Last August, an alarming, high-profile audit of King County’s Department of Community and Human Services’ spending on “high-risk” youth program providers found widespread problems and indications of potential fraud. So now, 10 months later, has DCHS been able to clean up the issues that led to the serious internal control problems the audit surfaced?
New DCHS Director Susan McLaughlin joins Erica and Sandeep (while David is away) to make the case that DCHS is back on track. The agency is now emphasizing “a culture of accountability,” McLaughlin tells us, and is implementing new supports for smaller community-based organizations to document their work. McLaughlin also expresses strong opposition to a recent proposal from King County Councilmember Rod Dembowski that would require the council to directly approve all spending under the county’s Best Starts for Kids program, saying his proposed approach would “have devastating impacts” by bottlenecking DCHS' work.
Going beyond the audit aftermath, McLaughlin tells us that she is confident that DCHS is ready to provide oversight of homelessness services contracts if County Executive Zahilay and Seattle Mayor Wilson decide to claw back those contracts from the troubled King County Regional Homelessness Authority (as they're rumored to be planning), and shares insights about what DCHS learned from the contentious process of siting its new Seattle crisis care clinic on Capitol Hill.
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[00:00:10] Hello and welcome to the latest episode of Seattle Nice. I'm Erica C. Barnett. He's Sandeep Kaushik. And today we have a very special guest, the newly appointed director of the King County Department of Community and Human Services, Susan McLaughlin. Thank you so much for being on our podcast today. Thank you for having me.
[00:00:33] Well, we're going to jump right in and I'm going to throw it to Sandeep in a sec. But just to set this up, after an audit found hundreds of thousands of dollars in potentially improper payments to contractors and independent ombuds referred some of those cases to state auditors and law enforcement.
[00:00:49] There's a lot of very alarming news that has been out there in recent months. And I think there's pervasive public opinion that DCHS, you know, has some problems, some inadequate financial controls and other problems. So I want to start by talking about the audit and I will let Sandeep kick us off and then we'll go from there.
[00:01:10] Yeah, well, I think, Erica, you were teeing it up. But Susan, I should also mention here, by the way, that our third partner in podcasting crime, David Hyde, is away at an undisclosed location right now. But this is why he's not here with us today. Forgot about that guy. Yeah, yeah, yeah. Who? David who? Right? But yes, Erica teed up, you know, the questions about the audit came out in August of last year.
[00:01:35] So it's been a bit now. But, you know, at the time, the headlines around the audit were using adjectives like, quote, damning or alarming. You know, I saw both of those in headlines at the time and, yeah, showed not just lax fiscal controls, but what clearly seems to be some non-trivial levels of perhaps outright fraud that was taking place in some of these social service contracts at DCHS.
[00:02:02] So what happened there? What's your read on, yeah, what that audit is actually telling you as the new head of this, you know, important King County agency? Yeah, thank you for that question. So, of course, I've read all the reports as well. And without a doubt, there were gaps in our infrastructure and our oversight of contracts and some mistakes that were made along the way.
[00:02:32] And I think DCHS has acknowledged that and taken full responsibility for that during the time. You talked about the I think the context is important here. The context that were reviewed were reviewed in the early phases of the public health emergency and the pandemic. It was a time when our funding was growing substantially and our staff and infrastructure did not grow at a similar pace.
[00:02:59] And so what we found is that we had large amounts of money. We were getting a lot of pressure during the pandemic to move that money out the door very quickly to get it to the communities in need. People were in crisis. I will also just say that during that time, DCHS was responsible for a lot of things within the pandemic response.
[00:03:24] So we had staff redeployed staffing isolation and quarantine facilities during that time as well. So you can imagine there's money. It needs to go out the door to people in need. We've got staff who normally would be doing compliance or oversight, working in isolation and quarantine facilities. And so it just kind of became this perfect storm in the moment for gaps to be made or gaps to be identified and mistakes to be made.
