SAN FRANCISCO PUBLIC LIBRARY 3 1223 07513 3133 MAYOR'S OFFICE OF COMMUNITY 5/S DEVELOPMENT: The Allegation That the 7rancisco PublicLibrary Housing Rights Committee /ernmentInformation Center Used Mayor's Office of Francisco Public Library | Larkin Street, 5th Floor Community Development Francisco, CA 94102 Funds for Political Lobbying BOOK l-ERENCE Cannot be Substantiated be taken from the Library DOCUMENTS DEPT. NOV - 6 2002 SAN FRANCISCO PUBLIC LIBRARY AuditNumber 02005 November 4, 2002 8. 159 5785h MAYOR'S OFFICE OF COMMUNITY DEVELOPMENT: The Allegation That the Housing Rights Committee Used Mayor's Office of Community Development Funds for Political Lobbying Cannot be Substantiated DOCUMENTS DEPT. NOV - 6 2002 SAN FRANCISCO PUBLIC LIBRARY AuditNumber 02005 November 2002 4, CITY AND COUNTY OF SAN FRANCISCO OFFICE OF THE CONTROLLER Edward Harrington Controller Monique Zmuda Deputy Controller November4, 2002 AuditNumber 02005 Roger Sanders, Acting Director Mayor's Office ofCommunity Development 25 VanNess Avenue, Suite 700 San Francisco, CA 94102 DearMr. Sanders: The Controller's Audits Divisionpresents its report on the investigation ofallegations thatthe Housing Rights Committee ofSan Francisco (committee) had used forpolitical purposes some ofthe funds allocated to itby the Mayor's Office ofCommunity Development (Community Development). The documents thatwe reviewed did not substantiate the allegation thatthe committee used grant funds to lobby forpolitical causes. The committee is one ofmore than 300 projects within the Tides Center, a California nonprofit corporation. The Tides Center agreement with Community Development specifies thatthe centerwill notuse grant funds for political lobbying. On the other hand, we did substantiate another allegation, which asserted thatthe committee deposited a donation thatthe committee had received to a bank accountthat belonged to Housing forAll, aballotmeasure committee. Our investigation revealed thatthe committee did engage in grassroots lobbying activities related to propositions on the City and County ofSan Francisco's November 2000 and November 2002 ballots, but it did not use Community Development funds to do so. Underthe federal Internal Revenue Code Section 501(h), the committee, through the Tides Center, may participate in such activities up to a specified dollar limit each year. However, the committee cannot use funds from its grant agreementwith Community Development, whichprohibits expenditures for lobbyingpurposes. Records showthatthe committee did not use any Community Development funds to pay for its lobbying activities. Finally, our investigation disclosed thatthe committee's executive director erroneously deposited a $250 check into a bank accountthat funded Housing forAll. The Controller's Audits Division will be working with Community Developmentto follow up on the status ofthe recommendations made inthis report. Respectfully submitted, 4-7500 CityHall•1Dr.CarltonB.GoodlettPlace•Room316•SanFranciscoCA94102-4694 FAX415-554-7466 SUMMARY RESULTS IN BRIEF ur investigation didnot substantiate allegations made that £ 5the Housing Rights Committee ofSanFrancisco V-^/ (committee) used funds from the Mayor's Office of Highlights... CommunityDevelopment (CommunityDevelopment) to pay for We found the lobbying activities during recent elections. Community following during our Development askedthe Controller's Audits Division to investigate investigation ofthe the allegations that the committee spent City funds forpolitical Housing Rights purposes and that it diverted to apolitical campaign some Committee donations it received. (committee), a project ofthe Tides Center: The committee receives funding from CommunityDevelopment to provide education, counseling, and advocacy for low income, The committee did not use grantfunds senior, and disabled tenants in SanFrancisco. On its own, the from the Mayor's committee has no status as an independent nonprofit organization. Office of However, the committee is aprojectwithin the Tides Center, Community which is a Californianonprofit corporation that administers more Development to than 300 projects. fundgrassroots lobbying expenditures. Our investigationrevealed that the committee did engage in grassroots lobbyingbut that it didnot use Community The committee did Development funds to pay forthese activities. According to the engage in federal Internal Revenue Service, grassroots lobbyingrefers to grassroots attempts to influence any segment ofthe public about legislative lobbying, butis allowed to do so. matters orreferendums. The committee's lobbying efforts were allowable because the committee, through the Tides Center, met The executive certain tax reporting requirements fornonprofit organizations and directorofthe because the committee paid forthe lobbying activities with committee unrestricted funds that came from sources unrelated to Community erroneously depositeda check Development. Bymeetingprovisions in Section 501(h) ofthe made out to the federal Internal Revenue Code, the Tides Center could spend up to committee into a $250,000 annually on grassroots lobbying. ballotmeasure committee's bank The committee, under the grant agreementbetween the Tides account. Center and CommunityDevelopment, is not allowed to use grant funds forpolitical purposes. The committee complied with the agreement with CommunityDevelopmentbyusing funds from the agreement to pay for educational and counseling services for and outreach to low income, senior, and disabled tenants in San Francisco. 