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Politics & Policy

Nonprofits targeted by new law to verify eligibility for taxpayer money

Supervisor Asha Safaí, seen at the mayor's State of the City speech on March 9, 2022, has called for a full audit of the Department of Homelessness and Supportive Housing after an audit found serious financial issues with the nonprofit United Council of Human Services. | Camille Cohen/The Standard

A week after city officials issued new rules that could pull contracts from San Francisco nonprofits that ignore state reporting requirements, one supervisor took an additional step Tuesday by introducing legislation that would enact the policies into city law.

The proposed ordinance from Supervisor Ahsha Safaí comes after The Standard reported in December that nearly 140 nonprofits were holding more than $300 million in city contracts after having their charitable status revoked, suspended or tagged as delinquent by the state Attorney General’s Office.

Nonprofits that receive more than $100,000 per year in city funds would be required by Safaí’s legislation to file paperwork with the City Administrator’s Office to show they are in good standing with the state. This was a common practice in the city up until 2011, according to Safaí’s office. 

The new law would also require the City Administrator’s Office to post compliance forms and tax summaries filed with the IRS on a publicly accessible website no later than July 1 of each year.

“While we have a great network of City-funded nonprofits that do amazing work, taxpayers expect that nonprofits will perform the work well and comply with federal, state and local law,” Safaí said in a statement. “This common-sense legislation protects taxpayers and increases government transparency by making sure the City validates public information from our federal and state partners before spending one cent.”

Last week, the offices of the City Controller, City Attorney and City Administrator issued a range of new guidance to ensure San Francisco’s nonprofit partners that are not in good standing come back into compliance or risk losing public funding. 

The new policy places the harshest scrutiny on suspended and revoked nonprofits. The Standard’s reporting identified five nonprofits whose status was revoked and two more that were suspended as of December. Those nonprofits had pending contracts worth more than $645,000.

The policy gives city departments 30 days to determine a transition plan for those nonprofits, which may include terminating their services immediately. The departments also have the option to transfer the services to another city nonprofit supplier or work with the suspended or revoked nonprofit to develop an action plan for them to return to good standing before a June 30 deadline.

The vast majority of San Francisco’s contractors that fell out of good standing with the state have been classified as delinquent. These nonprofits, which totaled 132 as of last December, now have until June 30 to fix their status with the state registry. Until they do, they will not be able to enter into any new contracts with the city, though departments are still authorized to issue purchase orders under existing agreements to the delinquent organizations. 

Some of the delinquent organizations’ bad standing dates back years. The Attorney General’s Office placed 30 city-funded nonprofits under this status before the end of 2020.

Josh Koehn can be reached at