It is a victory for Los Angeles in LAHSA v. Trump et al. that a federal court has temporarily halted the U.S. Department of Housing and Urban Development's suspension of the Los Angeles Homeless Services Authority and ordered HUD to execute already-awarded 2025 grants. The court found that HUD's action was arbitrary and unlawful, restoring LAHSA's role as the regional Continuum of Care applicant and protecting critical federal homelessness resources.
That is good news for Los Angeles.
Los Angeles can celebrate the protection of federal funding while still demanding stronger oversight of every public dollar. In fact, it must.
There have been legitimate and disturbing allegations of fraud and financial mismanagement involving a handful of organizations entrusted with public funds. In January, the Los Angeles County District Attorney charged the CEO of the nonprofit Abundant Blessings with allegedly defrauding LAHSA of more than $5 million. Public scrutiny of nonprofit finances, executive compensation, contracting and performance is not only appropriate; it is necessary.
Taxpayers should expect nonprofits receiving public money to be transparent, financially responsible and able to demonstrate that the services they were paid to provide were actually delivered.
But there is another part of the equation that deserves far more public attention. Who pays for the money it takes to deliver a government program before the government actually pays for it?
Nonprofits are often contracted to provide services that government has decided are necessary. They operate shelters, provide rental assistance, help people fleeing violence, deliver homelessness services, connect families to housing and provide countless other services on behalf of public agencies.
Yet many government-funded programs operate on a reimbursement model. The nonprofit have to advance the money.
Recently, Pat Bell CEO of House Of Ruth Inc. in Pomona confirmed that this is not an abstract financial problem.
She shared sitting across from her CFO, exhausted and confronting questions that should never be routine for an organization responsible for keeping survivors safe: “How will we cover payroll? How will we pay rising health insurance costs? How will we keep rental subsidies flowing for families trying to rebuild their lives?”
The agency has served survivors for 50 years. Yet today, its leadership worries every two weeks about whether there is enough cash in the bank to meet payroll while waiting for months of government reimbursements to be released. Federal funding has been erratic, inconsistent, delayed and paused. Executive orders, funding freezes, delayed contracts, and legal battles, ripple all the way down to a small agency in Pomona and ultimately to the survivors.
The organization has already drawn down its reserves to pay rent for survivors, salaries for crisis workers and the basic costs of keeping its doors open. It is not a story of financial irresponsibility. It is a story of an organization being asked to carry the financial risk of a public system while continuing to provide services that cannot simply be paused.
As the CEO put it, this has become its own kind of organizational trauma.
With this reimbursement model, that means the nonprofit is not simply providing the service. The nonprofit is financing the service.
“Resetting LA City to Meet Urgent Community Needs: Nonprofit Action Recommendations for Mayor Bass,” prepared by the Nonprofit Finance Fund and included in Los Angeles County Board materials, uplifts the financial challenges facing government-funded nonprofits; interest expense on loans used to bridge reimbursement gaps is typically not reimbursable through government grants. The report also recognizes that nonprofits can face lengthy delays between providing services and receiving payment, while operating with slim or nonexistent margins and limited ability to build reserves.
Why have we normalized a system in which a nonprofit organization is expected to borrow money to deliver a government program, while the government does not necessarily pay the cost of that borrowing?
The recent federal court ruling makes this conversation even more important. What if Judge David O. Carter’s decision did not favor Los Angeles Homeless Services Authority? What would have happened to the nonprofit agencies who advanced these payments?
We need to challenge the status quo.
Government agencies have budgets, reserves, borrowing authority and access to public financing mechanisms. They have the ability to plan for cash flow.
Most nonprofits do not have those same tools.
Many operate with limited unrestricted reserves precisely because government grants are restricted and because government-funded programs often do not allow organizations to generate meaningful surpluses.
People see a nonprofit receiving a $1 million government contract. They may assume the organization has $1 million sitting in a bank account. It does not. The organization has a $1 million program that requires an enormous advance amount in payroll, rent, services, and other expenses before reimbursement arrives.
The answer is not to eliminate nonprofit oversight but to create a better financing structure.
If government requires nonprofits to front the cost of delivering public programs, then government should be responsible for the reasonable financing costs created by that requirement.
That could mean upfront payments.
It could mean working-capital advances.
It could mean government-backed, low-interest or zero-interest bridge financing.
And where a nonprofit must use a commercial line of credit because of government reimbursement delays, reasonable interest and financing costs should be treated as an allowable cost of delivering the government program.
There should also be enforceable payment timelines.
If government wants nonprofits to meet deadlines for performance, reporting and invoicing, government should have corresponding deadlines for executing contracts, approving invoices and issuing payment.
Accountability should run in both directions.
If a program is a public responsibility, government should fund the full cost of delivering it.
And if we are serious about protecting taxpayer dollars, nonprofit organizations and, most importantly, the people these programs are designed to serve, we must stop expecting nonprofits to absorb the financial risks of government programs.
It is time to stop treating nonprofits as the bank for government.
Stephanie Whack is a survivor of domestic violence, an advocate at the intersection of victimization and homelessness, and a member of The OpEd Project Public Voices Fellowship on Domestic Violence and Economic Security. In 2024, she was awarded the LA City Dr. Marjorie Braude Award for innovative collaboration in serving victims of domestic violence.
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