King County Councilmember Rod Dembowski has proposed an amendment to the county’s budget that Department of Community and Human Services director Susan McLaughlin said will have “devastating impacts” on the county’s ability to deliver services through Best Starts for Kids, a countywide levy that pays for child care subsidies, mental health support, after-school programs, and other services for parents and kids.
An explosive audit last year found poor financial oversights, waste, and potential fraud in four Best Starts programs, and a followup investigation by the county’s ombuds office found that fraud, waste, and abuse “in some cases likely occurred” and that conflicts of interest were common.
Many of the community groups DCHS decided to contract with during and after the pandemic were considered “high risk” because were completely new to government contracting; the audit focused on these programs, according to DCHS Director Susan McLaughlin, “because issues had been raised around them” within DCHS. In April, the county auditor found that DCHS had made significant progress on audit recommendations, improving training and awareness.
Dembowski’s amendment would require DCHS to send a “notification letter” to the county council every time the department executes or amends any of the hundreds of Best Starts for Kids grants and contracts. Amendments can involve contract extensions, additional funds, or changes to underlying “boilerplate” county contract documents that require edits to many contracts at once.
Each letter would have to certify that the contractor has adequate staff and systems to both administer county programs and report back regularly on outcomes; that the grant advances BSFK goals and has measurable outcomes; and that neither the agency receiving the grant nor of its leaders or managers has ever been involved in financial misconduct, among other requirements.
McLaughlin, who was appointed permanent DCHS director this afternoon, called the proposal an “overstep” that would likely add months of additional process to each Best Starts for Kids contracts without meaningfully increasing oversight of the programs.
“I can certainly understand what the intention is behind this kind of legislation, but honestly, that amended amendment is not only unprecedented, but would really have devastating impacts on DCHS, on Best Starts for Kids, and our ability to deliver on the work,” she told me on the latest episode of Seattle Nice, where we interviewed the DCHS director about the audit and other issues.
“The administrative burden alone would be enormous. I mean, we’re talking about hundreds of contracts, because it includes not only new contracts, but any amendment. … So you’re talking about delays of potentially up to a couple of months in the work, for in my opinion, very little gain.”
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Although Dembowski’s specific proposal did not come up during a public hearing on McLaughlin’s appointment last week, Councilmember Claudia Balducci pushed back on Councilmember Rhonda Lewis’ suggestion that the county is currently overcorrecting in response to the audit and investigation findings. “I just feel I have to say in this moment that we have a problem with how the public perceives us right now, and I don’t believe we should be talking about overcorrection when we have not yet corrected that problem,” Balducci said.
Earlier this year, Dembowski proposed adding a new layer of oversight for DCHS by funding an Office of the Inspector General—in addition to the county auditor and ombuds—to investigate and look into complaints about contractors themselves.
Dembowski did not respond to requests for comment Monday and Tuesday, but we’ll update this post if we hear back.
KCRHA associate director William Towey at last week’s King County Council briefing
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.
The KCRHA spokesperson said, “Several of the issues raised in the assessment are already being addressed. The governance items referenced by the City and County—including spending controls, hiring controls, and a pause on new agreements that increase cost or liability—have been taken up directly with the KCRHA Governing Board and are in place.”
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.
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.
King County Executive Girmay Zahilay, speaking at a KCRHA governing board meeting last week.
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.
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.
After a representative from the auditing firm, Clark Nuber, presented their findings to the KCRHA’s governing board late last month, many board members and other elected officials began talking about “winding down” the embattled agency rather than working through all the issues the auditor identified, a process that could cost a million dollars or more and take as long as a year to complete.
“My highest priority as mayor is to bring people inside by rapidly expanding shelter and emergency housing with wraparound services,” Wilson said. “All options remain on the table as we await KCRHA’s full corrective action plan.” That plan, which is supposed to address the remaining audit findings, is due on May 23.
Contacted on Friday, Zahilay’s office said his office and the county’s Department of Community and Human Services “are closely reviewing the letter to ensure the corrective actions meet our expectations. We continue to engage with the King County Council, City of Seattle, KCRHA Governing Board, partner cities, and service providers to gather all the facts and work together on a planned and deliberate path forward without disrupting critical services for people living unsheltered.”