[00:03:52] And so what we have been doing for the last 10 months is working really hard at DCHS to put that infrastructure in place and strengthen our structure in general, create clearer controls within the department and then oversight, more consistent oversight within the department for all of the contracts that we're monitoring. So and I'm happy to talk in more detail about some of the things that we've put in place.
[00:04:18] Yeah, I mean, I think one of the elements, one of the things that was going on during and after the pandemic, too, that you've talked about is that a lot of these contracts were going out to organizations that perhaps didn't have a lot of experience with government contracting. And a lot of them were considered high risk. And I wondered if you could talk about that and what you learned, because you're describing controls and things like that that I would have expected to already be in place.
[00:04:47] So I'm just wondering, you know, with these higher risk or newer contractors, you know, what was the difference and, you know, what lessons were learned? And, you know, is DCHS going to be more hesitant to contract with less experienced folks in the future? Yeah. So you're absolutely right that there were we had policies and procedures in place and some of the controls in place for sure.
[00:05:12] And I think with some of the pressure to move things quickly and move fast to get things out into the community, that things were overlooked or moved faster than we normally would. And you're also right that we contracted with a lot of community providers that didn't have government contracting experience.
[00:05:31] And we did not have the staffing capacity at the time to really measure that effectively and then provide the capacity building and technical assistance that might have been needed at the time. For me, it's not an either or or mutually exclusive. DCHS always wants to contract with the provider that is best positioned to deliver the outcomes that we're trying to achieve and what we're investing in.
[00:06:00] Sometimes that's large providers and sometimes it's small community-based providers. We know that these community-based providers are working deep in community, communities that are already furthest from access to the services, types of services and supports that DCHS provides and maybe disenfranchised to government in general and getting help.
[00:06:24] And so they serve a strong purpose in our continuum and they're very important to our overall network of human services if we're actually going to be able to resolve the issues and serve the people that we're trying to serve. So, Susan, I've had a chance to talk to several people at the county now about this audit and the kind of fallout from it and all who shall go nameless because I keep getting people in trouble or getting myself in trouble. And I'd say too much about who I have these conversations with.
[00:06:53] And I get what you're saying that there was a – during the pandemic, there was a ramp up of spending on these sorts of programs for obvious reasons. And the capacity just wasn't there to provide that level of oversight. So there was definitely a mismatch that happened there. But I've heard people say that it went beyond that, right? Like the problems that perhaps there was actually some cultural issues within DCHS.
[00:07:17] And to be just super blunt about it, I realize this is not going to – this is going to get my kind of progressive sainthood card denied or something. But I've heard people say like that within the culture of DCHS and some other places at the county that there was a kind of set of – I don't know what you want to call them. I'll call them woke ideas that sort of took root.
[00:07:41] And that part of the problem here was that there was a culture that said, you know, even asking for basic oversight was somehow problematic, right, or racist or whatever. Do you see any of that? Do you reject that contention? Is there any kind of cultural issue here beyond just a lack of capacity? So I wasn't – obviously I wasn't in my role. I wasn't even at the county at the time this was happening. So I really can't speak to that.
[00:08:10] What I can speak to is the five months that I have been in this role and what I'm seeing and doing to make sure that DCHS maintains a culture of accountability. I also want to make sure, again, there was, you know, evidence in some of the reporting that's happened that also staff didn't feel comfortable raising concerns and that leadership was not being responsive, especially in a timely way.
[00:08:36] So my goal has been to make sure that staff not only know that they can and are expected to raise concerns but support a culture of accountability. You know, it's in the best interest of us and the providers themselves to have accountability. It's, again, I go back to it's not either or, it's both and.
[00:08:56] And what, you know, some of what we want to do at DCHS is make sure we're providing the kinds of capacity building and technical assistance to support providers so that they can effectively contract with government, meet the accountability. So the other thing that I would say is that we last summer implemented a contract compliance policy to help with that as well. This gives staff more of the support and the clarity that they need to bring concerns forward.
[00:09:24] It has an escalation protocol attached to it that lets staff know what the expectation is of when they're elevating. These go up to leadership now so that we are looking at every concern that is flagged and doing our due diligence and moving on it in a timely way to resolution. I would say the new executive Zahalai and his better government is also bringing an additional kind of emphasis to that culture of accountability that we really welcome.
