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Confused about the ending !!SPOILERS!!

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I finished up the book this afternoon and I'm really confused about the ending.

In act 3 scene 5 Katherine discovers the book that Hazie is writing and the ski mask that Webster "plans" to use. In act 3 scene 7 there is a cut to the police finding Katherine and Webster after Hazie shot them both and staged the scene.

I'm confused as to how the story go to this point. After Katherine found out Hazie staged all of this how did she not turn her in? How did Katherine allow Hazie to stay in the house after finding the book she was writing? It seems like there's a huge jump in logic I missed.