Press Release

Audit Finds One of City's Providers of Housing for Unhoused Residents Had Serious Financial Shortfalls Compounded by Wasteful Spending

HomeRise misused taxpayer funds, spending money on expenses not allowed by its city agreements and demonstrated gross financial mismanagement.
April 02, 2024

SAN FRANCISCO, CA — An audit report released today by the San Francisco Controller’s Office found that city-funded nonprofit HomeRise, one of San Francisco’s developers of affordable housing for individuals and families experiencing homelessness, had a long list of financial and compliance problems that could impact the organization’s ability to deliver essential services for vulnerable city residents. Among the serious concerns were gross fiscal noncompliance, wasteful practices that misuse taxpayer funds, and missing controls and oversight between 2019 and early 2023. The audit was requested by funding city departments — the Mayor’s Office of Housing and Community Development (MOHCD) and the Department of Homelessness and Supportive Housing (HSH) — due to concerns about the nonprofit’s organizational management and financial operations.  

Using city grants and loans, HomeRise constructs new buildings, rehabilitates existing structures, or leases properties to create housing for unhoused individuals and families. It also provides property management services (like maintenance and janitorial work) and receives grants to provide resident support services. Among the organizations the City contracts with to deliver similar services, HomeRise receives a relatively large share of city funds. It provided 18 percent of the supportive housing units and about 6 percent of the affordable housing units that MOHCD funds, and operated nearly one-third of the city-funded units that served people who were formerly homeless. That amounts to about 1,500 affordable housing units across 19 properties that HomeRise has produced, operated, or provided supportive housing with the aid of more than $200 million in grants and loans from the City.  

“Diverting any portion of city funding to questionable uses when it's earmarked to benefit residents is careless and irresponsible,” said Controller Greg Wagner. “No matter the extenuating circumstances, HomeRise had an obligation to ensure public funds were managed appropriately.” 

The audit’s notable findings include:  

  • HomeRise improperly transferred $2 million from a restricted account without approval and borrowed another $2.5 million from a property’s operating account to help cover corporate payroll charges. As of August 23, 2023, $2.1 million of this remained unpaid. 
  • A review of sampled expenses revealed unallowable, imprudent, or questionable spending by HomeRise that is inconsistent with the intent of its city grant agreement. For example, HomeRise spent money to do fundraising, pay its staff bonuses, and provide lunches and gifts to its staff.  
  • Staff bonuses of more than $200,000 charged to properties were unplanned and unbudgeted, worsening cash flow problems. 
  • HomeRise charged some operational costs to its properties that should not have been or, at a minimum, were questionable. Some of these costs also were unplanned and unbudgeted, including more than $100,000 in temporary rental charges, $96,000 for salaries paid to tenant program services staff, and $12,500 for a social event.  

The Controller’s Office is making nine recommendations for HSH and MOHCD to develop a road map to address and remedy the serious problems the audit found. Ultimately, HomeRise will have to demonstrate expeditious and consistent progress, including implementing stronger operational and fiscal management, if it is to meet its commitments and continue to work with the City.