Government Audit and Oversight Committee Hearing on Nonprofit Performance Audit - February 16, 2023
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Government Audit and Oversight Committee Hearing on Citywide Nonprofit Performance Audit - February 16, 2023
The Government Audit and Oversight Committee of the San Francisco Board of Supervisors held a hearing on February 16, 2023, to discuss the August 2022 Citywide Nonprofit Performance Audit Report. The hearing examined the city's $1.4 billion annual contracting with nonprofit organizations, focusing on performance measurement, monitoring practices, and transparency. The committee also considered closed session items on litigation settlements.
Public Comments & Testimony
- Sherilyn Adams (Larkin Street Youth Services / HSN) emphasized the burden of inconsistent department requirements, noting her organization had 28 monitoring visits from various departments. She called for streamlined processes and adequate funding for compliance infrastructure.
- Michael Blacker (Swords to Plowshares) highlighted the challenge of balancing paperwork with direct service delivery and urged support for frontline staff.
- David Linnell (Meals on Wheels) noted that a recent budget increase covered only 8.5% of a 22% cost increase, forcing his organization to fundraise 56% of its budget. He warned that negative press about a few nonprofits can harm fundraising for all.
- Beverly Upton (San Francisco Domestic Violence Consortium) reported that most member agencies were in compliance and that local nonprofits leverage city dollars four to one. She offered to collaborate on transparency efforts.
- Debbie Lerman (Human Services Network) called for the city to support struggling nonprofits with resources and assistance rather than only criticism, emphasizing that services are vital to economic recovery.
- Laura Lala Chavez (Lyric) echoed the burden of multiple department visits and supported improving the monitoring process.
- West Saver (Glide) noted that noncompliance often stems from chronic underfunding, contract inconsistencies, and payment delays that can approach a year. He advocated for centralized reporting and using monitoring results for capacity building.
- Doug Stiles (Huckleberry Youth Programs) cited late contract certifications causing cash flow problems of hundreds of thousands of dollars and supported multi-year contracts with escalators.
- Jessica (District 4 Youth and Families Network) stressed that recent negative publicity is damaging and misleading, and urged focus on the impact of underfunded contracts and wages.
- Alani (public caller) expressed frustration that many nonprofits are hard to reach or have limited hours, and that the public does not see enough change despite large funding amounts.
- Mr. DeCosta (public caller) alleged corruption and lack of whistleblower incentives, claiming departments favor certain nonprofits.
Discussion Items
- Presentation by Controller's Office: Mark Delarosa (Director of Audits), Amanda Kelly, Wendy Lee, and Laura Marshall presented the audit findings and the citywide Nonprofit Monitoring and Capacity Building Program. The audit covered over 2,000 contracts totaling $1.6 billion in fiscal year 2017-18, with a sample of 30 contracts across 13 CBOs totaling $42.8 million. Key findings: performance measures lack consistency across departments; reporting and monitoring vary greatly; and there is limited data sharing. Three recommendations focused on standardizing performance measurement, strengthening monitoring collaboration, and creating a centralized data system.
- Monitoring Program Details: The program monitors 192 contractors accounting for 85% of nonprofit spending. In fiscal year 2021-22, most contractors were in conformance; 15 had unresolved findings. Two organizations were placed on red flag status and two on elevated concern. Most common findings involved cost allocation procedures and board oversight.
- Supervisor Questions: Supervisor Stephanie asked about Baker Places and how red flag status was communicated. Controller's office explained that departments are notified but defunding decisions rest with departments; they are exploring better board notification. Supervisor Chan asked about definitions of core vs. expanded monitoring, how findings are used in contracting decisions, and capacity building support. Controller's office clarified that risk assessment determines monitoring level, and capacity building is offered via consultants. Supervisor Preston raised concerns about connecting wage pressures to compliance issues and the need for baseline compliance checks (e.g., attorney general filings).
- Discussion on Multi-Year Contracts: The controller's office is exploring allowing departments to include cost escalators in multi-year contracts, moving away from flat funding. The current budget process centralizes escalation decisions, which may not reflect true service costs.
