SEATTLE — KIRO 7 has obtained the first response from the King County Regional Homelessness Authority (KCRHA) after an audit found $8 million in missing funds and $4.26 million in overspent funds.
In it, KCRHA Executive Director Kelly Kinnison lays out what steps have been taken or are in the process of being implemented in response.
The audit laid out as much as $45 million of a budget deficit, but the report notes that “KCRHA operates under a cost-reimbursement funding model in which payments to service providers are made in advance of reimbursement from funders. As a result, the agency carries a fluctuating negative cash balance.... that reflects timing differences rather than an underlying deficit.”
Even still, the audit found, and RHA confirms, it spent $4.26 million more than it was budgeted.
Part of the deficit is a $1.26 million in owed interest. The authority’s account is held in the King County Investment Pool, which Kinnisson says means that when its account is negative, the authority owes interest.
In the report, she notes RHA will “implement a sustained mitigation plan to reduce structural drivers of interest and improve alignment between expenditures and reimbursements.”
For the missing $8 million, or as the audit says, “unreconciled,” the report notes the RHA is going to go through every transaction to find where that money should come from.
Seattle City Councilmember and KCRHA board member, both as of January, Dionne Foster said she still has remaining questions about how the accounting process could lose track of so much taxpayer money.
“We want to make sure, as a governing board, that we understand not just the new internal controls, but that we can get to this place where we understand how we got to that $8 million receivables balance,” said Foster.
While the audit did not find fraud, it found several areas where fraud could occur, specifically in the RHA’s use of gift cards, purchase cards, and reimbursement processes.
Foster found that aspect the most concerning, as gift cards can be used as cash. The audit noted gift cards have a purpose to quickly offer help to people who are homeless, through services, housing, transit options, or food, but the lack of preapproval or documentation left the gift cards open to fraud.
For those, the employee reimbursement process and purchase cards, Kinnison says the RHA is immediately requiring preapproval for any purchases or reimbursement before spending takes place.
It will also require training for all its employees and create more documentation about each of the three areas used. It also got rid of five of its seven purchase cards.
When she was Executive Director of WA Progress Alliance, Foster said those controls over spending were commonplace.
“We’re happy to see the agency take early action on this, and we need to continue to see action in these coming months,” Foster said.
The audit noted that finances were complicated to track and that there were no clear roles defined for who had authority for what was inside the RHA. Kinnison laid out that there will be a separation in accounting permissions on whether someone is a “maker” of purchases versus a “checker” of purchases.
The KCRHA will provide a more intensive corrective action report on May 23rd, and this report notes other follow-ups on June 30th and July 31st.
On Friday, Foster and fellow Seattle City Councilmember Alexis Mercedes Rinck will discuss what next steps the council should take and what it would take for the city to step away or otherwise dissolve the KCRHA.
Foster hopes the KCRHA can detail whether what the audit found is still occurring, or any issues that applied to the inception of the authority.
“Is this a more recent accounting challenge? That’s really important information for us as we’re assessing what’s happening inside the agency,” she added.
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