plan) to guide its The County Plan’s Five Goals for 2025: efforts to address homelessness. A committee led • Achieve a 30 percent reduction in annual inflow of by the Santa Clara County CoC developed the people becoming homeless. 2020–2025 county plan. The director of San José’s • House 20,000 people through the supportive housing department was a member of the county housing system. plan’s steering committee, and San José had two • Expand the Homelessness Prevention System and additional members involved in the county plan’s other early interventions to serve 2,500 people workgroup to gather community input. The text per year. box lists the county’s homelessness‑related goals. • Double temporary housing and shelter capacity to reduce the number of people sleeping outside. Although we recognize the value of the county plan, we are concerned that the city council did • Address the racial inequities present among unhoused people and families and track progress not adopt a city‑specific plan for implementing the toward reducing disparities. county plan (implementation plan) until recently. As a consequence, San José lacked the city‑specific Source: County plan 2020–2025. information necessary to assess and, if necessary, adjust its actions to ensure their effectiveness in meeting the specific needs of the city’s residents who were experiencing homelessness. For example, in 2021 and 2022, San José’s housing department submitted memos to the city council regarding the city’s CALIFORNIA STATE AUDITOR 21 Report 2023-102.2 | April 2024 spending priorities for its homelessness programs. However, those memos do not include forward‑looking, measurable goals for the programs. Consequently, the city may not know if its spending and actions met its needs. In addition, in the absence of a city‑specific implementation plan, the city has not assessed the effectiveness of its actions in achieving the county’s larger goals. Although the city included program‑specific targets in some grant agreements with service providers, it did not identify or report on how these targets helped or would help it achieve the county plan’s larger goals. For example, in fiscal year 2022–23, San José’s housing department approved spending $8 million in Measure E funds on the city’s homelessness prevention system. The city’s 2022–23 amendment to the agreement with a nonprofit for that system specifies that the city’s target was to assist 900 people in staying housed and prevent them from entering homelessness. However, it is unclear how this target specifically fits within the county plan’s goal to achieve a 30 percent reduction in the annual inflow of people becoming homeless because the target does not specify the total number of people the city needs to prevent from entering homelessness to help achieve the 30 percent reduction. The city auditor reached a similar conclusion in a 2023 audit, reporting that the city’s homelessness and housing measures lacked context that would relate them to the broader goals of the county plan. City staff explained that San José did not develop a city‑specific implementation plan for the county plan until recently because the city was focusing its efforts on responding to the COVID‑19 pandemic. However, the city reported that it took many homelessness‑related actions in those years. Having an implementation plan with clear goals would have helped the city to evaluate the effectiveness of its actions and measure its progress toward its goals. In December 2023, after we began our review, the city presented an implementation plan to its housing commission. In January 2024, the city council approved that plan. The new implementation plan establishes a direct tie with the county plan, creates accountability by linking the city’s actions to specific departments, and includes measureable outcomes for the city to report publicly on an annual basis. By establishing accountability and transparency, the implementation plan should better situate the city to evaluate the effectiveness of its future actions to address homelessness. In 2019 San Diego Established a City‑Specific Plan That Includes Clear, Measurable Goals To reduce and prevent homelessness, San Diego has followed a city‑specific community action plan (city action plan) since 2019. The Corporation of Supportive Housing (CSH)—a national nonprofit organization focused on homelessness and housing—authored this plan in partnership with a steering committee consisting of the city, the housing commission, and the Regional Task Force. The plan identifies the need to set targeted goals and implement a systemwide strategic approach to achieve those goals. It also includes analyses of multiple data sources, including demographic characteristics of people experiencing homelessness, current shelter capacity, permanent housing units, and available financial resources for homelessness. 22 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 The city action plan identifies five distinct The Five Strategies in San Diego’s Action Plan: strategies for addressing homelessness, which the text box presents. Each strategy identifies specific • Implement a systems‑level approach to target priorities. For example, to increase the homeless planning. production of and access to permanent housing, • Create a client‑centered homeless assistance system. the plan prioritizes planning for the development • Decrease inflow into homelessness by increasing of 3,500 units of permanent supportive housing prevention and diversion. over 10 years. For each of these longer‑term • Improve the performance of the existing system. priorities, the city identifies related actions, including the need to establish annual • Increase the production of and access to permanent solutions. development targets, create a funding pipeline, implement policy changes, and work with partners Source: The housing commission. to coordinate the implementation of those changes. The plan also includes clear goals to allow San Diego to track its progress and evaluate the effectiveness of its actions. The housing commission maintains public dashboards on the city’s progress toward some of its strategic goals. The public dashboards display updates on goals within reach in the next three years, performance data related to the implementation of the strategic goals, and progress toward housing goals. For example, to measure its progress of ending veteran homelessness, San Diego used Veterans Affairs Supportive Housing (VASH) voucher utilization rates, among other metrics. San Diego’s dashboard data showed that in each year since 2019, San Diego has issued more of the VASH rental assistance vouchers it received from HUD to veterans experiencing homelessness, increasing its utilization rate from 86 percent in 2019 to 93 percent in 2022. Table 3 describes San Diego’s progress toward achieving selected goals since 2019. San Diego has revisited its goals and updated them to reflect changes in recent years. In 2023 CSH used newly available data, trends, and resources to update the city action plan’s housing and prevention goals, as well as its financial modeling estimates of required funding to meet those goals. For example, it increased the shelter goal from 390–580 beds to 465–920 beds. The updated plan shows that the number of individuals entering homelessness has increased since 2019, when the city adopted the plan and determined the need for more homelessness prevention actions. Because San Diego recently updated its action plan goals in fall 2023, it is too early to evaluate its progress toward meeting the new goals. CALIFORNIA STATE AUDITOR 23 Report 2023-102.2 | April 2024 Table 3 San Diego Tracks the Progress Toward Some of Its Homelessness Strategic Goals LONG TERM STRATEGIC GOALS PROGRESS TOWARD GOALS Increase the outflow by Develop pipeline plan for 3,500 units of As of September 2023: increasing the production permanent supportive housing (PSH) over • Total PSH units needed to develop—2,802. of permanent solutions 10 years, including 2,802 units of supportive • Total PSH units in service—1,237. housing developed and 701 supportive • Total PSH units under construction—196. housing units leased in private rental market. • Total PSH units approved with finance pending—107. • Additional PSH units needed—1,262. Decrease the inflow by Increase diversion to at least 770 successful From 2019 through 2022: increasing successful interventions per year and reduce the number • The number of people experiencing homelessness for the prevention and diversion of people who become homeless for the first first time increased from 7,234 to 8,231. time or return to homelessness. • The number of people who returned to homelessness increased from 3,100 to 3,624. Improve system Ensure that the homelessness assistance Utilization in 2023: perfomance system is functioning at peak • Emergency shelter bed utilization—87%. utilization/performance. • PSH utilization—75%. Ensure that people quickly receive housing • Rapid Rehousing utilization—100%. and services. • Safe Haven utilization—88%. • Transitional housing utilization—83%. • Other PSH utilization—96%. Average length of time homeless in 2022: • 1,029 days, up from 771 in 2019. SHORT TERM GOALS MEASURES TO EVALUATE EFFECTIVENESS SYSTEM PERFORMANCE Decrease unsheltered Monthly unsheltered downtown count. As of August 2023, there were 1,207 unsheltered people in homelessness by 50% downtown San Diego, which is an increase of 437 people compared to the same month in 2019. Project One for All (POFA) voucher utilization— In 2022: rental housing vouchers and supportive • 778 POFA vouchers awarded. services for adults with serious mental illness • 545 POFA vouchers used to lease units. who are experiencing homelessness. • 86 POFA vouchers in progress or issued. • 81% POFA voucher utilization, up from 72% in 2019. Finish the job of ending Veteran PIT count. In 2023 there were 248 sheltered and 319 unsheltered veterans. veteran homelessness Veterans Affairs Supportive Housing (VASH)— In 2022: voucher program to provide rental assistance • 1,285 VASH vouchers awarded. for veterans who receive case management • 1,198 VASH vouchers used to lease units. and clinical services and who are experiencing • 93% VASH voucher utilization, up from 86% in 2019. homelessness. Prevent and end youth Youth PIT count. In 2023 there were 672 sheltered and 182 unsheltered youth— homelessness 511 less youth experiencing homelessness compared to 2022. Transition‑Aged Youth Family Unification In 2022: Program Voucher (TAYFUP)—rental housing • 50 TAYFUP vouchers awarded. vouchers to reunite children with their families. • 49 TAYFUP vouchers used to lease units. Transitional Aged Youth specific vouchers • 98% TAYFUP voucher utilization. (TAY). • 59 TAY vouchers awarded. • 49 TAY vouchers used to lease units. • 83% TAY voucher utilization, up from 65% in 2019. Source: San Diego's city action plan, housing commission dashboards, and 2023 CoC PIT count data. 24 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Blank page inserted for reproduction purposes only. CALIFORNIA STATE AUDITOR 25 Report 2023-102.2 | April 2024 Neither San José nor San Diego Has Consistently Evaluated the Effectiveness of Its Homelessness Programs Key Points • San José and San Diego spend millions of dollars annually on services to address homelessness that are provided through agreements with external providers, such as nonprofits. However, the cities have not consistently monitored and evaluated the performances of their providers to ensure that these agreements represent effective uses of funds. • People experiencing unsheltered homelessness face significant health and safety risks, increasing the importance of providing them with effective services. Both San José and San Diego have established programs to mitigate the risks that these individuals face. However, neither San José nor San Diego has measured the effectiveness of all of its programs to address the risks of unsheltered homelessness. • Several federal and state laws and regulations may impede cities’ ability to accurately evaluate and track certain information about people experiencing homelessness. Both San José and San Diego believe that increased access to such data would allow them to better evaluate the services they provide and identify those programs that are most effective. San José and San Diego Have Not Consistently Assessed the Effectiveness of Their Agreements With Service Providers Both San José and San Diego spend tens of millions of dollars on efforts to reduce homelessness through agreements with external service providers, such as nonprofits. Consequently, the cities’ management of those agreements is especially crucial for establishing accountability and ensuring the effectiveness of their homelessness spending. Nonetheless, the cities’ agreements with external service providers have not always included performance benchmarks to allow the cities to assess the results of the service providers’ efforts. Moreover, our review found that the two cities did not always establish well‑defined measures for assessing the performance of their providers or ensure that the providers submitted complete performance reporting. For each city, we reviewed 14 agreements for services such as rapid rehousing, encampment outreach, shelter, and homelessness prevention. Relying on the listings of homelessness‑related agreements the cities provided to us, we selected agreements for review based on their amounts, funding source, and program type. Eight of the 14 agreements for each city included funding from state and federal sources. The remaining six agreements primarily involved funding from local sources, including Measure E funds for San José. We evaluated each city’s agreements for defined performance measures and provider reporting requirements, and we considered each city’s assessments of provider services and its documentation of those assessments. 26 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Well‑defined performance measures establish clear expectations for providers. For example, an effective performance measure might specify a number of people to be served per agreement activity. Nonetheless, as Table 4 shows, San José either did not establish or did not clearly define its expected performance measures in the 14 agreements we reviewed. For example, in a $12 million agreement for emergency rental assistance, San José established as a performance measure that 80 percent of program households that the provider surveyed would report improved housing stability after receiving assistance and services. However, the agreement neither specifies the number of households the provider should survey, nor did the provider disclose in its resulting report the number of households it surveyed. We believe that such specificity would provide the context for the survey’s results and help ensure that those results are an accurate representation of the services provided. The city explained that it recognizes its agreements do not include clearly defined performance measures and that it has been working with an external consultant to improve its monitoring and compliance processes. Table 4 San Jose Did Not Always Clearly Define Performance Measures or Ensure It Received Performance Reporting in the Service Provider Agreements We Reviewed VENDOR / PERFORMANCE RECEIVED AGREEMENT NUMBER / AGREEMENT MEASURES CLEARLY PERFORMANCE FISCAL YEAR AMOUNT FUNDING SOURCE(S) SERVICES DEFINED? REPORTING? Destination: Home SV $3,000,000 Homeless Housing, Employment Initiative HTF‑16‑011C Assistance and Prevention and Homelessness Ill‑Defined Yes 2020–21 (HHAP) Prevention System Destination: Home SV 2,735,000 Measure E Homelessness HTF‑16‑011D Prevention System Ill‑Defined Incomplete 2020–21 People Assisting the 2,066,188 Emergency Solutions Service Outreach Homeless (PATH) Grants—CARES Act Assistance and ESG‑20‑EC01 Round 2 (ESG‑CV2) Resources (SOAR) Ill‑Defined Incomplete 2020–21 The Health Trust 234,956 General Fund Rapid rehousing— HALA‑17‑003C Supportive services Ill‑Defined Not Received 2020–21 Destination: Home SV 4,800,000 HHAP2 Homelessness HTF‑21‑004 Measure E Prevention System Ill‑Defined Incomplete 2021–22 Opening Doors 2020 187,000 General Fund Downtown Meals and 647021 Services Program Ill‑Defined Incomplete 2021–22 LifeMoves 2,000,000 General Fund and Housing Rapid rehousing ESG‑21‑003A Authority Litigation Award Ill‑Defined Yes 2021–22 Abode Services 1,746,264 HomeKey SureStay Hotel GF‑20‑005B Housing Homeless None Not Received 2021–22 Program CALIFORNIA STATE AUDITOR 27 Report 2023-102.2 | April 2024 VENDOR / PERFORMANCE RECEIVED AGREEMENT NUMBER / AGREEMENT MEASURES CLEARLY PERFORMANCE FISCAL YEAR AMOUNT FUNDING SOURCE(S) SERVICES DEFINED? REPORTING? Sacred Heart 1,000,000 Community Development Emergency Rental Community Service Block Grant—CARES Act Assistance Program— CPS‑20‑003 Round 1 (CDBG‑CV1) COVID‑19 Case Ill‑Defined Incomplete 2021–22 Management Sacred Heart 12,305,942 Emergency Rental Emergency Rental Community Service Assistance Program (ERAP) Assistance Program Ill‑Defined Incomplete GF‑20‑007A 2022–23 Destination: Home SV 8,000,429 Measure E Homelessness HTF‑21‑004A Prevention System Ill‑Defined Incomplete 2022–23 People Assisting the 2,880,000 HHAP Emergency Interim Homeless (PATH) Housing (EIH) at GF‑19‑013C Evans Lane Ill‑Defined Not Received 2022–23 People Assisting the 801,000 Encampment Resolution Safe Encampment Homeless (PATH) Fund (ERF) Resolution Ill‑Defined Incomplete ERF‑22‑10018‑01 2022–23 HomeFirst Services of 300,000 Measure E Rapid rehousing Santa Clara County program Ill‑Defined Yes ESG‑20‑002B 2022–23 Source: San José agreement files and auditor assessment. Similarly, San Diego did not clearly define its expected performance measures in six of the 14 agreements we reviewed, as Table 5 shows. In San Diego, the housing commission managed 11 of the 14 agreements, although the city provided oversight of that management. Nonetheless, the city indicated that it did not generally require that the housing commission set specific targets or goals for the performance measures in those agreements the commission managed, unless the funding source mandated establishing such targets. For example, in a $1.6 million agreement for interim housing and supportive services, the housing commission did not specify how many people the provider should serve or set a target for shelter occupancy. Housing commission staff explained that attaching goals to certain metrics can create unintended adverse behaviors from service providers to meet those goals, which is why some previous performance metrics have moved to reporting only. Moreover, two of San Diego’s 14 agreements did not establish any performance measures. For example, the city entered into a $415,000 agreement for outreach and engagement services but only required the service provider to report on data on referrals to services and exits to permanent housing; the city did not specify any targets or goals for the performance measures. San Diego received the report from the provider, but it was incomplete because it did not include exits to permanent housing. However, without consistently defining measurable expectations for service providers, both the city and the housing commission risk those providers’ using city dollars ineffectively and ultimately not reducing homelessness. 28 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Table 5 San Diego Did Not Always Clearly Define Performance Measures or Ensure It Received Complete Performance Reporting in the Service Provider Agreements We Reviewed VENDOR / AGREEMENT NUMBER / AGREEMENT PERFORMANCE MEASURES RECEIVED PERFORMANCE FISCAL YEAR AMOUNT FUNDING SOURCE(S) SERVICES CLEARLY DEFINED? REPORTING? Mental Health Systems, Inc. $419,750 General Fund and Transitional HHI‑20‑07.1* Affordable Housing housing and Yes Incomplete 2020–21 Fund supportive services Veterans Village of San Diego 1,955,443 General Fund Bridge housing and HHI‑20‑22* supportive services Yes Yes 2020–21 Family Health Centers of 1,550,000 Community Housing Navigation San Diego, Inc. Development Block Center HHI‑18‑22.1* Grant (CDBG) 2020–21 General Fund Ill‑Defined Yes Low and Moderate Income Housing Fund People Assisting 529,416 CDBG Operate housing the Homeless General Fund commision's H 20 H 2 I 0 ‑2 – 1 2 ‑ 1 17* Lo In w c o a m nd e M Ho o u d s e i r n a g te R H es o p m on el s e e s s C n e e n s t s e r Ill‑Defined Yes Fund Alpha Project for 2,959,661 HHAP Bridge shelter the Homeless ESG‑CV2 Yes Yes HHI‑20‑11.2* 2021–22 People Assisting 2,375,000 HHAP Coordinated street the Homeless General Fund outreach Yes Yes HHI‑21‑16.1* 2021–22 St. Vincent de Paul Village, 1,989,585 CDBG Interim shelter Inc. (Father Joe’s Villages) ESG HHI‑21‑03.1* General Fund Yes Yes 2021–22 Housing Commission Alpha Project for 1,635,554 General Fund Interim housing the Homeless and supportive HHI‑22‑41* services Ill‑Defined Incomplete 2021–22 City Net 415,000 General Fund Outreach to N/A† residents of None Incomplete 2021–22 encampments St Vincent de Paul Village, 10,458,046 HHAP Golden Hall Inc. (Father Joe’s Villages) Bridge Shelter Yes Yes HHI‑22‑57* 2022–23 Alpha Project for 6,571,548 HHAP Bridge shelter the Homeless Yes Yes HHI‑20‑20.2* 2022–23 PATH San Diego 3,475,000 HHAP Coordinated street N/A† General Fund outreach None Incomplete 2022–23 CALIFORNIA STATE AUDITOR 29 Report 2023-102.2 | April 2024 VENDOR / AGREEMENT NUMBER / AGREEMENT PERFORMANCE MEASURES RECEIVED PERFORMANCE FISCAL YEAR AMOUNT FUNDING SOURCE(S) SERVICES CLEARLY DEFINED? REPORTING? The Lesbian, Gay, 704,190 General Fund Shelter and Bisexual, Transgender supportive services Community Center Yes Yes HHI‑23‑30A* 2022–23 National Alliance for Mental 596,914 General Fund Overnight Illness San Diego shelter with case N/A† management Ill‑Defined Yes 2022–23 Source: San Diego agreement files and auditor assessment. * Housing commission‑managed agreement. † Agreement does not have an agreement number. Aside from not consistently establishing clearly defined performance measures in the agreements they entered into, the cities also did not always ensure that they received required data on provider performance. The agreements required providers to submit reports that present data on the activities they performed and the outcomes of their efforts. For example, San José’s housing department’s agreements specify that service providers must submit quarterly performance reports through an online system that the city uses to manage grants (grants system). However, we found that the grants system was incomplete and consequently, upon our request, staff had to search elsewhere for the reporting associated with some of the agreements we reviewed. Similarly, San Diego did not receive all the necessary reporting for four of the 14 agreements we reviewed. For example, the reporting it received for one agreement for outreach services worth about $3.5 million was incomplete because it lacked a required assessment by the provider of the services in question. Without complete and clear reporting of such data, the cities’ ability to determine the effectiveness of the services they purchased is limited. Moreover, we found that when the cities did receive provider performance data, the cities’ assessments were confusing at times. For example, in one assessment that San José performed of a $2 million amendment to an agreement for rapid rehousing services, city staff assessed a provider’s performance as “adequate.” However, the city staff’s description in the assessment of the provider’s performance indicated that the provider had failed to meet nearly all activity goals for the year. While the provider did not meet the contract performance targets, the city believes the performance was adequate given difficult circumstances related to moving people from an encampment into housing and agreed that it could have better documented why its assessment of the performance was adequate. We identified similar problems with San Diego’s performance assessments. The housing commission explained that it uses its monthly data collection tools to compare results of a program to the contracted benchmarks and that it bases these contracted benchmarks on its CoC's community standards and other best practice information. When we reviewed a data collection tool for an interim housing and supportive services contract, we saw that the service provider was consistently not meeting the 30 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 stated benchmark of 26 percent exits to permanent housing. In fact, the percentage of exits to permanent housing was 6 percent during the term of the agreement. Given that the provider was falling significantly short of meeting this benchmark, we would have expected the housing commission to analyze the provider's performance to determine whether the agreement was effective. However, the data collection tool did not include such an analysis from the commission. Although both cities asserted that they monitored or reviewed the performance of their service providers, their staff did not always document overall conclusions about the effectiveness of the service providers’ efforts. One reason for this gap is that the cities’ procedures do not require staff to formally document such assessments. These types of assessments are crucial for ensuring accountability and the reduction and prevention of homelessness. San José acknowledged that its agreement management procedures are outdated, and it stated that it is in the process of updating its guidelines to include more direction on how to assess