Waste of the Day: San Francisco Nonprofit Used Money On Gifts And Raises

Topline: A San Francisco nonprofit showed “gross fiscal noncompliance” and “wasteful practices” after receiving $240 million in grants, loans and subsidies from the city, according to a new audit report.

San Francisco nonprofit paid their staff exorbitantly at taxpayers’ expense

Key facts: HomeRise helps homeless Californians find affordable housing, but many of its issues stemmed from paying its own employees.

The nonprofit borrowed $4.5 million from its own operating account to pay employees. $2.1 million of that had not been returned as of last August, the city controller’s audit found.

HomeRise also gave staff surprise bonuses totaling $200,000, including “signing bonuses” for employees who had been working for 13 years. Other employees received raises of up to $87,000 over a span of nine months.

The group also spent $24,000 of city money on items that were not in its grant agreement, such as lunches and gifts for staff.

That’s partly because 15% of company credit cards did not require approval for purchases. Another 18% of credit cards allowed cardholders themselves to approve their own purchases.

Auditors claim that HomeRise’s year-end meetings were “largely focused on finding corporate expenses that could be paid for with remaining City grant funds.”

When HomeRise did spend its grant money properly, it often failed to track where the money went and could not present accurate inventory records to auditors.

Almost all of the nonprofit’s 200 employees had access to its financial data, which auditors said increases the risk of fraud and theft.

High vacancies, waste

Meanwhile, HomeRise failed to rent out all of its property and had a vacancy rate of 14.6%, which auditors say caused a $6.3 million revenue loss over four years. That contributed to thousands of dollars in late fees when the company missed a $1.2 million payment by over 90 days last year.

The audit recommends that San Francisco strengthens its oversight of HomeRise but does not cut its funding, since the nonprofit serves a “vital function.”

Supporting quote: In its response to the report, HomeRise said the audit “suffers from deep flaws” and that many of the issues have already been corrected.

“Many of the findings in the report, are, however, factually incorrect, and others are misleading by the lack of relevant context,” HomeRise CEO Janet Jackson wrote. “The report contains gross misstatements … manifesting a complete lack of understanding of the responsibilities of a non-profit organization’s all-volunteer board.”

Summary: It’s unclear exactly how much of the $240 million grants, loans and subsidies was misused, but what is clear is that this company should never have been trusted with public funds.

The #WasteOfTheDay is brought to you by the forensic auditors at OpenTheBooks.com.

This article was originally published by RealClearInvestigations and made available via RealClearWire.