An audit found a pattern of serious problems at a government-funded nonprofit that provides housing and other homelessness services, and the city has referred the situation to the Federal Bureau of Investigation and the District Attorney's office as a criminal matter.
The audit by the San Francisco Controller’s Office found a record of mismanagement at United Council of Human Services (UCHS), a nonprofit providing homelessness services that received $28 million in grants through a fiscal sponsor, Bayview Hunters Point Foundation.
The latter organization received $36.4 million from six grants to run Hope House Consolidated, Hope House for Veterans, Bayview Drop-in Resource Center, Jennings Safe Sleeping Village and a shelter-in-place site at Pier 94, all managed by UCHS.
Fiscal sponsorship arrangements are relatively common among small nonprofits, with the sponsor typically providing financial management and other help.
But the audit found that UCHS, which receives federal funding for its housing sites, had not properly vetted tenants or ensured that they were prioritized appropriately through the city’s “coordinated entry” system for homeless individuals. The organization has also failed to pay at least $30,661 in rent, among other findings.
In a Nov. 17 letter to the FBI's San Francisco office and Evan Ackiron, head of the District Attorney's white collar crime division, San Francisco Controller Ben Rosenfield and City Attorney David Chiu wrote that "access to housing was illegally sold to some residents."
"Although the individuals responsible may not have been UCHS employees, it appears that UCHS was aware of the criminal activity and did not initially report it to the funding department," the letter said.
The city Department of Homelessness requested the audit over concerns that the nonprofit used rent from clients to cover other ineligible expenses.
The audit uncovered a pattern of severe mismanagement of resources intended for homeless individuals that crossed over into illegality.
Out of 29 sample clients that the auditors examined, 83% were not properly prioritized for housing placement; the nonprofit also did not retain documentation for its tenants, according to the report. The inquiry also found a pattern of errors in calculations of rent owed and inaccuracies in tenant and unit information reported to the city.
The Controller found three UCHS employees who were enrolled in its Hope House Consolidated housing program without going through the coordinated entry process.
In addition, the nonprofit "intentionally" circumvented rules such that the Department of Homelessness and Supportive Housing didn't know how many of their units were vacant. UCHS also improperly collected rent that it never turned over to its fiscal sponsor and over-billed them for expenses on its American Express card, the audit said.
"The City asked for this audit because the Mayor wants to ensure accountability in how we deliver homeless services," said the Mayor's Office in a statement. "We’ve already begun to implement reforms laid out in this report by the Controller, and our goal is to use our local, state, and federal funding dollars effectively."
The Controller’s Office issued 14 recommendations, among them that the city consider terminating its grant agreements with the organizations, particularly those that involve federal funding.
While the city has the authority to modify contracts that involve local funds, it has no such flexibility with the stringent requirements that come with administering federal grants for housing.
Both federal and local government rules require certain prioritization and record-keeping procedures for organizations that receive public funds to provide low-income housing to homeless individuals.
Department of Homelessness spokesperson Emily Cohen said that the department agreed with 13 out of 14 recommendations but that "we are interested in finding a way to work with the provider; they have great relationships and trust built with people in the Bayview [...] we obviously want to ensure we follow the law."
"These are allegations," she added.
UCHS's CEO, Gwendolyn Westbrook—who's said to be a politically-connected operator in District 10—did not immediately respond to a message left at her voicemail. But in a Nov. 11 letter to Shireen McSpadden, the city's homelessness director, and Mark de la Rosa, head of audits for the Controller's Office, Westbrook claimed the audit was "not representative" and appeared to blame the fiscal problems on Bayview Hunters Point Foundation.
The nonprofit has gone through several fiscal sponsors in the past few years.
Its former fiscal sponsor, Bayview Hunters Point Foundation, approached the city earlier this year citing problems at UCHS and said it wanted out of the sponsorship arrangement. Felton Institute, another major nonprofit organization in the city, took over fiscal sponsorship of UCHS in 2022.
"I support every District 10 nonprofit as they provide valuable services for the community. I do after all, represent District 10," said District 10 Supervisor Shamann Walton in a statement.
It isn’t the first time the city’s budget office has found problems at UCHS.
A 2017 audit found a slew of organizational problems ranging from inexperienced board members serving longer terms than allowed, $88,140 in missing funds and a missing record of most employees who had ever worked at the company. The report presented 30 recommendations to establish more oversight at the nonprofit.
The nonprofit’s most recent tax return shows several employees making a $0 salary despite logging 40 hours a week for the organization.
In a statement, Supervisor Ahsha Safai called on the Controller's Office to perform a comprehensive audit of the homelessness department, saying that "the troubling result [of the UCHS audit] is that HSH didn’t even know the total number of occupied housing units they were funding.”
City-funded nonprofits have fallen under the microscope in recent months, with Supervisor Catherine Stefani calling for new legislation to tighten up oversight of nonprofits that receive city funding, also called “community-based organizations.”
This fall, a scandal erupted at Positive Resource Center and Baker Places, two related nonprofits that provide addiction treatment and other services, when the organizations asked the city for a $4.2 million bailout and threatened to close some of their programs.
Subsequent reporting by The Standard revealed that a top Department of Public Health official, Lisa Pratt, had been drawing a second six-figure salary from Baker Places, which receives the bulk of its funding from the health department.
Safai has called for a hearing on the situation at Baker Places and Positive Resource Center, which runs a network of drug rehab and other behavioral health sites in the city.
Josh Koehn contributed additional reporting for this story.