The San Francisco City Controllers office is currently asking for letters of support requesting a full audit of Tenderloin Housing Clinic, which is one of the largest contractors in the City of San Francisco. The initial request, submitted yesterday, is outlined below and can be copied in any emails of support to the controllers office.
emails should be sent to controller@sfgov.org (attention : Ben Rosenfield)
the original email header was: Ben Rosenfield-Request for Full Audit RE: Tenderloin Housing Clinic and Potential Mismanagment of City Funds; (over $100 million in City Grants in Question)
it also might help to include the original CC’s as follows in order to keep the process open and public . These are all San Francisco government email and as such are required to be kept on file, stored, and subject to future Sunshine Ordinance requests
controller@sfgov.org, trent.rhorer@sfgov.org, cityattorney@sfgov.org, home@prosf.org, board.of.supervisors@sfgov.org, gavin.newsom@sfgov.org, hotline@hudoig.gov, assessor@sfgov.org, eoclass@irs.gov, dshoemaker@sfgov.org
Controller:
As the controller’s office has a stated roll in the City’s multimillion dollar contracts with the Tenderloin Housing Clinic, I thought it might be appropriate to make your office aware of the following.
I have the two most recent audited financial reports for the THC. These reports outline ongoing significant deficiencies in the THC’s internal control over financial reporting including with their Modified Payment Program bank reconciliation and with their Rent Rolls and Property Management. In addition, the THC failed to report the receipt of real property with an estimated value of $20million as an asset; the THC only recently recorded this transfer with the City however the value recorded with the City is significantly lower than that noted for the initial transfer and has not reported this as an asset to the IRS or when applying for grants; no transfer tax seems to have been paid either by the THC or the donor of the property. The THC currently rents out the property to a company that parks their heavy equipment there. The THC also purchased 1/2 interest in a property in 1996 but only recently recorded this transaction with the City.
I have copies of several of the THC’s grant agreements with the City. The THC appears to be grossly non-compliant with several provisions such as the following:
1. Each of the City contracts with the THC specifically states: “no funds appropriated by the City for this Agreement may be expended for organizing, creating, funding, participating in, supporting, or attempting to influence any political campaign for a candidate or for a ballot measure.” As you will see from the e-mail string below this is an ongoing problem
2. Each of the City contracts with the THC specifically states, “Within sixty (60) days following the end of each Fiscal Year, Grantee shall deliver to City an unaudited balance sheet and the related statements of income and cash flows for such Fiscal Year, in all reasonable detail acceptable to City, certified by an appropriate financial officer of the Grantee as accurately presenting the financial position of the Grantee.” The THC has admitted that they did not prepare this for the most recent fiscal year and I don’t believe they have ever been compliant with this contingency. The City agencies granting the funds to THC do not have any unaudited financial statements from the THC on file. Timing is important and interesting as the THC renews or is newly awarded grants within the first 3 months of a calendar year without benefit of the unaudited financial reports and in prior to the receipt of the audited financial report.
3. Until recently, the THC had documented significant lobbying expenses on their audited financial reports (I have some of these). When Supervisor Alliioto-Pier asked for an investigation as to whether City funds were used for THC’s lobbying activities, she was shut down by Randy Shaw (head of THC and BeyondChron) (I have a copy of the letter sent Shaw sent to Allioto-Pier) and the request for investigation was not taken any further by the City.
4. Many of the City contracts with the THC, usually those involving HUD funding, specifically states, “Program income shall be substantially disbursed for eligible activities before additional cash disbursements may be requested under this Agreement.” For the fiscal year ending 2007 and 2008, THC reported Attorney Fees Receivable of approximately $100,000 for the fiscal years of 2007 and 2008. The City has no documentation to show that these fees were used by the THC to further grant-related activities prior to drawing down additional grant funds from the City.
