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L.A. AGENCY IMPROPERLY USED FUNDS FEDERAL MONEY FOR THE HOMELESS PAID OTHER BILLS.

Byline: Beth Barrett Staff Writer

The embattled Los Angeles Homeless Services Authority, which oversees the region's homeless programs, repeatedly violated regulations by using about $1.7 million in federal funds to bail out other programs, the Daily News has learned.

The improper transfers were made in fiscal 2004 and 2005 when the LAHSA staff used U.S. Housing and Urban Development grants to make ``temporary loans'' to pay emergency bills when the proper funds weren't as easily accessible.

William Vasquez, HUD's Los Angeles field office director of community planning and development, acknowledged in an interview that the authority violated federal rules that ban commingling of funds. He also said the loans were made without HUD's knowledge.

HUD, which this year awarded LAHSA $60.4 million - some of which LAHSA gives directly to housing authorities - could impose sanctions against the agency. Penalties could range from suspending the authority's federal funding to requiring repayment of the money with nonfederal dollars.

Los Angeles County auditors have been working for the past five months to correct the violations. LAHSA officials and auditors said this week that the practice has been stopped, borrowed federal funds have been repaid, and procedures are in place to prevent the practice.

They also said no criminal fraud has been found.

But the violations are the most serious yet in a string of fiscal and mismanagement problems that surfaced last year when auditors disclosed that the authority owed homeless providers $5 million, but had just $700,000 in the bank.

Mayor Antonio Villaraigosa said Thursday that he is ``very concerned'' about the possibility LAHSA has violated federal regulations.

``We are quickly getting to the point where it will be difficult to defend the status quo at LAHSA given the pattern of mismanagement over a sustained period of time,'' said Villaraigosa, who has asked for a management audit of the authority.

City Controller Laura Chick questioned the continuance of LAHSA, a city-county authority created in 1993 that was given fiscal autonomy in 2001.

With a fiscal 2006 budget of about $50 million, the authority has a staff of 65 aiding dozens of nonprofit agencies helping the region's approximately 80,000 homeless.

``The possibility of having to return precious dollars for the most needy in our society is more than a flare, it's like sending up fireworks saying, 'Pay attention,''' said Chick, whose auditors uncovered fiscal problems at the agency last summer.

``I really have concerns and doubts that LAHSA is a viable and effective agency that should continue in its current form.''

LAHSA Commission Chairman Owen Newcomer said the agency has ``been straightened out,'' and he isn't concerned about the previous federal violations.

``It has been corrected,'' Newcomer said. ``There are a lot of people who disagree with us. Those who look at the old problem need to look at the current situation.''

But LAHSA Commissioner Douglas Mirell, a Villaraigosa appointee, said the new disclosure about HUD violations is ``extremely troublesome.''

``I've received various assurances from various people (that) these are all historical anomalies,'' Mirell said. ``I'd heard about the commingling, but (the HUD violation) is new to me.''

Ramona Ripston, another Villaraigosa appointee and executive director of the American Civil Liberties Union of Southern California, said the disclosures are worrisome.

``There must be a problem there, and we have to look at how LAHSA operates and how they got there,'' she said.

Mitchell Netburn, the $150,000-a-year executive director for LAHSA, said in an interview that he couldn't ``recollect'' whether he knew the ``temporary loans'' were a violation of federal regulations at the time they were made.

But Netburn - whose performance is to be discussed in closed session as part of a commission meeting today - said he now does.

``In retrospect, it was wrong and we've put in procedures to keep it from happening again,'' Netburn said.

``The reason we did it ... we had no line of credit, and very often there was a length of time to draw down funds (from the correct funding source). We had very small providers who were going to close their doors and homeless people were going to be on the street. To prevent that from happening, we did this. Ultimately, no, it was not justified.''

It was quicker to draw on HUD funds than to go through more cumbersome processes with other funding sources when emergencies arose, he said, adding that LAHSA also occasionally used other funding sources to pay emergency bills.

``They had to rob Peter to pay Paul,'' said Terri Kasman, the county's chief accountant auditor, who has been working to reconcile LAHSA's numerous grants.

Los Angeles County Auditor-Controller Tyler McCauley said he wasn't aware that the temporary loans violated federal regulations.

McCauley said HUD officials told the county they just wanted the books corrected, with the grants reconciled with the programs they were originally supposed to pay for.

``They (auditors) corrected all the things they (LAHSA) did,'' McCauley said. ``They put them back in the right buckets.''

Vasquez said HUD's monitoring has been stalled by LAHSA's failure to complete its fiscal 2004 independent audit - now nearly a year late.

``All of a sudden, the system fell apart,'' said Vasquez, who said it is unusual for an organization of LAHSA's stature to have broken federal regulations.

``You'd expect an organization like LAHSA to have a professional accounting system in place that we could easily track,'' he said.

Netburn - defending his performance amid a political firestorm at City Hall, where Villaraigosa has shaken up the LAHSA commission with five new appointees - said he should get a second chance.

He blamed a constellation of problems for the situation, including the agency not having its own line of credit for emergencies - an issue also to be addressed at today's commission meeting.

He said the number of grants the agency received was expanding rapidly - including more complexities, such as when the city's three contracts split into 20 - at the same time his fiscal staff of 11 was about half of what was needed and a new chief financial officer was hired.

Netburn said establishing a line of credit had been discussed but was never seriously pursued because of the interest payments that would be required.

And he said the mandated fiscal 2004 independent audit was put on the back burner. ``With limited staff, the audit came second,'' he said.

The authority's disintegrating fiscal situation was flagged, he added, by his reports to commissioners who report to elected county and city officials.

``People make mistakes and learn from them,'' said Netburn, who took over the authority in September 2000 and said he has saved the county and city money by being understaffed for years. ``The goal was altruistic, but wrong. In retrospect, I wouldn't repeat it. At the time, we'd do a temporary loan - or have somebody on the streets.''

Beth Barrett, (818) 713-3731

beth.barrett(at)dailynews.com
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Publication:Daily News (Los Angeles, CA)
Date:Feb 3, 2006
Words:1143
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