By Erica C. Barnett
A forensic evaluation into the King County Regional Homelessness Authority’s finances found that the agency could not account for $13 million in public funding, according to a statement from Mayor Katie Wilson that also said “all options are on the table” when it comes to the embattled agency’s future. The city “will be pursuing immediate corrective action,” Wilson said. (The report is not a formal audit, but we’ll be using that term colloquially, with the recognition that it was officially an evaluation.)
In addition to the money that went missing—which includes $8 million the agency couldn’t account for, an administrative overspend of more than $4 million, and a previously reported programmatic overspend of more than $6 million—the report raises serious concerns about the KCRHA’s accounting practices and use of restricted funds, some of which may have been used for unauthorized purposes.
The report found, for example, that KCRHA used a single fund as a repository for earmarked money from various sources, then spent money from that fund to temporarily pay for other things, reimbursing the fund once the money came in for the contractor that received the original loan. A hypothetical example of this would be receiving federal dollars to pay for emergency shelter, using that money to pay for a homelessness diversion program while waiting for money to come in for that contract from the city, then putting the “loaned” federal money back in the pot so it goes to its original purpose.
“We were unable to determine to what extent restricted funds, intended for specific purposes, were used to temporarily cover unrelated costs,” the auditors wrote, “because the accounting records… obscured end-to-end traceability.” In general, they wrote, “we were unable to clearly determine if funds had been commingled or used for purposes other than intended due to traceability issues and use of large, complex reallocations.”
“Without clear tracking of funds, the organization could not easily demonstrate that cash was consistently used for its intended purpose. This increased the risk of potential noncompliance with Funder and contract requirements.”
PubliCola reported on the audit, by the accounting firm Clark Nuber, last week. The investigation, for which Seattle spent more than $600,000, started last August and was extended at the end of the year for additional work.
One issue the audit looked into was KCRHA’s routine negative budget balance, which requires the agency to borrow money, at interest, to pay its contractors every year. This balance, Clark Nuber found, went up and down throughout the year, including at times when the city had just loaned the KCRHA money to pay its bills. At times, the difference between what the agency owed and its cash on hand was close to $80 million.
The problem was caused, in part, by the fact that KCRHA often spent money it didn’t have yet, reconciling its accounts after the fact. The agency’s accounting staff also frequently submitted invoices that had significant errors; correcting those errors meant the agency went longer without getting paid, and relied heavily on borrowed money to pay providers.
“We would have expected that advance funds would have supported ongoing positive cash flow,” the auditors wrote. “However, we also noted that expenditures often occurred well before receipt of advances and were retroactively applied, meaning that expenditures were made before actual advance cash was available.”
“Erroneous invoices were rejected by [the city and county] and sent back to KCRHA for correction. Depending on the issue, the correction process was lengthy and administratively burdensome,” the auditors found. Twenty-five of the 29 sample invoices Clark Nuber inspected included errors, and all failed to include a mandatory authorization form.
According to the audit, had no consistent accounting system and routinely made errors that prevented payments from going out. In a departure from best practices, the agency didn’t reconcile its accounts at the end of each month, and did not use a single accounting system to track corrections, changes, and amendments to accounts.
Instead, the $200 million agency relied on “institutional knowledge,” “manual workarounds,” and “informal processes,” such as emails and “thousands” of edits to widely accessible Excel spreadsheet, to “complete core cash-related processes, including bank reconciliations.” In many cases, the same person was able to enter, revise, and delete individual transactions with no clear oversight.
“Cash position awareness appeared to rely primarily on informal reporting, manual tracking, and point‑in‑time statements provided after the fact by the County, rather than on forward-looking, system‑driven reporting,” the audit found.
“Issues and reconciling items were frequently resolved through informal channels such as chat messages rather than through retained workpapers or system documentation,” the audit found. “Nor did there appear to be standard internal controls to ensure there was no fraud, waste, or abuse.” In one example the audit found, the same person was responsible for entering information about cash flows and certifying that the information was correct.
The audit also found potential issues with prepaid gift cards given out to participants in the agency’s biannual Point In Time count, which relies on volunteer recruitment rather than a physical count of homeless individuals, and the use of purchase (credit) cards by staff. Typically, the report notes, these cards are only used for small, “incidental” spending, but KCRHA staff charged more than $1 million over the approximately four-year audit period, including for office furniture and clothing, raising questions about whether the cards were used properly. The $1.1 million included about $360,000 in expenditures for an ill-fated hotel program run by the Lived Experience Coalition, which PubliCola covered extensively in 2023.
