Los Angeles City Controller Kenneth Mejia has released a financial report titled, “Leveraging Idle Special Funds,” and claims to have found $72 Million in unspent money. He has recommended that the city spend $51 Million of those funds, including $10 Million toward housing and homelessness.

In analyzing $5.43 billion dollars held in 661 different special funds, the City Controller’s Office discovered 203 special funds that have had no activity for at least two years. The report also states that 62 of them have been untouched for surprisingly more than ten years.

While there are often specific restrictions on expenditures from these funds, the analysis shows more than $50 million in idle resources that city departments should deploy to meet the purposes for which the funds were collected. This includes more than $10 million earmarked for vital housing and homelessness functions.

The report offers detailed proposals for utilizing these untouched resources, calling on departments to submit expenditure plans for putting these idle funds to work. Controller Mejia also recommends terminating a number of these funds to redeploy their balances – or to return them to the source, including approximately $600,000 to the General Fund or General Fund reserves.

Controller Mejia says, “Our commitment to transparency and accountability impels us to continually press for maximizing the impact of public resources. Prudent reserves are vital for long-term fiscal sustainability. Yet letting funds sit in obscure accounts for years at a time shortchanges the people of Los Angeles at a time when they are insisting on greater responsiveness from their City government.”

Chief Deputy Controller Rick Cole adds, “We will continue to monitor the use of public resources and work for systemic change that eliminates bureaucratic barriers which slow progress. As stewards of public funds, making the most of those resources is crucial to rebuilding public trust.”

Mejia’s specific recommendations in the report, are stated thusly:

“To improve the short-term management and accountability over Special Funds administration, we recommend that the Mayor and Council instruct Departments to:

1) Submit spending plans to this Office for the 64 funds listed under the category “Department should submit an expenditure plan for these funds” in the Controller’s Status of Idle Funds report
2) Work with the City Administrative Officer (CAO) to transfer special funds to the General Fund for those seven (7) funds identified as “Repay Reserve Fund Loan” in the Controller’s Status of Idle Funds report
3) Follow the remaining actions to dispose the cash balances in the remaining Special Funds identified under the “Recommendations” heading in the Controller’s Status of Idle Funds report
4) Request the City Attorney to draft an ordinance to repeal previously closed Special Funds identified as “Repeal” under the “Status” heading in the Controller’s Status of Fund Ordinances to Repeal

For the long-term reduction in the number of idle Special Funds, we suggest referring to the Controller’s prior Special Fund reports. As such, we encourage the Mayor and Council to consider the following prior recommendations for implementation:

1) Instruct the CAO to develop a policy for automatically disencumbering outstanding Special Fund encumbrances three years or older
2) Request the City Attorney to incorporate a sunset clause for new Special Fund ordinances
3) Instruct the CAO to create a Departmental Special Fund Creation Form submitted by Departments to summarize the intent and nature of the new Special Fund requested

4) Instruct the CAO to create a policy to transfer cash to the General Fund from expired and obsolete grant Special Funds, especially when insufficient documentation is available to keep them”

With regard to the housing and homelessness recommendations, Mejia’s report identifies the following funds, currently dormant, to be put to use with the following recommendations stated as “Opportunity:”

“• $3,590,258- Central City West Housing, Fund 521: Cash balance is from developer contributions and program income to be spent for affordable housing programs in the Central City West planning area. There is $3.5 million in a 2022 appropriation for the “Third Thyme” project.
OPPORTUNITY: Support affordable housing through implementing the “Third Thyme” project.
• $3,187,875- CalHome, Fund 46X: The cash is made up of program repayments of principal and interest from borrowers to be used for additional soft-second loans to qualified low-income homebuyers.
OPPORTUNITY: Evaluate the uncommitted balance for opportunity to support affordable housing projects and programs.
• $1,164,815 – Local Housing, Fund 48G: This fund consists of state matching funds and program income for past multi-family housing and/or homeownership loans that have been repaid. There are no
OPPORTUNITY: The fund manager should appropriate the cash balance into new affordable housing programs or projects.
• $945,334 – A 2019-2022 United Way Greater of LA Housing Crisis Response Team Implementation Grant, Fund 62S: The fund is from a United Way grant to pay for five positions within the Mayor’s Office.
OPPORTUNITY: Evaluate unspent appropriations for opportunity to support housing programs.
• $491,907 – Channel Gateway/Venice Affordable Housing, Fund 911: The source of fund is a developer contribution of $1.0 million for the Channel Gateway project to be used within the Venice Community Plan Area. There are no appropriations.
OPPORTUNITY: Evaluate the cash balance for potential appropriations to support affordable housing programs or projects.
• $279,501 – Mortgage Credit Certificate Program, Fund 643: The fund is to cover fees and expenses by the Housing department to submit Special Funds Report applications to the state to fund the City’s Mortgage Credit Certificate (MCC) program. Currently, there is no state funding available. There is
$204,350 in unspent appropriations.
OPPORTUNITY: Evaluate the MCC program and unspent appropriations if they can be used to support affordable housing projects and programs.
• $240,087 – Emergency Rental Assistance Subsidy Program Trust, Fund 63D: The cash is from a transfer from Fund 53P State AB1290 and private donations. There are no appropriations.
OPPORTUNITY: Use the cash balance for new appropriations to support affordable housing programs or projects.
• $28,351 – California COVID-19 Emergency (Homeless Californians Grant), Fund 63B: There are no appropriations.
OPPORTUNITY: Use the cash balance for new appropriations to support affordable housing programs or projects.”

Image provided by the Controller’s Office

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