An audit has found a slew of financial problems, including misuse of taxpayer dollars and compliance issues, at a city-funded nonprofit that is one of San Francisco’s main developers of affordable housing.
Other issues the controller found included an improper $2 million transfer without needed approvals and $2.5 million borrowed from a property’s operating account to cover payroll. As of last August, $2.1 million of that had not been reimbursed.
Unplanned and unbudgeted staff bonuses of more than $200,000 worsened cash flow for the nonprofit, the audit said, along with some questionable expenses including more than $100,000 in temporary rental charges, $96,000 in salaries for staff providing services to tenants, and $12,500 for a social event.
“Diverting any portion of city funding to questionable uses when it’s earmarked to benefit residents is careless and irresponsible,” said Controller Greg Wagner in an April 2 press release. “No matter the extenuating circumstances, HomeRise had an obligation to ensure public funds were managed appropriately.”
The Mayor’s Office of Housing and Community Development and the Department of Homelessness and Supportive Housing requested the audit after both became concerned about the nonprofit’s finances and operations, according to the controller’s office. Both departments began noticing discrepancies and ineligible expenses in the use of grants funds in the fall of 2021 and into 2022, and they met with HomeRise staff several times over the concerns, according to the audit.
According to the audit, the mayor’s office through its community and development department contracts HomeRise to manage about 18 percent of the city’s supportive housing units and 6 percent of its affordable housing units. The nonprofit also operates nearly one-third of city-funded units for the homeless.
Since it was first contracted by the city, it has produced, operated, or provided supportive housing for about 1,500 affordable housing units across 19 properties using over $200 million in city grants and loans.
In the audit, several recommendations were made for its contracting agencies to help get the nonprofit back on track, including strengthening oversight, requiring detailed quarterly reports and meetings with the nonprofit, and reviewing budgeted and actual expenses, according to auditors.