5. Each of the City contracts with the THC specifically states, “Any services to be provided by a law firm or attorney must be reviewed and approved in writing in advance by the City Attorney”. If you go on the SF Superior Court, Civil Court Website and search by name using Tenderloin Housing Clinic, you will see extensive legal activity by the Tenderloin Housing Clinic, including evictions and lawsuits against the City; none of which have been approved in writing by the City Attorney. It should be noted that, nowhere in the budgets provided for grant consideration does the Tenderloin Housing Clinic mention the hundreds of thousands of dollars it spends on outside attorneys to evict tenants from the buildings they manage; the THC is, in fact, one of the most prolific evictors of the disadvantaged. The THC’s most recent law suit against the City was to claim damages over the fact that the City awarded a grant to another agency to manage a small, women’s only SRO. The case is closed but it raised questions as to whether the THC used any City funding to sue the City.Each of the grant agreements allow for auditing by the City as well as a wide range of penalties for non-compliance. I have copies of the City’s audit reports of the THC for the fiscal years 2007 and 2008. The report for 2007 raises considerable concerns regarding the THC and while the 2008 report seems to just gloss over things that the audited financial reports say are ongoing. No action has been taken by any of the City departments in regards to THCs non-compliance.
This is just the tip of the iceberg for the THC. We are talking about over $100 million in grants (much of it Federal money given to the City) the City gives to the THC (this doesn’t include the interest free loans the City makes to THC which will be “forgiven” as long as they are compliant with the terms and conditions of those loans). I have made the City Attorney aware of these repeated acts of non-compliance with contracts, but no action has been taken. Openly progressive, the THC, through BeyondChron, is very influential in City politics and policy and as this is an election year, the City may be a little gun shy of the THC. With the City facing billions of dollars in deficits and cuts to essential services, the public should be interested in the blind eye the City is turning to this matter. Hopefully, the Controller’s office will take appropriate action.
The following is part of the email string as referenced above (Mr Souvall is with PG&E, but this was included in the above request)
PROP 16- Potentially City Funded On-Line Mis-Information
Dear Mr. Souvall:
The article below appeared in today’s on-line issue of BeyondChron (www.beyondchron.com). My reason for writing is that BeyondChron is an LLC of the Tenderloin Housing Clinic which receives millions in funding, including a recent funding of $82,000,000, from the City and County of San Francisco. In their contracts for their funding of the Tenderloin Housing Clinic, the City and Count of San Francisco specifically states, “… no funds appropriated by the City for this Agreement may be expended for organizing, creating, funding, participating in, supporting, or attempting to influence any political campaign for a candidate or for a ballot measure.” The article by Mr. Hogarth does appear to be an attempt to influence a ballot measure, and, as you will see by the e-mail string below, this is not an isolated incident.
In their audited statements (the most recent of which I have attached to this e-mail) the Tenderloin Housing Clinic does not clearly identify the source of funding for BeyondChron. The City Attorney and the heads of the City agencies providing the bulk of funding have been made aware of this and other potential areas of gross non-compliance with grant agreement on the part of the Tenderloin Housing Cinic with their City contracts however, it may be in the public interest for PG&E to be aware of the situation as well.
I have additional information regarding this matter and am available to speak with you at your convenience.
With Kind Regards,
PG&E’s Disgusting Campaign for Prop 16
by Paul Hogarth‚ Apr. 20‚ 2010
0diggsdiggReview it on NewsTrustAlmost every day, I get mailers that urge me to vote “yes” on Proposition 16 – the worst initiative on the June ballot. Prop 16 would effectively block any local government from providing energy – a public option that would compete with PG&E’s monopoly. Their most recent mailing asks if you are “tired of feeling powerless over how government spends your money.” To date, PG&E has spent $30 million to pass Prop 16 – funds that come from ratepayers without our consent. Unlike politicians (who can be voted out of office if taxpayers are unhappy with how they spend our money), PG&E is completely unaccountable. But State Senator Mark Leno has a solution – SB 1441, which will be heard today in committee. If passed, the legislation would require a two-thirds vote of ratepayers – before utility companies can transfer funds to their holding company for other purposes. So if PG&E wants to spend $30 million of our money on a political campaign, they would have to get a two-thirds vote from all ratepayers. And frankly, I’m tired of feeling powerless over how PG&E spends my money.
