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Politics & Policy

SF pays big bucks to nonprofits, fails to properly monitor them

San Francisco City Hall contracts with hundreds of nonprofits to carry out work helping the community, but not all of these organizations receive the same scrutiny after receiving millions of dollars in taxpayer money. | Jana Asenbrennerova for The Standard

San Francisco nonprofits receive more than a billion dollars in taxpayer money every year, but the level of scrutiny they face varies greatly by department—and, in some cases, oversight of operations has been left to the honor system since the pandemic started.

City records show that two nonprofits—Baker Places and the United Council of Human Services (UCHS)—received mostly glowing marks from city agencies last year, not long before they were accused of mismanaging public funds. City officials are in the process of pulling some of Baker Places’ contracts and flagged UCHS for criminal investigations.

The Standard obtained performance monitoring reports for multiple city departments after an investigation found that nearly 140 nonprofits contracting with the city were legally barred from receiving or spending funds after having their charitable status revoked by the state Attorney General's Office.

A review of reports found low performance in some cases and inconsistencies in documentation, particularly within the Department of Homelessness and Supportive Housing, which had more than $87 million in contracts with nonprofits that were out of compliance with the state as of last year. While some of the agency’s nonprofits received intense scrutiny and feedback on how they could improve, others were essentially rubber-stamped and reports offered few comments beyond saying files were “in order, organized and easy to follow.”

As San Francisco has become increasingly reliant on the work of nonprofits, which can be more nimble and cost-effective than city departments, the performance reports have raised concerns about whether public agencies are sufficiently managing the organizations tasked with confronting the city’s biggest crises.

Wake-Up Call 

Supervisor Catherine Stefani, who oversaw a Government Audit and Oversight Committee hearing last month looking into how well city nonprofits are performing, said the discrepancies in reporting by city departments should serve as a wake-up call.

“This is exactly why San Franciscans are skeptical about how we are spending taxpayer dollars,” Stefani said in a statement. “Last year, we spent $1.4 billion on city contracts. And yet, the checks that are supposed to prevent and identify mismanagement failed.”

San Francisco Supervisor Catherine Stefani takes notes during a Board of Supervisors meeting at City Hall on May 3, 2022. | Camille Cohen

Sherilyn Adams, executive director for the nonprofit Larkin Street Youth Services, said in the February oversight hearing that working with the city can be burdensome.

“Contracting with the city is complicated and challenging,” Adams said. “When we are talking about streamlining the process, what we are talking about is [that] on the program monitoring side or doing business with individual departments, there is very little consistency.”

In August 2022, the City Controller’s office released an audit that found city departments operated in silos when monitoring nonprofits, creating redundancies and allowing organizations to escape notice when falling short of their objectives.

Debbi Lerman, executive director of SF Human Services Network, a lobbyist group for roughly 80 nonprofits in the city, said that the requirements placed on nonprofits can be heavy-handed. But she said her group supports a streamlined monitoring program.

“We’re in communication with Supervisor Stefani, and we support this effort,” Lerman said. “What we don’t want to see is layers and layers of more duplicative and unnecessary requirements placed on nonprofits. We’re trying to provide services, not fill out papers all day.”

In a statement, Mayor London Breed’s office called the city’s partnerships with nonprofits vital for delivering services to residents while also noting there have been challenges.

“When the Mayor learned of issues at UCHS last year, she asked for an audit by the Controller, which then helped us implement reforms to ensure we are using our local, state, and federal funding effectively,” the mayor’s office said. “And we expect our departments to do the same when and if issues arise.”

Paper Pushing

Baker Places, which has operated residential detox and treatment programs for thousands of people in the city, came under scrutiny last year after it twice begged supervisors for a bailout due to insufficient funds. However, less attention was given to how well the organization was carrying out its mission. 

A Google Street View of Baker Places at 170 9th St. in San Francisco.

A performance report conducted by the Department of Public Health in June of last year found that the Valencia Hummingbird respite program—designed to help people who are homeless, mentally ill and suffering from drug addiction—met just 50% of its contracted performance objectives. No plan of action was recommended. A report for Odyssey House, another rehab facility run by Baker Places, shows that it was meeting just 40% of its performance objectives.

The performance of these programs was not cited as a reason by the city to pull some of Baker Places’ contracts.

The Department of Public Health said in a statement that the agency is working with Baker Places “to maintain services through the end of this fiscal year and continue to review with them the transfer of services that will minimize impacts on clients and staff.”

In April 2022, the Department of Homelessness and Supportive Housing gave high marks to UCHS, which operates a recreational vehicle shelter at Pier 94, despite notes about pet feces being a “constant issue” and four trailers being destroyed by fires. The report noted that some guests weren’t going through the city’s coordinated entry system, which is required by law, but all objectives in the report were giving passing grades.

The organization’s CEO, Gwendolyn Westbrook, later told The Standard that she provided housing to as many as 20 family members, friends and employees.

In November, the City Controller’s and City Attorney’s offices issued a report that accused UCHS of widespread mismanagement. The two offices asked the FBI and SF District Attorney’s Office to launch criminal probes.

The Department of Homelessness and Supportive Housing also has a million-dollar contract with the Tenants and Owners Development Corporation (TODCO), but the agency has not done an inspection of any of the nonprofit’s eight low-income apartment buildings in the South of Market area since the start of the pandemic.

A recent investigation by The Standard reported that tenants in one of TODCO’s single-room occupancy buildings had frequent complaints about rat and roach infestations. Additionally, 15 people have died from drug overdoses in TODCO properties since the start of 2020.

Emily Cohen, a spokesperson for the Department of Homelessness and Supportive Housing, said in a statement that the agency uses a risk-assessment tool to determine which of its nonprofits should receive the attention of program monitors.

“We look at several factors to determine if a contract is considered high or low risk,” Cohen said.  “TODCO has not been prioritized for onsite program monitoring since it has been determined to be a low-risk grant. It is our intention to expand program monitoring to all grants and contracts as we staff up.”

Supervisor Stefani’s office has been working with the City Controller on legislation to address nonprofit performance monitoring, and new legislation could be introduced by the end of next month.

“We have to fundamentally change how we monitor and evaluate the performance of these organizations to ensure that they effectively deliver for the vulnerable populations they are meant to serve,” Stefani said.