Audit Reveals HomeRise’s Financial Mismanagement

San Francisco housing nonprofit HomeRise audited

A recent audit reveals financial mismanagement at San Francisco nonprofit HomeRise, highlighting misuse of public funds for lavish expenses instead of supporting homeless people. Despite these findings, the city, heavily reliant on HomeRise, faces limited options, underscoring the complex challenges of its dependence on nonprofits for essential services.


San Francisco Housing Nonprofit Has Been Misusing Millions

HomeRise, a San Francisco nonprofit that maintains a significant share of the City’s housing options for recently homeless people, has been accused of gross mismanagement and wasteful spending after an audit released by the San Francisco Controller’s Office covering a four-year period beginning in 2019.

The audit found that millions of dollars went toward large pay raises and bonuses for select employees, extravagant social events, and other inappropriate uses instead of being used for the intended purpose of supporting recently homeless residents living in their properties.

Since HomeRise gets roughly 30% of its operating budget from government grants and subsidies, many of these misused funds were taxpayer dollars. Misuse of taxpayer funds has been rampant among city-funded homeless sector nonprofits. Still, HomeRise is being offered a chance to correct itself under a new CEO due to how much of the City’s affordable and supportive housing infrastructure it controls.

What Does HomeRise Do?

HomeRise is an organization that develops and maintains housing projects intended to help unhoused people. Since 1990, it has been renovating existing buildings to serve as affordable and supportive housing across San Francisco, including Treasure Island, under the name Community Housing Partnership. HomeRise also provides support services and case management to residents in many of its buildings. 

HomeRise maintains many of the City’s housing options for people exiting homelessness. Across its 18 buildings, over 1500 individual units are designed to house single adults and families. But many of those units have been sitting empty. 

Suspicions Arise

The Controller’s Office had been seeing red flags in HomeRise’s finances for a few years before things came to a head in 2022, and an audit was called for. Performed by Sjoberg Evashenk Consulting Inc., the audit found widespread financial mismanagement, high staff turnover, and high vacancy rates, averaging around 14%, leading to revenue plunging while expenses spiked.

Despite these cash flow challenges, HomeRise continued to spend its limited funds on things like expensive fundraising events, staff bonuses, and lunches and gifts for staff, all of which auditors considered “unallowable, imprudent, or questionable spending that did not meet the intent of the City’s grant agreement.” 

There were also “signing” bonuses for longtime staff, $200,000 spent in bonuses ranging from $1,000 to $10,000 per employee, and raises and promotions that increased some salaries by 20%, or in one case as high as 74% over a nine-month span.

The company also had 118 credit cards in use without official protocols governing their use. Many of these cards did not require prior approval for purchases and had limits of $10,000, $15,000, or even as high as $70,000. In the midst of all this, HomeRise was also improperly recording expenses, borrowing funds from restricted accounts to cover cash flow issues elsewhere, and holding meetings to discuss which corporate expenses could be covered with any city grant funds remaining at the end of the year.

HomeRise’s Response to Audit

In its defense, HomeRise has objected to many of the audit’s findings as either inaccurate or misleading, saying in a formal response that the audit presents a false picture and “threatens to inflict great harm on the organization.”

Others in the industry recognize the problems of high senior staff turnover and high vacancy rates as pervasive to the industry as a whole, though not to the same extent as seen at HomeRise. Many organizations are currently trying to rework buildings with the highest vacancy rates, which are usually SROs with shared bathroom and kitchen facilities, into formats that better meet the target demographic’s needs. Nonprofits across sectors routinely struggle to balance compensating employees fairly and attracting top talent with top salaries against funneling the maximum amount of money into the mission.

In June of 2023, HomeRise appointed Janéa Jackson as its new CEO and tasked her with smoothing out all of the issues that had come up under previous executives. From the outside looking in, this seems a bit like putting someone new in charge of a sinking ship so that you can blame them when it inevitably goes down. However, the goal should be to turn things around quickly and return to HomeRise’s community housing roots, especially because the alternative would be disastrous for the City’s most vulnerable residents.

San Francisco Relies on HomeRise

Perhaps the scariest part of this situation is that the City of San Francisco depends on this private organization to operate a huge chunk of its homelessness services infrastructure—so much so that it couldn’t cut ties no matter what they did. Giving HomeRise a chance to correct its dodgy finances reads like less of an act of gracious generosity and more of a concession given with the knowledge that there was no real choice to be made. There is no viable alternative.

The audit itself explains this reality in no uncertain terms in its recommendations, saying:

“If the City chooses to reduce or rescind HomeRise’s City grants and agreements, there is much at stake. As stated, HomeRise has a critical role as part of San Francisco’s safety net for formerly homeless residents, as well as providing affordable and supportive housing units. This option might be difficult, time-consuming, and complicated to undertake…the City could partner with a different organization(s) to split up HomeRise’s housing portfolio, thereby allowing staff to stay on the job and tenants to stay in their housing. This option would be challenging with buildings owned by HomeRise and its LLP partners.”

The City of San Francisco relies on nonprofits to fulfill some of its most basic functions, like keeping residents safe and housed. It cannot do that with existing infrastructure, and if any of these nonprofits were to fail, it would be a scramble to find a new one to take its place and repeat ad nauseum. This situation shows the cracks of such a system and should make us question whether relying on nonprofits for essential functions is sustainable.


Kayla Robbins

Kayla Robbins

  

Kayla Robbins is a freelance writer who works with big-hearted brands and businesses. When she's not working, she enjoys knitting socks, rolling d20s, and binging episodes of The Great British Bake Off.

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