San Francisco nonprofits under the microscope

The City spent nearly half a billion dollars last year contracting out social services to hundreds of nonprofits but lacked the ability to track how the money was spent.

City Hall is now calling for accountability and oversight in how public money is doled out to these agenies in light of the fiscal crisis.

The City recently closed a budget deficit in excess of $400 million and is facing a similarly sized deficit for next fiscal year, which begins July 1.

Outside consultants are evaluating violence-prevention programs for youth in San Francisco’s most troubled neighborhoods, which The City is spending $10 million on, and at services treating those with substance abuse problems, which cost The City $50 million.

“This will help us make more strategic funding decisions and derive greater benefit from each dollar spent for San Francisco residents,” said Catherine Spaulding, an auditor with the City Controller’s Office.

About $477.5 million was given last year to 841 nonprofit groups, providing an array of services.

One nonprofit operating a substance abuse program with a focus on the Asian and Pacific Islander population was paid $18 million during that fiscal year, and two others, a housing clinic in the Tenderloin and a group that provides residential treatment for the mentally ill, were paid about $14 million each.

The City paid 104 nonprofits in excess of $1 million each, and about 60 were paid between $500,000 and $1 million, according to the database overseen by the City Controller’s Office.

The new studies are designed to provide The City with an improved system of measuring outcomes of the services to guide funding decisions for years to come, such as by judging a program’s success by client recidivism rates.

One study will examine the $10 million annually given to 60 youth violence prevention groups working in five “hotspot” areas of crime, including the Tenderloin, South of Market and the Western Addition, and spending $1.4 million on job-training services.

“We feel strongly we need to have more outcome-based measures,” said Maria Su, executive director of the Department of Children Youth and Their Families, which funds some of the nonprofits.

In a separate study, the nonprofits funded by the Public Health Department for substance abuse services are undergoing a three-year evaluation, with monitoring of those served. 

“There are some groups that have not been evaluated, and you always want to evaluate your programs to ensure that there are good outcomes and to improve where there isn’t,” said Barbara Garcia, deputy health director.

The studies come at a time that could help city officials make difficult funding choices during the tough financial times. But it could be a tough battle.

“Unfortunately, politics and political relationships in San Francisco often trump our concerted efforts to hold some nonprofits accountable for the outcomes their clients deserve,” Mayor Gavin Newsom’s spokesman Tony Winnicker said.

While Newsom “believes the majority of the city’s nonprofits are well-run,” Winnicker said, The City can “do more to ensure better outcomes.”

Of The City’s $1.2 billion discretionary budget, nearly $500 million is distributed to nonprofits from the city’s general fund. The City also administrated state and federal grants of close to $1.1 billion to nonprofits during the 2007-2008 fiscal year, according to a 2009 civil grand jury report on nonprofits. Nonprofits compete for city contracts to provide services.

Daniel Macallair, executive director of the Center on Juvenile and Criminal Justice, a city-funded nonprofit, said The City has dramatically improved the system in the last decade but there is “still a lot of room for improvement.”

“The biggest deficiency I see is a tendency to fund a lot of services that may be duplicative,” Macallair said.

Others said overhead costs could be reduced.

“I think that there are opportunities for consolidation of programs,” said Vitka Eisen, CEO of the Walden House. “I don’t think that there are enough services. If five different providers provide the same service then you are supporting five different administrative entities as well. We need more services and probably less administration.”

The City’s nonprofit task force is expected to issue recommendations in eight to 10 weeks on how to improve the system.

“Given government deficits and declining donations and philanthropic support to the nonprofit sector in a time of increasing need and demand for the health and human services they provide, it’s all the more important to evaluate the effectiveness of The City’s investments in this sector,” auditor Spaulding said.

Nonprofits on front lines of The City’s challenges

San Francisco’s nonprofit world is a vital component of city government.

When it comes to homelessness, substance abuse, poverty, violence and other challenges facing those living in San Francisco, nonprofits are on the front lines and in the communities working to bring relief to those suffering.

They operate after-school programs, job training, counseling, substance-abuse treatment and myriad other services.

“[Nonprofits] have been historical providers in The City for decades. Some of the populations that we try to reach they have a much better ability to do that, whether it’s cultural, language or neighborhoods,” said Barbara Garcia, deputy health director.

More than 50 percent of the Public Health Department’s services are performed by nonprofits, and for some city departments, nonprofits are their entire service arm.

“Many of our services are homeless services, substance-abuse services run by the nonprofits, so those organizations are playing a pivotal role around poverty issues in The City and ensuring that our families and our individuals in our community remain healthy,” Garcia said.

“All of those nonprofits help us with the overall cost of care. You look at all of our community clinics they are keeping people every day out of the emergency room, which are very expensive. They play an essential part to keep the city healthy and the budget healthy.”

Funding nonprofits

$58 million: Approximate amount The City spent on nonprofit indirect costs in fiscal year 2007-08

$10 million: Approximate amount The City funds in grants to about 60 community organizations for violence prevention and intervention services

$1.4 million: Amount The City funds in grants to 10 community-based organizations providing Youth Workforce Development services to high-risk youth

$1.2 billion: The City’s discretionary budget

$500 million:
Approximate amount of discretionary budget distributed to nonprofits

$1.1 billion: Amount of state and federal grants administered by The City in fiscal year 2007-08

Yearly expense

The City funds hundreds of nonprofits each year.

FY 2008-09: $490,878,678
FY 2009-10: $477,575,519       
Source: City Controller’s Office, Civil Grand Jury

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