An investigation into millions of dollars the city of Long Beach spent on homeless service providers has been turned over to an outside agency after auditors identified what the city auditor described as “irregularities” that raised “significant concerns.”
The disclosure marks a significant development in an investigation NBC4 has been following for months — and comes five months after Long Beach City Auditor Laura Doud declined to say whether the matter had been referred for criminal investigation.
In an email to NBC4, Doud wrote:
“During our audit, we identified irregularities that caused significant concerns. We reviewed the information and have turned over the investigation to an outside agency.”
The Auditor’s Office has not identified the outside agency or said whether it is a law enforcement agency.
NBC4 has asked whether the matter was referred to the U.S. Attorney’s Office, FBI or another federal, state or local law-enforcement agency. The Auditor’s Office has not responded to those questions.
Auditor previously declined to discuss possible criminal investigation
The latest disclosure takes on added significance because of what Doud told NBC4 during an exclusive interview in April.
At the time, Doud’s office was investigating homeless service providers and examining questionable billings, missing documentation and whether the city had received the services for which it paid.
Doud said auditors had encountered “some irregularities and some red flags” and knew the findings were “more concerning than a standard, routine audit.”
NBC4 then asked Doud directly: “Has this been referred for criminal investigation at any level?”
Doud initially asked for the camera to be stopped. When the interview resumed, she responded, “I’ve been advised not to address those questions regarding criminal investigation at this time.”
Five months later, Doud is now confirming that the investigation has been referred outside City Hall.
It remains unclear where it was sent, when the referral was made and whether the outside agency is conducting a criminal investigation.
What could an outside referral mean?
NBC4 Legal Analyst Royal Oakes cautioned that an outside referral does not by itself establish that criminal wrongdoing occurred.
“Usually when a city auditor hands the ball to an outside investigator, it’s a sign that they think this could be a very serious matter,” Oakes said. “They want somebody independent, somebody with special expertise.”
Oakes said potential outside agencies could include federal authorities such as the U.S. Attorney’s Office, FBI or IRS, as well as the Los Angeles County District Attorney or California Attorney General.
“We have no idea if people are looking at this as a possible criminal violation,” Oakes said, adding that an outside investigation could eventually involve investigative tools such as subpoenas.
No agency has been identified as the recipient of Long Beach’s referral.
Federal authorities investigating homelessness fraud
The development comes as federal authorities separately pursue alleged fraud and corruption involving homelessness programs in the Los Angeles area.
On Wednesday, U.S. Attorney Bill Essayli and a federal task force investigating potential misuse of homelessness funding announced arrests in separate cases involving alleged fraud and corruption, including a case involving the founder of a Culver City-based nonprofit.
There is no known connection between those cases and the Long Beach investigation.
Before NBC4 received Doud’s email confirming the outside referral, NBC4 had contacted the U.S. Attorney’s Office to ask whether federal authorities had received information involving the Long Beach homeless service providers.
A spokesperson responded: “Per DOJ policy, we can neither confirm nor deny the existence of any investigation.”
‘More concerning than a standard, routine audit’
During NBC4’s April interview, Doud said auditors had encountered questionable billings and problems with documentation.
She explained that without a proper audit trail, complete records and supporting documentation, auditors could not verify whether expenditures were valid or whether services had been provided as intended.
“There were some irregularities and some red flags that caught our eye,” Doud said, “and we knew that this was more concerning than a standard, routine audit.”
Doud also described the review as one of the most significant undertaken during her tenure.
“This is really one of our top audits that we have done in 20 years,” she said.
Doud told NBC4 in April that auditors were examining two homeless service providers.
The latest disclosure answers one important question: The investigation ultimately did leave City Hall. But several others remain unanswered.
NBC4 is continuing to seek answers from the Auditor’s Office and the agencies that could potentially be involved.