Subject: Request for follow up regarding findings of Independent Auditing and Fiscal & Compliance Monitoring of the Tenderloin Housing Clinic
Attached please find an independent audit report of the Tenderloin Housing Clinic from Daoro Zydel & Holland LLP dated 31 March 2009. This report had been provided to the Mayor’s Office of Housing by THC and was subsequently provided to me by MOH via a Sunshine Ordinance Request for Disclosure. As you will see, this report outlines areas of significant deficiencies regarding HUD funding whereby a significant deficiency is defined as "…a control deficiency or combination of control deficiencies, that adversely affects the entity’s ability to initiate, authorize, records, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity’s financial statements this is more than inconsequential will not be prevented or detected by the entity’s internal control."
The significant deficiencies detailed in the audit report are as follows:
* Finding No: 2008-01 Modified Payment Program ("MMP") Bank Reconciliation
* Finding No: 2008-02 Rent Rolls and Property Management
These findings apply to the the Federal Awards from Department of Housing and Urban Development:
The audit report attached indicates that these deficiencies are carry overs from previous years.
The audit report also outlines the following areas of concern:
1. In 1995, THC purchased 50% ownership interest at 126 Hyde Street but, but as of 30 June 2008 had not recorded the purchase with the City and County of San Francisco. They have subsequently recorded the purchase but at its original 1995 cost of $163,500.
2. In December 2007, THC received title to a vacant lot located in Bayview/Hunter’s Point. Although an appraisal obtained by the donor valued the property at $20 Million, as of 30 June 2008, THC did not record any value associated with the acquired land or site improvements. THC claims the parcel has no measurable basis to determine fair value because of a) the unique nature of the site (3.16 acres with direct and unfettered bay access) and b) they are uncertain as to how they will develop this property. The independent auditors report states, " Such lack of measurable value, and consequent omission in the financial statements of the Organization (THC) constitutes a departure from US generally accepted accounting principals (GAAP). …the effect of this departure on the financial statements cannot be determined at this time." Additionally, while not recording any value, THC rents this property to a company for parking of their heavy vehicles, thus making a profit on an asset that was not properly recorded.
To the best of my knowledge, MOH has not taken any action regarding this audit report and continues to fund THC.
Additionally, in April of 2008, HSA Fiscal and Compliance Monitoring of THC (also attached) noted several areas of concern including multiple instances of overbilling for legal services.
The City and County of San Francisco is currently experiencing budget deficits in the billions; it needs to use its limited resources wisely and ensure that the resources used are used in complete compliance with its requirements. From June of 2007 to June of 2008 alone, THC received almost $15 million in government grant,s a substantial portion of which was federal funding funneled to them via various City agencies such as DPH, DCFY, HSA, and MOH.
No organization should be allowed to continue to receive funding from the City and County of San Francisco if they are consistently unable to manage the funds provided to them as required by contractual agreement and law. At this time, I kindly request that the City and HUD conduct a thorough investigation of all its grant and loan programs with the THC to ensure compliance with the terms and conditions of the awards and to make the findings of such an investigation and any corrective action taken by the City available to the public.
I have additional information in support of my request and can be reached at your convenience at 415-260-7608.
With Kind Regards,