Key Outcomes
- The committee voted unanimously (3-0) to file the hearing, with plans for future legislation to improve transparency and oversight (motion by Vice Chair Stephanie, seconded by Supervisor Chan, all in favor).
- In closed session, the committee recommended items 2–8 (litigation settlements) to the full Board of Supervisors with a positive recommendation.
- The committee voted unanimously (3-0) not to disclose the closed session discussions.
Meeting Transcript
Good morning. The meeting will come to order. Welcome to the February 16th, 2023 regular meeting of the Government Audit and Oversight Committee of the San Francisco Board of Supervisors. I'm Supervisor Dean Preston, Chair of the Committee, joined by Vice Chair Catherine Stephanie and committee member supervisor Connie Chan. The committee clerk today is Stephanie Cabrera. And we want to thank the team at SFGov TV for staffing this meeting. Madam Clerk, do you have any announcements? Yes, thank you, Chair. The Board of Supervisors and its committees are now convening hybrid meetings that allow in-person attendance and public comment. While still providing remote access and essential remote access and public comment via telephone, the board recognizes that equitable public access is essential and will be taking public comment as follows. First, public comment will be taken on each item on this agenda. Those attending in person will be allowed to speak first, then we'll take those who are waiting on the public comment line. For those watching either Channel 26, 28, 78, or 99 and sfgovtv.org, the public comment call-in number is streaming across the screen. The number is 415-655-0001. Again, 415 655-0001. When prompted, enter the meeting ID 2499 452 1258, then press pound twice. When connected, you will hear the meeting discussions, but you will be muted and in listening mode only. When your item of interest comes up and public comment is called, those joining us in person should line up to speak along the curtain wall, and those on the telephone should dial star three to also be added to the speaker queue. If you're on your telephone, please remember to turn down your TV and all listening devices that you may be using. As already indicated, we will take public comment from those attending in person first, then we will go to those who are on our public call-in line. Alternatively, you may submit public comment in writing in either of the two following ways. Email them to me, the government audit and oversight committee clerk at Stephanie S T E P H A N I E dot Gabrera, C A B R E R A at SFgov.org. If you submit public comment via email, it will be forwarded to the supervisors and also included as part of the official file. You may also send your written public comment via U.S. Postal Service to our office in City Hall at 1 Dr. Carlton B. Goodlit Place, Room 244, San Francisco, California, 94102. Finally, items acted upon today are expected to appear on the Board of Supervisors' agenda of February 28th, unless otherwise stated. Thank you. Thank you, Madam Clerk. Please call our first item. Item number one is a hearing to discuss the findings and recommendations made in the August 2022 Citywide Nonprofit Performance Audit Report entitled The City Should More Effectively Evaluate the Impact of Services Provided by Community Based Organizations and requesting the City Services Auditor and City Performance Division to report. Members of the public who wish to provide public comment on this item should call 415 655 0001. When prompted, enter meeting ID 2499 452-1258, then press pound twice. If you have not done so already, please dial star three to be added to the speaker queue. The system prompt will indicate that you have raised your hand. Please wait until the system indicates that you have been admitted, and you may begin your comments when we go to public comment. Thank you, Chair. Thank you, Madam Clerk. And this item is sponsored by Vice Chair Stephanie, and I want to thank you, Vice Chair Stephanie, for your leadership on this. Very much looking forward to this hearing. And with that, turn it over to you to lead the hearing on this. Thank you, Chair Preston. Colleagues, I called for this hearing so that we can begin to have a meaningful dialogue on how to improve the city's contracting and oversight processes, uh, processes with our nonprofit service providers. As you know, San Francisco contracts with hundreds of nonprofit organizations to provide essential services to the city's most vulnerable populations to the tune of 1.4 billion dollars annually. And we want to make sure that those taxpayer dollars are being spent wisely and that the critical services that our nonprofits deliver are being delivered with positive outcomes. You know, I've long thought that we need to do a much better job of evaluating the programs and services the city funds and whether they meet the community's needs. To this end, in August of last year, the city controller released a citywide nonprofit performance audit. In it, the controller's office called for the standardizing and streamlining of existing process processes, strengthening performance measurement and monitoring, and requiring a level of transparency that currently does not exist with respect to the management of these contracts. And that's something that I think is extremely important.
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