an agreement for effectiveness and how to document that assessment. According to the housing commission, the agreements in which we identified shortcomings were for new programs that had standards that changed or had not yet been developed or the nature of the agreement did not warrant certain performance metrics. The housing commission provided documentation of its efforts to ensure compliance with agreement requirements, such as reviewing samples of program files to assess areas in which providers are performing well or may require additional technical assistance. However, it agreed that it could better document its assessments of the on‑going performance of these agreements. Sometimes circumstances exist that are beyond the contractor's control that may impact program performance, such as the COVID‑19 pandemic and housing shortages. Without such analyses, it is unclear how the cities and the housing commission decide to renew agreements. The weaknesses we note above have limited the information available to the cities when making such decisions. For example, in fiscal year 2022–23, San José funded an agreement for homelessness prevention services with $8 million from Measure E. The service provider reported having vastly exceeded expectations on most requirements, stating that it had provided financial assistance payments to more than 1,200 households in a three‑month period when the goal was only 215. Moreover, at the end of the agreement term, the provider reported providing a total of nearly 4,000 financial assistance payments, when the goal was only 860. When we asked city staff to explain how the service provider could have achieved such results within the agreement’s budget constraints, they were initially unable to do so. However, after talking with the service provider, the city conveyed to us the service provider’s explanation that it had reported its total number of financial assistance transactions, rather than the number of unduplicated households it helped. When we reviewed the updated version of the service provider’s results, we found that the provider actually did not meet the goal for the agreement term. In fact, it reported making only 789 payments during the agreement term. San José had not noticed or investigated the original inflated results in its assessments of the provider’s performance. Nevertheless, the city negotiated an extension to the agreement with the service provider for fiscal year 2023–24 without having accurate performance data. CALIFORNIA STATE AUDITOR 31 Report 2023-102.2 | April 2024 Agreements with service providers are critical to cities’ efforts to reduce and prevent homelessness. When the cities either do not establish clear objectives in those agreements or do not monitor providers’ performance in achieving objectives, they risk failing to meet the needs of their residents who are experiencing homelessness. Neither San José nor San Diego Has Measured the Effects of All Its Efforts to Mitigate the Health and Safety Risks of Unsheltered Homelessness People experiencing unsheltered homelessness face significant health and safety risks, particularly if they live in encampments. San José has established some programs to mitigate these health and safety risks. However, it has not measured the effectiveness of those programs. San Diego has allocated resources to programs related to public health and safety and has provided services to mitigate health and safety risks for people experiencing unsheltered homelessness. Nonetheless, San Diego did not always measure the effectiveness of its programs. The cities’ lack of clear performance measures leaves them unable to assess whether their health and safety actions have effectively addressed the profound risks that individuals living in encampments face. Because the cities have not consistently developed performance measures to evaluate the effectiveness of their programs, we reviewed the data that the cities have collected on program outcomes and on the frequency with which programs have contacted individuals experiencing unsheltered homelessness. Both cities have set some expectations related to frequency and do collect some data, however, they do not use performance measures, such as reductions in the frequency of public health‑related complaints, to evaluate effectiveness. Although San José Took Actions to Address Health and Safety at Encampments, It Did Not Always Assess the Effectiveness of Those Actions Beginning during the COVID‑19 pandemic, San José significantly increased its spending on programs related to the health and safety of people living in encampments and in residences in the surrounding communities. From fiscal years 2020–21 through 2022–23, San José budgeted a combination of federal, state, and local city funding for encampment site‑specific services and programs related to the health and safety of people experiencing unsheltered homelessness, as Table 6 shows. Its annual budgeted funding for these purposes increased from $12.7 million in fiscal year 2020–21 to $19 million in fiscal year 2022–23. San José adopted an encampment management strategy and safe relocation policy in 2021 that generally aligns with best practices. Specifically, encampment management best practices indicate that local governments should provide access to safe places to sleep and should provide public health services.5 In addition, the U.S. Interagency Council on Homelessness published principles for addressing 5 Encampment Principles and Best Practices, National Law Center on Homelessness and Poverty. 32 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 encampments that specify that communities should keep encampments away from areas that are unsafe. In alignment with these principles, San José designed its policy to minimize abatements and support people experiencing unsheltered homelessness where they are unless that location presents risk factors, such as reoccurring unsanitary conditions or potential for fire. Table 6 San José Increased Its Budgeted Funding for Health and Safety Programs From Fiscal Year 2020–21 Through 2022–23 FISCAL YEAR PROGRAM AND DEPARTMENT REPORTED OUTCOMES FUNDING SOURCE 2020–21 2021–22 2022–23 Parks, Recreation and Neighborhood Services Department BeautifySJ program: From fiscal year 2020–21 General Fund $919,000 $949,000 $13,675,000 Provides encampment sanitary through 2022–23, provided: (local) services, such as regular trash • 22,100 regular trash visits Coronavirus Relief Fund 1,424,000 36,000 — pick‑ups, and abatements. • 640 biowaste cleanups (federal) • 590 abatements American Rescue Plan — 4,514,000 1,210,000 • 280 enhanced cleanups (federal) Housing Department Service, Outreach and In fiscal year 2020–21: Multi‑Source Housing Fund 89,000 291,000 741,000 Neighborhood Services • Placed 83 portapotties and (mix of state, local, Hygiene program: 57 handwashing stations and federal) Provides hygiene stations at encampments. at some of the city’s largest From fiscal year 2021–22 encampments. through 2022–23: • San José did not measure the outcomes. Dignity on Wheels From fiscal year 2020–21 through Housing Trust Fund 500,000 500,000 500,000 Mobile Hygiene program: 2022–23: (local) Provides mobile laundry, • Served about 4,500 individuals. Homeless Housing, — — 500,000 shower, and other basic • Provided about 29,800 showers Assistance and Prevention needs services. and 9,600 laundry loads. (state) Safe Parking program In fiscal year 2020–21: Housing Trust Fund 350,000 — 20,000 for recreational vehicles: • Served 162 individuals at two (local) San José designates city‑owned community centers. American Rescue Plan — — 1,000,000 parking lots for people In fiscal year 2023–24: (federal) living out of their RVs to safely stay overnight. • Served 65 unduplicated Homeless Housing, — — 500,000 individuals at one RV safe parking Assistance and Prevention location that opened in July 2023. (state) Overnight Warming Locations: From fiscal year 2020–21 ESG, Community 4,712,000 915,000 855,000 San José operates overnight through 2022–23: Development Block Grant, warming locations on • Served about 1,950 people in its and Housing Trust Fund city property during cold overnight warming locations. (federal and local) winter months for people CARES Act 4,716,000 — — experiencing unsheltered (federal) homelessness. Totals $12,710,000 $7,205,000 $19,001,000 Source: City of San José departments. Note: Because of the way the city budgets and accounts for some programs, we used actual spending instead of budgeted amounts to identify funding for certain programs. CALIFORNIA STATE AUDITOR 33 Report 2023-102.2 | April 2024 Nonetheless, San José has not adequately evaluated its efforts to mitigate health and safety issues related to encampments. Although the city has set some expectations related to the frequency of the services it provides, it has not developed performance measures to evaluate how well its programs are mitigating health and safety risks. As a result, it is difficult to assess whether its programs are effective. For example, San José reported that it took steps during the pandemic to mitigate public health risks at encampments by providing some encampment site‑specific services, including an enhanced weekly encampment trash program and escalated cleanups and abatements through programs such as BeautifySJ and Services, Outreach, Assistance, and Resources. Under BeautifySJ, the city committed to performing trash pickups on a weekly basis at encampments. The city’s service data indicate that it completed about 33,600 service visits at about 250 encampments from 2020 through 2023. These visits included about 22,100 regular trash service visits, about 640 biowaste cleanups, and about 590 abatements. Although the city tracks its visits to encampments, our review of its data and reporting did not identify information demonstrating the effectiveness of its encampment services at mitigating health risks, such as a reduction in the number of public health incidents occurring at encampments. San José asserted that it was planning to hire a consultant to develop performance measures for BeautifySJ. The use of performance measures would better allow the city to evaluate whether it is achieving its goal of improving quality of life for unsheltered individuals and of creating healthy neighborhoods for all its residents. In addition to its programs focused on mitigating health risks, San José funded two programs from fiscal years 2020–21 through 2022–23 that provide safety to people experiencing unsheltered homelessness: the Safe Parking program (Safe Parking) and the Overnight Warming Locations program (Warming Locations). As Table 6 describes, Safe Parking involves the city designating parking lots that have overnight security in which individuals can safely sleep in their recreational vehicles (such as motorhomes or trailers), while Warming Locations involves the city’s opening locations with security on city property for unsheltered individuals during the cold weather months. San José’s implementation of both of these programs has addressed the safety of a small subset of the people experiencing unsheltered homelessness. For example, San José reported providing Safe Parking at two city‑owned sites for people who sleep in their recreational vehicles. It stated that the program temporarily served about 162 individuals during fiscal year 2020–21. However, city staff explained that the city did not renew the agreement with this service provider after it expired in June 2021 because the city had changed how it wished to serve people residing in vehicles. The city did not open a new safe parking location until recently, in July 2023. This new location currently can serve about 42 recreational vehicles on a daily basis, which is far fewer than the 700 recreational vehicles in which the city estimates people are living. 34 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 In addition, in June 2022, San José approved funding for a Safe Parking program for people who sleep in their cars. However, according to city staff, it did not open this location because a site for safe parking could not be identified by the city. Without a sufficient number of safe parking sites, the city increases the safety risks, such as physical or emotional threats, that people who sleep in their vehicles may face. Moreover, the city was unable to follow through with its plans to abate one of two large encampments by its airport. The Federal Aviation Administration (FAA) mandated that for safety reasons, San José must abate an encampment at Guadalupe Gardens because the park is in the airport’s flight path. In October 2022, San José reported to the FAA that it successfully had done so. The city also planned to abate an encampment at Columbus Park, which is adjacent to Guadalupe Gardens, by November 2022. However, it now does not expect to complete this abatement until the end of 2024 at the earliest. The city indicated that not everyone in the encampment was able to relocate to Safe Parking sites because some did not qualify for the program for reasons including not being able to provide proof of vehicle ownership. Accordingly, the city indicated that Columbus Park has continued to serve as an encampment for more than a dozen vehicles. Although city staff stated that San José Police Department officers accompany the BeautifySJ team during abatements on an on‑demand basis, the city does not have specialized police units dedicated to the concerns of individuals experiencing unsheltered homelessness. In 2018 the San José Police Department received a grant to start a new program—the Mobile Crises Assessment Team—that sends a team of dedicated officers and county behavioral health clinicians to respond immediately to community members experiencing mental health crises. The police department asserted that this program is intended to serve both people who are experiencing unsheltered homelessness and those who are living in residences. However, police department staff explained that the program primarily serves people in residences. In contrast, San Diego has police units dedicated to working with and providing outreach to people experiencing unsheltered homelessness, as we discuss in the section that follows. San José also has not established a consistent and formalized process for working with the county health department at encampments. In its fiscal year 2020–21 annual report to a city council committee, the city described its joint efforts with the county health department during the COVID‑19 pandemic, which included providing vaccines to people experiencing unsheltered homelessness. However, the city staff indicated that the city does not have a contract with the county health department to establish each party’s roles and responsibilities for mitigating public health risks. According to the city staff, San José relies primarily on its outreach contractors to report to the county public health‑related risks at encampments. In addition, the city explained that it collaborates with the county to address health concerns such as outbreaks. However, San José’s lack of an established process for working with the county’s health department to identify and mitigate public health risks at encampments could cause delays in the city’s response to public health emergencies in the future. The city agreed that it could strengthen or formalize its collaboration with the county on significant public health concerns. CALIFORNIA STATE AUDITOR 35 Report 2023-102.2 | April 2024 Although San Diego Has Taken Actions to Address Health and Safety at Encampments, It Does Not Measure the Effectiveness of All Its Programs San Diego’s total budgeted funding for public health and safety related to unsheltered homelessness has increased over the last three fiscal years, as Table 7 shows. From fiscal years 2020–21 through 2022–23, San Diego increased its budgeted funding for programs that help ensure the health and safety of people experiencing unsheltered homelessness and living in residences in the communities surrounding encampments. Over this period, the city’s total budgeted funding for these programs grew from $32 million to $43 million. Table 7 San Diego Increased Its Budgeted Funding for Health and Safety Programs From Fiscal Years 2020–21 Through 2022–23 FISCAL YEAR PROGRAM AND DEPARTMENT REPORTED OUTCOMES FUNDING SOURCE 2020–21 2021–22 2022–23 Environmental Services Department Clean SD program: From fiscal year 2020–21 General Fund $7,258,000 $6,875,000 $11,818,000 Conducts litter pickup, addresses through 2022–23: (local) instances of illegal dumping, • Abated about 1,200 to 2,300 Refuse Disposal Fund — 2,000 — sanitizes sidewalks, conducts encampments per year. (local) curbside community clean ups, • Sanitized about 6,600 to 8,500 and implements abatements. sidewalk blocks to reduce the potential presence of bacteria and communicable diseases. San Diego Police Department—Neighborhood Policing Division (NPD) Homeless Outreach Team, From fiscal year 2020–21 General Fund 23,565,000 27,910,000 28,277,000 Neighborhood Policing Teams, through 2022–23: (local) and the Crime Prevention Team: • Homeless Outreach Team reached Implements homelessness about 18,000 to 23,000 duplicated outreach services, proactive law number of people per year. enforcement, and encampment • Assisted about 4,900 to 7,800 abatement assistance. people per year. • Placed about 850 to 2,300 people into shelters per year. San Diego Housing Commission Day Center: From fiscal year 2020–21 Community Development 541,000 250,000 500,000 Provides a safe and comfortable through 2022–23: Block Grant drop‑in center for adults • Served about 5,700 to 6,000 (federal) at risk of or experiencing people per year. General Fund — 150,000 150,000 homelessness, offering a variety • Provided about 20,600 to 23,500 (local) of basic needs services. showers and about 1,800 to 3,400 laundry cycles per year. continued on next page … 36 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 FISCAL YEAR PROGRAM AND DEPARTMENT REPORTED OUTCOMES FUNDING SOURCE 2020–21 2021–22 2022–23 Multidisciplinary In fiscal year 2022–23: General Fund — — 450,000 Outreach Teams: • Served about 13 individuals. (local) Their goals are engagement, health stabilization, and connection to shelter and/or housing. This team focuses on a subset of unsheltered individuals who have very high needs and struggle to engage with services. San Diego Homeless Strategies and Solutions Department Safe Parking program: From fiscal year 2020–21 Community Development — — 444,000 San Diego designates parking through 2022–23: Block Grant lots for people living out of • Served about 970 to 1,150 (federal) their vehicles to provide a people per year in its safe Homeless Housing, 957,000 957,000 993,000 place to safely stay overnight parking locations. Assistance and Prevention and services to navigate them (state) toward permanent housing. Street Medicine program: In fiscal year 2022–23: General Fund — — 278,000 Provides mobile medical care, • Served about 160 individuals, (local) offering full scope primary care including 71 who reported medical services, addiction having a mental illness and treatment, psychiatric care, 44 who reported having an and case management for impairment caused by drug use. unhoused population. Safe Sleeping program: Serves as a safe, secure, Safe Sleeping program started in fiscal year 2023–24; and low barrier alternative thus, there was no funding information available prior to that time. resource for individuals experiencing homelessness. Totals $32,321,000 $36,144,000 $42,910,000 Source: San Diego budget documents, agreements with service providers, other city documentation, and documentation from the housing commission. However, San Diego has not evaluated the effectiveness of some of its health and safety programs, limiting its ability to determine whether these programs have helped to mitigate the risks for people experiencing unsheltered homelessness. For example, the Neighborhood Policing Division (NPD) in the San Diego Police Department provides homelessness outreach and proactive enforcement services for the safety of people experiencing unsheltered homelessness and residents in the surrounding community, as Table 7 shows. City staff explained that NPD collects general data on a daily basis, including the number of people its Homeless Outreach Team reached, assisted, or placed into housing. NPD staff provided data from 2020 through 2022 that indicate that the NPD Homeless Outreach Team officers reached about 18,000 to 23,000 people per year and placed about 850 to 2,300 people per year into a shelter. However, city staff indicated that these data are not unduplicated and that NPD does not have measures to evaluate the effectiveness of its actions and has identified other potential measures such as the number of individuals directed to mental health services and response times to complaints from residents. CALIFORNIA STATE AUDITOR 37 Report 2023-102.2 | April 2024 Although the city collects data about program actions, San Diego also has not measured the effectiveness of some of its programs that focus on health. For example, as part of its Clean SD program, San Diego identified actions— such as sanitizing sidewalks and addressing illegal dumping—that mitigate health risks to the public, including people experiencing unsheltered homelessness. For example, Clean SD has crews that clean up waste and litter on a daily basis from areas near encampments that pose a public health or environmental concern. Clean SD staff provided data that indicate that from fiscal years 2020–21 through 2022–23, the program annually abated from 1,200 to 2,300 encampments, sanitized sidewalks by cleaning about 6,600 to 8,500 blocks to reduce the potential presence of bacteria and communicable diseases, and addressed from 5,000 to 7,000 encampment‑related complaints from the public. Although the city tracked these data and set some expectations around the frequency with which Clean SD would provide services, it did not develop performance measures for evaluating the program’s effectiveness, such as a reduction in public health incidents arising from encampments. City staff explained that the city did not develop such measures because Clean SD has always been a collaboration among different city departments and lacked a central manager. According to the city staff, the city did not make Clean SD into a separate division within its Environmental Services Department until fiscal year 2023–24. City staff explained that the city is working with the new division’s management to develop performance measures that it can use to evaluate the program’s impact. San Diego has measured the number of people served by some city‑funded programs designed to ensure the health and safety of people experiencing unsheltered homelessness. For example, from fiscal years 2020–21 through 2022–23, the city and the housing commission administered programs through agreements with service providers to meet the immediate health and safety needs of people experiencing unsheltered homelessness, including programs that provided safe parking and safe sleeping. The city reported that it has four safe parking locations for recreational vehicles and cars with a total of 233 parking spots, and its website indicates that it has two safe sleeping locations that can serve 533 tents. The city reported that its safe parking program served more than 3,000 people in fiscal years 2020–21 through 2022–23, as Table 7 shows. In addition to the sites it already has, San Diego has identified options for more safe parking and safe sleeping locations to ensure individuals’ safety while the city searches for other shelter options. As the result of a previous public health incident, San Diego has established formal collaboration with the county for its work on public health. Specifically, the city entered into a memorandum of agreement (MOA) with San Diego County’s Health and Human Services Agency (HHSA) in 2020 to clarify their contractual relationship related to public and environmental health services. The city and county took this action following a 2018 San Diego County grand jury report that revealed that they did not coordinate their responses during a hepatitis A outbreak in the city among individuals who were experiencing unsheltered homelessness that resulted in 20 deaths.6 The California State Auditor’s 2018 audit report included similar findings.7 6 The San Diego Hepatitis A Epidemic: (Mis)Handling a Public Health Crisis, San Diego County grand jury, May 2018. 7 San Diego’s Hepatitis A Outbreak: By Acting More Quickly, the County and City of San Diego Might Have Reduced the Spread of the Disease, Report 2018‑116, December 2018. 