[00:09:53] And that order is putting taking some good steps forward enterprise wide as well to ensure that that is emphasized. King County Council Member Rod Dembowski has proposed legislation that would require the council essentially approve every single budget request or RFP for a new contract for Best Starts for Kids, which is, I think, the overarching program that we're talking about here.
[00:10:19] And it would also require DCHS to certify that there's no fraud going on in each of these contractors and that the contractors have, you know, the infrastructure to actually administer the contract and provide accountability. What would the impact of this amendment be on DCHS? And do you see any benefit in that kind of council oversight?
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[00:11:37] I can certainly understand what the intention is behind this kind of legislation, but honestly, that amendment is not only unprecedented, but would really have devastating impacts on DCHS, on Best Starts for Kids, and our ability to deliver on the work. The administrative burden alone would be enormous. I mean, we're talking about hundreds of contracts because it includes not only new contracts, but any amendment.
[00:12:06] We do, people probably don't understand, but we do routine amendments to contracts all the time. It might be to extend the length of time. It could be to add additional resources. Sometimes there's a boilerplate change in the county boilerplate that requires an amendment. And all of that would require us to create this letter, go through all the steps, and submit a motion, and then council has to approve the motion.
[00:12:33] So you're talking about delays of potentially up to a couple of months in the work for, in my opinion, very little gain. Most of the contractors we've been contracting with for years. And the other thing that I would just add with regard to the audit context is, you know, it was a very small subset of Best Starts for Kids contracts that were reviewed during the audit. Not even the entirety of Best Starts for Kids. And certainly not representative of the entire department.
[00:13:03] Not even a random sample. These contracts were chosen specifically because issues had been raised around them. So it's probably, you know, an overcorrection, I would say, to, A, draw a conclusion that it's rampant across DCHS. But then to also go to this length and put that kind of burden on staff and providers, I think, is just probably an overstep.
[00:13:32] I'm going to make one quick editorial comment about this thing. And then I do have one last question about the audit I want to ask. But just in terms of an editorial comment, I just – in my conversations with various people at the county, one thing that's sort of come up is, I think, and is relevant to Rod's amendment here, is that some of these contracts that have turned out to be problematic, right, that have surfaced in the audits to some of these smaller community-based groups.
[00:14:02] People have said to me some of the directions for actually giving money to those groups came – originated at the council during the kind of pandemic period in consultation with DCHS. And so I do – I think that does raise the question of, like, adding this extra layer of council approval. Is that going to change anything at all? I don't know, right? I mean, given what I've heard about this, you know, what happened and what went wrong. My question, though, is this.
[00:14:28] You mentioned, as you said, this was just a sample – a sampling of Best Start for Kids contracts that got audited. And it was covering kind of just the peak pandemic period, right? So has there been any effort on the part of DCHS to look at other contracts to see whether – more broadly to see whether there are similar issues or fraud concerns? And in the subsequent time period too, right?
[00:14:56] I mean, in the 2023-24 period that maybe wasn't covered by the audit, is there some effort to go back and ascertain whether everything's on the up and up there? Yeah. So I'll first just say that DCHS manages a substantial amount of federal and state dollars in addition to our local funding. And so there's variability in the divisions on how much they have.
[00:15:22] But those get audited on an annual basis pretty significantly. And we have not had as a department any audit findings on those fundings – on that funding. And, you know, that means that we have had the proper controls in place. And those, again, happen annually and were happening throughout this period that we're talking about.
[00:15:45] We are right now, as we speak, actually launching a review of all of our locally funded contracts. This was an amendment to the King County Auditor's Office 2627 work plan that was approved by councils. That's about just under 1,500 contracts that we have to do a review by the end of 2027 on.
[00:16:10] And so we will be looking at, again, just to make sure that there are no issues or concerns with any of our other locally funded contracts. So switching topics a little bit, I reported last week on some discussions about pulling back contracts from KCRHA, the King County Regional Homelessness Authority, in light of – speaking of audits, a recent audit or forensic review by Clark Neuber.
