Smith: State audit busts SJ's financial mismanagement of non profits—it's time for an SJ Non Profit Registry
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Concerns about non profit accountability in SJ have a long history of being ignored. Irene Smith of the Independent Leadership Group and United Housing Alliance suggests that the blistering State Audit report on SJ's out-of-control homelessness expenditures means it's finally time to get serious about managing non profits that receive city funds. Originally on Medium NonProfit Accountability Registry.
Perhaps the most eye-popping takeaway from the blockbuster California State Audit of San Jose's homeless programs is this: No one can tell you how money is being spent on homelessness services in San Jose.
The list of entities committing financial mismanagement is sadly long:
The Feds certainly can’t tell you, although they give plenty of funds.
Neither the State nor the County can tell you, although there have been plenty of bonds.
The Housing Department of San Jose can’t tell you, even though they are the public entity directly charged with managing the funds.
And non-profits who accept money from government agencies as well as individual donors and corporations can’t tell you, even though they're the direct recipients of taxpayer funds.
The systemic problems with the city’s mismanagement of non profits deserves further scrutiny by City Hall and local media, and I will spend the remainder of this post on that specific issue and how San Jose is lagging other cities in getting their non profits under control. This is a two-part series: part one will review expenditures mismanagement and part two will review services mismanagement.
The recent State audit of San Jose's Housing Department shows that San Jose failed to adequately track $300 million in homelessness spending. The 115-page report, details the SJHD's utter failure over the past decade to address homelessness.
Cities like SJ increasingly rely on “non-profits” to deliver city services, including housing, mental health etc. But the spending and performance of outsourced service providers are not transparent. City programs themselves are ultimately responsible to the taxpayer through public records requests but non-profits are not held to the same standard despite receiving substantial financial support. Non-profits play by different rules and are not subject to the same oversight, staff protections, community outreach and audit rules that normally apply to city services.
The word ‘non-profit’ itself conveys an undeservedly benign glow. We must recognize non-profits (NPOs) for what they truly are: unaccountable and well-funded advocacy groups. And large corporate backers who get tax credit for their donations to NPOs include: Google, Meta, Apple, real estate developers and individuals that live outside SJ. With loads of money coming into NPOs each year, we can see NPO executive high salaries.
Many California cities have awakened to how the lack of oversight of non profits has drained city coffers, and are responding. Check out some recent headlines:
San Francisco measures NPO results
San Francisco spends more than $1.4B per year with more than 600 non-profits. As a result of too much money for no results, the SF board of supervisors unanimously passed a new requirement that SF measure the results that non-profits produce for the residents of SF. This action came as a result of an audit of NPO financial shortfalls in addressing their homeless clients.
Los Angeles measures NPO results
In Los Angeles residents have banded together (LA Alliance for Human Rights) to sue the county and the city; they won. They were tired of the public health hazards and. Judge David O. Carter ordered a "comprehensive independent audit of all homelessness programs funded or run by the city of Los Angeles." The audit scope document, drafted by the Alliance in collaboration with other parties, will focus on City budgets, programs, performance, and impacts.
Meanwhile in San Jose
The saga of First Community Housing, a provider of homeless housing services in San Jose, is a typical example of the fiscal failures and cozy executive relationships between many “non-profits” and the city. Last summer SJ had to provide a $26 million emergency bail-out to First Community because of financial mismanagement. According to the First Community website, its board of Directors is led by Ru Weerakoon, a self-described former senior advisor to San Jose mayors Chuck Reed and Sam Liccardo.
We also see uncomfortable and lucrative transitions for the SJ Housing Department (SJHD) to lead homeless NPO advocacy groups such as SV@Home after they leave city employment. Then the former SJHD employees lobby their former teammates for funding for their NPO without appropriate accountability. From SJHD director to CEO non profit From NPO CEO to private consultant San Jose also has seen SJHD staff serve on the boards of NPOs which receive city funding. After 8 years as SJHD director, homelessness worse
Recommendation: San Jose Registry for NPOs
It’s time for San Jose to follow San Francisco’s lead and more closely regulate non-profit relationships with the city and provide a dynamic transparent registry of NPO money, activity, and results.
1. Require all NPOs and other government agencies such as SCC or the SCC Housing Authority whether receiving or spending money on homelessness in SJ, to participate in a dashboard registry.
2. Annually report size, efficacy, & growth of non-profit contracts with city.
3. Prevent city staff simultaneously serving on non-profit boards that contract with the city thereby eliminating conflicts of interest.
4. Treat non-profits as lobbyists and make all meetings transparent so that NPOs cannot use taxpayer money to lobby city council.
5. Require financial and governance transparency from all non-profits that contract with city.
6. Audit the San Jose Housing Department annually for cost to benefit analysis.
As the city elects 4 new Council Members and new County Supervisors in November, we call on candidates to support new legislation mandating accountability & transparency by all the non-profits that implement city policies.
Read the whole thing here.
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