38 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 The current, collaborative process facilitates the city and the county working together to identify public health risks at encampments and address them in a timely manner. The public health and safety MOA clarifies the city’s and county’s roles and responsibilities in their coordinated response to public health matters. In October 2021, San Diego County’s HHSA reported an outbreak of shigellosis—an intestinal infection—among people experiencing homelessness in the city. In January 2022, the city declared the outbreak resolved without any deaths. It credited this outcome to its work with the county, demonstrating the importance of having a coordinated response. The Cities’ Limited Access to HMIS Data May Impede Their Efforts to Evaluate Homelessness Programs Several federal and state laws and regulations Federal and State Laws and Regulations Limit the may impede the ability of the State and local Data That Can Be Shared Without Consent jurisdictions to accurately assess and track certain information about people who are FEDERAL experiencing homelessness. The text box lists Health Insurance Portability and Accountability Act: Applies some of these laws, which generally protect the to health plans and certain health care providers. Some confidentiality of personal information. The protected health information data may be disclosed without limitations to data‑sharing further emphasize consent if the data will only be used for limited purposes. the importance of the cities’ monitoring the Family Educational Rights and Privacy Act: Applies to performance of their service providers to ensure educational agencies or institutions that receive federal funding. the success of the programs they fund. Personally identifiable information from educational records can be disclosed without consent as long as it is used for purposes The main source of data about people related to that person’s education. experiencing homelessness is HMIS, for Violence Against Women Act: Applies to covered housing which the CoCs are responsible. HMIS is a providers who serve victims of domestic or dating violence, local information technology system in which sexual assault, or stalking. The providers cannot share a victim’s recipients and subrecipients of federal funding information without consent of the victim. record and analyze client, service, and housing HMIS Standards: Client consent is required to share data but data for individuals and families at risk of or not to enter data into HMIS. experiencing homelessness. CoCs must ensure Substance Use Records: Some records can be disclosed compliance with the federal Privacy and Security without consent in case of medical emergency, research, or Standards for HMIS. These standards allow audit purposes. Consent form must outline exactly what can certain uses of a person’s protected personal be disclosed; can be revoked at any time. information (protected information), including for service provision and coordination, service STATE payment and reimbursement, administrative Confidentiality of Medical Information Act: Individual must functions such as audits, and removing duplicate consent to disclosure of medical information by a health care data. Although the standards allow local plan or provider unless there is a court order, search warrant, governments to access data they enter into HMIS, death investigation, or need for diagnosis or treatment. they may not have access to personal information Information Privacy Act of 1977: Individual must consent to entered by other entities. CoCs use consent forms disclosure of personal information by a state agency unless to allow them to use data provided by people who there is a legal requirement or a medical necessity. access homelessness services. Juvenile Case Records: Files may only be accessed by someone who is related to, works with, or represents the child. Both cities we reviewed indicated that they believe they would benefit from greater access Source: Federal and state laws. to HMIS data. San José has an agreement with CALIFORNIA STATE AUDITOR 39 Report 2023-102.2 | April 2024 Santa Clara County to have full access to data that the city has entered into the county’s HMIS. Through this agreement, San José is required to participate in HMIS and must comply with HUD data standards when collecting data. The agreement also requires the city to comply with federal and state confidentiality laws and regulations. San José’s deputy city manager for homelessness indicated that if the city fully utilized data available in HMIS, it would be able to understand and analyze the data better and make better decisions about its programs for preventing and ending homelessness, and that the city is working with the county to expand its access to HMIS to the City Manager’s Office, as well as other departments whose staff work directly with people experiencing homelessness. He further stated that having access to disaggregated data could enable the city to understand changes in the demographics of the population experiencing homelessness and adjust its approach to better suit their needs. He also stated that the city could track which programs are working and understand additional questions or areas to explore to understand why they are working. San Diego also believes that greater access to HMIS would be beneficial. The Regional Task Force operates the HMIS for the San Diego CoC. The city has a memorandum of understanding with the housing commission that states the housing commission and its contractors will enter data into HMIS. However, the director of San Diego’s HSSD noted that the city does not have direct access to this HMIS data because of CoC restrictions. According to the director, San Diego has direct access to data only for projects it directly oversees, not data for projects run by other entities within the city. San Diego explained that its lack of citywide access to HMIS limits its ability to track the impacts of its projects in real time. Instead, the city can receive aggregated reports on its programs every two to three weeks. The city asserted that tracking its programs in real time would allow it to coordinate its services more effectively and maximize funding directed to positive outcomes. Although increased data‑sharing would likely have benefits, the State and cities must work within the state and federal laws and regulations that limit the sharing of protected information. Nevertheless, the California Interagency Council on Homelessness (Cal ICH)—the state entity responsible for coordinating the State’s efforts to prevent and end homelessness—has begun to facilitate some data‑sharing by making available a dashboard with the anonymized aggregate data that it receives from each of the CoCs. The dashboard includes information such as the number of people accessing particular services. By creating this dashboard, Cal ICH has enabled CoCs to coordinate with cities and other local jurisdictions to analyze the data and compare the outcomes of similar programs without compromising personal information. 40 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Blank page inserted for reproduction purposes only. CALIFORNIA STATE AUDITOR 41 Report 2023-102.2 | April 2024 To Better Address Homelessness, San José and San Diego Will Need to Develop Additional Interim and Permanent Housing Key Points • In both San José and San Diego, more than 85 percent of the placements for individuals experiencing unsheltered homelessness moved those individuals into interim, rather than permanent, housing. Although interim housing serves an important purpose, around 40 percent of people exiting such placements returned to unsheltered homelessness. • In recent years, both San José and San Diego have taken steps to develop additional interim housing sites. However, neither city currently has the capacity it requires. • The cities’ efforts to address their lack of permanent housing have not produced enough of such housing to meet the needs of people experiencing homelessness. Although San José has not set a target for the number of permanent supportive housing units it needs, San Diego has done so. Nevertheless, neither city has a clear, long‑term plan to develop and fund the permanent housing it needs. Although Interim Housing Provides Important Shelter, Most Placements of People Experiencing Unsheltered Homelessness in Interim Housing Do Not End Up in Permanent Housing The final phase of homelessness—exiting homelessness—should culminate in entering permanent housing, but most placements of people experiencing unsheltered homelessness are into interim housing. HUD defines the types of interim housing available for people experiencing homelessness, as the text box shows. We refer to these three types of housing collectively as interim housing. Types of Interim Housing Interim housing does not involve a long‑term Emergency Shelter: Any facility with the primary purpose solution to an individual’s living situation and is of providing a temporary shelter for the homeless in considered sheltered homelessness. Nonetheless, general or for specific populations of the homeless and interim housing is a critical service that protects which does not require occupants to sign leases or people from many of the impacts of unsheltered occupancy agreements. homelessness, such as the health and safety risks we Transitional Housing: Housing that facilitates the movement previously described. An interim housing facility of homeless individuals and families into permanent housing may have multiple beds in a single shared space within 24 months or longer, as determined necessary. or may have a number of individual units, each of which has one or more beds. Safe Haven: Supportive housing that serves hard‑to‑reach homeless persons with severe mental illness who came In both San José and San Diego, at least 85 percent from the streets and have been unwilling or unable to participate in supportive services. of placements for people experiencing unsheltered homelessness move people into interim housing, Source: Federal regulations. as Figure 8 shows. These numbers align with the statistics we present in Report 2023‑102.1. We used 42 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Figure 8 Most Unsheltered Placements Were Into Interim Housing 85% 8,880 INTERIM HOUSING REPORTED DESTINATION AT EXIT 8,041 • Emergency Shelter—97% PLACEMENTS EXITED† 16% Unsheltered Homelessness • Safe Haven—0% 22% Sheltered Homelessness San José* • Transitional Housing—3% 35% Other‡ Unsheltered Placements 16% Permanent Housing from fiscal year 2019–20 3% Institutional Housing through March 2023 9% Temporary Housing PERMANENT HOUSING REPORTED DESTINATION AT EXIT 434 15% • Housing Only—24% PLACEMENTS EXITED† 14% Unsheltered Homelessness 1,542 • Housing With Services—1% 3% Sheltered Homelessness • Permanent Supportive Housing—58% 15% Other‡ • Rapid Rehousing—17% 58% Permanent Housing 4% Institutional Housing 6% Temporary Housing 89% 21,320 INTERIM HOUSING REPORTED DESTINATION AT EXIT 20,014 • Emergency Shelter—95% PLACEMENTS EXITED† 32% Unsheltered Homelessness • Safe Haven—0% 12% Sheltered Homelessness San Diego* • Transitional Housing—5% 37% Other‡ Unsheltered Placements 10% Permanent Housing from fiscal year 2019–20 2% Institutional Housing through March 2023 6% Temporary Housing PERMANENT HOUSING REPORTED DESTINATION AT EXIT 1,468 11% • Housing Only—1% PLACEMENTS EXITED† 5% Unsheltered Homelessness 2,640 • Housing With Services—6% 2% Sheltered Homelessness • Permanent Supportive Housing—19% 6% Other‡ • Rapid Rehousing—74% 81% Permanent Housing 2% Institutional Housing 4% Temporary Housing Source: State data system. Note: Rounding of numbers may prevent percentages from totaling 100. * City location information in state data is imprecise because reported information may show the principal site of a shelter or housing provider but not show all locations. Additionally, placements within a city do not necessarily indicate that the city government was the entity responsible for those placements. † Some placements of individuals showed that the person had not yet exited the program and was still enrolled and receiving shelter or housing services as of the date we obtained the data; therefore, the number of placements is higher than the number of those who exited the program. ‡ Category Other can include the following: worker unable to determine, client doesn’t know, client prefers not to answer, data not collected, or other. CALIFORNIA STATE AUDITOR 43 Report 2023-102.2 | April 2024 information in the state data system to identify placements moving unsheltered people into housing from July 2019 through March 2023. This data system has limitations in identifying the location of placements because a provider with multiple sites reports all placements at only the principal site. Additionally, the placements within a city are not necessarily the direct responsibility of that city’s government. People experiencing homelessness access interim housing in a variety of ways that involve multiple entities. In some places, people experiencing homelessness can access a shelter through a hotline established in their area. People can also access shelters by walking directly to them or through contact with outreach teams consisting of county, city, or service provider staff. As we explain in a later section, San Diego uses a centralized process that places people into shelters that best meet their needs. For San José, the county has a hotline that connects people experiencing homelessness to shelters. In contrast, HUD requires CoCs to develop and implement a coordinated entry system that CoC and Emergency Solutions Grant funded projects must use to connect people experiencing homelessness to permanent housing, as Figure 9 shows. A coordinated entry system is a centralized process within a CoC that prioritizes people for permanent housing resources based on their level of need. For San Diego, the Regional Task Force operates the coordinated entry system, and for San José, Santa Clara County operates the coordinated entry system. Figure 9 HUD Requires a Coordinated Entry System to Connect People With Permanent Housing ACCESS POINT ASSESSMENT PRIORITIZATION PLACEMENT Someone experiencing homelessness After entering through an access Once a person’s needs are identified, When a resource becomes available, the can enter the coordinated entry system point, the person’s information is the person is prioritized according to person is placed in the available housing, through an access point. collected and an assessment is done those needs and placed into a queue which could include any of the following: to determine the person’s needs. for the next available opening. • Permanent supportive housing • Rapid rehousing • Other permanent housing HOTLINE HIGH MODERATE LOW NEED NEED NEED OUTREACH SHELTER Source: Federal regulations, HUD, Regional Task Force, and Santa Clara County CoC. 44 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 In the absence of available permanent housing, having adequate interim housing is critical to providing people experiencing homelessness with shelter. For example, San José and San Diego each had a similar number of people experiencing homelessness—6,340 people in San José and 6,500 in San Diego, according to the 2023 PIT count. However, there were significantly more than twice as many placements in San Diego into interim and permanent housing than in Housing Placements From San José, as the text box shows. More people may July 2019 to March 2023 have been placed in housing in San Diego in part San José: because significantly more interim housing beds are • Nearly 10,500 total placements: nearly 9,000 into interim located within it: 4,000, compared to housing and more than 1,500 into permanent housing. San José’s 2,500. San Diego: • Nearly 24,000 total placements: more than 21,000 However, people experiencing unsheltered into interim housing and more than 2,600 into homelessness who were placed in interim permanent housing. housing had worse outcomes than those placed Source: State data system. into permanent housing. As we explain in Report 2023‑102.1, the data show that 84 percent of exits statewide from permanent housing placements involved individuals reporting that they were moving into permanent housing, while only 13 percent of exits statewide from interim housing placements involved individuals doing so.8 The data also show that 44 percent of the exits from interim housing placements involved individuals reporting that they were returning to homelessness, in comparison to only 4 percent of the exits from permanent housing placements. Figure 8 shows roughly similar trends for San José and San Diego.9 Data provided by San José suggest that certain types of interim housing, such as its bridge and emergency interim housing sites, are more effective at leading to permanent placements. We describe these types of interim housing in more detail in the next section. San José’s data indicate that of the 984 exits from certain bridge and emergency interim housing sites in fiscal years 2020–21 through 2022–23, 478 exits moved individuals into permanent housing. However, the volume of these exits appear to make up a small portion of the total exits in the city: San José had more than 8,000 total exits from interim housing placements from fiscal year 2019–20 through March 2023, as Figure 8 shows. Because thousands of people continue to experience unsheltered homelessness in both cities, greater capacity to place individuals into interim and permanent housing is needed for homelessness to be significantly reduced. San Diego’s unsheltered population decreased from 2,600 in 2019 to just under 2,500 in 2022 before increasing to nearly 3,300 in 2023. San José’s unsheltered population declined at a rate of nearly 3.5 percent per year, from 5,100 in 2019 to 4,400 in 2023. The number of placements in both cities fluctuated up and down over these years. 8 People can exit from permanent housing placements. At that time, they generally report their next living situation. For example, HUD defines short‑ or medium‑term rapid rehousing services as a permanent housing placement. When individuals stop receiving rental assistance or supportive services, they exit that housing. Their next living situation could be another permanent housing location, such as an apartment they rent. Alternatively, it could be a return to homelessness. 9 The reported destinations included an Other category that accounted for 35 percent of exits from interim housing placements in San José and 37 percent of exits from interim housing in San Diego. This category includes the following types of exits: worker unable to determine, client doesn't know, client prefers not to answer, data not collected, or other. CALIFORNIA STATE AUDITOR 45 Report 2023-102.2 | April 2024 San José and San Diego Have Established Additional Interim Housing Sites but Still Lack Needed Capacity As we previously discuss, individuals who are placed in interim housing tend to have worse outcomes than those placed in permanent housing. Nonetheless, building permanent housing for people experiencing homelessness can take considerable time, making the provision of interim housing a critical step. Within San José’s and San Diego’s city limits, multiple entities may fund and operate interim housing sites, including nonprofits. However, the two cities also have established city‑funded interim housing sites. San José currently has nine city‑funded interim housing sites, while San Diego has 17. Both cities have plans to establish additional sites over the next several years to meet the needs of their unsheltered populations. San José Has Not yet Reached Its Goals for Its Provision of Interim Housing San José has been working for several years to develop interim housing. In 2019, before the start of the COVID‑19 pandemic, San José had only one city‑funded interim housing site. To help address the immediate need to provide individuals experiencing homelessness with shelter and supportive services during the pandemic, the city rapidly increased the number of interim housing sites it had to nine by 2023. The text box describes the different types of interim housing that the city uses. Types of Interim Housing San José Uses Various memos to and from the city council Bridge housing communities: Prefabricated modular units document San José’s approach to developing that provide interim housing and supportive services to interim housing. For example, in September 2021, single adults, couples, and/or families. These communities the mayor and city council members approved a include individual beds/units and shared use of facilities, memo recommending that city staff pursue several such as kitchens. initiatives aimed at increasing interim housing capacity. The initiatives included exploring funding Emergency interim housing: Prefabricated modular units created as an emergency response to the COVID‑19 opportunities, adding more units to existing sites, pandemic that provide interim housing and supportive and identifying six additional sites for council vote. services to single adults, couples, and/or families. This The memo referenced the city’s 2017 goal to have housing includes individual beds/units and shared use of at least one interim housing facility located in each facilities, such as kitchens. city council district, and it established a goal to Converted hotels/motels: Primarily a part of the create 1,300 interim housing units, which included state‑funded program Homekey, which provides funding for 300 Homekey units. the conversion of underutilized hotels into interim housing. Although it is making efforts, San José has yet to meet Overnight warming locations: Overnight shelters located these goals. The city explained that it uses an internal on city‑owned properties during the winter season. spreadsheet to track data related to interim housing Source: San Jose AB2176 Annual Reports to the Legislature, unit counts. Using these data, San José reported to Housing Department website, and City Council memos. us that it had interim housing facilities in four of its 10 districts and had completed 589 units. The city indicated that from the early stages of developing interim housing, adjacent neighborhoods have expressed opposition to almost every site. The city identified that opposition and limited available site options as barriers that have made achieving the goal of one interim housing site in each city council district difficult. 46 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 San José explained that after the city council’s approval of the September 2021 memo, it published on its website the Emergency Interim Housing Siting and Evaluation Guidelines and Process (interim siting guidelines) to assist the city in determining the locations of emergency interim housing units. According to staff, they use the interim siting guidelines to assess sites for their feasibility, viability, and practicality. The guidelines state that assessments should use criteria such as plot acreage, shape, gradation, city council district, and the potential for San José to own or control the land. However, it is unclear when the guidelines became effective and to whom they apply because the city council has not formally adopted them. As Figure 10 shows, San José had approved the development of five sites (four additional sites and an expansion at one existing site) for interim housing as of October 2023, in addition to the nine it had already completed. It identified that two new sites will involve converted motels or hotels, and two will be other types of interim housing facilities. The expansion is of an existing emergency interim housing facility. Of these five facilities, one is located on land the city owns. After the completion of these housing projects, San José will have 13 interim housing facilities. The city stated that these facilities will have a total of more than 1,000 interim housing units, bringing it closer to its goal of 1,300 units. Nevertheless, five council districts will still lack interim housing facilities. In addition, San José identified seven potential additional sites that the council has approved for staff to consider. When we attempted to evaluate the use of the city’s interim housing beds, we found that San José does not regularly monitor this information. Consequently, it lacks complete and accurate information to assess whether the usage of its existing interim housing units and beds is efficient and whether more beds and units are needed. A month after our request, the city provided utilization data from HMIS for seven of the nine current interim housing sites. However, after doing so, the city noted problems with the data’s accuracy. It explained that significant maintenance issues at one facility left multiple units unavailable for extended periods of time, for example. At another facility, the bed capacity was incorrectly listed in HMIS as less than half of its actual capacity, producing inaccurate utilization rates of more than 100 percent in the database. Although we could not verify the data because of the above‑noted issues, they show that the other five interim housing facilities had utilization rates from 70 percent to 100 percent by the end of fiscal year 2022–23. CALIFORNIA STATE AUDITOR 47 Report 2023-102.2 | April 2024 Figure 10 San José Has Identified Five Proposed Sites for Interim Housing PROPOSED INTERIM HOUSING DISTRICT SITES UNITS 1 – – 2 2* 304 3 1 72 4 – – 5 – – 6 1 unknown 4 7 – – 8 – – 9 – – 5 10 1 75 3 District boundary SSaann JJoosséé Proposed interim housing site 6 7 1 8 9 2 10 ¹ 0 1 24 Miles Source: Analysis of San José's website and the city's confirmation of locations. Note: This map does not include overnight warming locations because the locations of these interim housing facilities change each year. * One of these sites in District 2 is a proposed expansion of an existing interim housing facility. 