An audit released by the office of the Auditor of the State of California shows that Coronavirus Aid, Relief, and Economic Security Act (CARES) funds earmarked to support individuals and families who are at risk of or experiencing homelessness went largely undistributed during the COVID-19 pandemic. The audit summary claims, “…the department did not take critical steps to ensure that the 316 million dollars in ESG-CV funds promptly benefited the vulnerable population for which it was intended.”

The Department of Housing and Community Development is responsible for administering the Emergency Solutions Grant (ESG) program which received 316 million dollars in federal funding. That amount is more than 300 million dollars higher than typical annual funding.

The department does not directly provide services, shelter, and housing to at-risk and homeless individuals and families. Emergency funds are distributed through a reimbursement process. Local Continuum of Care entities (CoCs), which are groups of organizations and individuals that collaborate on homeless services and homelessness prevention for a specified geographic area must have a contract with the department to receive funding.

“The department’s delays in providing access to this funding hampered the efforts of Continuum of Care entities,” stated State Auditor Elaine Howle. “These delays slowed the CoCs’ abilities to contract with service providers and to expand services for the vulnerable homeless population.”

The audit found that the “department took steps to simplify its process for determining potential allocation of these funds to the CoCs, its failure to expedite its contracting process meant that most CoCs could not acces the first round of ESG-CV funding until December 2020 – five months after they had submitted their applications for funding.”

In June 2021--14 months after the CARES Act passed-- the department, finally acknowledging that it lacked the capacity to manage the ESG-CV program, entered into a 7.6 million dollar contract with a firm with “expertise in administering federal programs.” The audit results state, “…the department has known since June 2020 that it would need a contractor to manage the ESG‑CV funds. However, the department only recently began preparing to manage and evaluate the contractor’s work. The State Contracting Manual requires state agencies to assign internal staff who are responsible, among other things, for monitoring progress of work to ensure that the services are performed according to the quality, quantity, objectives, time frames, and manner specified in the contract.”

The report further states, “According to the federal programs branch chief, the department plans to use the contractor’s scope of work as the basis for a plan for tracking the contractor’s progress and for reviewing work products…. the department’s new contract manager, hired in April 2021, has started developing a contract monitoring plan spreadsheet.” The contract manager told a different story, “…she stated that the department had not yet developed a formal plan or reporting mechanism for how it will track the contractor’s progress…”

The Department of Housing and Urban Development (HUD), which funded the 316 million dollar award to the ESG program, “…identified the department’s lack of written policies and procedures for meeting ESG programmatic, fiscal, and administrative requirements as a deficiency,” in a 2019 report.

The result of the department’s poor management of the ESG program could see tens or even hundreds of millions of dollars reallocated due to disuse before the federally mandated spending time frames expire. “The State must spend at least 20 percent of its total 316 million dollar award, or 63 million dollars, by September 30, 2021.” The summary further states, “Although the department recently reported total expenditures of 55 million dollars, the department relied on the CoCs to self-report estimated expenditures to reach this amount and has not yet validated or verified this information.”

“CoCs were left without necessary direction from December 2020, when they first received funds, until June 2021 when the contractor began managing the program. The department’s delayed actions undermined the intent of the ESG‑CV funds to address the urgent needs of individuals experiencing homelessness during the pandemic,” said Howle.

As of August 2021, the federal government reported that the State had spent only 2 million of the 316 million it was allocated.

Since March 2020 less than 1% of available funds have been used. “I couldn’t be angrier to hear that resources I fought to bring home to fight the homelessness crisis have been caught in Sacramento’s never-ending web of red tape,” said Rep. Harder. “We all know homelessness is an emergency and to think the Department of Housing and Community Development sat on its hands rather than using federal resources to move folks off the streets is just astounding. I’m calling for the state to accelerate the distribution of these homelessness funds TODAY. And I’m calling for a full report on what went wrong over the past year and how we can make sure federal funds actually get put to good use.”

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