All the “Yes on 16” mailings come with a legal disclaimer that says – “major funding from Pacific Gas and Electric Company, a coalition of taxpayers, business and labor.” That’s not true. 100% of the Prop 16 campaign budget comes from PG&E. Where is the “coalition” giving them that money?
Rita O’Flynn 415-386-8224 Cell: 415-260-7608
From: rita_august@msn.com
To: dshoemaker@sfgov.org; cityattorney@sfgov.org
CC: home@prosf.org; auweia1@gmail.com; districtattorney@sfgov.org; board.of.supervisors@sfgov.org; ross.mirkarimi@sfgov.org; bevan.dufty@sfgov.org; angela.alioto-pier@sfgov.org; arron.peskin@sfgov.org; david.chiu@sfgov.org; carmen.chu@sfgov.org; hotline@hudoig.gov; matt.dorsey@sfgov.org
Subject: RE: Tenderloin Housing Clinic Potential Non-Compliance with MOCI/ MOH Grant Terms and Conditions
Date: Mon, 1 Mar 2010 07:43:01 -0800Dear Mr. Herrera and Mr. Shoemaker;
I am writing in follow up to the e-mail below with further examples to support my concerns regarding the Tenderloin Housing Clinic’s compliance with grants from the City. To recap, THC’s grants with MOCI/MOH specifically states, “… no funds appropriated by the City for this Agreement may be expended for organizing, creating, funding, participating in, supporting, or attempting to influence any political campaign for a candidate or for a ballot measure.”
Within the past few days, the following articles have appeared in BeyondChron:
Sit/Lie: Bad Old Law Resurfaces
by Tommi Avicolli-Mecca‚ Mar. 01‚ 2010
“Ultimately, this law will not solve anything. There are already laws on the books to deal with aggressive or threatening behavior on the street. Sit/lie won’t get anyone into housing or services, but it could negatively impact someone’s chances to get housing if they end up with an arrest record. It won’t stop the troublemakers, it merely forces them to remain standing when they’re causing problems.The Board should simply say “No” to sit/lie.”
Will Dufty Protect North Beach Seniors from Eviction?
by Paul Hogarth‚ Feb. 25‚ 2010
“I seriously doubt that Bevan Dufty knew Pollard is taking advantage of current law to quietly displace these tenants (although Pollard and his sister, who manages SF Garage, did each contribute $100 to his mayoral campaign.) I called Dufty yesterday afternoon and left a message about Chiu’s measure, but did not get a call before the end of the day. But he can vote for Chiu’s legislation, as the Union Street case clearly shows the need.”These publications appear, at the very least to be examples of “attempting to influence” specifically prohibited by contract. As you should know, the City’s contracts with THC provide the opportunity for investigation and corrective action on the part of your departments.
As Mr. Herrera himself, stated in BeyondChron, “…San Francisco expects its grant recipients to live up to their obligations…”.
With Kind Regards,
Rita O’Flynn
additional information
The attached and the following outlines and summarizes the areas of concern prompting the request for full audit of the Tenderloin Housing Clinic:
1. CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORTS-Fiscal Year Ending June 30, 2008 and June 30, 2009
a. Failure to Fully Disclose Assets: In both of the audited financial reports, the auditors indicate that during the fiscal year ending June 30, 2008, the TENDERLOIN HOUSING CLINIC received a donation of real property (900 Innes, San Francisco) that has not be recorded on the financial statements. In the opinion of the auditors, Daoro Zydell & Holland, “accounting principles generally accepted (GAAP) in the United States of America require that such donated property be recorded at fair value.
i. In both of these reports, the auditors indicate that the value of donated property was assessed at $20,000,000.
