By Erica C. Barnett
Mayor Katie Wilson told PubliCola she is dissatisfied with the King County Regional Homelessness Authority’s five-page response to an April 22 letter, sent jointly with King County Executive Girmay Zahilay, directing the agency to come up with a written plan to address five “high-risk” findings from a recent forensic audit.
KCRHA’s response, Wilson said, “did not adequately address my concerns regarding management of City funds, particularly regarding invoicing problems and negative cash balances. All options remain on the table as we await KCRHA’s full corrective action plan.”
The audit found that the KCRHA could not account for $8 million in public funds, and had overspent its administrative budget by $4 million; on top of that, the homelessness agency owes King County around $1.26 million in interest on loans that is not covered by its current budget. Wilson and Zahilay gave the agency until last Friday, May 8, to provide a written plan, including:
“A strategy with a detailed timeline outlining how the KCRHA is going to address issues related to unreconcilable and unrecoverable cash”—the entire $13 million;
“Details of immediate action” to ensure that reimbursements for KCRHA employee spending is pre-approved and documented. According to the audit, there were a number of odd-looking reimbursements, including more than $9,000 in lodging costs for an interim chief financial officer, that weren’t explained, and in general, reimbursements “did not have necessary approval and/or supporting documentation as required by governing policies”;
Immediate actions to ensure gift cards distributed to homeless people during the “point in time count,” which now consists of interviews and a data analysis, are documented and tracked, which they have not been in the past;
A plan to ensure “segregation of duties” for expenditures. Currently, the same person can approve an expenditure, make changes in the KCRHA’s accounting system, and verify that an expenditure was appropriate; and
Actions the agency is taking to control employees’ use of cash-equivalent “purchase cards,” which the audit found have been used by various employees for purchases that weren’t clearly documented, making it difficult or impossible to know if they were legitimate.
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The KCRHA’s response, signed by strategic director William Towey, continues to blame many of the agency’s financial shortcomings, including its ongoing negative balances and the “missing” $8 million, on the fact that it operates on a reimbursement model, meaning that the agencies pays nonprofit homeless service providers before its funders—the city and the county—reimburse them, resulting in periodic negative balances. The audit found that this model doesn’t account for the KCHRA’s financial problems; since it came out, the KCRHA went tens of millions more into the red.
In the letter, Towey also said the KCRHA is working to address other issues flagged by the city and county, by tightening expense reporting rules, working to segregate staff duties to the extent possible, requiring better documentation of purchase and gift cards, and reconciling the budget to address the outstanding $8 million balance, which the auditors said may have to be “written off” if KCRHA can’t account for it.