In a sample of 14 “high-dollar” purchases, Clark Nuber found that every purchase raised concerns, including purchases by someone other than the cardholder, missing receipts, and approvals by people who were not authorized to approve such expenses.
King County Executive Girmay Zahilay and Wilson sent a joint letter to Kinnison spelling out steps to establish “clear fiscal controls and accountability for taxpayer funds, and directing KCRHA to “act swiftly to address identified challenges” from the report.” The letter says the KCRHA needs to take specific steps such as separating accounting duties so that the same person isn’t overseeing expenditures and compliance checks; setting strict rules for employee reimbursements and gift cards; and provide a written correction plan for the issues raised in the report.
Late Wednesday afternoon, Kinnison sent a letter to the agency’s governing board late this afternoon, which said that Kinnison had requested the audit “to ensure transparency and establish a clear, independent understanding” of what she called “concerns related to our financial systems and reporting during the agency’s early formation.” (Multiple sources familiar with how the audit came about disputed this characterization).
The audit covers the period through July 2025.
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Shortly after this post originally ran, King County Executive Girmay Zahilay’s office released the audit along with a joint letter from Zahilay and Wilson saying the two executives “expect KCRHA to act swiftly to address identified challenges” from the report, with a response
In her letter, Kinnison said the audit’s negative findings “are concentrated in KCRHA’s early formation period and reflect structural challenges associated with startup conditions, the pandemic response, an initially fragmented governance framework, and a highly complex funding model. Since that time, we have made meaningful progress. Governance has been restructured, and core operations — including contracts, data systems, and provider coordination — are functioning more effectively. Our financial systems have also improved, though additional strengthening is still needed.”
The report noted that although many of the issues arose under earlier CEOs, including controversial founding CEO Marc Dones, many of the problems have not been corrected since current CEO Kelly Kinnison was hired in August 2024. “Weaknesses remain in the current state, including issues related to process workflows, accounting methodology and reporting transparency, invoicing and receivables management, budgeting management, reliable supporting documentation, governance and oversight, and effectiveness of internal controls,” the report found.
The auditors also noted that Kinnison “was absent from most ongoing bi-weekly project update meetings” about the audit, forcing the auditors to work with lower-level managers to answer questions and address issues.
Two Seattle City Councilmembers, Maritza Rivera and Bob Kettle, condemned the agency’s financial, and both Rivera and King County Councilmember Rod Dembowski called for the KCRHA’s dissolution.
“The results of the recent King County Regional Homelessness Authority audit are damning,” Kettle said in a statement. “It shows an epic, and consistent, failure of leadership at the top of the agency —especially at its start. It also reveals the failure of leadership of the county and city. The audit reveals troubling systemic issues that can no longer be ignored if we are to address the homelessness and public safety crisis in Seattle effectively.”
Rivera went further. “I am shocked and outraged after seeing the results of the forensic evaluation of the King County Regional Homelessness Authority, which I just received today,” she said in a statement. “It shows an egregious mismanagement of funds and an unacceptable lack of financial accountability.
“KCRHA has a history of dysfunction and inefficiency, and it is time to acknowledge that it has failed in its mission. I am calling for Mayor Wilson to provide a plan for the dismantling of KCRHA as soon as possible, and a commitment to work with City Council to determine how Seattle will move forward in meeting its shelter and housing needs.”
Later on Wednesday evening, City Councilmembers Alexis Mercedes Rinck and Dionne Foster sent a more measured joint statement, saying the audit findings are “serious, unacceptable and demand immediate action and accountability.”
Asked about the possible dissolution of the KCRHA on Wednesday night, Rinck said, “I think we can do regionalism without having a whole separate agency” overseeing homelessness contracts. The process of setting up a regional entity has shown that Seattle, King County, and other cities can coordinate and talk to each other about their differing needs without having what amounts to a separate pass-through agency handling all the region’s spending, she said.
Under the interlocal agreement that established the authority, the city and county must take at least one year to dissolve the agency if they decide to dismantle it rather than try to reform and save it. The KCRHA, city, and county would spend much of that time transferring the contracts KCRHA manages back to the city’s Human Services Department and the county’s Department of Community and Human Services.
Kinnison’s letter to the board says most of the money that is unaccounted for is made up of “unreconciled receivables”—services that were delivered but “require further reconciliation within the accounting system.” In general, Kinnison told the board, the agency did not lose or misuse funds.
The KCRHA’s governing board will take up the audit findings at its meeting on Friday.