1 When th—e committee did incur expen—ses for lobbying, it correctly reported through the Tides Center some ofthese expenses. However, the Tides Center did not correctly identify in its general ledger all ofthe committee's lobbying expenses, and therefore did not report all ofits lobbying expenses. Finally, we substantiated the allegation that the committee deposited to abank account for aballot measure committee, Housing for All, a donation that the committee had received. The committee's executive director, who was a signatory on thebank account, did deposit erroneously a $250 check in August 2000, made out to the Housing Rights Committee, into abank account that funded aballot measure committee called Housing for All. 2 INTRODUCTION ALLEGATIONS "V uring the months ofJune through August 2002, several i S SanFrancisco newspaper columns alleged that the 1 Housing Rights Committee ofSan Francisco (committee) used money from the Mayor's Office ofCommunityDevelopment (CommunityDevelopment) to lobby forProposition H, an initiative that appeared on theNovember 2000 ballot, which sought to prevent the pass-through ofcapital improvements to tenants in SanFrancisco. The columns also alleged that the committeehas used CommunityDevelopment funds to lobby against ahousing initiative thatwill appear ontheNovember 2002 ballot. Another allegation focused onthe possibilitythat the committee took advantage ofits nonprofit status to launderpolitical contributions by diverting donations itreceivedto apolitical campaign committee. CommunityDevelopment asked the Office ofthe Controllerto We determine the validity ofthe allegations about the committee. were to assess whether the committee used grant funds providedby CommunityDevelopment forpolitical lobbying. The grant agreementbetween the City and County ofSan Francisco (City) and the Tides Center, the nonprofit organizationthat administers — the committee, prohibits the Tides Center includingthe — committee from using grant funds forpolitical lobbying. BACKGROUND The Housing Rights Committee ofSanFrancisco is aproject withinthe Tides Center, a Californianonprofit corporation that provides nonprofit infrastructure for its sponsoredprojects by offering services inprogrammanagement, finance, administration, and human resources. The committee itselfhas no status as an independent nonprofit organization. As administrator of300 projects located in 40 states and 12 countries, the Tides Center has approximately 500 employees at the various projects. The committee's mission is to empower tenants through education, counseling, and organization to obtain fundamental rights to habitable, affordable housing in San Francisco. 3 Through the Tides Center, Housing Rights Committee Receives Funds From Many Sources The Housing Rights Committee receives funds from many sources, including federal and local governments, private foundations, and individuals. While CommunityDevelopmentprovided $103,692 in grant funding during the period July 1, 2000, through June 30, 2002, the committee, through the Tides Center, also received $267,430 in grants and contributions from foundations and individuals. CommunityDevelopment provided funds to the committee so that the committee could help low income, senior, and disabled tenants avoid displacement from theirhomes; find housing and support services for very low-income renters and seniors; increase tenants' knowledge about tenant law, legal services, and supportive social services; and prevent conversion offederally subsidized buildings to market rentals. The committee was to achieve these goals by supplying counseling services, conducting outreach, and offering workshops to tenants. The Tides Center Is Permitted to Make Limited Expenditures to Influence Legislation As a California nonprofit corporation, the Tides Center, which administers the committee, is exempt from state and federal income taxes as long as it adheres to state and federal requirements, including federal tax laws. Although some nonprofit organizations may engage in certain lobbying activities, as long as they do not devote a "substantial part" oftheir activities to attempting to influence legislation, theymust not use any federal funds for such purposes. Further, state and local governments, which also fund nonprofit organizations, may also prohibit the use oftheir funds for such purposes. Generally, nonprofit organizations use unrestricted funds, ormoneynot identified for specific purposes, to conduct lobbying activities. Nonprofits receive these funds, which carryno restrictions on their use, from sources that are private or unrelated to the government. For example, the Tides Center receives funds from foundations and individuals, forthe support ofthe committee. The Internal Revenue Service describes one type ofallowable lobbying bynonprofit organizations as grassroots lobbying, which is the attempt to influence any segment ofthe general public regarding legislative matters. However, nonprofit organizations 4