PORTLAND, Ore. (KATU) — Sunstone Way, a homeless shelter provider in the Portland area, is facing more accusations in a new preliminary report from Multnomah County that says it misused a little more than $3.4 million in county funds.

A county spokesperson said later the funds at issue were up to $3.6 million.

Sunstone Way was known for its operations in both Multnomah and Clackamas counties, running more than 300 shelter beds a night. Its website says it has since closed its six locations due to “decreasing revenues and increasing operating costs.”

PAST COVERAGE: Portland homeless service provider Sunstone Way to close amid financial issues, lawsuit

According to the report, done by the Department of County Management, Sunstone Way’s finances were reviewed between July 1, 2024 and Feb. 28, 2026. The report found four major things of concern:

Unbudgeted administrative payroll billed as direct costs; Unallowable vendor prepayments and estimated billing;Classification, documentation, and allocation of direct costs; and Classification and allowability of indirect expenditures.

Jessica Vega Pederson, the Multnomah County board chair, called these allegations “shocking” in an email sent to the central finance team about the report. She goes on to say these allegations “do not reflect my expectations of contractor accountability.”

RELATED: KATU EXCLUSIVE: Portland to close two shelters, shift management at another

Vega Pederson also asked for corrections to what she called a “fiscal oversight of contracted providers.” She has asked the Homeless Services Department to:

Conduct an immediate Fiscal Compliance Review of the highest-risk providersPlease provide a detailed description of the definition of a “high-risk provider”Provide the expected delivery date of a detailed plan and schedule for all fiscal compliance reviewsProvide an overview of detailed invoice reviews including the cadence of review and the scope of the information included in the reviewMake a recommendation to me regarding a requirement that technical assistance and financial education be required to new providers and/or providers contracting above a certain threshold or meeting certain criteriaStatement from Sunstone Way:

“For more than four years, Sunstone Way has operated under the guidance, oversight, and approval processes of Multnomah County’s Homeless Services Department, and its predecessor, the Joint Office of Homeless Services. Sunstone Way’s budgets were approved, annual reviews conducted, and our audits were completed without adverse findings. Sunstone Way acted in good faith reliance on the direction, recommendations, and approvals provided by the County. Sunstone Way did its accounting and invoicing as the County instructed from the beginning and never requested reimbursement from the County for improper expenses.

It’s deeply troubling to see these new allegations. If the County believes these long-standing County-recommended practices that are also utilized by other providers were incorrect, it should explain how these practices were repeatedly approved under its own oversight structure. The hard-working, dedicated homeless services staff of Sunstone Way are the ones harmed by the County’s actions. Sunstone Way will continue to work with the County to improve understanding of the existing and approved accounting practices.”

Statement from Commissioner Julia Brim-Edwards, who is running for chair:

Sunstone Way was identified as a high-risk contractor in 2022 and yet the County Chair did not require more rigorous contract and expense oversight that was recommended by the County’s independent auditor over the last several years. This is another lapse in accountability for public funds and unacceptable.

The second whistleblower – in tandem with a County financial review – highlighted the most recent issues with Sunstone Way. The County Chair should have directed staff to provide enhanced oversight after the 2022 auditor recommendations were made.

The public and the Commission should not have to rely on whistleblowers to expose misuses of taxpayers’ dollars to light. When additional allegations of misspent funds were raised, I called for greater transparency and accountability for public funds. The preliminary findings released today points to continued misuse of taxpayers’ dollars over an extended period of time.

I expect there to be the implementation of an action plan providing consistent, rigorous and transparent contract management and accountability – especially for high-risk contractors. That’s needed to ensure fiscal controls are in place, taxpayer dollars are being used effectively and funds meant to be spent on homeless services are spent responsibly and to deliver the outcomes the County and community needs.

Since joining the Commission in 2023, Commissioner Brim-Edwards has consistently called on County leadership to implement audit recommendations from the independently elected County Auditor to improve financial management and services to the community. In the most recent budget, she championed a Commission directive, through a budget note, that created a contract oversight program with the Homeless Services Department. The program is designed to improve contract oversight and management, and advanced a countywide tool to increase active, ongoing contract performance management to get the outcomes the community needs. The Commission approved the directive as part of the recent budget adoption.

Statement from Sharon Meieran, who is running for chair:

“This didn’t just come out of nowhere. How do you pay $3.6 million for services that aren’t justified on their face? In a world where that happens, the blame falls on the one cutting the checks, not the one submitting the requests for payment.

The reality is the County completely lacks a system of oversight or accountability in its contracting, and it absolutely fails to tie spending to results. The Chair and previous homeless services directors keep trying to sweep that truth under the rug, but they’re tripping over it in public now.”

Sunstone Way has 15 days to respond to the report.