ii. In both of these reports, the amount listed for total assets does not include the $20,000,000 in real property, thus potentially under reporting the total assets of the TENDERLOIN HOUSING CLINIC by over 60%.
b. Non-Compliance with Federal Reporting Requirements for Federal Grant Recipients: In both of the audited financial reports disclosed instances of ongoing non-compliance with US Offices of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of the TENDERLOIN HOUSING CLINIC’s major federal programs, many of which are funneled to the TENDERLOIN HOUSING CLINIC via the City and County of San Francisco. Thus, there is a liability to the City and County of San Francisco in terms of loss of federal funding due to non-compliance on the part of the TENDERLOIN HOUSING CLINIC.
c. Control and Significant Deficiencies in Internal Controls over Financial Reporting: A control deficiency is exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect non-compliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the entity’s ability to administer a federal program such that there is more than a remote likelihood that non-compliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by the entity’s internal control.
i. Significant Deficiency Noted for the Modified Payment Program (MPP) Band Reconciliation: In both of the audited financial reports, the auditors indicate that the TENDERLOIN HOUSING CLINIC is not able to prepare a complete and accurate bank reconciliation for its MPP bank account. Specifically, the TENDERLOIN HOUSING CLINIC is not able to generate a detailed list of funds of funds within individual client accounts that make up the balances in the MMP band and corresponding MMP liability accounts. The TENDERLOIN HOUSING CLINIC admits that this has been an ongoing problem since 2006 for which they have received additional funding from the City and County of San Francisco to address, but, as of the fiscal year ending June 30, 2009 this remains a significant deficiency.
ii. Significant Deficiency Noted for Rent Rolls and Property Management: In both of the audited financial reports, the auditors indicated that the TENDERLOIN HOUSING CLINIC does not prepare “rent rolls” as the term is defined by the industry, of any of its master lease hotel properties or the Galvin Apartments (which is wholly owned by the TENDERLOIN HOUSING CLINIC and for which the TENDERLOIN HOUSING CLINIC realized over $5,000,000 in rents). Without a rent roll, the TENDERLOIN HOUSING CLINIC is unable to readily determine its tenant rents receivable at specific internals, tie to bad debts to specific units or to easily track vacant units. The TENDERLOIN HOUSING CLINIC admits it has been aware of this problem since 1999; as of the fiscal year ending June 30, 2009 this remains a significant deficiency.
d. HUD Grants: According to the independent auditors, the significant deficiencies noted for MMP and Rent Rolls and Property Management also applies to HUD Grants: CFDA#14.218 and CFDA# 4.238.
e. Recording of Real Property with the City and County of San Francisco:
i. According the audited reports, in 1995, the TENDERLOIN HOUSING CLINIC purchased 50% ownership interest in 126 Hyde Street, San Francisco, however the TENDERLOIN HOUSING CLINIC’s ownership was not officially entered into the title records until January 14, 2009 at which time the TENDERLOIN HOUSING CLINIC recorded the value at its original 1995 cost of $163,500.00. For the fiscal year ending June 30, 2009 the TENDERLOIN HOUSING CLINIC has reclassified 126 Hyde Street as an asset but at its 1995 value. The TENDERLOIN HOUSING CLINIC “rents” most of this building for its office space and includes some or all of this rent as an expense in budgets presented to the City and County of San Francisco as part of grant award contracts.
ii. As noted above, the transfer of 900 Innes was not recorded in a timely fashion with the City and County of San Francisco and the value recorded is in conflict with the assessed value stated in the auditing reports.
