Auditor Issues Report on COVID-19 Emergency Rental Assistance Program, Warns State at Risk of Losing Federal Funds

California State Auditor Elaine Howle issued a report this week warning the state may be at risk of losing millions of unobligated federal funds intended for rent and utility assistance amid the COVID-19 pandemic. The report comes as part of the state’s high-risk audit program. Recall, in August 2020, the auditor designated the state’s management of federal COVID-19 funds as a high-risk issue with substantial risk of serious detriment to the state and its residents.

Under the report issued this week, the auditor focused on the Department of Housing and Community Development’s (DHCD) management of $1.8 billion for California’s program to provide rental assistance benefits to eligible households with residents at risk of eviction. California faces a crucial deadline of September 30, 2021, to obligate funds for their intended purpose issued in the program’s first funding round by the federal government. California received a total of $2.6 billion in the first round of funding with $1.5 billion to the state and $1.1 billion directly to 49 cities and counties statewide.

Auditor Howle, in her report, raises concerns with DHCD’s management of the funds including:

• DHCD did not properly utilize the definition of “obligated funds” in its most recent report to the U.S. Department of Treasury
• DHCD remains at risk of losing up to $337 million in unobligated funds if the amount of obligated funds is not increased by the September 30, 2021, deadline
• DHCD’s ability to reallocate funds has been slowed by changes to the state’s rent relief program

DHCD, in its response to Auditor Howle’s report, disagreed with the conclusion that funding is at risk after the September 30, 2021, deadline due to differences in interpretation of federal law.

The full auditor report is available here.