San Francisco Imposes New Disclosure Requirements on Nonprofits

I was once a millionaire. No kidding, my family was super “house rich.” My father was in the Army and we lived on the Presidio of San Francisco when the Presidio was an Army post. Right across the street from the Golden Gate Bridge. I woke up everyday to a thick marine layer slowly dissipating until the imposing bridge came clearly into view. That’s right, 962 Lincoln Blvd. Take a guess how much those homes are worth today. I didn’t have bright yellow hair, but I was a real life Richie Rich.

Anyway, we have occasionally remarked on the need for a whole new monitoring and enforcement system for tax exemption. TE/GE can’t do it, not on the measly budget it is provided. And state AGs have bigger fish to fry usually. So we can assume that there are plenty of violations that go uncorrected. Let’s call it the “nonprofit tax gap,” through which millions, probably, go un-collected. But nature abhors a vacuum so local governments are increasingly active in the black hole that is nonprofit enforcement.

Yesterday, we blogged about a ballot initiative in Los Angeles that would limit the amount of hospital executive compensation. Further north, in the Bay area to be exact, there’s been a rash of scandals involving improper spending by nonprofit organizations.

The Standard launched its investigation of city-funded nonprofits after the United Council of Human Services, an organization providing homes and shelters for homeless people in the city’s Bayview neighborhood, was referred to the FBI and the District Attorney’s Office for what officials described as a pattern of severe mismanagement.

The Standard subsequently found that the Attorney General’s Office had suspended United Council’s nonprofit status, meaning it was not permitted to solicit donations or operate as a charity in California. Another nonprofit called Baker Places fell under scrutiny last year after it asked the city for two emergency bailouts, threatening to close some of its programs. An investigation by The Standard found that a top Department of Public Health official, Lisa Pratt, had improperly collected a six-figure salary from the nonprofit alongside her full-time job as the city’s director of jail health services.

Records show that the city lacks a standardized system for monitoring nonprofit performance, in many cases relying on the honor system since the pandemic. Both UCHS and Baker Places received largely glowing reviews from city agencies last year, not long before they were accused of mismanaging public funds.

So the San Francisco Board of Supervisors passed an ordinance yesterday allegedly beefing up disclosure requirements for nonprofits that receive more than $100,000 in city funding. The ordinance requires the normal types of disclosures already available to the city and pretty much everybody else under federal law. But its not a total waste of legislative time and money. The ordinance includes an important new requirement. Nonprofits must give the city “a public copy of the most recent federal tax return under Section 990.” Hmmmm. Good luck finding “Section 990.”

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darryll k. jones