Audit: California risked millions in homelessness funds due to poor anti-fraud protections

California put hundreds of millions of homelessness dollars at risk because of its “disorganized” and “chaotic” anti-fraud policies, according to a critical federal audit.

The audit released Tuesday analyzed California’s Department of Housing and Community Development, which oversees the state’s homelessness programs. It gave the California agency its lowest possible ranking, finding that it lacked adequate policies to prevent, detect and respond to fraud. As a result, the audit found, the state agency failed to properly protect $319.5 million in federal homelessness funds, which were distributed during the COVID-19 pandemic, from the possibility of misuse.

The audit did not uncover any new instances of fraud.

“Fraud poses a significant risk to the integrity of federal programs and erodes public trust in government,” Inspector General Rae Oliver Davis, with the U.S. Department of Housing and Urban Development, said in a news release. “Enhancing its robust antifraud program will help the California Department of Housing and Community Development ensure that its pandemic grant funds, and future homelessness assistance funds, are safeguarded from fraud.”

With the arrival of the COVID-19 pandemic in 2020, the federal government poured $4 billion into its Emergency Solutions Grant program, which was intended to help people struggling with homelessness. California’s share of that pot was $319.5 million — a 2,505% increase from its typical annual allotment. With that huge influx of money also came an increased risk that bad actors would attempt to use those funds for nefarious purposes. But California failed to adequately step up its anti-fraud measures, according to the federal housing department.