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Politics & Policy

San Francisco gives $1.7B to nonprofits. This lawmaker wants audits

Supervisor Catherine Stefani listens during a press conference.
San Francisco Supervisor Catherine Stefani is proposing a new law to strengthen oversight of taxpayer-funded nonprofits in the city. | Source: Juliana Yamada for The Standard

Supervisor Catherine Stefani is introducing legislation Tuesday to strengthen oversight of taxpayer money given to nonprofits while also helping San Francisco hold organizations more accountable in meeting performance goals.

The city currently gives $1.7 billion to more than 600 nonprofits, but a report by The Standard earlier this year found that almost 140 nonprofits had fallen out of good standing with the state and $25 million in public funds went to organizations that should have been barred from doing business with San Francisco. A follow-up story found that city departments were failing to properly monitor contracted nonprofits, many of which are tasked with tackling the city’s most pressing challenges, such as homelessness, drug addiction and mental health. 

Stefani’s legislation would require nonprofits that receive contracts worth at least $750,000 in a fiscal year to submit balance sheets audited by an outside accounting firm. The City Controller’s Office would be given additional powers to monitor the financial dealings of nonprofits, and the city would also be forced to put firmer rules in place to include “measurable objectives” in contracts.

“This legislation represents a significant stride towards building a more transparent and accountable government that delivers high-quality services to our residents,” Stefani said in a statement. “By implementing these measures, we aim to strengthen the partnership between our city and its nonprofit collaborators, ensuring our collective ability to serve the community effectively and efficiently.”

In the last two years, audits by the Controller’s Office have uncovered numerous issues with nonprofits that have received millions of dollars in taxpayer money. 

Last fall, the homelessness services nonprofit United Council of Human Services was accused of mismanaging funds and keeping incomplete records after receiving tens of millions of dollars in city contracts. City officials referred the nonprofit’s CEO to the FBI and District Attorney’s Office for criminal investigations, and the organization was eventually banned from receiving future contracts

These reports followed the near-collapse of Baker Places and Positive Resource Center, two connected nonprofits that requested two emergency bailouts in the span of months to continue providing behavioral health services.

City Controller Ben Rosenfield, whose office worked closely with Stefani on the legislation, endorsed the proposed revisions in a statement Tuesday.

“This legislation outlines meaningful, practical steps we can take as a government to improve the quality of safety-net services and the consistency of the city’s oversight of them,” Rosenfield said.

While the proposals in Stefani’s legislation would enact tougher controls, it’s also meant to make the reporting process easier on nonprofits, which often are forced to compile numerous—and frequently duplicative—reports if they contract with multiple city departments.

“This review of contracting policies is long overdue and will make it easier for nonprofits to do business with the city,” said Debbi Lerman, director of the San Francisco Human Services Network, which represents a coalition of local nonprofits in the city. “By streamlining and standardizing administrative processes, this legislation will help nonprofits maximize their time and resources for meaningful, clearly defined service outcomes while maintaining strong accountability measures.”