Auditor Says County Failed to Adequately Monitor Spending by Troubled Contractor

The Multnomah County auditor says the county Homeless Services Department could have limited the mess that followed the collapse of homeless shelter nonprofit Sunstone Way. In an April 21 memo, Auditor Jennifer McGuirk says the county launched the nonprofit as a way to outsource its duties, then ignored her warnings that it needed safeguards to track Sunstone Way’s spending.

The department and the central finance division objected to that criticism, replying today that it in fact followed the auditor’s prescriptions but still didn’t spot that Sunstone Way was in distress.

WW broke the news in February that Sunstone Way’s former finance manager sued the nonprofit for retaliation after she questioned spending on office space, bloated contracts with other organizations, travel and bar tabs. In March, Sunstone Way announced it would cease operations, laying off all 175 staffers and leaving both the city of Portland and the county scrambling to replace the three pod villages and two homeless shelters it oversaw.

The first warning of signs of trouble at Sunstone Way, however, were spotted by McGuirk, who flagged in 2022 that the nonprofit, then known as All Good Northwest, had overbilled the county by $525,000, much of it via duplicated payroll expenses. That overbilling was particularly alarming to McGuirk because the county had founded the nonprofit and was its only funder—leading her to question why the county didn’t simply provide the services itself.

McGuirk now says that moment was the county’s opportunity to scrutinize Sunstone Way’s spending—a chance she alleges the county ducked.

In an April 21 memo to Chair Jessica Vega Pederson and the county board, McGuirk says she made four recommendations for reform after the 2022 spending mishap, two of which might have allowed the county to better prepare for the nonprofit’s death spiral.

First, she says, she suggested detailed and frequent monitoring of the nonprofit’s invoices, along with a review of supporting documents like ledger details.

“Following my office’s 2022 report, the Homeless Services Department should have conducted more thorough monitoring and invoice reviews of All Good Northwest,” McGuirk says in her memo. “But my office’s understanding is that the Homeless Services Department did not increase the frequency of monitoring and review for Sunstone Way to the level we recommended for the high risk associated with this provider.”

Eric Arellano, Multnomah County’s chief financial officer, wrote a memo of his own May 11 in tandem with Antoinette Payne, the Homeless Services Department’s finance director. They contend that homeless services has a sufficiently strict process for invoice review: “That review includes a thorough review to ensure billing aligns with contract service scope and contract budget, that expenses are allowable, and that coding is correct, alongside other key checklist items.”

Arellano agrees that the department should craft a system for looking at supporting documents from high-risk contractors, but warns it might be too expensive.

McGuirk’s second recommendation, which she says she repeated in 2023 and 2025, was that the county separate the dual roles played by program staff—who McGuirk says both serve as the advocates for county contractors and their financial overseers.

“This dual role allows staff too much latitude to change performance targets when providers underperform, potentially shielding them from necessary accountability,” McGuirk says in her memo. “It also puts staff in an untenable position; it is practically impossible to be both a provider’s advocate and the one who scrutinizes it and holds it to account.”

Arellano replies that the roles were in fact separated in 2022. His reply suggests that program staff still review invoices, but that a second layer of independent review was added to safeguard the county’s money.

More generally, Arellano today pushed back on the notion that shoddy oversight left the county unprepared for Sunstone Way’s downfall. “Though we agree with the recommendations—and in fact we have implemented certain parts—we must clarify for the record that the current service disruption with Sunstone Way is not a direct result of these contract management issues.”

The county has opened a review of Sunstone Way’s finances, Arellano says.

Vega Pederson could not be immediately reached for comment.

Sunstone Way is set to close or hand over its five locations by the end of June. In the 2024 fiscal year, it was the Department of Homeless Services’ 11th-largest contractor.

This story has been updated to better reflect the positions of both parties.