48 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 San Diego Has Taken Steps to Increase Its Interim Housing but Likely Does Not yet Have Adequate Shelter Capacity In San Diego, the city’s HSSD and housing commission oversee a system of city‑funded interim housing sites. HSSD is mainly responsible for developing new interim housing sites and administering funding for interim housing services and operations. The housing commission, through a memorandum of understanding with the city, is mainly responsible for overseeing the operations of those interim housing sites. The text box Interim Housing Structures in San Diego lists the types of interim housing structures that the city uses. Sprung structure: A tent‑like structure with multiple beds in a shared space. In June 2023, San Diego developed a Comprehensive Hotel/motel/apartment building: A repurposed building Shelter Strategy (shelter strategy) for expanding its that provides individual units with one or more beds in each. interim housing capacity, but that strategy is missing Brick and mortar: A building with multiple beds in a important details on shelter options and funding. shared space. The strategy identifies possible sites for expanding and increasing the city’s interim housing capacity. Source: HSSD. However, it does not establish locations, timelines, or budgets for some of the sites. When we asked about this missing information, HSSD’s director explained that the city may not necessarily build every site in the strategy. She explained that the department operates on a funding cycle of one fiscal year that is considered in decisions about which sites to pursue. According to the city’s website as of March 2024, the city was operating 17 interim housing sites that provided 1,856 beds. According to our analysis, the shelter strategy at its release in June 2023 proposed 10 new interim housing sites that, if completed, would provide over 900 additional interim housing beds. Data provided by the city show that as of September 2023, it had completed four of these sites, for a total of 263 additional beds. It is pursuing four additional proposed sites that, if completed, would provide at least 245 beds. Of the four proposed sites, the city owns or controls two sites, the housing commission owns one site, and one site has an undisclosed location to protect the safety of the population it serves. As Figure 11 shows, these proposed sites are clustered in just two council districts, with two of the three sites in downtown San Diego. When we asked why the city’s interim housing facilities are concentrated in downtown, HSSD explained that the city has located interim housing in the areas with the highest need and the highest concentrations of people experiencing unsheltered homelessness. According to the city’s monthly count of individuals who are unsheltered, 1,939 people were experiencing unsheltered homelessness in downtown San Diego in January 2023. In comparison, San Diego’s 2023 PIT count found that 3,285 people were experiencing unsheltered homelessness citywide. These numbers support San Diego’s assertion that the majority—59 percent—of the people in the city who are experiencing unsheltered homelessness are located downtown. San Diego’s shelter strategy proposes sites that target the needs of specific groups of people. The shelter strategy compares the composition, such as gender and veteran status, of the city’s unsheltered population to the respective percentage of city‑funded shelter beds. The plan includes options to develop interim housing for groups who are underserved in CALIFORNIA STATE AUDITOR 49 Report 2023-102.2 | April 2024 Figure 11 San Diego Has Identified Four Proposed Sites for Interim Housing 5 1 PROPOSED INTERIM HOUSING* DISTRICT SITES UNITS 1 – – 6 2 1 unknown 3 2 165 4 – – 5 – – 6 – – 7 7 – – 8 – – 9 – – District boundary 9 Proposed interim housing site 2 3 SSaann DDiieeggoo ¹ 4 ¹ 8 0 1 2 4Miles Source: San Diego’s shelter strategy and HSSD. * One interim housing site location with 80 units is not displayed for safety reasons. 50 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 the current shelter landscape, such as youth and survivors of domestic violence. For example, the city is in the process of opening a site for survivors of domestic violence. At emergency shelters—one type of interim housing—the housing commission implemented a coordinated intake process beginning in 2021. The intent of this process is to help facilitate shelter utilization analysis and to match people to shelters that best meet their needs. For example, the intake coordinators can determine which shelters are able to accommodate a person with mobility issues or health conditions who needs a specific bed, such as a bottom bunk. The housing commission believes that this process improves data collection and allows the housing commission to better monitor shelter usage and placements. The housing commission noted that it is currently developing ways to measure and quantify the benefits and impact of the coordinated intake process but is unable to provide evidence of these benefits at this time. Nonetheless, San Diego does not complete the vast majority of its referrals of people experiencing unsheltered homelessness to the emergency shelters included in the coordinated intake process because San Diego lacks available beds. The housing commission provided us with a selection of data that included one daily report per month showing utilization rates and one weekly report per month of referral data. These data indicate that San Diego’s shelter utilization rates have increased as its referral completion rate has decreased, as Figure 12 shows. These utilization and referral completion rates suggest that San Diego’s shelters consistently operate at or near full capacity and that the city does not have enough shelter capacity for people experiencing unsheltered homelessness. Neither San José nor San Diego Has a Clear, Long‑Term Plan for Meeting Its Need for Permanent Supportive Housing As we previously discuss, permanent housing placements are critical to ensuring that individuals do Types of Permanent Housing not return to unsheltered homelessness. HUD defines the different types of permanent housing options Rapid rehousing: Housing relocation and stabilization services and short‑ or medium‑term rental assistance as available to people experiencing homelessness, necessary to help an individual or family experiencing which the text box describes. Both San José and homelessness move as quickly as possible into permanent San Diego have focused their recent efforts to housing and achieve stability in that housing. address homelessness on the provision of permanent supportive housing. Permanent supportive housing is Permanent supportive housing: Permanent housing in a type of community‑based permanent housing that which supportive services are provided to assist individuals with a disability who are experiencing homelessness to does not include a designated length of stay and that live independently. provides supportive services to people experiencing homelessness who also have a disability. Although Other permanent housing: Includes permanent housing San José has taken a number of steps to further the with supportive services for individuals experiencing development of such housing, it has yet to set a target homelessness who do not have a disability and permanent for the number of permanent supportive units it housing without supportive services. needs. Consequently, it is difficult to measure the city’s Source: Federal law. progress. In contrast, San Diego has established such a target; however, it does not have a long‑term plan for achieving its goal. CALIFORNIA STATE AUDITOR 51 Report 2023-102.2 | April 2024 Figure 12 San Diego Does Not Have Enough Shelter Beds for Its Unsheltered Population UNSHELTERED POPULATION INCREASED WHILE SHELTER UTILIZATION INCREASED From 2020 through 2023, From fiscal year 2021–22 through fiscal year 2023–24 San Diego’s unsheltered population so far, San Diego’s shelter utilization rate increased from 2,283 to 3,285. increased from 87% to 97%.* HOWEVER REFERRAL COMPLETION DECREASED From fiscal year 2021–22 through fiscal year 2023–24 so far, San Diego’s referral completion rate decreased from 48% to 21%.* The most common reason for an incomplete referral was the lack of available beds. Source: Housing commission data and PIT counts. * These data only represent the utilization and referral rates related to shelters using the coordinated entry process and overseen by the housing commission. 52 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 San José Has Incentivized the Development of Permanent Supportive Housing but Has Not Identified the Number of Units It Needs San José has identified the development of permanent supportive housing as its primary goal for housing for people experiencing homelessness. However, the city has not identified a specific target for the number of permanent supportive housing units it plans to develop to help meet this need. Although the city is making some progress toward increasing its permanent supportive housing units, determining the adequacy of its progress will be difficult until it identifies such a target. To help fund the construction of permanent supportive housing, San José generally provides loans to developers who are working on affordable housing projects.10 To help create affordable housing, the city publishes funding notices to alert developers to the availability of city funding for gap financing—which fills a funding gap to make a project feasible—for projects with affordable housing restrictions.11 The city also develops requests for proposals to alert developers when it has land available on which it would like to develop affordable housing. For both processes, the city establishes a scoring system to evaluate the project or proposal submissions. These scoring systems have at times awarded additional points to project applications that include the development of permanent supportive housing units. In December 2021, San José took two major steps toward increasing its permanent supportive housing. First, it issued a funding notice that made $150 million available to developers for gap financing. This $150 million consisted of both federal and local funding, including Measure E funds. Following the notice, the city selected 11 affordable housing developments for consideration for the funding. When informing the city council of its selections in May 2022, San José indicated that all 11 projects proposed to include permanent supportive housing, for a total of 448 units. San José did not retain all of its documentation of its application evaluation process, so it is unclear how it arrived at the score for each development. The city council has since approved funding for seven developments that will include a total of 64 permanent supportive housing units and 186 rapid rehousing units. In December 2021, San José also issued a request for proposals to build housing developments on city‑owned sites. Of the four proposals that it selected to submit to the city council, one indicated that it would include 49 permanent supportive housing units. When we reviewed the system the city used to score proposals it received, we found that the system did not specifically include an incentive for permanent supportive housing units. However, the city indicated that if the developers later request funding through a city funding notice, the permanent supportive housing incentive in the funding notice would apply. 10 San José does not fund the supportive services that this type of housing provides; rather, the county funds these services. 11 In the December 2021 funding notice we discuss in this section, these affordable housing restrictions required that units be restricted to no more than affordable rent for lower‑income households (individuals and families having extremely low income, very low income, and low income) and that developers must prioritize 45 percent of all funding resulting from the funding notice for extremely low income housing. These affordability restrictions carry a 55‑year minimum term and survive the payoff of any city loans. CALIFORNIA STATE AUDITOR 53 Report 2023-102.2 | April 2024 To influence the location of affordable housing developments, which may include permanent supportive housing units, San José adopted an Affordable Housing Siting Policy (siting policy) in December 2022. The siting policy directs the city to work toward increasing affordable housing access in neighborhoods with higher resources, as delineated in a state Opportunity Map.12 San José had difficulty providing us with accurate data about its permanent housing. Nevertheless, the data it did provide show that since January 2020, it has proposed and approved funding for 10 affordable housing developments that are not yet completed. These 10 developments have a combined total of 219 proposed permanent supportive housing units and 242 proposed rapid rehousing units. However, none of the 10 developments were subject to the siting policy because they were selected before the policy’s adoption. As Figure 13 shows, the majority of these 10 sites are clustered in two council districts. The city indicated that it does not own or control any of the 10 approved sites. When we asked San José about its plans for funding additional permanent supportive housing units in the future, the city provided a list of seven potential developments that include proposed permanent supportive housing units. However, it offered no details about how, when, or whether it would pursue funding these developments. San Diego Lacks a Long‑Term Plan for Meeting Its Need for Permanent Supportive Housing Like San José, San Diego has focused its efforts on building permanent supportive housing. However, the city does not currently have enough proposed permanent supportive housing sites to meet its identified need. As we previously discuss, San Diego’s city council passed a city action plan in 2019 that identified the number of interim and permanent housing units it would need to build over the following 10 years to prevent and end homelessness. In 2023 San Diego updated these numbers to reflect changes in data, trends, and available resources. The updated city action plan shows that San Diego will need a total of 465 to 920 new interim housing beds and 3,520 new permanent supportive housing units by 2029. San Diego’s process for increasing permanent supportive housing involves providing loans to developers that are working on affordable housing projects. Since fiscal year 2020–21, the city housing commission and the city’s Economic Development Department (development department) have used funding notices to award over $51 million in loans to finance affordable housing projects that include permanent supportive housing units. Over $21 million of this amount is dedicated specifically for the development of those permanent supportive housing units.13 When we selected five of the projects for review, we found that the housing commission and development department had scored and selected them according to the criteria established in the funding notices. 12 The California Tax Credit Allocation Committee/Housing and Community Development Opportunity Map identifies areas in every region of the State that have characteristics that research has shown to be most strongly associated with positive economic, educational, and health outcomes for low‑income families when compared to other neighborhoods in the same region. 13 To calculate the amount of funding dedicated to permanent supportive housing units, we determined how much funding was awarded to a project that included permanent supportive housing units, the number of affordable housing units in the project, and the number of permanent supportive housing units in the project. We took the total amount of funding awarded to the projects and divided it by the number of affordable units to get a per‑unit amount. We then multiplied the per‑unit amount by the number of permanent supportive housing units to get the total funding for permanent supportive housing units for the project. We then added the total funding for permanent supportive housing units for all the projects. 54 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Figure 13 San José’s Proposed Permanent Housing Sites Are in a Limited Number of Council Districts PROPOSED PERMANENT HOUSING PERMANENT SUPPORTIVE RAPID DISTRICT SITES HOUSING REHOUSING 1 – – – 2 1 49 0 DISTRICT 6 3 4 71 106 4 – – – 5 1 0 29 4 6 4 99 107 7 – – – 8 – – – 5 9 – – – 3 10 – – – District boundary Proposed permanent housing site SSaann JJoosséé 7 1 6 8 9 2 10 ¹ 0 1 24 Miles Source: Analysis of San José's website and the city's confirmation of locations. CALIFORNIA STATE AUDITOR 55 Report 2023-102.2 | April 2024 San Diego’s 18 currently proposed permanent supportive housing sites are clustered in a few city council districts, as Figure 14 shows. These sites include a total of 874 proposed permanent supportive housing units. Of the 18 proposed sites, the city owns or controls one, the county owns three, and the housing commission is seeking to purchase four. The remaining sites are owned by other entities, some of which are the developers of the projects. As we previously explain, San Diego developed the shelter strategy in June 2023 to expand its interim housing for people experiencing homelessness. However, the city lacks a similar plan that specifies how it will meet its identified need for permanent housing for people experiencing homelessness. The city does not have a plan to build the remaining units it needs and has not identified potential sites for those units. San Diego’s planning department explained it is in the process of developing a review of city‑owned property to identify sites that might be suitable for permanent housing development. This review could be an important component of the city’s efforts to meet its permanent housing needs, but it is too early to determine its efficacy. In the absence of a clear plan, it remains uncertain whether San Diego will be able to meet its permanent supportive housing goals. After the completion of its current proposed sites, the city would need to work with developers to complete an average of 441 permanent supportive housing units per year to achieve its goal of 3,520 units by 2029.14 When asked whether it will be able to fund and develop the 3,520 units, the housing commission explained that its progress in developing permanent supportive housing is reliant on federal and state resources, such as federal housing vouchers and state Homekey funds, and that these resources are limited. The housing commission indicated that the city will not be able to achieve the 3,520 units without additional resources from the federal and state government. 14 The housing commission explained that since the release of the 2023 update to the city action plan, one site has been completed with 64 permanent supportive housing units. 56 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Figure 14 San Diego’s Proposed Permanent Housing Sites Are in Six of Its Nine City Council Districts PROPOSED PERMANENT HOUSING PERMANENT SUPPORTIVE DISTRICT SITES HOUSING 1 – – 2 2 74 3 6 421 4 2 29 5 5 – – 6 – – 7 1 105 8 3 113 9 4 132 District boundary 1 Proposed permanent housing site 6 DDIISSTTRRIICCTT 33 7 SSaann DDiieeggoo 9 2 3 4 Downtown San Diego ¹ 8 0 1 2 4Miles Source: The housing commission and the city's economic development department data. CALIFORNIA STATE AUDITOR 57 Report 2023-102.2 | April 2024 Other Areas We Reviewed To address the audit objectives approved by the Joint Legislative Audit Committee (Audit Committee), we also reviewed the unsheltered homelessness rates for San José’s and San Diego’s different demographic groups, the cities’ costs related to administering homelessness services, and the length of time it took cities to award state funding for homelessness services. In Both San José and San Diego, Some Demographic Groups Experience Unsheltered Homelessness at Higher Rates than Others The various demographic groups in San José and San Diego experience different rates of unsheltered homelessness. Similar to national trends, American Indian or Alaska Native and Black or African American people are overrepresented among the people experiencing unsheltered homelessness in both cities. San Diego has taken some actions to provide targeted homelessness services and housing to demographic groups that disproportionately experience unsheltered homelessness, but San José has not taken such actions. In San José, Certain Demographic Groups Have Experienced Disparities in Access to Some Homelessness Services To improve the transparency of its homelessness programs and funding, San José started using a public dashboard in 2023 that displays some information about these programs, including the number of people sheltered in interim housing. However, the city’s dashboard does not present demographic information, such as race, gender, and age. Similarly, San José’s annual homelessness reports do not include the demographic information of people that the city has served through its homelessness programs. City staff acknowledged the lack of demographic information and indicated that future versions of the dashboard may contain such information. By better tracking of demographic information, San José could evaluate service delivery to different demographic groups. In fact, our review found that some demographic groups are overrepresented among people experiencing unsheltered homelessness. For example, the HMIS data that Santa Clara County provided us show that from fiscal years 2020–21 to 2022–23, American Indian or Alaska Native and Black or African American people have been overrepresented among the people experiencing unsheltered homelessness in San José. Compared to San José’s general population, Black or African American people are about five times more likely to be unsheltered and American Indian or Alaska Native people are about seven times more likely to be unsheltered, as Figure 15 shows. Figure 15 In San José, Certain Demographic Groups Experience Higher Rates of Unsheltered Homelessness 60% 50 40 30 20 10 0 Multi-Racial White Native Hawaiian Black, African Asian or American Indian, or Pacific Islander American, or Asian American Alaska Native, African or Indigenous RATIO 1:2.6 2.1:1 10:1 5:1 1:9.6 7.3:1 32–2202 raeY lacsiF ni egatnecreP 58 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Percentage of people experiencing unsheltered homelessness 53.2% Percentage of people in the general population 39.2% 25.5% 14.9% 14.0% 8.7% 5.7% 4.1% 2.0% 2.8% 1.2% 0.2% Source: HMIS and the U.S. Census. Notes: The exclusion of respondents in the demographic category Other prevents percentages from totaling 100. Ratios are rounded to the nearest tenth. Some groups in San José also experienced disparities in accessing services. HMIS data that Santa Clara County provided us for fiscal years 2020–21 through 2022–23 show that American Indian or Alaska Native people and Black or African American people were underserved in certain housing and homelessness services. For example, in fiscal year 2022–23, Black or African American people comprised 14 percent of the population experiencing unsheltered homelessness but only 2 percent of the recipients of permanent housing services when no disability was required for entry. Similarly, in fiscal year 2022–23, American Indian or Alaska Native people comprised nearly 9 percent of those experiencing unsheltered homelessness but only 3.5 percent of those receiving homelessness prevention services. San José staff stated that the city recently started implementing some equity‑focused practices through its request for proposals process. For example, the department’s fiscal year 2023–24 request for proposals for organizations to provide services for homeless and at‑risk youth scores an applicant’s ability to provide culturally competent and equitable services. It awards up to 15 points for that element of the proposal on a 100‑point scale. CALIFORNIA STATE AUDITOR 59 Report 2023-102.2 | April 2024 We observed more positive outcomes in some cases when San José tailored programs for specific demographic groups, such as families. For example, San José awarded a grant to a nonprofit service provider to provide rent subsidies and services to prevent families from becoming homeless. In its annual homelessness report to the city council for fiscal year 2020–21, San José reported that the program assisted 1,925 families, including 2,759 children. Further, our review of HMIS data found that from fiscal years 2020–21 through 2022–23, children received the largest portion of homelessness prevention and rapid rehousing services and that no children under 18 in the system remained unsheltered during those years. San José’s efforts and results for this group contrast to the disparities we identified related to demographic groups characterized by race. San Diego Has Taken Steps to Ensure Equity in Its Provision of Services San Diego’s tracking and reviewing of the demographic information of people experiencing homelessness may have helped it to increase the equity of the actions it takes to address homelessness. Specifically, the housing commission tracks the demographic information of people accessing homelessness programs funded by the city and by the housing commission. The city then collaborates with the housing commission to track the effects of its homelessness actions on different demographic groups, and it uses the data to plan its future actions. The demographic breakdowns allow the city to identify disparities among different segments of people experiencing unsheltered homelessness and take actions to decrease those disparities. Although certain groups continue to be overrepresented among people experiencing unsheltered homelessness in San Diego, our review of the CoC’s HMIS data from fiscal years 2020–21 through 2022–23 did not reveal any racial disparities in access to homelessness services. In fiscal year 2022–23, American