'Damning' audit finds lax King County oversight allowed potential fraud, improper payments to contractors

Updated on 9/9/2025 at 4:40 p.m.: A previous version of this story reported grant amounts awarded based on numbers provided by the county auditor, which has since corrected those figures. This story has been updated to reflect the county's corrected figures.

The King County Auditor found that lax financial oversight at the Department of Community and Human Services allowed potential fraud and numerous improper payments to contractors for four youth programs in the last three years.

The audit found that DCHS, which handles nearly 90% of county grants, failed to conduct basic, routine financial and contract monitoring of grantees as its awards climbed from a combined $922 million in 2019 and 2020 to $1.87 billion in 2023 and 2024.A major source of grant funds is the county's 10-year-old Best Starts for Kids levy, which funded three of the audited youth programs.

Although DCHS policy is to conduct in-depth fiscal reviews of 33% of its grantees per year, auditors found that, in 2023, the department only examined 1% of its grantees’ financial records and practices, and 2% in 2022.

“I was alarmed by the level of internal control failure that we encountered during this audit,” Kymber Waltmunson, the county’s chief auditor, told the county council on Tuesday.

Among the findings — which involved $34 million and 36 contracts for the youth programs — was a $7,000 DCHS payment to a contractor who had altered the original $1,000 invoice, auditors found. The county paid $37,500 in travel expenses one contractor billed for a trip scheduled after the contract ended, and approved hundreds of thousands of dollars in payments to unapproved subcontractors across multiple contracts, a violation of terms.

“Make no mistake, this is a damning audit,” said King County Councilmember Claudia Balducci, who called for an investigation of DCHS and corrective measures.

The audited programs included three juvenile diversion programs: Restorative Community Pathways, Family Intervention and Restorative Services, and Stopping the School to Prison Pipeline, as well as an education and community empowerment program for youth and families, Liberation and Healing from Systemic Racism.

Auditors found that as the department’s grantmaking increased dramatically in recent years, so did DCHS efforts to improve equity by giving more contracts to organizations with little to no government contracting experience.

“Innovation in government to better serve the community is positive,” Waltmunson told the council. “The concern is that DCHS made these policy choices without installing a safety net to monitor whether the funds were being used appropriately.”

In 2024, a DCHS risk assessment determined that nearly half of its 359 grantees were "high risk," the audit found, based on their experience level. Still, the department “has not fully developed a strategy to promote financial stewardship or sufficiently prioritized resources to improve oversight,” auditors found.

Although Best Starts for Kids funding provides consultants to help less-experienced organizations apply for levy-funded grants, build capacity, develop financial systems, and comply with grant requirements, auditors found only 6% of consulting for organizations went toward financial management support.

Councilmember Sarah Perry said county grants without proper support and oversight can harm well-intentioned small organizations and damage their reputations.

“When we step out into a new way of being with $1.5 billion, we are asking people who are applying for our support to have faith in us, and for us to have faith in them,” Perry said. “Whether some took advantage of that or not, we have systems that are not set up for their success.”

Kelly Rider, director of DCHS, told the council that the department is already carrying out plans to improve its systems.

“I cannot emphasize enough how seriously I and our DCHS leadership takes these findings,” Rider said.

The agency has added more compliance staff and is nearly at the level it needs to do the required number of fiscal reviews annually, Rider said, but still needs additional staff to process contractor invoices and improve its contract management practices.

“Robust” internal controls at DCHS may take until 2027, Rider said.

Councilmember Jorge Barón called that “a little too long” to wait for “things that we should have had already.” Barón asked Rider to let the council know what DCHS needs to follow the audit recommendations promptly.

“If we're going to ask people to invest again in these programs, we need to make sure that we give them confidence,” Barón said, referring to the county's preparations to ask voters to renew the massive Best Starts for Kids Levy next year.