By Erica C. Barnett

Two recent reviews of the King County Regional Homelessness Authority’s financial and other internal policies—a monitoring report by the King County Department of Community and Human Services and a financial audit by the State Auditor’s Office—found that the agency made a number of financial errors in its first year of operations. Among other errors, the KCRHA overstated its revenues, failed to inform grant recipients of the federal requirements attached to funding, and spent grant dollars in ways that were inconsistent with their intended purpose.

“The Authority did not have effective internal controls in place to ensure accurate and reliable financial reporting,” the state audit found.

State auditors also discovered that the KCRHA failed to list many of the federal requirements when awarding grants to 11 homeless service providers, which could put those providers at risk of being out of compliance with federal rules and potentially “spending the funds for unallowable purposes.”

Additionally, accounting errors led the agency to end last year with a negative balance—or overspend—of $17 million. Bill Reichert, the agency’s interim chief financial officer, told PubliCola the agency didn’t bill its funders, which are Seattle and King County, on time for some expenses, resulting in a temporary negative balance—something the county’s monitoring report noted as well, saying the KCRHA had failed to meet the county’s deadlines to submit invoices, which led to late payments.

“This was a startup. There was a lot of learning going on, and standing up processes, and things didn’t get reconciled as soon as they should have,” Reichert said. “It’s not likely to occur again, because we’ve taken a number of steps to shore up training in our systems and processes.”

In a separate, emailed statement, Reichert said the authority “is working hard to ensure we understand the current state of the agency’s financial operations, identifying any gaps in oversight, process and practice so we can implement a set of targeted solutions.”

The county report also highlighted the KCRHA’s consistent late payments to homeless service providers, who reported having to “float” their budgets for 2022 by depleting reserves, a challenge for smaller organizations without significant cushions to fall back on when the homelessness authority failed to pay them on time.

“KCRHA was not able to execute contracts in a timely manner,” the report noted. The agency had only signed about half of its 2023 contracts by the end of April, the monitors found, “which place[d the] burden on contracting agencies to shoulder the financial burden of operations without incoming revenue.”

In a statement to PubliCola, KCRHA interim CEO Helen Howell said the agency “is committed to a full assessment of KCRHA, and these audits and reviews are an important step to help us improve. … We are clarifying what needs to change to get this agency fully on track.” The agency, Howell continued, is “making progress, and we will continue to push ourselves to be better.” Howell became interim CEO after former CEO Marc Dones resigned in May; the agency is currently looking for a permanent CEO.

As we reported when the agency was first staffing up, many experienced grants and contracts specialists at Seattle’s Homeless Strategy and Investment division sought agreements with the KCRHA to transfer their existing jobs to the new agency, but Dones wanted to hire their own team, and told HSI staff they would have to re-apply for their jobs—which most declined to do. As a result, there was a significant loss of institutional knowledge about how to administer homelessness contracts at the new agency, contributing to an already steep learning curve for the new authority.

In its response to the state audit, the authority wrote that it “has already taken significant steps to implement many of the necessary components in our contracting year for 2023. We have been actively involved in recruiting experienced personnel and providing on-job trainings to strengthen our contract and grant management and compliance monitoring.”

The county’s report also raised concerns about the KCRHA’s governing structure, monitoring practices, transparency, and communication with the nonprofit agencies that it pays to provide outreach, shelter, and other services.

The KCRHA’s Continuum of Care board, which came under fire earlier this year after a board member shouted down a colleague’s objections to the proposed appointment of a repeat sex offender, often lacked a quorum and didn’t get enough information from KCRHA to make decisions or recommendations about complex decisions, like the agency’s annual federal funding requests, the report found.

As PubliCola reported, the KCRHA ran a bit of a coup on the CoC board earlier this year, recruiting new members to the stakeholder group that oversees the CoC and holding an unusual “convening” to adopt a new charter and a new slate of members for the board. (Ordinarily, CoC “convenings” are day-long events that include panels and discussion sessions; this year’s meeting was focused on these two votes.) The agency is supposed to hold two major meetings a year, but has failed to do so, according to the report.

The report also raises concerns about the KCRHA’s compliance with the state Open Public Meetings Act, noting that information about meetings often isn’t available in a timely or transparent fashion, and says the agency doesn’t have a consistent way of communicating with service providers or stakeholders about important decisions, like changes to Coordinated Entry—the system for accessing services, shelter, and housing. The KCRHA got rid of a committee that met quarterly, in public, to discuss Coordinated Entry, and “[a]s a result, subsequent changes to CE processes were made with little notice to, or input from, providers and other stakeholders.”

Although the report praises KCRHA for its “innovative” data collection strategies, including an annual count of the region’s homeless population that was based on state data and a separate qualitative survey of people experiencing homelessness, the monitors note that it remains “[u]nclear how KCRHA uses data/metrics to monitor evaluate program performance (other than for funding decisions) and to evaluate system performance.”

Last week, the KCRHA posted a response on its website to the state and county reports; a federal audit will also be released later this month.