The city is demanding a response to the report by early May addressing findings and a full corrective plan later in the month. KCRHA has also been told to stop hiring and freeze spending.
The audit commissioned by city and county officials last summer as concerns rose around the authority’s finances also shows the organization bleeding funds with a negative cash position of $44.7 million. The report found the authority has structural spending issues where expenditures consistently outpaced the reimbursements and funding inflows.
The KCHRA’s budget was proposed as $205 million in 2026 with about 60% coming from Seattle and the rest from the county and state and federal pass-through grants.
The authority was formed as officials pledged the new effort would consolidate efforts to address the homelessness crisis at a broader, more regional level.
Wednesday, the terrible numbers of the audit came from a burst of outcry from the mayor’s office and City Hall over the findings. The full audit report from Clark Nuber P.S. is even more damning.
Councilmember Maritza Rivera of District 4 said the report documents “egregious mismanagement” and serious failures in financial oversight and internal controls in her call for the KCRHA to be “dismantled.”
District 3 representative and Council President Joy Hollingsworth has not publicly addressed the audit’s release.
In the mayor’s statement, the administration said only that the City of Seattle has received the results of the investigation covering the period from the agency’s inception through July 2025 and that the report “identifies serious failures of KCRHA’s internal controls, fiscal management and accountability.”
The mayor’s office says the investigation found that the agency is unable to account for $13 million in funding “and the City will be pursuing immediate corrective action.”
That would amount to around 6% of its budget.
“Addressing homelessness is my highest priority, and I have serious concerns about KCRHA’s management of city funds,” Wilson said. “We need to take swift action to protect public dollars. All options are on the table.”
The audit revealed a laundry list of failures:
- Critical Cash Deficit: As of July 31, 2025, the KCRHA reached a negative cash position of approximately $44.7 million.
- Unreconciled Receivables: The agency has an outstanding receivables balance of $8 million that management could not explain or reconcile, which may need to be written off.
- Structural Spending Issues: Cash shortfalls were found to be structural rather than event-driven; expenditures consistently outpaced the timing of reimbursements and funding inflows.
- Administrative Overspend: The audit identified a $4.26 million administrative operating deficit, including $1.26 million in unrecoverable interest charges from borrowing against the King County investment pool.
- Significant Programmatic Overspend: The audit identified an additional $6.4 million in programmatic overspending for 2025 where expenditures exceeded approved budgets without required authorization.
- Heavy Reliance on Contracted Staff: Administrative costs were driven by a reliance on high-priced temporary staffing; for example, the KCRHA paid $450,000 for 11 months of an interim CFO’s services—nearly double the permanent position’s salary.
- Weak Internal Controls: The evaluation noted “significant exceptions and gaps” in internal controls, including a lack of a formal monthly accounting close process and an absence of a documented internal control framework like COSO.
- Segregation of Duties Failures: Accounting system permissions were not properly configured, allowing the same individuals to control multiple stages of a single transaction, such as creating, approving, and submitting invoices.
- High-Risk Purchasing-Card and Gift Card Usage: 100% of sampled P-card transactions contained compliance exceptions, according to the audit. Additionally, the agency spent $1.1 million on P-cards for large housing payments that bypassed normal contract and reimbursement processes.
Seattle has provided the vast majority of the agency’s local funding
At one point growing to a $250 million a year effort, KCRHA was officially established in late 2019 through an Interlocal Agreement between the county and the City of Seattle under then-Mayor Jenny Durkan.
It did not become fully operational until mid-2021 as it struggled to set priorities with funding provided primarily by Seattle despite its regional mandates.
In 2024, former US Department of Health and Human Services policy director Kelly Kinnison was selected as a new CEO to help the KCRHA steer through its financial challenges. The authority had been without a permanent leader since founding CEO Marc Dones stepped down in 2023 amid criticism of his $11 billion plan for establishing the organization.
Last year under then-Mayor Bruce Harrell, Seattle began clawing back much of the administration of homelessness resources including outreach from the authority.
Mayor Wilson has sped the city’s move away from the authority with the planned rapid expansion of Tiny House Villages to provide a burst of emergency shelter in Seattle.
For the 2026 budget cycle, Seattle’s proposed allocation to the KCRHA was around $125 million.
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