The taxpayer-funded nonprofit HomeRise, one of San Francisco’s developers of affordable housing, misused millions in tax dollars – including spending on gifts for staff and fundraising events – and has “a long list of financial and compliance problems,” according to an audit by the San Francisco Controller’s Office.
“Among the serious concerns were gross fiscal noncompliance, wasteful practices that misuse taxpayer funds, and missing controls and oversight between 2019 and early 2023,” the audit found.
The audit was requested by the Mayor’s Office of Housing and Community Development (MOHCD) and the Department of Homelessness and Supportive Housing (HSH) “due to concerns about the nonprofit’s organizational management and financial operations,” the controller said.
Using city grants and loans, HomeRise constructs buildings, rehabilitates existing structures, or leases properties to create housing. It also provides property management services, including maintenance and janitorial work, and receives grants to provide resident support services.
The audit found:
- “HomeRise improperly transferred $2 million from a restricted account without approval and borrowed another $2.5 million from a property’s operating account to help cover corporate payroll charges. As of August 23, 2023, $2.1 million of this remained unpaid.”
- “A review of sampled expenses revealed unallowable, imprudent, or questionable spending by HomeRise that is inconsistent with the intent of its city grant agreement. For example, HomeRise spent money to do fundraising, pay its staff bonuses, and provide lunches and gifts to its staff.”
- “Staff bonuses of more than $200,000 charged to properties were unplanned and unbudgeted, worsening cash flow problems.”
- “HomeRise charged some operational costs to its properties that should not have been or, at a minimum, were questionable. Some of these costs also were unplanned and unbudgeted, including more than $100,000 in temporary rental charges, $96,000 for salaries paid to tenant program services staff, and $12,500 for a social event.”
“Among the organizations the City contracts with to deliver similar services, HomeRise receives a relatively large share of city funds,” the controller noted. “It provided 18 percent of the supportive housing units and about 6 percent of the affordable housing units that MOHCD funds, and operated nearly one-third of the city-funded units that served people who were formerly homeless. That amounts to about 1,500 affordable housing units across 19 properties that HomeRise has produced, operated, or provided supportive housing with the aid of more than $200 million in grants and loans from the City.”
The Controller’s Office made nine recommendations for HSH and MOHCD to address the problems detailed in the audit report and said HomeRise “will have to demonstrate expeditious and consistent progress, including implementing stronger operational and fiscal management, if it is to meet its commitments and continue to work with the City.”