A behavioral health nonprofit that faced accusations of financial mismanagement and scandal involving an employee is set to pay the city millions of dollars after officials extended a financial life raft to keep operations going.
Baker Places, which offers treatment to residents with both psychiatric and addiction problems, could end up forking over about $7.7 million to the city in a payment agreement that would run a little over two decades.
The figure is a result of debts the nonprofit has accumulated over the years with the city stemming from cash advances on its contracts. The amount also comes about from the findings of an audit, which found that the organization owes over a million dollars related to Medi-Cal billing.
Part of the deal will encompass a $3 million real estate transaction in which the city would acquire property from the nonprofit at 333 7th St. in the South of Market neighborhood.
The nonprofit may also eventually hand over two additional facilities to the Department of Public Health—one on Dolores Street and another on Grove Street. That plan is still in the early stages, according to a city-provided memo.
The $7.7 million agreement is set for a hearing on Wednesday before the Budget and Finance Committee and comes after the nonprofit faced solvency issues between October 2021 and November 2022 when it warned officials that it would have to suspend operations or fold if it didn’t receive an immediate injection of cash.
In response, the Board of Supervisors approved a $1.25 million infusion of funding for Baker Places in June 2022. The amount was less than the $3.2 million the Department of Public Health requested.
Despite the financial lifeline, the nonprofit announced in October 2022 that it would be scaling back some of its services after continued monetary shortfalls that amounted to over $4 million. The bailout requests infuriated members of the Board of Supervisors, who raised concerns about mismanagement at the organization.
“This is an organization that had been continuously propped up by the Department of Public Health,” said Supervisor Ahsha Safaí, who had previously called for a hearing about the operations of Baker Places. “It was almost one of those too-big-to-fail [organizations] … there was too much investment, too much riding on their delivery for the Department of Public Health.”
A spokesperson for Baker Places declined to comment, stating that “it's too soon to speak in detail or answer any questions” since the agreement hasn’t been approved yet.
Previous audits of the nonprofit found that Baker Places, which is a subsidiary of PRC, an organization formerly known as Positive Resource Center, had faced issues in the past with its accounting activities.
In December 2022, the Controller’s Office placed the organization on “red flag status,” which designated it as an organization at “imminent risk” of being unable to follow through with its contract agreement.
Late last year, the nonprofit was removed from the red flag list but remains on “elevated concern” status. The city also put the nonprofit on a corrective action plan, which ended earlier this month because of apparent progress the organization had made in shoring up its finances.
The nonprofit was also rocked by scandal in October 2022 when The Standard reported that a city employee making six figures at the Department of Public Health was also pulling in an additional salary worth over $100,000 from Baker Places. The individual, Lisa Pratt, had not received prior approval for the arrangement with the city and later resigned from her role at the nonprofit.
The city currently has four contracts with Baker Places that total $18 million. The nonprofit oversees over 200 beds across 30 facilities. At the end of 2022, the nonprofit transferred two of its programs to another organization, HealthRight 360.
Officials say they have faith that the nonprofit will be able to be financially successful going forward.
“It’s been going consistently in the right direction,” said Supervisor Hillary Ronen, who is co-sponsoring the repayment agreement legislation along with Rafael Mandelman. “I feel good about the course we took.”
Ronen also pointed to recent legislation from Supervisor Catherine Stefani that seeks to beef up oversight of nonprofits contracting with the city, which she says will help prevent another bailout situation.
Baker Places’ repayments to the city come as a host of nonprofits have come under scrutiny by elected officials and law enforcement in recent years after allegations of fraud and waste. In February, a joint investigation by the city attorney and controller found an organization had swindled around $100,000 in a scheme that involved booze, motorcycles and cigars.