2. CITY AND COUNTY OF SAN FRANCISCO GRANT AWARD CONTRACTS
The City and County of San Francisco currently has approximately $100,000,000 in grant contracts with the TENDERLOIN HOUSING CLINIC. Most of these contracts contain standard provisions with which the TENDERLOIN HOUSING CLINIC appears to be non-compliant.
a. Failure to Provide Required Unaudited Financial Information: Each of the City contracts with the TENDERLOIN HOUSING CLINIC specifically states, “Within sixty (60) days following the end of each Fiscal Year, Grantee shall deliver to City an unaudited balance sheet and the related statements of income and cash flows for such Fiscal Year, in all reasonable detail acceptable to City, certified by an appropriate financial officer of the Grantee as accurately presenting the financial position of the Grantee.” The TENDERLOIN HOUSING CLINIC has admitted in writing that they do not prepare this. The City agencies granting the funds to TENDERLOIN HOUSING CLINIC do not have any unaudited financial statements from the TENDERLOIN HOUSING CLINIC on file. Timing is important and interesting as the TENDERLOIN HOUSING CLINIC renews or is newly awarded grants within the first 3 months of a calendar year without benefit of the unaudited financial reports and in prior to the receipt of the audited financial report. For this year, the City and County of San Francisco approved $82,000,000 as a single grant (in addition to others) to the TENDERLOIN HOUSING CLINIC in the setting of the deficiencies noted in item 1 above.
b. Failure to Secure City Attorney Approval for Legal Services: Each of the City contracts with the TENDERLOIN HOUSING CLINIC specifically states, “Any services to be provided by a law firm or attorney must be reviewed and approved in writing in advance by the City Attorney”. If you go on the SF Superior Court, Civil Court Website and search by name using TENDERLOIN HOUSING CLINIC, you will see extensive legal activity by the TENDERLOIN HOUSING CLINIC, including evictions and lawsuits against the City; none of which have been approved in writing by the City Attorney.
c. Failure to use Program Income Generated by a Grant Prior to Drawing Down Additional Funding From a Grant: “Program income shall be substantially disbursed for eligible activities before additional cash disbursements may be requested under this Agreement.” TENDERLOIN HOUSING CLINIC reported Attorney Fees Receivable of approximately $100,000 for the fiscal years of 2007 and 2008. The City has no documentation to show that these fees were used by the TENDERLOIN HOUSING CLINIC to further grant-related activities prior to drawing down additional grant funds from the City.
d. Failure to Comply with Grant Agreement Provisions Regarding Political Campaigns and Ballot Measures: Each of the City contracts with the TENDERLOIN HOUSING CLINIC specifically states: “no funds appropriated by the City for this Agreement may be expended for organizing, creating, funding, participating in, supporting, or attempting to influence any political campaign for a candidate or for a ballot measure.” BeyondChron, the LLC internet news service of the TENDERLOIN HOUSING CLINIC has a long history of clear violations of this contract provision. (Examples available upon request)
e. Potential Use of Grant Funds for Non-Grant Approved Activities: According the audited financial reports for 2008 and 2009, the TENDERLOIN HOUSING CLINIC pays an outside attorney hundreds of thousands of dollars for legal services. A review of the City and County of San Francisco Civil Court website, shows that most of TENDERLOIN HOUSING CLINIC’s outside legal actions are for evictions from the properties managed by the TENDERLOIN HOUSING CLINIC. The TENDERLOIN HOUSING CLINIC may, in fact, be one of the City’s most prolific evictors. TENDERLOIN HOUSING CLINIC, in many of its grant requests, indicates funding received will be used to maintain tenants in properties and prevent evictions; there is no mention of use of City funding for evictions. Thus, the source of money for the multitudes of evictions by the TENDERLOIN HOUSING CLINIC is not clear from the available financial records for the TENDERLOIN HOUSING; the City has an obligation to ensure that grant funding has not been used for evictions.
f. Potential Use of City Funds to Sue the City: The TENDERLOIN HOUSING CLINIC’s most recent law suit against the City (Superior Court Case No. 509616) was to claim damages because the City awarded a grant to another agency to manage a small, women’s only SRO. The case is closed but it raised questions as to whether the TENDERLOIN HOUSING CLINIC used any City funding to sue the City.
Consolidated Financial Statements and Independent Auditor_rof
also on Indybay and Scribed
Consolidated Financial Statements and Independent Auditor_rof by auweia1 on Scribd