State Audit Finds Millions in Kitsap County Grant Reporting Errors

Kitsap County overreported federal opioid grant expenditures by $2.2 million and reported nearly $3.7 million in disaster assistance expenditures in the wrong year, according to a Washington State Auditor’s Office report.

The audit covers the county’s 2025 fiscal year. Auditors found that the county’s procedures for preparing and reviewing its federal spending schedule failed to catch the errors.

The county subsequently corrected the errors, the report says. Auditors issued unmodified opinions on the county’s financial statements and compliance with requirements for the major federal programs examined. They reported no federal award findings or questioned costs.

The reporting problems involved the Schedule of Expenditures of Federal Awards, a supplementary schedule accompanying the county’s financial statements that identifies spending under federal programs.

Auditors found that the county reported $2.2 million in activity that was not federally funded as expenditures under the federal Opioid STR grant program.

Separately, the county left $3,664,923 in expenditures under the COVID-19 Disaster Grants — Public Assistance program off its 2024 federal spending schedule and reported them on the 2025 schedule instead.

Auditors confirmed that the timing error did not change the required audit coverage or the number of federal programs that had to be audited in 2024.

They nevertheless warned that the weakness in the county’s controls increased the risk of failing to meet certain federal audit requirements.

The schedule and its accompanying notes also contained numerous less significant misstatements, according to the finding.

Auditors attributed the problems to county staff overseeing grant programs being unaware of special reporting requirements. The county’s controls did not adequately ensure that employees preparing the schedule knew those requirements, the report says.

The state classified the problem as a “significant deficiency” in internal controls over financial reporting.

That is less severe than a material weakness but serious enough to require the attention of those responsible for overseeing the county’s finances. Auditors identified no material weaknesses in financial reporting and no instances of noncompliance material to the county’s financial statements.

The auditor’s office recommended stronger preparation and review procedures, sufficient resources and additional training so staff could properly identify and report grant activity.

In its written response, the county said the finding concerned the federal spending schedule, which is supplementary information accompanying its financial statements. It said it had added a final review checklist to the schedule’s preparation process.

The county said its auditor’s office also plans an interim review of grant activity across departments before the annual schedule is prepared. The county said it would train employees involved in grant administration and reporting, with particular attention to special requirements for new awards.

The county said its auditor’s office already reviews grant contracts and award agreements to identify reporting requirements. It plans refresher training for contract reviewers and additional checklists and resources to help ensure proper accounting classifications.

The State Auditor’s Office said it will review the county’s progress during its next audit.