Over the past few months, rarely has a week gone by without a story detailing a new scandal involving mismanagement of our nonprofit contracts. In early September of last year, an affordable housing nonprofit spent almost $500,000 on an incredibly flawed ballot measure that would have penalized small businesses as they continue to recover from the pandemic. In October, Positive Resource Center/Baker Places came to the city with a $4 million bailout request because they had become insolvent. This request was made just as the outgoing director of that nonprofit was thrown a lavish goodbye party at a luxury hotel downtown. It was later reported that Baker Places employed a city employee at a rate of $123,000 in addition to her $428,750 city salary.
The most egregious example of mismanagement was widely publicized this past fall. The San Francisco Controller’s Office found the United Council of Human Services to be out of compliance on numerous fiscal and procedural agreements, raising doubts as to their leadership and effectiveness as a nonprofit. The shortlist of infractions includes UCHS improperly keeping rental revenue instead of turning it over to its fiscal sponsor, noncompliance with hiring processes, improper calculation of income for most tenants, and providing housing for ineligible applicants.
The CEO at the helm of UCHS during this time was responsible for managing $28 million in public funds. These findings represent a betrayal of public trust at best and alleged criminal conduct at worst. In fact, the controller’s audit has since been turned over to the FBI and the District Attorney’s Office White Collar Crime division for further review. No one should accept this level of blatant mismanagement. San Francisco deserves accountability and transparency when it comes to how and where it uses our taxpayer dollars.
Sadly, the nonprofit contracting crisis we currently find ourselves in was totally predictable. In 2001, then-Supervisor Sophie Maxwell established a city Contracting Task Force after a civil grand jury found that the city’s contract management system was “too decentralized and place[d] administrative burdens on non-profit organizations.” She asserted in a unanimously passed resolution that, “Failure to address this growing burden for the non-profit community can and will ultimately create a crisis at the core of this city’s safety net, wasting scarce resources directed at . . . San Francisco’s most vulnerable population.”
The task force met for 18 months, developed 13 recommendations, and shared an implementation plan with the Board of Supervisors in June 2003. Twenty years and countless reports later, the city is still muddling through how to best manage nonprofit contracts within an incredibly siloed system of city agencies. In the meantime, former Supervisor Maxwell’s fear has become a reality. With each new headline, the public’s faith in the city’s ability to properly manage nonprofits deteriorates.
San Francisco contracts with hundreds of nonprofit organizations to provide essential services to the city’s most vulnerable populations to the tune of $1.4 billion annually, which has increased by 180 percent from 2012–13. With a looming fiscal crisis, we absolutely must do better.
Restoring the public’s faith in government is what I have been working toward since I was first elected in 2018. When I discovered that the Behavioral Health Commission’s fiscal agent was grossly mismanaging the commission’s finances, I authored legislation to restore legitimacy to the commission. I voted no, twice, on a contract extension for a failing pretrial diversion project that was not achieving the results expected nor reported by the nonprofit managing the program. And I passed one of the most comprehensive reform measures for grants management that the city has seen. From 2017 to 2020, city departments issued 5,746 grant awards totaling $5.4 billion without open solicitation, transparency, fairness, or documentation. Now, the city is required to impartially award these grants after competitive solicitation.
In August of last year, the city controller released a citywide nonprofit performance audit. In it, the Controller’s Office called for standardizing and streamlining existing processes, strengthening performance measurement and monitoring, and requiring a level of transparency that currently does not exist. We need to do a much better job of evaluating the programs and services the city funds and whether they meet the community’s needs, especially as we rely on nonprofits to deliver critical services. According to the audit “it is difficult to measure overall impact of the programs and services provided because performance measurement and program monitoring vary among city departments and most data is not shared.” If this sounds familiar, it is because the 2003 task force report recommended that this be addressed 20 years ago.
Monitoring our nonprofits is an opportunity for our departments and the city as a whole to understand better the day-to-day work nonprofits perform and to ensure that the money the city pays to nonprofits is spent appropriately to provide the intended services. Additionally, we can’t overburden our nonprofits with duplicative and confusing requirements not pertinent to their mission. It takes away from their ability to provide the essential services they are contracting with the city to deliver.
I will not stand idly by while our city suffers the ills of unchecked management of our nonprofit contracting. I will continue to use the powers vested in the legislature to help disentangle this web of funding and contracting. That’s why I have asked the City Attorney’s Office to draft legislation that would implement the recommendations outlined in the controller’s August audit. The solution to simply throw money at our city’s biggest problems of homelessness, mental health, public safety, and addiction is not working. Clearly, we cannot spend our way out of these crises and by our own hand create a new one.
