By Erica C. Barnett

In a “corrective action plan” issued last Friday, the King County Regional Homelessness Authority laid out the steps it proposes taking to improve its accounting practices and financial oversight after a damning forensic audit called both into question last month.

While the 157-page proposal “acknowledges” past failures, including significant issues such as overspending and sloppy accounting, it also argues that that some of the most significant issues, including a consistent negative cash balance, rest largely at the feet of King County and the city of Seattle, the agency’s two primary funders.

“Where findings involve shared workflows between KCRHA, the City, and the County, KCRHA is identifying those as shared operating-model issues requiring joint correction,” the plan says. Specifically, the plan blames an “early operating model” that “did not provide sufficiently mature shared structures for reconciliation, reimbursement timing, advance management, invoice review, funding changes, financial reporting expectations, and escalation.”

“KCRHA’s internal failures must be corrected. But the region must also establish a stronger operating framework among KCRHA, the City of Seattle, and King County.”

Th forensic evaluation, by the auditing firm Clark Nuber, found that the agency could not account for around $8 million in funds it was supposed to have, overspent its administrative budget by $4 million, and had failed to budget for $1.26 million in interest on loans from King County.

In addition, the audit found, the KCRHA appeared to have commingled funds that were contractually earmarked for specific purposes, failed to segregate financial duties among different employees, and relied on casual financial practices and “institutional knowledge” to account for spending and balance its budget, including Excel spreadsheets that showed “thousands” of edits by various people who had access to budget documents.

The audit also found the agency was operating with a a negative cash balance of around $45 million as of last July—an amount that had increased to $63 million by March. KCRHA has long blamed this recurring shortfall on its “reimbursement-based” structure: The agency pays providers and waits for the county and city to reimburse it for what it spends, requiring it to take out loans from the King County Investment Pool (KCIP) while it waits for payments.

However, an auditor with Clark Nuber said last month that this structure alone couldn’t account for the agency’s erratic and increasing negative cash balance, noting that many other agencies use a similar structure without incurring negative balances that just seem to “grow, grow, grow.”

Additionally, the audit found lax oversight of how employees used and distributed “cash equivalent” funds such as gift cards to people who participated in interviews for the KCRHA’s Point In Time Count (a data-based extrapolation that replaced an actual count several years ago) and purchase cards, or “P-Cards,” which employees could use like credit cards.

“KCRHA accepts responsibility for correcting its internal deficiencies,” Kinnison wrote in a memo to Mayor Katie Wilson and King County Executive Girmay Zahilay that accompanied the plan. “At the same time, several of the highest-priority issues — including reimbursement timing, fund advances, [King County Investment Pool] exposure, backend funding adjustments, invoice review workflows, and administrative funding structure — cross organizational boundaries. Durable resolution will require active partnership by KCRHA, the City of Seattle, and King County. KCRHA owns its internal failures; the region must jointly fix the shared operating model.”

The proposal (which, as an aside, includes many similar bullet-pointed lists and identical repetitions that suggest it may have been written with help from AI) lays out steps the agency will take to address the issues identified in the audit and improve its budgeting and financial practices.

These include identifying the $8 million in “missing” funds; increasing controls on employees’ use of cash equivalents like purchase cards; doing monthly budget closeouts; and working to segregate budget duties so that the same person is not responsible for approving an expenditure and certifying that the money was spent appropriately, for instance.

KCRHA is asking the county and city for additional funds to implement the plan, which Clark Nuber principal Mike Nurse estimated could take a year or more and cost millions of dollars. The plan says the KCRHA’s ownfinancial staff are already stretched too thin to take on the complex work involved in fixing all the deficiencies the auditors identified. “KCRHA does not currently have sufficient internal capacity or specialized technical capability to complete this body of work at the pace and confidence level required by the current environment without additional support,” the proposal says.

Additional funding could pay for new staff and temporary help, such as a “highly qualified interim CFO,” “a small technical finance and accounting team,” or “an outside consulting firm.”

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As we reported at the time, Kinnison laid off the KCRHA’s last chief financial officer in October as a cost-saving measure and has not replaced him. The corrective action plan frames this choice, which Kinnison said at the time was “due to our budget shortfall,” as a prudent financial decision made after “current executive leadership determined that the organization first needed to better understand the scope of deficiencies, the structure of required remediation, and the qualifications needed for future-state finance leadership.”

The cost savings from laying off the CFO and 12 other staffers, including the agency’s general counsel, were offset by the decision to spend millions of dollars on temp workers from outside agencies, which charge hefty fees on top of each worker’s take-home pay. Temporary financial staffers from the Robert Half agency, hired between 2023 and 2025, cost the KCRHA as much as $150 an hour, the equivalent of more than $300,000 a year.  The KCRHA used other staffing firms to provide temporary staff to do routine administrative work, like administering grants and contracts, according to contracts PubliCola has reviewed.

Other high-dollar items between 2023 and 2024 included more than half a million dollars for legal services, nearly $64,000 for PR and communication firms, and $167,000 to a company called U-Need Accounting.

It’s unclear whether city and county officials will hand over additional funding to address the problems outlined in the audit, or how much. After the recent KCRHA board meeting about the audit findings, local elected officials and board members began discussing ways to thoughtfully “wind down” the agency without interrupting services or unnecessarily risking the loss of state and already shaky federal funds.

At a governing board meeting before the KCRHA issued its report last week, King County Executive Girmay Zahilay cautioned, “I know that there have been a lot of calls to dismantle the organization and do things of that nature, but we understand that first and foremost, we have to make sure that our providers, who are out there doing that work, get paid. We have to make sure that we have an entity that can receive those critical federal resources. … Right now, we can’t jeopardize tens of millions of dollars that go into this system during this time.”

Seattle Mayor Katie Wilson said little at that meeting; earlier this month, she told PubliCola that the agency’s initial response to the audit “did not adequately address my concerns.”

The corrective action plan acknowledges that the agency could cease to exist in the future, cautioning that a lot has to happen in any “transition” to a different structure. In addition to overseeing contracts and paying providers, the KCRHA functions as the Continuum of Care for the region, meaning it’s the only entity currently authorized to receive federal homelessness funds. It also oversees the region’s Homeless Management Information System, a central database that tracks every person who receives homeless services in the region, and conducts the annual Point In Time Count.