By Erica C. Barnett

Seattle and King County owe the King County Regional Homelessness Authority around $8 million, KCRHA associate director William Towey told the County Council’s committee of the whole last week, referring to the $8 million in spending that, according to a forensic audit, “could not be reconciled” by auditors and “may have to be written off.” The $8 million made up the bulk of more $13 million the homelessness agency had either overspent or could not account for when Clark Nuber released its forensic audit in April.

“Basically, these are the funds that we should have billed to King County in the city of Seattle, and that we didn’t, and we are in the process, in phase one, of completing a cash accounting, which will help us identify what the amounts of those funds are and who they accrue to,” Towey said. A KCRHA spokesperson confirmed that the agency doesn’t know the exact amount they failed to bill for and how much they believe they are owed by the city and county, respectively.

Towey attended the council meeting without KCRHA CEO Kelly Kinnison, who was on a family vacation.

Committee vice-chair Claudia Balducci expressed incredulity that King County may be expected to pay KCRHA additional money, on top of its regular funding and whatever it will cost to untangle the agency’s finances and fix the most critical issues outlined in the audit.

Even if the city and county decide to take over control of the region’s homelessness contracts and shut down the agency, they could end up spending millions winding it down; already, the city and county have committed to funding a team of outside accountants, and KCRHA’s finance committee has recommended hiring seven new staff despite a hiring freeze.

“Did I hear you correctly to say that KCRHA believes that King County and Seattle owe the agency money, and if so, how much?” Balducci asked.

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“Yeah, you heard me correctly,” Towey responded. At some point between 2021 and mid-2025, the years the audit covered, “a situation occurred where we expended funds to providers and failed to bill either the city of Seattle or King County for those expenses,” Towey said.

It’s “not great,” Balducci responded, “that there was an $8 million that was unaccounted for, that now will have to come out of the backs of our taxpayers.”

A spokesperson for King County Executive Girmay Zahilay told PubliCola KCRHA has not provided a bill breaking down what the county “owes” the homelessness agency, but is supposed to complete an initial calculation of its outstanding accounts receivable by June 22.

“Failing to properly bill the city and county does not result in the city and county owing KCRHA $8M,” the spokesperson said. “Because the receivables have not yet been validated or tied to specific costs, it is too early to determine whether there is an existing County funding source or account available to pay any portion of the amount.”

Towey suggested that the $8 million that remains accounted for is as much the county and city’s responsibility as the KCRHA’s, because the two governments should have noticed that KCRHA wasn’t billing them and taken action to make them do so.

“Again, I tend toward being generous, but if I have a great relationship with a vendor, and I want them to come work on my business regularly, and they bill me every month, and I notice that they fail to bill me for some funding, I would probably try and correct that myself,” Towey said.  “Now, that is in no way meant to say that this is not our fault,” he added.

As he and Kinnison have done previously, Towey downplayed the audit findings, saying that since Kinnison was hired, the agency has addressed or is in the process of addressing most of the major issues Clark Nuber identified, such as poor financial management and potential misuse of “cash-equivalent” funds,  as credit cards and gift cards. “In the grand scheme of what this is about, these are relatively small dollar amounts,” he said. (Clark Nuber has strongly disputed the KCRHA’s positive spin on its findings, and urged the city, county, and KCRHA governing board to closely verify every claim from the agency, given its history of failing to follow through on commitments.)

Towey also suggested that the vast majority of the problems the auditors identified were long in the past, resulting largely from inept past leaders, early mistakes, and efforts to respond to homelessness quickly during the COVID pandemic. In “hindsight,” he said, people will look back and say, ‘”Gosh, that could have been done a bit more efficiently, but again the expenses are clearly to the right people for the right things.”

Balducci was taken aback by at the blithe tone of Towey’s presentation, which she called “completely at odds with where my constituents are,” Balducci said. “My constituents think that we are done with this organization. … As policymakers, we all own part of how we got here today. We made some decisions that in retrospect we probably should have done differently. But here we are, and I’m just afraid that this is a sinking ship, and regardless of all the work that’s going in, it feels like fiddling on the Titanic.”

Balducci was “shocked,” she added, that Kinnison didn’t make time to attend the meeting of “one of the organizations that’s going to decide the future” of the agency she leads. “That’s not a good look.”

Committee member Rod Dembowski, who was among the first councilmembers to call for dismantling the KCRHA, seemed more impressed by Towey’s presentation, noting that he had worked with Towey when he was head of Lake City Partners, a North Seattle homelessness agency.

“And so I would just say, William, I’m glad you’re over there at KCRHA, and I hope that your time there is short, and that we can get you over here at the county when that’s done,” Dembowski said.

In response to PubliCola’s questions about whether and how the city will pay the money KCRHA says it owes, a spokesperon responded, “The City, County and KCRHA are in conversation about how to resolve this and other on-going financial management issues at the agency, starting with embedding a financial firm this summer.”

Editor’s note: This post has been updated to include KCRHA’s responses.

By Erica C. Barnett

Clark Nuber, the firm that conducted a damning forensic evaluation of the King County Regional Homelessness Authority in April, has responded to the agency’s “corrective action plan” (or CAP) with an equally scathing assessment that lays out seven “red flags” that, according to the auditors, the homelessness agency failed to address in its plan to correct systemic financial issues.

The CAP, Clark Nuber wrote, completely ignored several directives from the city and King County, including orders to put a freeze on hiring and spending, and relies on “trust us” assurances that the KCRHA will fix other serious deficiencies. Given the KCRHA’s repeated failure to meet its prior commitments, “funders should not rely exclusively on KCRHA’s self-reported progress,” the auditors wrote. The plan includes “pervasive use of potential hedge language, like: “‘has begun,’ ‘has initiated,’ and ‘will include'” throughout, the assessment found.