Indian or Alaska Native people and Black or African American people were significantly overrepresented among those experiencing unsheltered homelessness in San Diego, as Figure 16 shows. However, these groups proportionally received housing and homelessness services. For example, the HMIS data showed that in fiscal year 2022–23, about 24 percent of people experiencing unsheltered homelessness were Black or African American. In that same fiscal year, about 29 percent of permanent supportive housing recipients were Black or African American, as were 38 percent of rapid rehousing recipients, 27 percent of transitional housing recipients, and 27 percent of homelessness services recipients. San Diego has tailored programs for certain groups to help ensure equity. In 2020 the CoC approved the creation of the Ad Hoc Committee on Addressing Homelessness Among Black San Diegans to explore the factors contributing to Black people experiencing homelessness and to develop recommendations to better address disparities. In line with the San Diego County’s Ad Hoc Committee’s recommendations, in 2024 the city plans to fully implement a new program tailored to Black San Diegans experiencing unsheltered homelessness. The program has a goal to place individuals living in a specific encampment into permanent housing services, and the city is funding it through the State’s Encampment Resolution Funding program. San Diego reported that half of the people in the targeted encampment identify as Black, Indigenous, or people of color. Tailoring programs to address the needs of specific demographic groups could potentially allow cities to reduce inequity by helping people in those groups exit homelessness. Figure 16 In San Diego, Certain Demographic Groups Experience Higher Rates of Unsheltered Homelessness 70% 60 50 40 30 20 10 0 Multi-Racial White Native Hawaiian Black, African Asian or American Indian, or Pacific Islander American, or Asian American Alaska Native, African or Indigenous RATIO 1:4.7 1.4:1 2.6:1 4.5:1 1:10.1 4.5:1 32–2202 raeY lacsiF ni egatnecreP 60 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Percentage of people experiencing unsheltered homelessness 62.1% Percentage of people in the general population 45.2% 24.5% 17.8% 18.2% 5.5% 3.8% 1.3% 0.5% 1.8% 2.7% 0.6% Source: HMIS and the U.S. Census. Notes: The exclusion of respondents in the demographic category Other prevents percentages from totaling 100. Ratios are rounded to the nearest tenth. Both San José’s and San Diego’s Staffing and Administrative Costs Appear Reasonable We reviewed the amounts of local funds that the cities identified as operational costs of administering homelessness programs, as Table 8 shows. The cities incurred most of these costs for programs related to housing strategies and homelessness prevention—for example, programs that provide rental assistance or finance interim housing. The remainder of operational costs related to programs involving encampments. CALIFORNIA STATE AUDITOR 61 Report 2023-102.2 | April 2024 Table 8 Both Cities’ Operational Costs Paid With Local Funding Were Mostly for Housing and Homelessness Prevention FISCAL YEAR CITY AND EFFORT TO ADDRESS HOMELESSNESS 2020–21 2021–22 2022–23 San José Abate, manage, and clean up homeless encampments $919,000 $949,000 $13,675,000 Housing and homelessness prevention 14,670,000 20,954,000 45,422,000 San Diego Abate, manage, and clean up homeless encampments 6,721,000 6,921,000 7,059,000 Housing and homelessness prevention 33,416,000 10,203,000 23,376,000 Source: Cities’ financial data. Note: Costs are rounded to the nearest thousandth. We did not identify any instances in the expenditure data the cities provided in which San José or San Diego exceeded state or federal funding limits for administrative purposes. Specifically, grant programs generally establish limits for the percentage of these funds that can be used on administration. When we reviewed expenditures that the cities made from state and federal homelessness funding sources, we did not identify any spending related to administration or overhead that exceeded allowable limits. Further, although we could not validate the accuracy and completeness for the reasons stated earlier in the report, we reviewed financial records provided by the cities and we did not find any instances in which the cities' financial records identified inappropriate uses of homelessness funds on city administration, including on city facilities or on allocations to the city manager, city council, mayor, or staff. Although staff from multiple departments in each city are involved in efforts to address homelessness, the cities dedicate few staff members to performing this work full‑time. As Table 9 shows, the cities have budgeted positions that are focused entirely on addressing homelessness. However, the cities also have other staff who work on homelessness issues but whose positions are not specifically budgeted for this purpose. For example, both cities have staff who perform work abating encampments, but they may have budgeted those same positions for other responsibilities as well. The Cities’ Processes for Awarding State Funds Generally Took Several Months We reviewed the time the cities took to encumber state funding through agreements with service providers after receiving it from the State. Specifically, we evaluated documents that showed when the cities received funding from the State, as well as data from the cities’ financial systems that showed when the cities encumbered the funds to service providers. We found that the cities took from six weeks to seven and a half months to encumber these funds. Both cities explained that identifying service providers and entering into agreements can take several months and that the timing is dependent on a variety of factors, such as the type of service needed and the availability of providers. 62 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Table 9 Both Cities Have Few Budgeted Positions That Solely Work to Address Homelessness FISCAL YEAR FULL-TIME EQUIVALENT (FTE) STAFF POSITIONS 2020–21 2021–22 2022–23 San José* Homelessness FTE 11.00 10.25 13.00 Total FTE 6,592.21 6,646.54 6,884.09 San Diego*† Homelessness FTE 23.15 27.15 32.15 Total FTE 11,726.93 11,943.71 12,777.15 Source: Cities’ adopted budgets and financial management reports. * The cities’ financial reporting does not identify counts of staff for certain specific work related to homelessness, such as those engaged in work abating encampments. The table therefore does not include all city staff who do this work, such as those working as part of BeautifySJ in San José. † San Diego’s housing commission has budgeted positions in which staff work full time on addressing homelessness; however, not all of that time is spent working directly on activities that are part of the housing commission’s agreements with the city, so those positions are not included in this table. CALIFORNIA STATE AUDITOR 63 Report 2023-102.2 | April 2024 Recommendations The following are the recommendations we made as a result of our audit. Descriptions of the findings and conclusions that led to these recommendations can be found in the sections of this report. San José To ensure the effectiveness of its actions to prevent and end homelessness, San José should, by September 2024, finalize the annual goals in its city implementation plan on homelessness. The city should then follow its planned schedule for updating its implementation plan goals and for publicly reporting each fall on its progress toward meeting each goal. To promote transparency, accountability, and effective decision‑making, San José should, by September 2024, publicly report in a single location, such as a spending plan, all of the federal and state funding it receives, as well as the local funding it allocates for reducing homelessness, including Measure E funding. It should also regularly monitor the amount of its unspent funding to ensure that it complies with any future spending deadlines and can adequately explain to the public the anticipated timing of its future spending. To ensure that it effectively and transparently spends its funding to prevent and end homelessness, San José should do the following: • Ensure that when it renews or enters into new agreements with service providers, it establishes clearly defined performance measures. • Require that beginning by September 2024, staff at least annually document an overall performance review and assessment of the effectiveness of each service provider based on the performance measures in the agreement and other expectations that San José has set. To better assist people experiencing unsheltered homelessness, San José should, by September 2024, develop performance measures to evaluate the effects of the city’s public health and safety programs related to unsheltered homelessness listed in Table 6 on page 32. An example of such a performance measure is a reduction in the number of public health incidents occurring at encampments. San José should publicly report on the effects of its actions in its annual homelessness report. To ensure that it equitably provides homelessness services to all demographics, San José should immediately begin requesting monthly citywide demographic data from the county of Santa Clara to determine which demographic groups are overrepresented among people who are experiencing homelessness and which groups are underserved by specific program types. San José should take actions as needed to address demographic disparities, such as performing additional outreach or other appropriate actions to meet the needs of underserved groups. 64 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 By September 2024, San José should develop goals for contributing to the building of permanent housing for people experiencing homelessness that align with its implementation plan for meeting the goals of its CoC’s action plan. By the same date, the city should also formally adopt a policy for identifying and approving suitable locations for interim housing. In addition, it should develop plans for meeting its goal of having one interim housing facility in each city council district, likely by pursuing the construction of interim housing at the additional locations it has already identified. San José should immediately begin monitoring the utilization data from its interim housing facilities and ensure that the data are complete and accurate. The city should take necessary action to remedy any issues it identifies. San Diego To promote transparency, accountability, and effective decision‑making, San Diego should, by September 2024, publicly report in a single location, such as a spending plan, all of the federal and state funding it receives and the local funding it allocates for reducing homelessness. It should also regularly monitor the amount of its unspent funding to ensure that it complies with any future spending deadlines and can adequately explain to the public the anticipated timing of its future spending. To ensure that it effectively and transparently spends its funding to prevent and end homelessness, the city should do the following: • Ensure that when it renews or enters into new agreements with service providers, it establishes clearly defined performance measures. • Require that beginning by September 2024, staff at least annually document an overall performance review and assessment of the effectiveness of each service provider based on the performance measures in the agreement and other expectations that San Diego has set. To better assist people experiencing unsheltered homelessness, San Diego should, by September 2024, develop performance measures to evaluate the effects of the city’s public health and safety programs related to unsheltered homelessness listed in Table 7 on page 35. An example of such a performance measure is a reduction in the number of public health incidents occurring at encampments. San Diego should publicly report on the effects of its actions. By September 2024, San Diego should develop plans for siting and building the permanent housing it has identified that it needs for people experiencing homelessness. The plans should specify the amount of funding necessary to build the housing, as well as possible funding sources. CALIFORNIA STATE AUDITOR 65 Report 2023-102.2 | April 2024 We conducted this performance audit in accordance with generally accepted government auditing standards and under the authority vested in the California State Auditor by section 8543 et seq. of the California Government Code. 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 the audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Respectfully submitted, GRANT PARKS California State Auditor April 9, 2024 Staff: Nicholas Kolitsos, CPA, Principal Auditor Jordan Wright, CFE, Principal Auditor Chris Paparian, Senior Auditor Ani Apyan, MPP Myra Farooqi Rachel Hibbard Nicole Menas Eduardo Moncada Data Analytics: Ryan Coe, MBA, CISA Brandon Clift, CPA Legal Counsel: Joe Porche 66 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Blank page inserted for reproduction purposes only. CALIFORNIA STATE AUDITOR 67 Report 2023-102.2 | April 2024 Appendix A Funding Sources and Eligible Uses San José and San Diego have each received funding to address homelessness from a number of federal and state sources. Table A below lists these sources and their eligible uses. The table also describes in general terms how each of the cities reported having used the funds. Table A Funding Sources and Eligible Uses ACTUAL USES FUNDING SOURCE ELIGIBLE USES SAN JOSÉ SAN DIEGO FEDERAL Community Acquisition, construction, reconstruction, • Neighborhood infrastructure • Interim Housing, Day Center, Development Block rehabilitation or installation of public facilities improvements Family Shelter, Homelessness Grant (CDBG) and improvements including shelters for people • Contractual community Response Center, Serving experiencing homelessness. services Seniors, Jewish Family Services • Emergency housing vouchers • Rental support case management Community Same as under the CDBG program, but all activities • Meal delivery program • Jewish Family Services program Development Block must be used to prevent, prepare for, and respond to • Emergency motel voucher • Operation Shelter to Home G (C r D an B t G — ‑C C V A ) RES Act the COVID‑19 pandemic. program • Serving Seniors • Legal services program Emergency • Renovation, major rehabilitation, or conversion of • Homeless outreach • Shelter, Rapid Rehousing Solutions Grant buildings to be used as emergency shelters. • HMIS support (ESG) • Provision of essential services related to emergency shelters or street outreach. • Maintenance, operation, insurance, utilities, and furnishings related to emergency shelters. • Provision of rental assistance to provide short‑ or medium‑term housing to individuals or families at risk of or experiencing homelessness. • Housing relocation or stabilization services for individuals or families at risk of or experiencing homelessness. Emergency • Prevent, prepare for, and respond to the COVID‑19 Emergency shelters • Homelessness prevention Solutions Grant— pandemic among individuals and families who are • Housing recovery CARES Act (ESG‑CV) homeless or receiving homeless assistance. • Support additional homeless assistance and homelessness prevention activities under the Emergency Solutions Grants program to mitigate the impacts of the COVID‑19 pandemic. Home Investment • Production or preservation of affordable housing. Not applicable Not applicable Partnerships • Tenant‑based rental assistance (TBRA). Program—American Rescue Plan • Supportive services, including those defined in (HOME ARP) federal law, homeless prevention services, and housing counseling. • Purchase and development of noncongregate shelter. continued on next page … 68 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 ACTUAL USES FUNDING SOURCE ELIGIBLE USES SAN JOSÉ SAN DIEGO STATE Encampment • Ensure the safety and wellness of people • Safe encampment resolution Not applicable Resolution Funding experiencing homelessness in encampments. • Evacuee transition facilities Program (ERF) • Resolve critical encampment concerns and transition individuals into safe and stable housing. • Encourage a data‑informed, coordinated approach to address encampment concerns. Homeless Addressing homelessness, including prevention, • Crisis response interventions • Capital improvements Emergency Aid criminal justice diversion programs individuals • Homelessness prevention • Rental assistance Program (HEAP) experiencing homelessness and mental health needs, system • Outreach and emergency aid. • Safe Parking • Youth Focus • Diversion Homeless Housing, • Rental assistance and rapid rehousing. • Emergency shelters • Diversion, shelter operations, Assistance, and • Operating subsidies in new and existing units. • Homeless youth outreach coordination, Prevention Program family reunification program, • Landlord incentives. • Homelessness prevention (HHAP) safe parking program, • Outreach and coordination. system rapid rehousing, landlord • Support for homeless services and housing • Homelessness outreach engagement, storage program, delivery systems. • Case management youth services programs, Safe Haven program, • Delivery of permanent housing and innovative women's shelter. housing solutions. • Prevention and shelter diversion to permanent housing. • New navigation centers and emergency shelters. CALIFORNIA STATE AUDITOR 69 Report 2023-102.2 | April 2024 ACTUAL USES FUNDING SOURCE ELIGIBLE USES SAN JOSÉ SAN DIEGO Permanent Local • Predevelopment, development, acquisition, Housing shelters Affordable housing loans Housing Allocation rehabilitation, preservation, and necessary Program operating subsidies for multifamily, residential live‑work, or rental housing that is affordable to households with extremely low income to those with moderate income. • Affordable rental and ownership housing for people earning up to 120 percent of area median income or 150 percent of area median income in high‑cost areas. • Matching portions of funds placed into local or regional housing trust funds. • Matching portions of funds available through the Low and Moderate Income Housing Asset Fund pursuant to state law. • Capitalized reserves for services related to the creation of new permanent supportive housing, including developments funded through the Veterans Housing and Homelessness Prevention Bond Act of 2014. • Assisting people who are at risk of or experiencing homelessness by providing rapid rehousing, rental assistance, navigation centers, emergency shelters, and the new construction, rehabilitation, and preservation of permanent and transitional housing. • Accessibility modifications. • Efforts to acquire and rehabilitate foreclosed or vacant homes. • Homeownership opportunities, including, but not limited to, down payment assistance. • Fiscal incentives or matching funds to local agencies that approve new housing for extremely low‑income, very low‑income, low‑income, and moderate‑income households. HomeKey • Acquisition or rehabilitation of motels, hotels, Hotel acquisition Not applicable hostels, or other sites including apartments or homes, adult residential facilities, residential elderly care facilities, manufactured housing, commercial properties, and other buildings with existing uses that could be converted to permanent or interim housing. • Master leasing of properties. • Conversion of units from nonresidential to residential. • New construction of dwelling units. • Purchase of affordability covenants and restrictions for units. • Relocation costs for individuals who are being displaced as a result of rehabilitation of existing units. • Capitalized operating subsidies. continued on next page … 70 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 ACTUAL USES FUNDING SOURCE ELIGIBLE USES SAN JOSÉ SAN DIEGO SB 89 COVID‑19 • Support for the acquisition/lease of hotels, motels, Interim housing Operation Shelter to Home Emergency Fund trailers, and other alternative isolation placements. • Emergency shelter operations, including furnishings, medically indicated services and supplies, and equipment needed to maintain a sanitary shelter environment for clients and staff. • Support for increasing shelter capacity and the acquisition of new shelters. • Street outreach, including supplies and equipment needed to protect staff from COVID‑19 and to meet the urgent physical needs of people experiencing homelessness. • Support for transporting those experiencing homelessness to and from shelters and medical care. • Support for additional staff for infectious disease preparedness and case management for clients. Family • Rapid rehousing, including housing identification, Not applicable Not applicable Homelessness rental subsidies and incentives to landlords, such Challenge Grant as security deposits and holding fees for eligible families, housing search assistance, rapid rehousing case management and services. • Operating subsidies in new and existing affordable or supportive housing units, emergency shelters, and navigation centers. • Street outreach to assist eligible families to access crisis services, interim housing options, and permanent housing and services. • Services coordination, including access to workforce, education, and training programs, or other services needed to improve and promote housing stability for eligible families and to direct case management services to families. • Systems support for activities that improve, strengthen, augment, complement, or are necessary to create regional partnerships and a homelessness services and housing delivery system that makes experiences of homelessness rare, brief, or a one‑time occurrence. • Delivery of permanent housing and innovative housing solutions, such as unit conversions that are well suited for eligible families. • Prevention and shelter diversion to permanent housing, including flexible forms of financial assistance, problem solving assistance, and other services to prevent people from losing their housing or from needing to enter emergency shelter/interim housing or becoming unsheltered. • Interim shelter for eligible families. • Improvements to existing emergency shelters. AB 179 Passthrough To the City of San Diego for startup costs for Not applicable Not applicable emergency shelter for victims of domestic violence. Source: Federal and state law and information from the cities’ financial management systems. CALIFORNIA STATE AUDITOR 71 Report 2023-102.2 | April 2024 Appendix B Placements Into Interim and Permanent Housing We used the state data system to identify the number of times a reporting entity placed individuals experiencing homelessness into each category of permanent and interim housing. Table B shows the number of placements in San José and San Diego from fiscal year 2019–20 through March 2023. As the table shows, the majority of placements during this period were into interim housing and, more specifically, into emergency shelter. Table B Placements Into Interim and Permanent Housing FISCAL YEAR PARTIAL YEAR HOUSING TYPE 2019–20 2020–21 2021–22 TOTAL 2022–23* †ésoJ naS Permanent Housing PH‑Housing Only — — 13 357 370 PH‑Housing With Services — 6 13 — 19 (no disability required for entry) PH‑Permanent Supportive Housing 386 157 236 119 898 (disability required for entry) PH‑Rapid rehousing 73 62 74 46 255 Subtotal 459 225 336 522 1,542 Interim Housing Emergency Shelter 2,136 2,333 1,964 2,155 8,588 Safe Haven 2 8 8 8 26 Transitional Housing 86 47 73 60 266 Subtotal 2,224 2,388 2,045 2,223 8,880 Total 2,683 2,613 2,381 2,745 10,422 †ogeiD naS 72 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Permanent Housing PH‑Housing Only — 2 23 11 36 PH‑Housing With Services 42 18 78 26 164 (no disability required for entry) PH‑Permanent Supportive Housing 90 97 213 91 491 (disability required for entry) PH‑Rapid Rehousing 602 388 433 526 1,949 Subtotal 734 505 747 654 2,640 Interim Housing Emergency Shelter 6,453 4,683 5,212 3,905 20,253 Safe Haven 14 7 36 18 75 Transitional Housing 273 212 334 173 992 Subtotal 6,740 4,902 5,582 4,096 21,320 Total 7,474 5,407 6,329 4,750 23,960 Source: Homeless Data Integration System. Note: This table counts an individual once for each housing placement; therefore, a person can be counted more than once. * Data obtained for fiscal year 2022–23 contains information only through March 2023. † City location information in state data is imprecise. Reported information may show the principal site of a shelter or housing provider, but not all locations. Additionally, placements within a city do not necessarily indicate that the city government was the entity responsible for those placements. CALIFORNIA STATE AUDITOR 73 Report 2023-102.2 | April 2024 Appendix C Scope and Methodology The Audit Committee directed the California State Auditor to conduct an audit of San José and one city selected by the State Auditor to assess the effectiveness of their homelessness spending. Specifically, the Audit Committee asked us to review the outcomes that the two cities achieved with state and local homelessness funding. Table C below lists the objectives that the Audit Committee approved and the methods we used to address them.15 The Audit Committee also requested that we review the effectiveness of the State’s spending on homelessness. We presented the results of our review of the State in a separate report (2023‑102.1). Unless otherwise stated in the table or elsewhere in the report, statements or conclusions about items selected for review should not be projected to the population. Table C Audit Objectives and the Methods Used to Address Them AUDIT OBJECTIVE METHOD 1 Review and evaluate the laws, rules, and Reviewed and evaluated state and federal laws and regulations applicable to the cities regulations significant to the audit objectives. we reviewed. Reviewed and evaluated relevant city municipal code and ordinances. 