Department of Community and Human Services Needs to Strengthen Financial Stewardship

The Department of Community and Human Services (DCHS) has taken steps to make community grants more accessible and, in so doing, has exposed itself to significant financial risk. During our review of youth programs, we found instances of improper payments, including potential fraud, across multiple contracts. In its annual risk-assessment process in 2024, DCHS scored nearly half of the 359 grantees it reviewed as high risk. DCHS has not fully developed a strategy to promote financial stewardship or sufficiently prioritized resources to improve oversight. Through the Best Starts for Kids capacity-building program, DCHS offers some grantees free consulting services to help them succeed. However, we found that grantees rarely use the capacity-building program for financial management support, limiting the program’s ability to reduce financial risk.

DCHS lacks documented policies and procedures, training, and checklists for validating invoices — reducing consistency and increasing opportunities for fraud, waste, and abuse. In our review, we identified grantees whose spending deviated significantly from contract budgets without appropriate amendment or oversight. We also found insufficient documentation for expenses that are at higher risk of misuse, such as prepaid cards and stipends. DCHS has gaps in document management and did not have clear criteria for ending contracts or awarding grants to for-profit companies, reducing consistency and transparency.

We make recommendations to help DCHS strengthen financial stewardship and build a robust internal control framework to support it. This includes ensuring that staff have the guidance and tools to validate invoices, promote contract compliance, and prevent and detect fraud. We also recommend that DCHS develop a plan to better support the financial management needs of grantees.

The Department of Community and Human Services awarded 87 percent of county grants between 2019 and 2024. It has experienced significant growth in grant funding, awarding more than $1.8 billion in 2023 and 2024, up from $922 million in 2019 and 2020. During the COVID-19 pandemic, DCHS faced pressure to absorb some risk to distribute emergency funds quickly. In addition, DCHS manages tax levies including the six-year Best Starts for Kids levy, ending in 2027, and the nine-year Crisis Care Centers levy, ending in 2032. DCHS runs its own procurement processes to award these funds, resulting in contracts known as community grants. Unlike other contracts, community grants are outside the scope of King County’s central procurement group, limiting independent oversight. In this environment, DCHS faces a higher risk of fraud, waste, and abuse as it allocates public funds.