One of San Francisco’s most well-known and visible nonprofits has been flagged by the city controller for “serious” financial issues, according to a document obtained by The Standard. It’s the latest in a series of difficulties facing Urban Alchemy.
The controller’s office, which audits the city’s finances, wrote in an Aug. 21 letter that Urban Alchemy, which embeds formerly incarcerated street ambassadors in troubled neighborhoods, has not properly tracked employee output for two years in a row. The letter also claims that the nonprofit was at one point experiencing cash-flow issues.
The group has not maintained adequately detailed records about how workers are devoting their time across Urban Alchemy’s programs, the controller's office found. These include initiatives with the city’s homelessness and economic development departments, among others.
In a statement, the controller’s office said its findings amount to “serious fiscal or programmatic” issues, but can be fixed. “This designation is not permanent — it’s meant to motivate corrections and can be rescinded if Urban Alchemy remedies the issues in the next few months,” a spokesperson said.
The problems are the latest blow to San Francisco’s nonprofit network, which received $1.5 billion in funding from the city last year and has faced increasing scrutiny amid a slew of scandals at prominent organizations.
Urban Alchemy spokesperson Jess Montejano said the organization is “proud” of its work with the city and is working to fix its accounting issues.
“We are grateful for our partnership and expanding work with the City to drive real change and results in the neighborhoods and with the vulnerable populations that we serve,” Montejano wrote, citing a Stanford study published last year that found Urban Alchemy helped reduce crime in areas where ambassadors are stationed.
Montejano said the organization’s finances “have always been strong,” and its audited financial statements are “100% clean with no issues.” He said cash flow is supplemented with a bank line of credit since the organization “regularly” experiences reimbursement delays.
Some of the findings are based on financial records from 2023 to 2024, which the controller's office said offer "an indicator of financial health" but do not "necessarily reflect Urban Alchemy’s current state."
Founded in 2018, Urban Alchemy is often credited with bringing stability to tough intersections in the Tenderloin and Mid-Market, where homeless residents and drug users frequently congregate in large groups. Its employees, known as “practitioners,” wear green-and-black vests with the Urban Alchemy logo on the back and are tasked with offering aid and keeping sidewalks clear. According to its website, the group has about 1,300 employees.
The organization started in San Francisco and Los Angeles and has since expanded to Oregon, Texas, and Alabama. Nonprofit filings show its revenue and expenses have increased in parallel from approximately $10 million in 2020 to about $70 million in 2023, the last year for which information is available.
Late last year, cracks started to appear in Urban Alchemy’s financial health. Records showed the organization blowing its budget by as much as $500,000 one month.
In a statement after publication, Montejano disputed the organization's budgetary problems and said the city had directed the organization to expand its services last fall.
"Urban Alchemy has never 'blown through our budget,'" Montejano said. "For our contracts with the City, our staffing numbers are dictated by the City and its needs."
Emails among city employees managing Urban Alchemy’s contracts noted that extra cash was needed for the organization “to make payroll.” In November, Supervisor Connie Chan, who serves as the Board of Supervisors’ budget chair, withheld $7.7 million from the group until it could demonstrate positive performance outcomes.
Urban Alchemy’s general counsel, Sharon Hang, wrote in a November letter to the mayor’s office that the group was at risk of laying off more than 300 employees amid budget concerns. It has so far avoided mass layoffs.
In May, The Standard reported that city officials probed the nonprofit’s management in response to the budget issues. The organization had asked the city for advances to stay afloat.
Update: This article has been updated with additional information and quotes from Urban Alchemy.