2 b. Determine whether state or federal • Reviewed state and federal laws and regulations related to data collection, privacy, laws or regulations impede the ability and sharing. of the State or local jurisdictions to • Interviewed state and city staff to understand any impediments they face in sharing accurately assess and track the population data and in collaborating with one another. experiencing homelessness. c. Identify any impediments to state and local jurisdictions’ sharing of data and meaningful collaboration. 3 Evaluate the extent to which San José and • Interviewed staff in the cities of San José and San Diego to identify each city’s plans and San Diego are meeting the goals they have goals for ending homelessness. established in their policies and plans for • For San José, reviewed the county‑level community action plan to end homelessness ending homelessness. and the city’s homelessness planning documents to identify the city’s goals to end homelessness. We determined that the city did not have city‑specific goals to implement the county‑level plan until it adopted an implementation plan in January 2024. • For San José, reviewed progress reports and city council memorandums from fiscal years 2020–21 through 2022–23 to evaluate whether the city met certain goals, such as its goal to have 1,300 interim housing units. • For San Diego, reviewed the city‑specific community action plan on homelessness to identify the city’s goals to end homelessness. • For San Diego, reviewed the progress reports and dashboard on the city’s action plan implementation to evaluate whether the city met the goals in the city action plan. continued on next page … 15 Objectives 2 and 2a directed us to examine the State's structure and efforts for funding and addressing homelessness and the cost‑effectiveness of such state‑funded programs. Our analysis related to those objectives is the subject of Report 2023‑102.1, Homelessness in California: The State Must Do More to Assess the Cost-Effectiveness of Its Homelessness Programs, April 2024. 74 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 AUDIT OBJECTIVE METHOD 4 Identify, for the past three fiscal years, how • Reviewed grant award letters, city budgets, single audits, Annual Comprehensive much San José and San Diego have received in Financial Reports, and appropriation ordinances. noncity funding for homelessness programs, • Coordinated with each city’s relevant department contacts to identify in the cities’ including but not limited to Project Roomkey, financial systems the state and federal homelessness‑related funding, expenditures, Homekey, and federal stimulus funds. and remaining balances for the past three fiscal years. Neither San José nor San Diego a. Determine how the cities have allocated and received funding for Project Roomkey. spent these funds and identify whether there is any amount remaining. • Evaluated the cities’ appropriate and effective use of funding by reviewing the outcomes of agreements the cities made to award funds from a variety of nonlocal b. Evaluate whether the cities have funding sources to service providers. The cities provided their homelessness‑related appropriately and effectively used these agreements for each of the past three fiscal years. For San José, we selected eight funds, including whether funding allocated agreements based on program type, grantee, and agreement amount from the list for city staff and contractors aligns with the of more than 100 agreements that the city provided. For San Diego, we selected intent of the programs. eight agreements from the list of 46 that the city provided. However, some entries in c. Identify whether any allocations, and San José’s list did not have complete information, and we identified agreements that the amounts, were made to pay for city each city had entered but not did not include in its list. Consequently, we determined administration or any other overhead or that the lists of agreements the cities provided were incomplete. nonprogrammatic functions, such as city hall or other city facilities or allocations to the • For each city, tested the agreements to determine whether funding for city staff and city manager, city council, and mayor and service providers aligned with the intent of programs. their staff. • Reviewed appropriations to identify allocations for nonprogrammatic overhead functions such as City Hall or other city facilities, city manager, mayor, or staff. • Determined whether program outcomes were clearly defined, measured, reported on, publicly available, and compared to those of similar programs. 5 Identify the outcomes San José and San Diego • Analyzed data about the State’s homeless population to determine the number have achieved from their use of noncity funding of individuals experiencing unsheltered homelessness who were placed in shelter to reduce homelessness, and determine the or housing, the outcomes of individuals experiencing homelessness, and services following for each city: individuals experiencing homelessness received. a. The number of unsheltered individuals the • Interviewed Cal ICH about how it collects and uses data from CoCs. city has placed in shelter or housing during each of the past three fiscal years, including • Compared the increase in each cities’ unsheltered population with the number of the type of shelter or housing. placements into interim or permanent housing. b. The rate of placing individuals in shelter or • Because the state data system does not include data that would enable us to calculate the housing compared to the growth rate of its amount of time to fill vacant beds, reviewed utilization data from each city to determine unsheltered homeless population. the utilization rate at the city‑controlled facilities. Additionally, for San Diego, we reviewed c. The amount of time it takes to fill vacant data that allowed us to calculate the rate at which referrals to shelters were completed. beds and facilities for those facilities • Reviewed agreements and other documentation between the cities and their controlled by the city or its contractors. homelessness program service providers to determine the amount of time it took for d. The amount of time between the city cities to award state funds to providers. Because cities draw down federal funds as a receiving noncity funds and disbursing them reimbursement, we reviewed state funding sources. to service delivery organizations and the efficiency and effectiveness of this process. • Interviewed city employees to understand the funds disbursement processes. e. The length of time it took the city to place • Determined that the state data system does not include information that would enable individuals in shelter or housing and how us to calculate the amount of time to place individuals in shelter or housing. It also does much the city spent on services for these not track how much a city spent on services before or after placement. The cities also do individuals while they were unsheltered not collect this type of information. Therefore, we were unable to address Objective 5e. compared to after they were placed. • As discussed in Report 2023‑102.1, used the state data system to identify and calculate f. The permanent housing outcomes associated the outcomes associated with federally funded and non‑federally funded programs with the programs and services funded and services. Within the non‑federally funded outcome information, we were unable through noncity funding. to separate out the permanent housing outcomes for state‑funded programs from the overall permanent housing outcomes because of inconsistent data. CALIFORNIA STATE AUDITOR 75 Report 2023-102.2 | April 2024 AUDIT OBJECTIVE METHOD 6 To the extent possible, review available • For each city, obtained and reviewed demographic data from the HMIS managed by its CoC. demographic data on San José's and San Diego’s • For each city, reviewed demographic data from fiscal years 2020–21 through 2022–23 unsheltered population and identify whether on the number of people experiencing unsheltered homelessness and identified groups there are segments of each city's unsheltered that were overrepresented in this population. population that are underserved. To the extent possible, determine the reasons for those • For each city, reviewed demographic data from fiscal years 2020–21 through 2022–23 on instances and identify whether there are homelessness services and housing solutions that people experiencing homelessness additional funding opportunities or homeless received to identify any disparities in accessing services. programs that each city could pursue to better serve these segments of the population. • Identified the actions each city took to address demographic disparities. 7 Identify any funding sources San José and • Interviewed staff in San José and San Diego to identify the programs each city San Diego used during the three most recent established and actions each city took to ensure the health and safety of people fiscal years to ensure the health and safety of experiencing unsheltered homelessness. the unsheltered population and the outcomes • For fiscal years 2020–21 through 2022–23, reviewed agreements, budgets, and financial each city has achieved from its use of this system data from the cities to identify the funding sources and amounts for programs funding. Determine the following: intended to ensure the health and safety of people experiencing unsheltered homelessness. a. Whether each city has made an effort to identify public safety and health issues at • Reviewed the outcome information of each city’s programs intended to ensure the homeless encampments, including the health and safety of people experiencing unsheltered homelessness. encampments at Columbus Park in San José. • Reviewed and assessed each city’s policies and processes for evaluating health and b. Whether the services each city has provided safety risks around encampments. to address public safety and health issues adequately mitigated the impact of these • Reviewed progress reports and data to evaluate whether each city mitigated health and issues on the population of encampments safety risks around encampments. and surrounding areas. • For San José, reviewed the Columbus Park encampment work plan and progress updates to c. Whether each city has worked with its determine whether the city took actions to identify and mitigate the health and safety risks. respective county and its public health department to provide services to address • For San José, interviewed staff and determined that the city does not have a contract and mitigate these public safety and with the county health department. health issues. • For San Diego, reviewed the city’s agreement with the county health department and evaluated the use of that agreement in mitigating public health risks at encampments and surrounding areas. 8 Identify other public and local funds, including • Reviewed city budgets, Single Audits, Annual Comprehensive Financial Reports, San José's Measure E Funds, that San José and appropriation ordinances, and Measure E reports. San Diego have used during the three most • Coordinated with each city’s relevant department contacts to identify local recent fiscal years to address homelessness. homelessness‑related funding and expenditures for the past three fiscal years. a. Evaluate the effectiveness of each city's use of these funds. • Evaluated the effectiveness of San José’s use of local funds by testing a selection of six agreements using local funding from a list of more than 100 agreements we sourced by b. Identify how many full‑time equivalent city combining a list that the city provided with additional agreements we identified from staff are engaged in work abating homeless city records. encampments, including management and clean up through San José's BeautifySJ • Evaluated the effectiveness of San Diego’s use of local funds by testing a selection of initiative, and how many staff in each six agreements using local funding from a list of 46 agreements that the city provided. city's housing department are focused on solutions to homelessness through • For each city, selected two agreements for each of fiscal years 2020–21 through 2022–23 efforts such as homelessness prevention, based on funding source, program type, and funding amount. We tested the agreements rapid rehousing, temporary housing, and to ensure that they had defined performance measures and that the cities had received permanent supportive housing. required performance reporting. We also verified whether the cities had evaluated the effectiveness of the services provided. c. Quantify the annual operational costs of administering each city's programs • Reviewed the adopted budgets of each city and reports from its financial management during the three most recent fiscal years systems to identify full‑time equivalent staff engaged in abating encampments and to abate, manage, and clean up homeless those focused on solutions to homelessness. encampments and of its efforts to provide solutions to homelessness through housing • Reviewed financial documentation from San José’s budget department that identified strategies and homelessness prevention. and summarized the city’s operational costs associated with this work. • Reviewed financial documentation from the San Diego departments involved with this work that identified and summarized their operational costs. continued on next page … 76 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 AUDIT OBJECTIVE METHOD 9 Identify San José's and San Diego’s • For each city, interviewed staff and reviewed city records to identify proposed interim proposed sites for building interim and and permanent housing sites for individuals experiencing homelessness. permanent housing for individuals • Interviewed staff in each city to identify policies and processes for approving interim experiencing homelessness. and permanent housing sites. We then reviewed these policies and processes. a. Identify each city's policies and processes for approving housing sites. • Requested that each city identify the proposed interim and permanent housing sites it owns. b. Determine how many approved sites each city owns or controls. • For each city, created a map graphic of the proposed interim and permanent housing c. Determine whether the sites are equally site locations to demonstrate the distribution of sites across city council districts. distributed among each city council district. • Obtained information about each city’s potential additional interim and permanent d. Assess each city's efforts to identify potential housing sites. We identified and reviewed each city’s plans for future interim and additional sites for both interim and permanent housing. permanent housing, the locations of those sites, and the status of any plans to build more housing. 10 Review and assess any other issues that are None identified. significant to the audit. Source: Audit workpapers. Assessment of Data Reliability The U.S. Government Accountability Office, whose standards we are statutorily obligated to follow, requires us to assess the sufficiency and appropriateness of any computer‑processed information we use to support our findings, conclusions, or recommendations. In performing this audit, we relied on electronic data obtained from Cal ICH’s state data system for the period from July 1, 2019, through March 31, 2023. To evaluate the data, we reviewed existing information, interviewed people knowledgeable about the data, and performed electronic testing of key elements of the data. We identified problems with the state data system data, such as the inclusion of deleted records, test entries, and illogical entries, such as some enrollment numbers that exceeded the bed capacity of the corresponding shelters. Consequently, we found the state data system data to be of undetermined reliability for the purposes of analyzing the number and duration of those enrolled in homelessness services. We also relied on electronic data files that we obtained from San José and San Diego that contained financial information, housing information, and agreement information. To evaluate the data, we reviewed existing information, interviewed people knowledgeable about the data, and performed electronic testing of key elements of the data. Nevertheless, we could not determine the completeness of these data, so we found them to be of undetermined reliability. Although the data may contain errors that affect the precision of the numbers presented, we concluded that there is sufficient evidence in total to support our findings, conclusions, and recommendations. CALIFORNIA STATE AUDITOR 77 Report 2023-102.2 | April 2024 * 1 * California State Auditor’s comments begin on page 93. 78 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 CALIFORNIA STATE AUDITOR 79 Report 2023-102.2 | April 2024 2 2 1 80 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 3 1 CALIFORNIA STATE AUDITOR 81 Report 2023-102.2 | April 2024 82 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 CALIFORNIA STATE AUDITOR 83 Report 2023-102.2 | April 2024 4 84 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 CALIFORNIA STATE AUDITOR 85 Report 2023-102.2 | April 2024 5 6 5 86 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 6 CALIFORNIA STATE AUDITOR 87 Report 2023-102.2 | April 2024 7 88 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 8 8 CALIFORNIA STATE AUDITOR 89 Report 2023-102.2 | April 2024 9 9 90 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 10 CALIFORNIA STATE AUDITOR 91 Report 2023-102.2 | April 2024 92 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Blank page inserted for reproduction purposes only. CALIFORNIA STATE AUDITOR 93 Report 2023-102.2 | April 2024 Comments CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM THE CITY OF SAN JOSÉ To provide clarity, we are commenting on the response to our audit report from the city of San José (San José). The numbers below correspond with the numbers we have placed in the margin of the city’s response. 1 San José implies in its response that our audit report lacks detail or context regarding the impacts of the COVID‑19 pandemic. However, we acknowledge the impact of the pandemic generally in the Introduction of the report on page 5, and specifically as it relates to San José’s efforts on pages 21, 31, and 34. 2 The city’s response refers to text from page 1 of the audit report’s Results in Brief, which provides a high‑level summary of our report’s findings and conclusions. We present detailed information about San José’s PIT count data since 2015 in Figure 4 on page 7. We acknowledge on page 7 that after increasing from 2015 to 2022, San José saw a slight drop in the number of people experiencing homelessness from 2022 to 2023. The numbers San José references in its response vary slightly from the numbers we present in Figure 4 because, while we used the numbers from the city’s final 2022 report published in late 2022 and that it currently has on its website, San José appears to reference preliminary numbers from May 2022. 3 The city claims in its response that we do not adequately explain in our report the systemic factors causing homelessness. On the contrary, we describe in the Introduction on page 4, that the University of California, San Francisco’s June 2023 study of people experiencing homelessness found that high housing costs and low incomes had left participants vulnerable to homelessness and that the most frequently reported economic reason for entering homelessness was loss of income. We describe on the same page that the study found that factors such as scarcity of housing, high cost of housing, lack of rental subsidies, and lack of assistance in identifying housing create barriers to accessing housing. 4 We are encouraged by San José’s assertion that it is already taking steps to implement our recommendation, and we look forward to reviewing its efforts as part of our regular follow‑up process. Nevertheless, to fully implement this recommendation, we expect the city to develop a mechanism—such as a spending plan–for its homelessness funding that identifies the available funding and how it intends to allocate that funding. For example, the city could identify the amounts of funding it has available from federal, state, and local sources each year, indicate the amounts of that funding it plans to allocate to specific homelessness‑related activities, and report on its spending at the end of each year. We also expect the city to regularly monitor the amount of its unspent funding to ensure that it complies with any future spending deadlines and adequately explain to the public the anticipated timing of its future spending. 94 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 5 San José has misquoted our recommendation in its response. As is our standard practice, we communicated with San José during its review of our draft report to discuss any questions or concerns it may have. Based on these conversations, we informed San José that we would make changes to the recommendation regarding its evaluation of its health and safety programs. The revised recommendation is on page 63. 6 We believe that the recommendation is appropriately focused on San José’s programs. As we discuss on page 33, San José did not develop performance measures to evaluate how well its programs are mitigating health and safety risks, and our recommendation is focused on the city developing performance measures for the programs we reviewed to demonstrate their effectiveness. Further, nowhere in our recommendation do we prescribe that the city develop epidemiological surveillance efforts to track and evaluate potential impacts. Instead, we recommend that the city develop performance measures to evaluate the effects of the city’s public health and safety programs related to unsheltered homelessness and to publicly report on the effects of its actions. In addition, San José explains that it is in the process of updating its performance measures for the BeautifySJ encampment management programs and is seeking ways to evaluate and improve upon health and safety services. Although this is encouraging, San José must ensure that it develops clear performance measures so it can assess whether its health and safety actions have effectively addressed the profound risks that individuals living in encampments face. 7 Our recommendation does not prescribe the frequency with which San José should monitor demographic data by program. Rather, Santa Clara County has these data available and can produce monthly reports, and we believe that San José should immediately begin requesting this data and take actions as needed to address demographic disparities. It is at the city’s discretion to determine the frequency of its monitoring of the data, and we look forward to reviewing its progress as part of our regular follow‑up process. 8 Our recommendation is focused on the need for San José to formally adopt a policy for identifying and approving suitable locations for interim housing to ensure that the city is transparent and accountable for the process it uses to locate interim housing sites. We state on page 46 that the city has not formally adopted its Emergency Interim Housing Siting and Evaluation Guidelines and Process, which staff indicated they use to assess sites, and it is unclear when they became effective and to whom they apply. In its response, the city confirms that those guidelines are in use today. We are not recommending any rigid criteria for site identification and selection beyond what the city has already developed. Rather, we believe it is important that the city formally adopt the policy because it will need to develop more interim housing to meet its goals. As we state on page 45, San José has yet to meet its goals for creating interim housing units and locating at least one interim housing facility in each city council district. CALIFORNIA STATE AUDITOR 95 Report 2023-102.2 | April 2024 9 We stand by our conclusion that San José lacks a clear, long‑term plan to develop and fund the needed permanent housing. On page 52, we explain that San José has yet to set a target for the number of permanent supportive units it needs, and the city acknowledges in its response that the implementation plan’s overall goal is still under development. Consequently, it is difficult to measure the city’s progress. Further, as we state on page 53, when we asked San José about its plans for funding additional permanent supportive housing units in the future, the city provided a list of seven potential developments that include proposed permanent supportive housing units. However, it offered no details about how, when, or whether it would pursue funding these developments. 10 We disagree with San José’s assertion that it monitors utilization data daily. Specifically, during the course of our audit, we requested the utilization data and it took the city a month to provide us with the data, which indicated to us that it was not readily available. Further, as we describe on page 46, after providing us with the data, the city noted problems with the data’s accuracy. For example, the bed capacity at one interim facility was incorrectly listed as less than half of its actual capacity, producing inaccurate utilization rates of more than 100 percent in the database. Thus, we stand by our recommendation that the city monitor its utilization data and ensure that it is complete and accurate. 