King County’s embattled regional homeless authority is facing a nearly $17 million shortfall due to budgeting for unearned administrative fees on grants that were never administered, a new report shows.
The report, commissioned by Seattle and King County, shows providers failed to administer more than $250 million in grants from 2021 through July of this year. Those grants typically include a percentage set aside for administrative fees.
“A significant portion of the administrative funding is earned only as the underlying grant funds are used,” the report states.
Because King County Regional Homelessness Authority’s leadership planned to recoup 100% of those funds from the grants that were never administered, the agency found itself with a $16.7 million gap by the end of the auditing period on July 31.
“Not all of the awarded funding was used each year," the report said. "When providers underspent grant funding, the administrative funding tied to the underspent portion was never earned, while the operating costs KCRHA had budgeted against it were still incurred. The result is a shortfall in administrative funding that accumulated year over year."
The report comes as the result of a financial audit of the KCRHA in April found $8 million could not be accounted for along with the agency running a deficit in the tens of millions of dollars each month while awaiting reimbursement.
That led to the city and county commissioning the joint study and working to address the issues identified by the audit.
“Earlier this year, we required stronger oversight and independent financial monitoring at KCRHA to get clear answers about the agency’s finances and address longstanding failures in financial management,” said a joint statement Thursday from King County Executive Girmay Zahilay and Seattle Mayor Katie Wilson. “Today’s findings are a direct result of that work. The $17 million unrecoverable balance is unacceptable, and the County and City are working together to address repayment while protecting critical services for people experiencing homelessness.”
Following the April audit, both the city and county reexamined its relationship with the regional authority, ultimately deciding to bring homelessness services back in-house while retaining the KCRHA to apply for and administer federal grant applications.
“These findings reinforce why we announced a plan in July to stabilize, right-size, and reset KCRHA," the statement said. "We are preparing to return administration of locally funded service contracts to the City and County beginning in January 2027, while preserving KCRHA’s essential regional functions.
“This reconciliation is an important step toward a reliable accounting of KCRHA’s finances," the statement ended. "Our work continues to strengthen controls and ensure corrective actions are carried through."
Seattle and King County council members reacted strongly to the report's findings.
“It is shocking to learn that because of persistent financial mismanagement by KCRHA, the City and the County will now have to repay nearly $17 million in debt on its behalf," said Seattle City Councilmember Maritza Rivera wrote in a statement. "Since its inception, KCRHA has been overspending its budget, not reconciling its accounts, and accumulating debt."
King County Councilmember Rod Dembowski called the report's findings "shocking."
“Today’s revelations contravene representations made by Authority leadership to the County Council that the missing money was most likely due to unbilled services delivered," he said in a statement. "Instead, it shows that for years they have overspent on staffing and overhead, taking critical funds away from shelter and services with deficit spending that will now require a bailout. The magnitude of the mismanagement and dereliction of duty in terms of oversight of the Agency is truly outrageous.”
King County Councilmember Reagan Dunn also reacted to the report in a separate statement.
“Once again, King County residents will be asked to foot the bill to cover for bureaucratic and financial mismanagement at KCRHA," he wrote. "Amidst the agency’s repeated administrative mistakes, we shouldn't forget that our region’s homelessness policies have failed the most vulnerable among us."
Going forward, a workgroup is expected to release a report at the end of November that “will help inform the county’s future efforts to create more holistic systems that meet the scale of homelessness in our region, increase affordable housing options, and address upstream systems to reduce the number of people entering homelessness,” according to a July release.
However, Rivera and Dunn both said it's time to pull the plug on the regional agency completely.
"We have already taken back our homelessness contracts; it’s time to entirely dissolve the agency," she wrote Thursday.
Dunn wrote, "If we want to truly reduce homelessness and help those on our streets who desperately need assistance, rearranging the deck chairs on the Titanic isn’t enough. We must reverse our failed policies, restore accountability to taxpayer spending, and end the failed experiment that is KCRHA.”