“KCRHA also agrees that progress should be independently verified,” a KCRhA spokesperson said. “That is why the CAP itself recommended external stabilization support, and why we welcome the City and County’s intent to embed external financial expertise to support validation, documentation, and implementation. KCRHA is not asking funders or the public to rely on management assurances alone.”

The KCRHA, Clark Nuber found, also continues to insist—inaccurately—that its deficit (currently around $65 million, up from $45 million last July) is the inevitable result of its funding structure, in which the agency pays homelessness nonprofits and gets reimbursed by the city and county. Many large nonprofit and quasi-governmental organizations use reimbursement-based systems, the auditors pointed out, without the kind of steadily increasing negative balance KCRHA has experienced.

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“[The deficit grew steadily and consistently over time, which is the signature of a management process failure rather than an external shock or an inherent feature of reimbursable funding,” the evaluation found. One of the main issues, the auditors wrote, is that KCRHA has routinely submitted invoices late—up to 16 months—which has prevented the agency from getting reimbursed on time.

The KCRHA spokesperson said the agency “accepts responsibility for internal weaknesses that contributed to the problem” of negative balances. “Those are within KCRHA’s control and are being addressed through the CAP. At the same time, resolving the interest obligation and preventing recurrence will require coordinated work with funders on reimbursement timing, advances, working-capital structure, and treatment of accrued interest.”

The “root causes” of the negative balance “included internal factors: the absence of a formal monthly close process, inconsistent invoice preparation and submission, a lack of real-time cash monitoring, inadequate budget oversight, and insufficient internal controls,” the auditors wrote. “These are organizational management weaknesses, not consequences of the funding model itself.”

Overall, Clark Nuber found that the corrective action plan had not fully met any of seven “key dimensions” laid out in the forensic audit, including “KCRHA understanding of issues,” “achievability,” “accountability,” and risk.

Additionally, they said, the corrective plan says nothing about $6.4 million in  overspending on programs—”the most significant omission in the CAP”—and the growing amount of interest it owes the King County Investment Pool, from which it routinely borrows money. As we noted in our initial coverage, the $6.4 million is on top of $8 million in spending the KCRHA could not account for, $4 million in administrative overspending, and $1.26 million in interest that is “still growing.”

The KCRHA spokesperson said the agency already addressed the $6.4 million in overspending in late 2025 and early 2026.

Clark Nuber also noted that the KCRHA has put off establishing internal financial controls until the far-off Phase 3 of the plan, even though these controls are “not an aspirational best practice,” but required by federal law. “This means KCRHA will be administering significant public funds, including federal awards, without the required control structure throughout the period that is supposed to represent its most intensive corrective action effort.”

The report includes ten short-, medium-, and long-term recommendations for the city and county. It’s unclear whether either government will take the auditors’ adivce to heart; ten days after Clark Nuber published its report, Seattle Mayor Katie Wilson and King County Executive Girmay Zahilay jointly announced plans to “embed” (and pay for) an outside consultant to “ensure [the] corrective actions” in the KCRHA’s plan “are being implemented with urgency.”

Wilson’s office did not respond to questions Wednesday; Zahilay’s office referred us to his statement about the decision to hire a consultant. The new finance committee of KCRHA’s governing board—one of the steps outlined in the CAP—will meet Thursday morning at 10am.

By Erica C. Barnett

Mayor Katie Wilson and King County Executive Girmay Zahilay both announced that they plan to “embed an independent financial analyst” in the agency, as a statement from Wilson put it yesterday.

According to Zahilay’s announcement, “This analyst will provide more transparency into financial practices, improve payment processes, and ensure corrective actions are being implemented with urgency.” Wilson’s announcement referred to the analyst (or analysts) as “a financial services team” that will “shore up financial and internal controls at KCRHA.”

The decision came after a flurry of discussions late last week about how to respond to the KCRHA’s “corrective action plan,” which laid out a series of steps to respond to a damning audit that found the agency lacked basic financial controls, overspent its administrative budget, and could not account for $8 million in spending. The audit also found that KCRHA had a consistent and growing negative budget balance—around $45 million when the audit concluded, an amount that had increased to $65 million by the time the auditors presented their results.

The announcement represented a slowdown of what had been growing momentum to “wind down” the agency quickly and send the contracts it manages back to the city and county agencies that used to oversee them. It was also a reversal of a plan set in motion last week.

As recently as last Friday, Wilson and Zahilay were planning to announce on Monday that they were taking back the homelessness contracts and distributing them to the city’s Human Services Department and King County’s Department of Community and Human Services,  according to accounts from people familiar with the discussions. (Zahilay, rather than Wilson, was reportedly leading the charge to pull the plug). Homeless advocates, city council members, and some members of the business and philanthropic community reportedly urged caution, and cooler heads apparently prevailed.

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Under the scenario the city and county were contemplating last week, the KCRHA would continue to exist—at least temporarily—as a shell of itself, serving as the region’s Continuum of Care for federal funding purposes and administering the Point In Time Count of the region’s homeless population.

This may still happen; the decision to fund an accounting team to address the problems identified in the audit does not preclude shutting down the agency. But as of now, that will no longer happen on an accelerated timeline.

As we reported last week, KCRHA CEO Kelly Kinnison and Associate Deputy for Strategy William Towey have asked for $500,000 to hire a fnancial consultant—as Kinnison put it, a “CFO-type role”— through the staffing firm Robert Half, which charges hefty recruitment fees on top of their temporary staffers’ salaries. The KCRHA laid off its most recent chief financial office last October and never replaced him.

A spokesperson for Zahilay’s office said the county does not know yet how much the consultant will cost or how the city and county will split the spending.

Wilson’s office did not respond to questions.