96 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Blank page inserted for reproduction purposes only. CALIFORNIA STATE AUDITOR 97 Report 2023-102.2 | April 2024 THE CITY OF SAN DIEGO March 12, 2024 Grant Parks, California State Auditor * 621 Capitol Mall, Suite 1200 Sacramento, California 95814 Re: Response to Report No. 2023-102.2, Homelessness in California: San Diego Must Do More to Plan and Evaluate Efforts to Reduce Homelessness Dear Mr. Parks: Thank you for the opportunity to review and provide a response to the above-referenced audit report. The City of San Diego (City) generally concurs with the recommendations in this report and will take appropriate steps to implement them where feasible. At this time, some recommendations have been partially implemented and are expected to be completed by September 2024; work on other recommendations is underway but may be completed after the audit’s recommended target date. The City’s response to Recommendation 3 highlights the City’s use of performance measures to review the effectiveness of its contractors but notes that public health remains within the purview of the County of San Diego. The City appreciates the opportunity to showcase the work that it continues to do to move our unsheltered residents into shelter and housing. The draft audit report provided to the City included four recommendations. The City’s responses to each recommendation are included below. Recommendation 1: To promote transparency, accountability, and effective decision- making, San Diego should, by September 2024, publicly report in a single location, such as by creating a spending plan for all of the federal and State funding it receives and the local funding it allocates for reducing homelessness. It should also regularly monitor the amounts of its unspent funding to ensure that it complies with any spending deadlines and can adequately explain to the public the anticipated timing of its future spending. City Response: Agree, the City has existing spending plans already in place, but will publicly report them in a single location. The City already maintains spending plans on homelessness-related programming. For 1 example, the annual budget process highlights the funding allocated to homelessness across General Fund departments and grant funding from State and federal resources. This information can be found in Volume 1, inclusive of grant funding, as well as Volume 2 of the annual budget. Furthermore, the City has detailed spending plans for each federal and State funding source, as spending plans for all federal and State funding received are approved by the City Council in advance of receiving the awards in order to authorize appropriations and expenditures under any of these funds. * California State Auditor’s comments appear on page 103. 98 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Page 2 Grant Parks, California State Auditor March 12, 2024 The City of San Diego, through its SAP Enterprise Resource Planning (ERP) system, tracks all federal, State, and local funding it receives. While all grants are segregated and reported separately as is required by most granting agencies, other local funds are allocated at the fund, department, program, or cost center level. The allocation, budgeting, and expenditure of local funds use the City’s current financial and budgetary structure, which serves many and sometimes competing, financial reporting needs. The allocation of local funds toward homelessness programs is mostly contained within the budgetary allocation to one department, the Homelessness Strategies and Solutions Department (HSSD). However, other budgetary allocations of local funds that are performed by specialized functions of the City, such as neighborhood policing and refuse collection services, are accounted for under the responsible department to ensure accountability with those charged with implementing such programs. In addition to the annual budget process, the City monitors expenditures and unspent funds on a quarterly basis during the budget monitoring process. Each of these reports is made publicly available on the City’s website and is also presented as informational items at 1 Budget and Government Efficiency Committee and City Council meetings. Moreover, per Council Resolution R-313615 executed in June 2021 and recommendations by the City’s Independent Budget Analyst (IBA) in Report No. 21-19 Recommendation No. 2, HSSD includes detailed updates on the spending of State grants and other funding related to homelessness as part of the quarterly budget monitoring report. While these reports do not include spending and efforts for abatement and policing, they are responsive to the IBA’s recommendation on reporting to the City Council on the executed and planned use of homelessness funding across funding sources. These updates have been consistently developed and provided to the City Council as well as published on the City’s website during the quarterly monitoring process. Moreover, the City is required to complete quarterly reports for each one of its State grants to monitor both expended and remaining funds and ensure funds are on track to be spent in alignment with expenditure deadlines. As previously mentioned, every dollar of State, local, and federal funding is tied to a specific detailed funding plan, and unspent funds are already allocated to the approved uses. Because of this work, the City has never encountered a situation where it was at risk of not complying with funding expenditure deadlines. Certainty of future funding also plays a role, and the City has consistently requested the State create reliable, ongoing funding through the Homelessness Housing Assistance and Prevention program so it can build more certainty into its contracts and housing programs. Finally, this audit recommendation requests the City create plans for unspent funds. The City 2 does have these plans in place, however, the auditors did not inquire about plans for future use of remaining (unspent) funds during their review. The report did mention that unspent General Funds do not typically carryover to the next year’s budget, however, multi-year grant funds do carryover, and unspent funds at the end of any fiscal year are factored into the future year’s spending plans and are published in Volumes 1 and 2 of the City’s budget. To implement this recommendation, the City will aggregate the existing spending plans currently funded with federal and State sources as well as those costs directly allocated to HSSD to produce an annual report on expenditure by funding source and use by September 2024. In addition, the City will assess the feasibility of identifying ancillary costs related to CALIFORNIA STATE AUDITOR 99 Report 2023-102.2 | April 2024 Page 3 Grant Parks, California State Auditor March 12, 2024 support provided by departments other than HSSD. To the extent feasible, these costs will also be incorporated into the annual report at a later date. Recommendation 2: To ensure that San Diego effectively and transparently spends its funding to address and end homelessness, the City should do the following: a) Ensure that, when it renews or enters into new agreements with service providers, it establishes clearly defined performance measures. b) Require that, beginning by September 2024, staff at least annually document an overall performance review and assessment of the effectiveness of each service provider based on the performance measures in the agreement and other expectations that San Diego has set. City Response: Agree. The City already requires performance measures, and an overall review 3 and assessment of the effectiveness of service providers is in progress. While the City and the San Diego Housing Commission (SDHC) will continue to refine service provider performance measures, staff note that it can be challenging to mandate specific housing performance measures on service providers because service providers’ client housing outcomes are largely dependent upon the availability of housing inventory, which is outside of the control of the service provider. The City acknowledges that the current housing environment is more challenging than ever due to limited supply and all-time high rents. Due to these challenges, the City intentionally has service providers report on performance outcomes as detailed in each operating agreement but has not defined specific numerical targets, as housing outcomes may be outside the control of any individual operator. In the absence of set targets for housing outcomes within operating contracts, the City can conduct a comparative analysis across service providers and programs to see what interventions and operators have higher-than-average housing placements. Staff are also able to assess factors leading to improved outcomes to replicate elements of programming and allocate greater resources to programs that generate higher placements. For example, during an analysis of permanent or other long-term housing placements across programs, the City concluded that the Family Reunification Program had higher-than-average outcomes compared to other City-funded programs. As such, the City increased funding for the Family Reunification Program as the services provided were proving to be most effective and efficient in housing placement for individuals experiencing homelessness, considering the challenges in the broader local housing supply. Additionally, certain projects identified in Table 5 of the report as having ‘ill-defined’ performance measures did include detailed scopes and budgets with specific performance 3 requirements (such as hours of operation and types of services to be delivered) and outcome measures (such as the number of individuals to be served). Contracts supported by federal programs, including Community Development Block Grants (CDBG) and Emergency Solutions Grants (ESG), are included in annual performance and review reports to the U.S. Department of Housing and Urban Development (HUD) and are subject to HUD monitoring. During the subject fiscal years of this State audit, HUD monitoring of the City of San Diego as an entitlement grantee resulted in no findings. 100 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Page 4 Grant Parks, California State Auditor March 12, 2024 Finally, the City is currently in the process of creating an annual performance review and assessment. In the City’s Fiscal Year 2023 Adopted Budget, HSSD added new positions dedicated to performance monitoring. These positions have been filled, and formal documentation efforts for tracking operator performance are already underway. One additional vacant position that is in the process of being filled, will oversee data and analysis associated with performance more broadly across programs in the system. The new position will be responsible for tracking program data on a monthly basis, analyzing trends, and providing recommendations on how to improve program activities and outcomes, as necessary. Recommendation 3: To better assist people experiencing unsheltered homelessness, San Diego should, by September 2024, develop performance measures to evaluate the effects of the City’s public health and safety programs related to unsheltered homelessness listed in Table 7. An example of such a performance measure is a reduction in the number of public health incidents occurring at encampments. San Diego should then report publicly on the effects of its actions. 4 City Response: Disagree. The County of San Diego is the lead agency on public health matters for the region. The City’s contracts related to services for individuals experiencing unsheltered homelessness do include performance measures that are reported on to HSSD. While specific targets for each measure have not been identified, the data for each performance measure is tracked to understand the effectiveness of City-funded programs and where there may be areas to increase support or make programmatic improvements. HSSD also included Key Performance Indicators in the Fiscal Year 2024 Adopted Budget, which includes metrics related to outreach strategies. Moreover, HSSD has amended its Key Performance Indicators for the Fiscal Year 2025 Proposed Budget to include metrics on shelters, safe parking, and safe sleeping, in addition to outreach services. Additionally, starting in Fiscal Year 2025, the Environmental Services Department will use the following Key Performance Indicator for its Sidewalk Sanitizing program: • Perform sidewalk sanitation services on at least 9,600 City blocks each fiscal year to reduce the potential presence of pathogens, bacteria, and communicable diseases. Recommendation 4: By September 2024, San Diego should develop plans for siting and building the permanent housing it has identified that it needs for people experiencing homelessness. The plans should specify the amount of funding necessary to build the housing, as well as possible funding sources. City Response: The City agrees that plans for siting and building permanent housing should be created, and staff are working on an Affordable Home Development Master Plan. However, due to resource constraints, the timeline for the completion of this work is projected to be in 2025 instead of by September 2024. When completed, the Master Plan will provide a comprehensive plan to utilize City-owned property to develop homes for people of all incomes in all communities that are best served by transit and amenities. The Master Plan will reduce development costs and expedite housing construction on public land. CALIFORNIA STATE AUDITOR 101 Report 2023-102.2 | April 2024 Page 5 Grant Parks, California State Auditor March 12, 2024 Additionally, the Master Plan will identify potential shelter sites to address the urgent need for increased shelter capacity for people experiencing homelessness. This Master Plan will expand upon the work and analysis completed in the City’s existing Comprehensive Shelter Strategy, published in June of 2023, which provided an analysis of existing sheltering options and the type and quantity of shelter beds needed in our region. The City has significantly expanded its homelessness programs over recent years, and in turn, has created a system of services across the continuum. To meet demands of the most vulnerable unsheltered populations, the City has made significant investments in new programming. In recent years, the City has significantly expanded shelter bed capacity, opened two safe sleeping sites, expanded safe parking, received a pro-housing designation from the State, passed a series of housing action packages to increase development, and launched the Bridge to Home program in an effort to produce more homes that are affordable to all San Diegans. The City is committed to continuing to expand programs for those experiencing homelessness and increasing the availability of housing for all. The City looks forward to continuing to work with the State in addressing homelessness and housing affordability. The City appreciates the effort undertaken by the California State Auditor in completing this review and thanks the staff involved. Sincerely, Eric K. Dargan Chief Operating Officer EKD/KAP cc: Paola Avila, Chief of Staff, Office of the Mayor Matthew Vespi, Chief Financial Officer David Nisleit, Chief, Police Department Alia Khouri, Deputy Chief Operating Officer Kristina Peralta, Deputy Chief Operating Officer Kris McFadden, Deputy Chief Operating Officer Casey Smith, Deputy Chief Operating Officer Christiana Gauger, Chief Compliance Officer, Compliance Department Matt Yagyagan, Director of Policy, Office of the Mayor Adrian Granda, Director, Department of Government Affairs Sarah Jarman, Director, Homelessness Strategies and Solutions Department Rolando Charvel, Director and City Comptroller, Department of Finance Christina Bibler, Director, Economic Development Department and Department of Real Estate and Airport Management Renee Robertson, Director, Environmental Services Department Heidi Vonblum, Director, City Planning Department Kim Zolgahdri, Interim Deputy Director, Homelessness Strategies and Solutions Department 102 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Page 6 Grant Parks, California State Auditor March 12, 2024 Sarah Ferry, Assistant Deputy Director, Homelessness Strategies and Solutions Department Luis Briseño, Program Manager, Compliance Department CALIFORNIA STATE AUDITOR 103 Report 2023-102.2 | April 2024 Comments CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM THE CITY OF SAN DIEGO To provide clarity, we are commenting on the response to our audit report from the city of San Diego (San Diego). The numbers below correspond with the numbers we have placed in the margin of the city’s response. 1 Despite its assertion that it already maintains spending plans, San Diego has not reported all of the funding it receives and spends for reducing homelessness in a central location, as we discuss on pages 13 and 19. The city’s budget and quarterly monitoring reports present information on certain homelessness programs for a single fiscal year and do not show in a single location all the amounts of homelessness funding the city has received, budgeted, and spent. The decentralized nature of the city’s homelessness funding information, plans, and uses, limits public transparency of and accountability for its efforts to reduce homelessness. 2 The city misunderstands the intent of our recommendation. As we explain on page 17, the State has recently allocated more than $52 million to San Diego. Therefore, it is critical that it describes how it plans to use them by the 2027 and 2028 spending deadlines, as Table 2 on page 18 shows. Our recommendation is intended to help ensure that San Diego not only complies with future spending deadlines, but also that it fully explains to the public the anticipated timing of its future spending of these funds. 3 San Diego misrepresents the extent to which its agreements with service providers contain performance measures, which are critical for the city to establish and monitor to ensure that providers are effectively addressing and reducing homelessness. As we show in Table 5 on pages 28 and 29, we found that two of San Diego’s agreements with service providers did not include any performance measures. Table 5 also shows that we identified four city‑funded agreements— three managed by the housing commission and one by San Diego—in which the performance measures were ill‑defined, despite the city’s claims in its response that some of these agreements did include specific performance requirements and outcome measures. As we explain on page 27, without defining measurable expectations for service providers, the city and the housing commission risk those providers using city dollars ineffectively and ultimately not reducing homelessness. 4 We stand by our recommendation that the city should develop performance measures to evaluate the effectiveness of the city’s programs focused on public health and safety. Although the city indicates it disagrees with the recommendation, many of the actions it describes in its response appear to align with the intent of our recommendation. We look forward to reviewing San Diego’s progress as part of our regular audit follow‑up process. 104 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 Blank page inserted for reproduction purposes only. CALIFORNIA STATE AUDITOR 105 Report 2023-102.2 | April 2024 March 7, 2024 Grant Parks * California State Auditor 621 Capitol Mall, Suite 1200 Sacramento, California 95814 Dear State Auditor Parks, The San Diego Housing Commission (SDHC) appreciates the opportunity to submit a written 1 response to the portion of your draft report about state and local homelessness funding that relates to SDHC. As we shared previously with your office, the City of San Diego’s Office of the City Auditor released a report in March 2023 about its performance audit of SDHC’s homelessness services contract management, which found that SDHC “ensures contracted homelessness services programs follow best practices through contract design, ongoing administration, and compliance monitoring.” This was one of two findings in City auditor’s report related to SDHC, and the report included one finding for the City of San Diego. The Office of the City Auditor’s report also included two recommendations related to SDHC’s processes for sole-sourced contracts, which SDHC agreed with and implemented. Your office informed SDHC that your report does not include any findings or recommendations for SDHC or the Housing Authority of the City of San Diego. However, additional context about 2 your report’s discussion of SDHC is important to provide a more complete understanding of these items for state lawmakers, stakeholders and members of the public who may review your report, as jurisdictions throughout California, including San Diego, continue to address homelessness challenges in their communities. Measuring Performance Expectations Measuring contract performance involves far more than only the identified program outcomes for a specific contract. Outcomes such as exits to the most appropriate permanent or longer-term housing are significant objectives for contracted service providers. However, how programs operate is also important. Monitoring programs for compliance with other elements of the contract Scope of Work is essential for the creation and maintenance of equitable programs that focus on the needs of the people they serve and identify housing options for them while serving them with dignity as they work toward a longer-term housing solution. During the audit, SDHC provided hundreds of documents to your office, reflecting several monitoring activities to ensure compliance with performance expectations for homelessness * California State Auditor’s comments appear on page 115. 106 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 shelters and services contracts that SDHC administers. However, your report fails to acknowledge these monitoring activities. The audit team appeared focused only on the “Program Outcomes” section of the Scope of Work 3 to determine how SDHC measures and monitors program performance. However, your report does not acknowledge that “Program Outcomes” align with regional and national best practices and the regional Continuum of Care’s Community Standards. Further, the “Program Outcomes” section of the Scope of Work comprises one to two pages of a roughly 23-page Scope of Work. While “Program Outcomes” certainly are important, they are not sufficient alone to measure contract performance. The Scope of Work also describes operational expectations for each program. Sections of the Scope of Work unaddressed by the audit team are critical to creating quality programs, informing the region’s homelessness response system, and standardizing performance requirements across programs, interventions, and program operators. 4 Erroneous Conclusions For example, the draft audit report includes the following statements under the heading “Housing Commission Agreements”: • “The housing commission’s agreements with external service providers have not always included performance benchmarks to allow the housing commission to assess the results of the service providers’ efforts.” • Page 5: “Without defining measurable expectations for service providers, the housing commission risks those providers’ using city dollars ineffectively and ultimately not reducing homelessness.” • Page 7: “When the cities either do not establish clear objectives in those agreements or do not monitor providers’ performance in achieving objectives, they risk failing to meet the needs of their residents who are experiencing homelessness.” 