New oversight for $2 billion in S.F. grants
There are no city laws governing how San Francisco grants up to $2 billion a year in funds for causes ranging from care for seniors to protections for tenants.
Until now.
On Tuesday, the Board of Supervisors unanimously passed Supervisor Catherine Stefani’s latest piece of legislation tackling public corruption in the wake of the scandals that led to criminal charges for two city department heads. The first piece, approved last year, focused on a loophole in contracting that former Public Works director Mohammed Nuru is accused of exploiting to get bribes in exchange for awarding city contracts. The second piece targets the process for giving grants.
The legislation follows a recommendation from a city controller’s report that investigated contract and grant processes after last year’s Public Works scandal. The resulting report didn’t point out any specific examples of corruption in grants but said the lack of oversight left open the possibility of shady deals. The report recommended San Francisco clean up the process and make clear rules
about giving out city money.
The latest legislation does that, with implications for the city’s departments and supervisors, who each award $1 million in extra budget money toward services in their districts.
“The ongoing local and federal investigations have made clear that we need more accountability from city departments, and this ordinance will be a critical step forward to safeguard taxpayer dollars,” Stefani said during a recent committee meeting. “I believe these reforms are long overdue.”
Supervisor Aaron Peskin said during the same meeting that it was “amazing that this isn’t already law.”
The new legislation will mandate what are now recommendations from four city departments, dating back to 1997 and updated in 2018, about how grants are awarded. Because the recommendations aren’t binding, “practices vary significantly among departments and, in some cases, lack adequate controls,” according to the controller’s report.
The ordinance will require each city department to set up an open and competitive solicitation process for grants that includes advertising so potential recipients could apply. There will be some exceptions, including direct aid such as food stamps for lowincome residents. And some grants can still be awarded without the competitive process if approved by the department’s board or commission.
The legislation will require departments to keep records of grants for five years and submit reports to the Board of Supervisors listing each grant awarded without an open and competitive process. The ordinance will also allow departments to cancel, reject or advertise grants. In order to prevent corruption, the city can suspend or ban grant recipients who lie to get money and charge the recipient for the amount of the grant and more damages.
The measures will take effect by Jan. 1, 2022.
Eloise Pasachoff, law professor at Georgetown University Law Center who has researched government grants, said in an email that San Francisco’s legislation “looks like an improvement that will bring the city’s process in line with other jurisdictions.”
“Requiring agencies to engage in competitions and to specify and publicize their evaluation criteria up front (will) play an important role in avoiding backroom deals,” Pasachoff wrote.
She said recordkeeping and auditing help ensure grantees are doing what they promised, but pointed out that the law lacks a requirement for regular auditing — it just allows the city to audit “at reasonable places and times.” She imagined that could be a problem since it reduces incentives to comply, but said required regular audits when state and federal money are at play may fill the gap.
Grants are big business in San Francisco. City departments awarded 5,746 grants with a value of $5.4 billion from July 2017 to March 2020, according to the controller’s review.
One of the major grant makers is the Mayor’s Office of Housing and Community Development, which awarded $63 million from July 2020 to June 2021 to causes including eviction protection and supportive housing for people with HIV/
AIDS. The department plans to give out $75 million worth of grants from July 2021 to June 2022.
During the pandemic, the Office of Economic and Workforce Development handed out $12.4 million in grants to struggling businesses.
Public Works, which doled out $24 million worth of grants from 2017 to 2020, came under scrutiny in the controller’s report, but the department was not accused of any improper grant making.
Public Works spokeswoman Beth Rubenstein said the department’s grants are all awarded through an open and competitive process and comply with the city’s updated 2018 recommendations. She said the department “fully supports the proposed legislation.”