A scathing audit released Thursday of the SFPUC's Community Benefits Social Impact Partnership Program found it was so badly managed that the city wasn’t verifying that contractors were keeping their promises to give back to the community – pledges that helped them win the bidding process in the first place.
The program encourages firms seeking work for the commission on certain projects to commit to donate time, money, and resources to community organizations, getting extra credit on bids if they did so. But the audit found the program was “poorly designed,” with significant flaws that posed the risk of abuse, noting that in some cases, bidders who won contracts failed to honor those promises.
The report found seven separate contractors with completed contracts have failed to deliver nearly $700,000 worth of promised benefits and that the SFPUC “took limited or no action” to enforce those contract provisions. Other contractors decreased the value of their commitments after winning bids, even though their proposals were scored based on their initial promises.
“SFPUC increases the risk that it will award contracts to contractors that ultimately will not deliver the greatest value to the City or its residents,” wrote auditors from the Sacramento firm Sjoberg Evashenk Consulting, which contracted with the City Controller’s office to perform the review.
“Allowing some contractors to default on their SIP commitments while others strive to (and do) meet their commitments, places contractors on unequal footing and jeopardizes the program’s long-term sustainability.”
In fact, only about a third of the $22 million in financial contributions pledged under the program has actually been distributed to community organizations during the program’s first decade, according to the audit.
Last year, an NBC Bay Area investigation found the Social Impact Partnership Program was prone to potential abuse and that at least one city insider was cashing in as a program consultant.
The investigation found a paid SFPUC consultant had also raked in millions of dollars consulting with private firms on crafting their SIP proposals on bids for agency projects. Some of those firms, after winning bids, directed hundreds-of-thousands-of-dollars in Social Impact Partnership payments to a non-profit founded by the consultant's business partner and wife.
Although the audit didn't find concrete evidence of fraud or corruption, it found “unreliable and inconsistent recordkeeping” diminished transparency and impeded program monitoring. The Controller's Office said the audit focused on overall program management, rather than specific individuals.
City Controller Ben Rosenfield said the program was “born out of good intentions,” but that “good intentions alone aren’t enough.”
“Stronger controls are needed to ensure that decisions regarding the focus of these resources are made in the light of day and free from the risk of inappropriate steering,” Rosenfield said in a statement accompanying the audit’s release.
Supervisor Gordon Mar, who called for the audit more than a year ago, said the report has been a long time coming.
"[The SIP Program] can deliver millions of dollars in benefits for our communities," Mar said. "But only if we have a program that's transparent, accountable and effective. And unfortunately, the program has fallen short of that."
In a statement, the SFPUC said it agreed with each of the audit’s recommendations for shoring up weaknesses in the program and said changes are already underway.
“It’s a new day at the SFPUC,” said new General Manager Dennis Herrera in a written statement. “Moving forward, we are committed to updating this program to provide transparency, accountability and results. No one at the SFPUC will tell contractors which organizations to make commitments to or how much to give them. This program will be a model of integrity and effective oversight.”
Mar said he still has unanswered questions about the program and plans to call for government hearings next week.