3 These statements misunderstand and misrepresent what the “Program Outcomes” section of the Scope of Work includes; they do not acknowledge that “Programs Outcomes” are aligned with best practices and Community Standards; and they assume the “Program Outcomes” section is the only way to define “measurable expectations.” They further misunderstand and misrepresent the comprehensive nature of the full Scope of Work section of SDHC’s contracts and SDHC’s extensive activities and efforts to monitor program performance. SDHC’s Scopes of Work include the minimum performance benchmarks for the homelessness intervention as defined in the regional Continuum of Care’s Community Standards. The Continuum of Care’s Community Standards establish community-wide expectations on the operations of projects and establish a minimum set of standards regarding the quality of housing and services provided in the area the Continuum of Care serves. Additionally, the Continuum of Care sets minimum performance benchmarks for specific interventions. Currently, the Continuum of Care Community Standards only include the percentage of exits to permanent housing as a performance indicator for all interventions. This aligns with national best practices around orienting programs to be “housing-focused,” which means that the goals of most homelessness services interventions are to resolve a person’s homelessness. The Continuum of Care’s performance benchmarks have been revised and updated over the years. SDHC has always CALIFORNIA STATE AUDITOR 107 Report 2023-102.2 | April 2024 incorporated the most up-to-date version of those benchmarks in its contracts and adjusted data collection tools to align with revisions to those benchmarks when necessary. Other key elements of the Scope of Work include: • Program Services to be offered to program participants utilizing Housing First principles and other national best practices to ensure low-barrier access to programs and services. • System Coordination, which includes the required use of the Continuum of Care’s Homeless Management Information System (HMIS) to capture program- and system- level data to inform system design; participation in the Continuum of Care’s Coordinated Entry System (CES) to ensure program participants are appropriately prioritized and connected to available community housing resources; participation with 2-1-1 San Diego to ensure potential program participants and community partners are able to identify the program when needed; and participation in 2-1-1 San Diego’s Community Information Exchange (CIE) database to aid in the creation of service plans and coordination of care for program participants. • Program Standards that reflect local and national best practices for service delivery and include detailed expectations regarding what needs to be included in program policies and procedures, program staffing, and program participant engagement in service delivery and program design. • Program Site Management and Security (when applicable), which identifies standards for site management, site security, emergency preparedness, and community engagement, to ensure the program site is safe and suitable for human habitation and/or occupation (depending on the program) at all times. • Monitoring and Improvement Activities, which describe requirements for participation in compliance monitoring and technical assistance conducted by SDHC. • Requests for Reimbursement, which identifies requirements for supporting documentation for service providers to receive reimbursement/payment for services rendered. SDHC Compliance Monitoring Activities 3 In addition to the evaluation of monthly data collection tools described in your office’s report, SDHC also performs several other monitoring and compliance activities related to the elements of the Scope of Work identified above, which are not discussed in your office’s report. Data on performance outcomes are very important, but they are not the only indicator of performance. Other elements of contract performance management, which have already been shared with the auditing team, include the following: • Compliance Monitoring: In support of creating and maintaining quality programs, SDHC implemented robust monitoring and improvement activities. SDHC monitors program compliance annually. A series of monitoring tools were developed for each intervention and are further informed by the Scopes of Work. Examples of monitoring tools, reports, and workflows have been provided to State auditors upon their request. The monitoring tools are updated each year, as necessary, to reflect any changes in the Scope of Work. As part of monitoring activities, SDHC's compliance team performs a thorough review of the service provider’s 108 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 policies and procedures and program forms. SDHC’s compliance staff also selects a sample of files for review. These monitoring activities assess areas where the service provider is performing well or may require additional technical assistance or course correction. In particular, file reviews assess if all mandatory forms are included in participant files and if case notes reflect the use of national best practices, such as Housing First fidelity and consistency with Continuum of Care Community Standards. A sample of monitoring reports was provided in a September 25, 2023, document submission to the auditors. Compliance monitoring procedures were provided in a submission of documents on September 29, 2023, to the State auditors. In the event compliance monitoring activities identify deficiencies, immediate attempts are made to mitigate the issues and bring the service provider back into compliance. Monitoring reports and general feedback mechanisms (such as email) describe the deficiencies and provide a due date for correction. Technical assistance is provided, as necessary, to support service providers, and follow-up meetings may be conducted to clarify concerns. If service providers are unable to resolve deficiencies and are determined to not be operating within the requirements of the Scope of Work, SDHC may institute a Performance Improvement Plan (PIP). SDHC staff adhere to internal policies and procedures for the PIP process. A sample PIP workbook was provided to the State auditors. The Scope of Work also requires the use of program participant feedback to inform program design and identify any areas of opportunity to enhance programs. SDHC’s compliance team collects this data quarterly as a component of monitoring performance for all programs. It is important to note that in addition to monitoring reviews, SDHC’s compliance team performs monthly audits of all Coordinated Entry System (CES) referrals to permanent housing programs SDHC administers, such as Rapid Rehousing and Permanent Supportive Housing, to ensure service providers are documenting and accepting/declining referrals according to CES policies and procedures. • Requests for Reimbursements: Detailed budgets are created in support of the Scope of Work, and other fiscal considerations such as expenditure rates and the efficacy of those expenditures are closely monitored monthly over the course of the agreement term. During the budget development period, which begins prior to contract execution, SDHC staff work closely with service providers to develop a budget that monetarily supports the program’s operational costs and ensures the service providers use the necessary staffing structure to maintain appropriate caseload ratios and/or on-site staff. The monthly monitoring of the budget begins with the service provider’s submission of Request for Reimbursements (RFRs), which is the process used for invoicing SDHC for program expenses. The RFR packets undergo a thorough review that consider aspects such as eligibility of the expenses claimed, if sufficient supporting documentation was provided to substantiate the expense, and if the claimed expenses align with the approved budget. Any ineligible CALIFORNIA STATE AUDITOR 109 Report 2023-102.2 | April 2024 expenses are disallowed and not reimbursed to the service provider. This supports fiscal responsibility and good financial stewardship. The monthly RFR data are captured in an internal database, and reports are available in the form of a fiscal monitoring tool. The fiscal monitoring tool is used to compare expenditures against the budget and project budget utilization. The tool also identifies areas where technical assistance may be required. Further, each quarter, SDHC staff perform a thorough budget analysis and review of expenditures and subsequently meet with service providers to review quarterly fiscal and programmatic outcomes. The RFR review process is captured in “Policy 2.2: Processing Requests for Reimbursements” in the Policies and Procedure manual already provided to the State auditors. • Quarterly Check-In Meetings and Technical Assistance Plans: SDHC’s Homelessness Innovations Division’s Policies and Procedures describe the method for facilitating the quarterly meetings and detail the items to be included on the agenda such as reviewing budget utilization, program outcomes, and other items identified as requiring more technical assistance. This is “Policy 2.8: Monitoring & Analysis” in the team’s Policy and Procedures manual provided to State auditors. Examples of the Fiscal Monitoring Tool and Quarterly Meeting Check-In Agenda were provided in the supplemental documents submitted for review. In addition to the Quarterly Check-In Meetings, technical assistance is provided at intervals, often daily, weekly or monthly. Technical assistance may be formal or informal. • Internal SDHC Tools: SDHC drafted and continually updates a Policies and Procedures manual to guide the work of the team. All core contract administration functions are detailed in the Policies and Procedures manual, such as RFRs and data collection tools A copy of the Policies and Procedures manual was provided to State auditors on September 29, 2023. The Policies and Procedures manual also contains Professional Standards that SDHC has developed for the staff overseeing contracts. The standards are contained in the team’s Policies and Procedures manual within “Policy 1.4: Professional Standards.” These standards define the minimum expectations for staff with regard to professionalism and core competencies related to contract administration. For example, a Senior Program Analyst assigned a portfolio of programs is expected to perform contract administration according to the following standards: 110 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 The professional standards are supported by the Policies and Procedures manual provided to State auditors, which support the core function of administering the programs, including data collection tools, Requests for Reimbursement (RFRs), Quarterly Check-In Meetings, Technical Assistance Plans, Monitoring Reports, Performance Improvement Plans (PIPs), Budget Development, Expenditure Tracking, Informational Reports, Public Dashboards, and Performance Monitoring. 2 Additional Details Missing from the Audit Report In the second paragraph after Table 3 in the section under the heading “Housing Commission Agreements,” your office’s report stated: “The housing commission did not clearly define its expected performance measures in 3 of the 11 agreements reviewed.” In the same paragraph, the report further stated, “For example, in a $1.6 million agreement for interim housing and supportive services, the housing commission did not specify how many people the provider should serve or 2 set a target for shelter occupancy.” SDHC previously submitted responses to those concerns to your office by email on January 25, 2024; however, this additional context is not reflected in the report. It is provided here: • Contract HHI-18-22.1 (Family Health Centers of San Diego Housing Navigation Center) Outcomes in the initial contract were primarily based on Family Health Centers of San Diego’s (FHCSD) response to the Request for Proposals for this project, as this was a new program model that had only been piloted in a few other jurisdictions, with some variations. There were no community standards or other baselines to develop outcomes. The Homeless Management Information System (HMIS) did not include the ability to collect all the data FHCSD had proposed reporting. Therefore, it could not be captured on the data collection tool initially. Subsequent discussions with the operator occurred in January and February 2020 about how to capture those data elements, whether through customized services in HMIS or through the provider’s internal data systems. FHCSD developed an on-site electronic database for tracking and reporting on a variety of data points, including services provided by on-site partners and metrics related to clients' CALIFORNIA STATE AUDITOR 111 Report 2023-102.2 | April 2024 status in the housing process. As SDHC and FHCSD worked together in the months after the program opened, they discussed options for how best to capture performance data toward several outcomes in the contract that were not included in the data collection tool at program opening (as noted above), including whether to utilize FHCSD's internal database or another system. The onset of the COVID-19 pandemic in March 2020 disrupted these conversations. This let the Housing Navigation Center to shift to a modified schedule and service delivery plan as of April 2, 2020. Ongoing discussions on reporting and outcomes were ultimately affected by the closure of the Housing Navigation Center program on October 29, 2020, prior to the end of the contract term, due to service delivery and staffing challenges related to the pandemic. • Contract HHI-21-17 (PATH – Homelessness Response Center) After the Housing Navigation Center closed, SDHC began operating the Homelessness Response Center at the same location. SDHC contracted with People Assisting the Homeless (PATH) to provide system navigation and related services at the Homelessness Response Center. Most of the metrics in the outcomes table in the Scope of Work for this contract are listed as “reporting only” because this was a new program model, and SDHC needed to gather data to establish baselines for future metrics. The program model was developed as a result of successful practices SDHC had implemented during Operation Shelter to Home, the City’s shelter response to the COVID-19 pandemic, combined with some practices that had been implemented at the Housing Navigation Center. This was unlike any other approach nationally. SDHC did not have baseline outcomes to include in the Scope of Work at that time. In subsequent amendments, SDHC added outcomes for persons served through system navigation, exits to permanent housing, and average length of enrollment for exits to permanent housing. The data collection tool evolved over time from the initial contract Scope of Work as SDHC gained a better understanding of the program model and further determined what could be captured in the Homeless Management Information System for reporting. • Contract HHI-22-41 (Harm Reduction Shelter) The “$1.6 million agreement for interim housing and supportive services” mentioned in the statement above from your office’s report refers to the Harm Reduction Shelter. In the Scope of Work, the sections named “Program Description” and “Target Population/Geographical Area,” as well as other sections, state, “Individuals will be referred and provided case management and supportive services directly through the County of San Diego’s Community Harm Reduction Team.” This means that the SDHC- contracted program operator does not have control over who is referred to and enters the shelter. Therefore, it would not be appropriate to set a contract performance outcome for the number of people the program operator is expected to serve or a target for occupancy. Additionally, it is not a best practice to set performance goals related to persons served annually. As SDHC staff shared with the auditor’s office, in the past, when such persons- served goals were set, some programs exited clients after a specified amount of time (e.g., 90 days) to ensure they were turning over beds often enough to meet the goal of persons 112 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 served for the year. This resulted in people being exited to the streets before housing goals could be achieved. As a result, SDHC revised outcomes to align with the Community Standards (as referenced above), which focus on exits to permanent housing and average length of stay for exits to permanent housing. In all other shelter contracts, SDHC includes occupancy as a measured outcome as well, to ensure existing beds are utilized to the fullest extent possible. In the last paragraph before Table 5, which continues immediately after Table 5 in the draft report, your office stated: “the housing commission did not always ensure that it received required data on provider performance…The housing commission did not receive all of the necessary reporting for 2 2 of the 11 agreements.” SDHC previously submitted responses to those concerns to your office by email on January 25, 2024. However, this additional context is not reflected in the report. It is provided here. • Contract HHI-22-41 (Harm Reduction Shelter): The goal for “Exits to Permanent Housing” was changed to 26 percent in the data o collection tool because the San Diego Regional Task Force on Homelessness (RTFH) updated its community standards in June 2021. SDHC updated the data collection tools to align with that new standard even though all contract Scopes of Work did not reflect that update due to the timing of contract execution and the release of the new standards. “Number of Individuals on the Program Waitlist” is in the Scope of Work; o however, SDHC removed it from all shelter data collection tools starting in Fiscal Year 2022 because SDHC launched the Coordinated Shelter Intake Program. With this intake program, shelters no longer maintained individual waitlists for their programs. Additionally, this particular program (as stated above) did not control who enters the shelter, as that was overseen by the County of San Diego. The 100 percent spend-down of awarded funds is monitored outside of the data o collection tool through the monthly Requests for Reimbursement review and fiscal monitoring process. SDHC removed this from the outcomes table in Fiscal Year 2023 when SDHC created a completely revised and standardized contract template, as this was legacy language from some federally funded programs that required 100 percent grant spend-down. • Contract HHI-20-07.1 (Mental Health Systems Serial Inebriate Program) The Scope of Work reflects a goal of 100 percent for “Prioritize Entry for Persons from the Streets, Emergency Shelters, or Safe Havens,” but this metric is reported only in the data collection tool. This metric and goal were included in the Scope of Work because, at the time of the initial contract term, they were part of the Continuum of Care Community Standards for Transitional Housing Programs. However, upon further consideration of the uniqueness of the population served by the Mental Health Systems Serial Inebriate Program, SDHC removed that goal because all persons served by the program are referred by the courts, and the operator did not have the ability to decide who to prioritize for the program. Almost all the “serial inebriates” referred by the courts were coming from jail or detoxification facilities and not from the “streets, emergency shelters, or safe havens.” That is also why SDHC added the “Prioritize and target serial inebriates in the CALIFORNIA STATE AUDITOR 113 Report 2023-102.2 | April 2024 community” reporting metric. Although it is not in the Scope of Work outcomes table, it is in Section 6.a. of the Scope of Work. Your office’s report further stated, “…staff did not always document an overall conclusion about the effectiveness of the service providers’ efforts. … These types of assessments are crucial for ensuring accountability and the reduction and prevention of homelessness. Without such analyses, it is unclear how the housing commission decides to renew agreements. The weaknesses we note above have limited the information available to the housing commission when making such decisions.” SDHC disagrees with these statements for the following reasons: • As outlined above, SDHC has extensive documentation regarding program performance through compliance monitoring activities, requests for reimbursement activities, quarterly check-in meetings, technical assistance plans, and data collection tools. • When deciding to renew contracts, SDHC considers external factors that affect the ability of homelessness programs to achieve some performance metrics, such as staffing challenges and the scarcity of housing resources available through the Coordinated Entry System (CES) amid historically low vacancy rates and high rental costs in the City. Addressing Systemic Issues SDHC has acted to improve some of the systemic issues that impact program performance. For example, in October 2020, SDHC, in partnership with San Diego City College, launched an innovative, first-of-its-kind program, the Homelessness Program for Engaged Educational Resources (PEER). The Homelessness PEER course provides specialized education, training and job placement assistance to develop the workforce needed for programs and services that help San Diegans experiencing homelessness. In 2022 SDHC engaged in a compensation study of homelessness services sector positions to review and consider recommendations for ensuring competitiveness of wages for critical frontline positions and launched a wellness initiative for frontline staff to support sector efforts to attract and retain staff. Conclusion Addressing homelessness challenges in communities throughout California, including the City of San Diego, is complex and requires a variety of shelters and services programs that address diverse needs among the homelessness population. SDHC continues to rise to these challenges by developing innovative initiatives, collaborating with private sector service providers and other government agencies, and growing its team, as necessary, to meet the needs of some of the City’s most vulnerable people experiencing homelessness. We have done this with efficiency, effectiveness and accountability for ourselves and our partners. The Homelessness PEER course, homelessness services sector compensation study and wellness initiative described above are among initiatives SDHC has developed to strengthen the necessary workforce and address the staffing needs for homelessness shelters and services programs. Additionally, SDHC has emphasized making services housing-focused and providing case management to exit more households to longer-term and permanent housing beyond the limited housing resources available in San Diego’s regional Coordinated Entry System and within the high-cost, low-vacancy residential housing market in San Diego. We also follow a process to continually enhance our efforts to align with best practices and ensure contract expectations meet 114 CALIFORNIA STATE AUDITOR April 2024 | Report 2023-102.2 community standards. This requires monitoring activities, technical assistance and system-level investments, many of which are detailed in this response to the audit. All of this has occurred as the homelessness services sector in recent years has experienced a series of challenges, including the Hepatitis A outbreak in 2017, the worldwide COVID-19 pandemic, the fentanyl crisis affecting San Diego and cities across the country, and the affordable housing crisis in the City of San Diego. 2 It is unfortunate that the audit report’s discussion of SDHC and its efforts was too narrowly focused, did not reflect understanding of the breadth of SDHC’s extensive efforts, and lacked the 4 context necessary for a comprehensive assessment of the homelessness shelters and services system. Sincerely, Lisa Jones President and Chief Executive Officer San Diego Housing Commission CALIFORNIA STATE AUDITOR 115 Report 2023-102.2 | April 2024 Comments CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM THE SAN DIEGO HOUSING COMMISSION To provide clarity, we are commenting on the response to our audit report from the San Diego Housing Commission (housing commission). The numbers below correspond with the numbers we have placed in the margin of the housing commission's response. 1 We provided a redacted copy of the draft report to the housing commission for review; therefore, the page numbers, wording, and headings that the housing commission cites in its response do not align with this final report. 2 The housing commission’s response demonstrates its misunderstanding of the focus of the audit we performed as requested by the Joint Legislative Audit Committee (Audit Committee). Specifically, the Audit Committee directed us to assess how effectively San José and another city, which we selected as San Diego, are using funding to prevent and reduce homelessness. As such, we reviewed the housing commission’s management of agreements with service providers on behalf of San Diego to determine how the housing commission ensures that its service providers are effectively providing housing and services to reduce homelessness. Despite this audit scope, the housing commission’s response and the documentation it references focus on its efforts to ensure that service providers comply with agreement requirements, such as by reviewing requests for reimbursements and providing technical assistance. None of these activities amount to an assessment of how well service providers are reducing homelessness. As we show in Table 5 on pages 28 and 29, we found that the housing commission had set performance measures for most of its agreements with service providers. However, we also found that it did not always assess whether the service providers met those performance measures—a shortcoming that we describe on page 30. In fact, the housing commission agreed that it could better document its assessments. As we explain on page 27, without defining measurable expectations for service providers, the housing commission risks those providers using city dollars ineffectively and ultimately not reducing homelessness. 3 The housing commission incorrectly states that our report does not acknowledge that its program outcomes align with certain best practices and standards. In fact, we describe on page 29 that the housing commission explained that it uses its monthly data collection tools to compare results of a program to the contracted benchmarks and that it bases these contracted benchmarks on its CoC's community standards and other best practice information. 4 We stand by our report’s conclusions. We conducted this audit in accordance with generally accepted government auditing standards. In following those standards, we obtained sufficient and appropriate audit evidence to support our findings and conclusions. As is our standard practice, we engaged in extensive research and analysis for this audit to ensure that we could present a thorough and accurate representation of the facts. The information the housing commission includes in its response does not refute any conclusions included in our report.