CA Auditor: State Agencies Mismanaged COVID-19 Funds

CALIFORNIA —The California State Auditor said Tuesday that a state agency neglected to properly distribute funds meant to help those experiencing homelessness during the coronavirus pandemic. As a result, auditors said local programs could lose funding next year amid missed deadlines.

The California Department of Housing and Community Development reportedly received $316 million under the federal Coronavirus Aid, Relief and Economic Security Act to "prevent, prepare for, and respond to the COVID-19 pandemic for individuals who are at risk of or experiencing homelessness."

“In the weeks and months following the passage of the CARES Act, we expected the department to have taken every step possible to ensure that timely access and it did not," the report said.

Auditors said the department failed to show "leadership and readiness" to distribute funding to local organizations, which may not be able to spend the full amount allocated within federally mandated time frames.

The report also found that the department did not collect the necessary information needed to effectively measure the state's use of federal funds to help those experiencing homelessness.

Gov. Gavin Newsom's office disagreed with the audit, The Associated Press reported.

“Gov. Newsom acted quickly and comprehensively to protect people experiencing homelessness during the pandemic, which is why California’s approach has become the national model,” Erin Mellon, the governor’s spokeswoman, said in a statement, according to the AP.

Auditors also found that three state agencies mismanaged federal COVID-19 funds. The mismanagement of such funds created a "substantial risk" to Californians, according to an annual high-risk report released last week.

Last August, State Auditor Elaine Howle highlighted a significant amount of federal coronavirus aid granted to the state as a "high-risk statewide issue" since several agencies and programs received an amount of funding that exceeded normal expenditures. This increase required agencies to quickly establish better management to distribute funding to those who needed it.

"Failure by the departments that implement these programs to engage in adequate outreach efforts could have left Californians without medical care or money to pay for housing and food for themselves and their families," according to the report.

The Employment Development Department, the Department of Public Health and the Department of Finance were all identified in the audit.

In January, Howle said smaller communities received significantly less funding per person than larger counties, a distribution that was left up to the state's Finance Department.

The state's employment department was identified in the audit as an agency with "significant weaknesses" in fraud prevention, a widespread blunder that has continued to make headlines.

"EDD did not take substantive action to bolster its fraud detection efforts for its unemployment insurance program until months into the pandemic," Howle said in the report.

Howle highlighted about $10.4 billion in potentially fraudulent claims associated with the EDD, adding that the agency took months to address the issue. In addition, she said the EDD did not take appropriate action against claims filed from "suspicious addresses and removed a key safeguard against improper payments."

Last spring, the EDD decided to nix the tedious work of verifying each claimant's eligibility as millions flocked to the Employment Development Department's website amid sweeping stay-at-home orders and mass closures across several business sectors.

During the week ending Aug. 22, 2020, the department received an average of 60,368 new electronic claims each day, and 40 percent of those claims were routed for manual processing: 24,147 manual claims per day, which is a tenfold increase, according to a state report.

Possible fraud schemes caught the attention of officials in early September last year when Californians who hadn't previously filed unemployment claims began receiving bizarre amounts of letters from the employment agency in August, many of which were regarding claims of other people.

Another audit, conducted in April, revealed that $467 million in federal COVID-19 funds may have been mismanaged by the state Department of Public Health. The oversight of funding was linked to an insufficient amount of contact tracing that lagged the department's initial ambitions.

"Fewer-than-expected tracing staff and an influx of new cases resulted in only a small fraction of COVID‑19 cases undergoing the full contact-tracing process," according to the audit. "Because of the mismanagement of federal COVID‑19 funds by several state agencies, it remains a high-risk statewide issue."