The San Francisco Controller's Office has accused HomeRise, a nonprofit that operates a large portfolio of housing for formerly homeless individuals, of misusing millions in taxpayer funds intended to help support residents living on the margins.
The office released an audit Tuesday that described gross mismanagement and wasteful spending at the organization, which operates nearly one-third of city-funded supportive housing units for formerly homeless people. The audit, which was initiated by the Mayor's Office of Housing and Community Development and the Department of Homelessness and Supportive Housing, covers a four-year period between 2019 and 2022, along with part of 2023.
According to the report, which was prepared by outside auditors, Sjoberg Evashenk Consulting Inc., HomeRise's questionable practices wound up diverting funds that might have otherwise gone towards tenant services or facility improvements.
Among other issues, the nonprofit reportedly granted large pay raises—as much as 20% or more in some cases—to some employees, despite insufficient cash flow.
Exacerbating its fiscal issues, HomeRise also created at least three new corporate positions during the audit period, apparently without considering the fiscal impact, the report said. The organization also paid out some $200,000 in bonuses.
“Diverting any portion of city funding to questionable uses when it's earmarked to benefit residents is careless and irresponsible,” said Controller Greg Wagner. “No matter the extenuating circumstances, HomeRise had an obligation to ensure public funds were managed appropriately.”
In an interview, HomeRise's CEO, Janéa Jackson, acknowledged the audit's findings and said that the nonprofit has been working closely with the Controller's Office to correct the fiscal and organizational issues.
Jackson noted that HomeRise had significant management changes last year, hiring a new chief financial officer in May 2023; Jackson herself joined as CEO in June 2023.
"This is the past, and many of the concerns have been resolved or are continuing to be resolved," Jackson said. She added that the organization is willing to make all changes necessary to restore its good standing with the city and ensure strong governance and fiscal practices.
The mayor's housing office and the homelessness department identified issues in 2021 and requested an audit in 2022, removing HomeRise from certain projects during that time, according to Jeff Cretan, spokesperson for Mayor London Breed.
The nonprofit's fiscal issues included a high rate of vacancy at many of its housing facilities, which led to losses of more than $6 million during the audit period. In July 2023, its average vacancy rate was 14.6%; housing facilities with the highest vacancies included 666 Ellis St. (26.3%), the San Cristina at 1000 Market St. (34.5%) and the Senator Hotel at 519 Ellis St. (29.2%).
HomeRise also improperly recorded expenses and improperly borrowed funds from restricted accounts to cover cash flow issues, according to the audit.
The organization is among the largest operators of housing for formerly homeless people in San Francisco, earning about 30% of its roughly $34 million budget from government grants and subsidies in fiscal 2021. As of October 2022, its total outstanding loans, subsidies and grant agreements with the city topped $240 million across 19 properties, with 1,500 housing units in and around the Tenderloin and South of Market.
HomeRise is the latest city-funded nonprofit to fall under scrutiny for alleged misuse of taxpayer funds or misconduct.
In February, a joint investigation by the City Attorney and Controller's Offices accused J&J Community Resource Center, which provides services for low-income families and youth, of improperly billing the city for expenses that included cigars and motorcycle rentals.
Last year, the city blocked contracts to United Council of Human Services, a provider of housing and shelter services of flouting city rules on who recieved housing and extensive fiscal misconduct. The city referred the nonprofit to the FBI and District Attorney's Office.