The future of Los Angeles’ homelessness agency — and $240 million in federal funding — hung in the balance Thursday as a federal judge pressed officials over who should control the money and why years of alleged mismanagement were allowed to continue.

At the center of the legal battle is the Los Angeles Homeless Services Authority (LAHSA), which oversees an $845 million budget and contracts with more than 100 service providers.

The agency has faced years of criticism from city, county and federal audits over weak financial controls and oversight. The latest crisis erupted in June when the US Department of Housing (HUD) suspended LAHSA after opening an investigation into alleged false statements, financial mismanagement, internal control failures and conflicts of interest.

LAHSA sued to block the suspension, while the federal government argued the freeze should remain in place, allowing providers to seek funding directly from HUD.

The hearing drew a packed courtroom filled with lawyers for the federal government, LAHSA, the city, county and other agencies — but no elected city or county leaders, prompting U.S. Attorney Bill Essayli to publicly criticize their absence.

“I am extremely disappointed that not one county supervisor, not one city council member bothered to show up to this hearing today,” Essayli told U.S. District Judge David O. Carter. “This is not an attorney problem. This is a leadership problem,” he added.

Essayli said the federal government can no longer pour taxpayer money into a system repeatedly warned about its failures.

HUD alleged LAHSA failed to track whether taxpayers paid for vacant motel rooms, improperly shifted funds between contracts, couldn’t verify nearly 2,300 housing sites and didn’t adopt a written conflict-of-interest policy until September 2025.

Federal attorney Joshua Ha pointed to nearly two decades of audits flagging problems at LAHSA, including repeated concerns over grant oversight, performance, accounting and millions in unused federal funds.

Judge Carter questioned why HUD allowed LAHSA to remain the region’s lead homelessness agency as recently as April 2026 if the problems were so severe. A HUD attorney said previous enforcement efforts failed and new audits made clear “the time for half measures has passed.”

Carter also criticized the city and county for what he called a cycle of “blame shifting” between local governments and LAHSA. “The city is LAHSA, the county is LAHSA, and LAHSA are the city and the county,” Carter said.

Essayli told Carter he has walked Skid Row and recently rode with LAPD officers through MacArthur Park, where he encountered a homeless family seeking treatment but struggling to connect with services.

“The money is not getting to the people that need it,” Essayli told the court.

He also pointed to two recent federal fraud prosecutions involving taxpayer money intended to address homelessness and warned investigators are digging deeper. “There’ll be more indictments coming in this space very soon,” Essayli said.

LAHSA pushed back, saying HUD imposed the suspension without following procedures that would have given the agency notice and an opportunity to respond.

Attorneys for the Los Angeles Continuum of Care, the regional coalition of governments and service providers that coordinates federal homelessness funding, warned bypassing LAHSA could fracture the system and leave providers scrambling to Washington for money.

One attorney accused HUD of choosing to “drop a bomb into the region” and warned of a funding “free-for-all.”

The Continuum told Carter roughly 200 providers rely on the funding and about 11,000 people are housed through programs connected to the federal money.

After the hearing, LA Alliance Executive Director Paul Webster told The California Post the fight felt painfully familiar.

“What we are seeing is LAHSA constantly not living up to what it was intended to be and pointing the finger at everyone else when problems are exposed,” Webster said. “They blame everybody else when they are the ones failing.”

Afterward, Essayli told The Post he believes LAHSA’s days at the center of the system are numbered.

“I think it’s clear LAHSA is not going to be in the driver’s seat moving forward,” he said. “It’s just a matter of when, not if.”

HUD’s inspector general investigation remains underway, and permanent debarment of LAHSA remains possible depending on what investigators find.

Essayli expects Carter to move quickly.

“I suspect he’ll probably issue an opinion by next week,” he told The Post.