[00:16:37] And I think that last week they decided not to announce that. I'm curious, though, is DCHS going to be pulling back the contracts from KCRHA? Can you tell us anything about those discussions? So no decision has been made on what the next step is with KCRHA or those contracts.
[00:16:58] And Executive Zahalai and his team will, along with and in partnership with the mayor of the city of Seattle, because we co-fund KCRHA along with other funding, will announce those decisions, I think, when they're ready. What I can tell you is that DCHS will be prepared if it is their decision for contracts to come back into DCHS, that we are putting the infrastructure in place. We are figuring out what additional infrastructure we might need.
[00:17:26] Were we to become responsible for these additional contracts and funding? And what people might not know is actually we have these contracts in the past. So before KCRHA existed, King County and DCHS managed these contracts before. And we have the depth of knowledge and expertise within our Housing and Community Development Division to manage this work. And we've done it before.
[00:17:54] So we are prepared to do whatever the executive and the mayor determine is the next step for this. Do we have any timeline on when we would expect any kind of announcement from the exec or the mayor or jointly on what they're going to do here? I don't have a specific timeline that I can provide you. They are working on it. So I think it will be sooner rather than later.
[00:18:17] I will also just note that by legislation or direction from the council, we have a report due to council on August 1st with any update in the plan. So sometime between now and August 1st, I think given sort of the environment and other things going on, probably we'll hear something sooner. It won't wait till the end of summer. Great. Thank you. That's very helpful to know.
[00:18:41] Yeah, and I've certainly heard there's an enormous amount of sensitivity around how to handle the situation at KCRHA. And one of the things that's driving that sensitivity or feeding into it is this uncertainty around federal funding streams for homelessness programs, right?
[00:19:02] We just had a situation, I think it was on Friday that nationally it got announced the Trump administration was pulling a really large amount of money that was flowing to Los Angeles. And they're kind of equivalent of KCRHA, right? That was overseeing local homelessness contracts for reasons that they cited that sound an awfully lot like, you know, kind of some of the situations that have arisen around KCRHA. They were saying there was lax oversight of funding.
[00:19:29] They couldn't account for all the dollars, wasn't clear where it was going or how it was being spent. And therefore the Trump administration was saying they're not going to give LA any money whatsoever. They're just going to, you know, potentially tens of millions of dollars in funding is going to go poof.
[00:19:44] So what does that say about our situation here in King County and in Seattle, given the public issues that have surfaced around the Clark Neuber, you know, forensic accounting and what have you? Susan, yeah, what's your take on where we stand on all that?
[00:20:04] Yeah, so you're, I believe, referring to the continuum of care grants, which are federal grants that support mostly in Washington and King County permanent supportive housing for people. And yeah, I should just say I'm on the DESC board. And so obviously there's a lot of DESC money, right? Money that flows to DESC housing programs that are potentially affected by this. And so I'm hearing a lot about it on that side. Yeah, I'm sure you are.
[00:20:33] I mean, it's one of the largest, you know, federal investments in supportive housing in our region. And the majority of our continuum of care grant funding has gone specifically to permanent supportive housing. And that, you know, kind of housing first model that, you know, we know that housing makes such a difference in improving people's overall health and well-being, decreasing, you know, visits to the emergency department, jail bookings, all of the things that we want.
[00:21:02] So we should be worried. We should be worried. We were worried regardless of what happened in LA, for sure. I mean, the federal, this federal administration is changing policies and really impacting and already was decreasing the amount of funding that could be used for permanent supportive housing. And they want it moved to things like transitional housing and just services and supports.
[00:21:27] And so the number one priority right now is, so let me back up for just the public education so that they understand the KCRHA is the lead entity and grant applicant for the continuum of care grants. So that is one body of work that they do. And then the other is the management of the contracts with county and city funding. And the NOFO, the Notice of Funding Opportunity, just recently came out for the 2026 funding.
[00:21:57] And applications are due here in a couple of months. Our number one priority is to, you know, make sure KCRHA has, can respond to the audit results put in place, the fiscal controls, policies and oversight that is required to shore them up and strengthen their internal structures so that we have a strong application for the COC grant. And that's what we're doing right now.
[00:22:27] I think we're working to embed both fiscal oversight and staff to help support that work in partnership with KCRHA to make sure that the King County region can put forth its strongest application that we can. And either way, probably there's going to be less money available to us if things don't change with regard to the application.
[00:22:48] Given that there's probably going to be less money, if not no money from the federal government, the continuum of care, I think it's like $67 million this year. Some amount of that is probably going to fall away. Where does that leave the county? The county's in a budget crunch, just like the city. So where does that leave the county in terms of being able to backfill or fund some of those programs? I mean, is there any possibility that county funding will start flowing into some of these permanent supportive housing and other programs that might get cut?
[00:23:17] Yeah, so we're obviously exploring every potential possibility with the city and the state and what will happen if we don't get this full amount of money. We are also looking at, so one of the things that we can do and are doing is looking at current programs that the county or state are funding.
[00:23:37] Maybe it's with our local behavioral health sales tax, for example, or something else that are actually eligible for the new continuum of care grant because they have these new projects fund. It's like $1.3 billion, things like that. And so a first step would be if they're not going to fund permanent supportive housing, are there other things that we can put up for them to fund under the COC grant and move money around, basically?
[00:24:04] So it would free up resources to cover other things. So we're looking at that as an option as well. And I think just everyone's looking to kind of shore up and reserve money wherever we can to backfill whatever happens with that. And so those conversations are happening at the county, city, and state level all in partnership to figure out what we can bring forward. So the Capitol Hill Crisis Care Center has obviously been pretty contentious.
[00:24:33] There's neighborhood businesses and residents saying it's an inappropriate location to have a walk-in clinic. It's at Broadway and Union on Capitol Hill. And I wanted to know what you've learned about the outreach that went on for the siting of that location and how you're applying those lessons to the next crisis care center, which is opening in South King County. Yeah, absolutely.
[00:25:00] Well, as you can imagine, siting any kind of housing or treatment facility is probably the hardest thing to do. And, you know, we're trying to do it in different ways. So in some ways, the backlash that happened around the Broadway facility is not surprising at all. There's always people who, you know, don't want it. You know, they're not in my backyard kind of ideas.
[00:25:27] Because what we've learned and what we're doing differently is just to try to get out there with community a lot sooner. It's also very hard. The way this building came to be and the negotiations were so complex that it didn't really allow us to do the community engagement while we were in the negotiations.
[00:25:47] So what we're doing in South King County is we're starting the community engagement process sooner and before sites are even identified so that we can people can be engaged with us fully understand what a crisis care center is, what it can bring to a community. We really see this as part of the solution to some of the things that are going on, including some of the challenges that Capitol Hill is having. It's not going to resolve everything.
[00:26:15] And a lot of the issues there are public safety issues, which are beyond sort of what a crisis care center and the treatment aspect does. But it will help. And it is a place for first responders, mobile crisis response teams to bring people who are really struggling with their mental health or substance use. Regardless of insurance, it's open 24-7. So we really do see it as a resource.
[00:26:39] And so what we're doing is just trying to get out there sooner, engage community and businesses sooner, even before we have a site identified so that we have those relationships. Those relationships are in place. We can understand from that community what will make a crisis care center successful. How does it need to be tailored to the South King County community looks really different than Central or North King County. And so what kinds of things do we need to take into consideration there?
[00:27:05] And then we'll go deep in the conversations as particular sites start to emerge with those regions and jurisdictions in particular. Awesome. Well, thank you so much, Dr. Susan McLaughlin, director of DCHS at King County. Really appreciate your speaking with us. Thank you, Susan. Really appreciated the opportunity to talk to you. Yeah, thanks for having me. I really appreciate it. That has been another episode of Seattle Nice. I'm Erica C. Barnett. He's Sandeep Kaushik.
[00:27:34] David Hyde will be back next week. Thanks for listening.